Those immortal words rolled off the tongue of then Vice President Spiro T. Agnew in the early 1970's. Richard Nixon picked Agnew to appeal to Conservative voters. Although later convicted of tax fraud and forced to resign as VP, Mr. Agnew's wonderfully alliterative phrase has stayed in my mind these intervening 40 years or so, and actually bring a smile to my face when I recall them. My memories of Mr. Agnew were of a smiling, happy man who loved to play golf and didn't spend much time working (so was the perfect VP). Although he could be very denigrating and condescending in what he actually said, he was always upbeat and positive in how he said it. His "Nabobs of Negativism" barb was directed at the press that dared to question Republican notions of how to run the country.
In some respects Spiro seems have have been the archetype of what is now the quintessential Republican. He was a man so sure his instincts were always right and so sure he had special understanding that he was disdainful of research, facts or other opinions, except to the extent some single fact might be cited to support what his gut told him to do.
Not to say only Republicans can have those characteristics. Here in California two democratic members of the legislature are gone as a result of indictments relating to their hubris. But democrats are wildly individualistic, they are sort of like cats, independent and impervious to what others think. Republicans are more like dogs, they have to fit into the mores of the pack. So the most dominant can lead the whole pack astray.
It tickles my sense of irony that Agnew's words so perfectly describe the modern Republican party. Certainly blaming the other guy is a basic political gambit, but the Republican party has taken it to ludicrous levels. They started ripping Obama the day he was sworn in and have spent the last 5 to 6 years trying to villify him, They were pretty up front about the fact everything they did the first four years was what they deemed would allow them to beat Obama out of a second term.
Examples are legion. When Obama continued and expanded the bail-outs George Bush started, instead of dealing with the reality we needed to hold our noses and accept the medicine the country needed because of their silly policies during the 10 years they ran Congress, they saw it as an opportunity to rip him up one side and down the other. They acted like frat boys who had a decade long wild party and ended up setting the house on fire and now were complaining the firemen are using too much water to put the fire out.
Since Obama was reelected their new strategy is to do nothing and hope to get Republican majorities in Congress in 2016. They have turned Congress into the most expensive and unproductive debating society the world has ever see, blocking even something as obviously non-partisan as allocating money to take care of the Veterans of the wars Republicans so confidently led us into a decade ago. It would cost too much money they say. Makes perfect sense if your world view is about your needs, while you are oblivious to your obligations. The wars are winding down so we don't need them anymore, no point in spending money on Veterans.
I once was was a Republican. Many of the high minded principles they traditionally have espoused need effective representation so they can be a consistent influence on government policy. There are Republicans, I am sure, who are serious about doing good things for the country. But the reality is the discipline the current party enforces, stemming from the basic incompatibility of the coalition they have thrived on, has made them irrelevant, drifting away from the views of the majority of the American people, and left them on the verge of a lifetime achievement award for being the ultimate nabobs of negativism.
Thursday, March 6, 2014
Tuesday, March 4, 2014
Banker's bonuses
Entertaining but at the same time disheartening tidbit in the Economist Business overview (3.1.14)
The British Government bailed out the Royal Bank of Scotland during the crash of 2008-09 and the British Government is still the majority shareholder. Since the bailout the Bank consistently posted big losses. For 2013 the bank lost around 13 billion dollars. Yet the bank still doled out bonuses to executives that amounted to about $800,000,000.
What can you conclude? Only thing that occurs to me is the interchangable club that runs both banks and government treasury's has a different measure of success than the rest of us.
The British Government bailed out the Royal Bank of Scotland during the crash of 2008-09 and the British Government is still the majority shareholder. Since the bailout the Bank consistently posted big losses. For 2013 the bank lost around 13 billion dollars. Yet the bank still doled out bonuses to executives that amounted to about $800,000,000.
What can you conclude? Only thing that occurs to me is the interchangable club that runs both banks and government treasury's has a different measure of success than the rest of us.
Sunday, March 2, 2014
Thoughts on Achieving Stability and Prosperity in our economy
The discipline of Economics is a wild and woolly place were anyone with a notion can probably find data to support it. But when you cross-check economics against history, the outlines of what tax policies a government should pursue to maximize stability and prosperity are pretty clear. Here are a couple of basics that recent history has highlighted.
I. Don't view Corporations as cash cows to fund all your government activities. Corporations are fictional entities we create to encourage risk. As fictional entities they are both highly mobile and highly adaptable, so taxing corporations is rather like trying to catch a greased pig.
The way to deal with corporations is:
A. Surcharge the products they sell as an access to markets tax. The more they sell to us the more they pay. Thus if they are a domestic corporation that sells mostly overseas, they pay little tax, encouraging them to stay here even if our labor costs are higher. Domestic corporations and foreign corporations get treated equally so it is difficult for other countries to lure away our corporations by offerring lower tax rates.
B. Have some sort of retained earnings tax so Corporations can't stockpile huge amounts of cash. Any cash they have been sitting on for more than two years has to be either kicked out to shareholders as dividends, paid to employee's, or they are taxed. The longer the corporation holds funds, the higher the tax. As we have seen since the crash a few years ago, Corporations have not been investing in new enterprises that create jobs, they have been stockpiling cash or buying back their own shares (which is really a way of paying income to the people who own their shares, or share options, without their having to pay taxes). The lack of enthusiasm among corporations for investing in new ventures that creat jobs has been a big contributing factor to our languishing economic recovery.
C. Stock options as a compensation for Corporate employee's should be taxed just like any other ordinary income at the value of the stock at the point it vests. Stock options began because people thought it would motivate management to care about the long term success of the Corporation. But it is pretty clear that generally corporate management no longer pays much attention to long term planning, everything they do is about pumping up the Corporate share price in the short term to make their options as valuable as possible because that is what is best for them personally.
However, we should also create a mechanism where stock options could be treated beneficially under the tax law if the options go into a trust that provides the employee can't touch the principal until 7 years after the employee leaves the company. This would make stock options a more viable tool to motivate managers to plan for the long term health of the Corporation.
D. All of these are reasonable steps to require from Corporations in return for the huge benefit society confers by granting limited liability. Limited Corporate liability imposes major costs on society, we should be compensated for those costs and we should design tax law to shape corporate compensation schemes to guide their behavior towards conduct that benefits society, not just the owners of the Corporation.
II. Go back to steeply graduated income tax rates. Basic Government funding should come mostly from people. Government should be to serve the people, the people should therefore support the government to the extent they benefit.
A simple fact is that the more assets you have the more benefits you get from government. On top of that allowing wealth to concentrate in a few hands undermines the purchasing power that drives a healthy economy. Concentrated wealth makes the rich relatively richer but in reality they are poorer than if the wealth is more dispersed because there is less money circulating in productive parts of the economy.
So income tax rates should meet the following criteria:
1. Be based on computations of the mean income of a full time worker in this country. People up to that mean pay a modest tax. Above the mean rates should increase until they become very high on people who make a lot of money. The wealth of the wealthy is protected by Government, they should pay the lions share of costs of the institutions that provide that protection.
2. The mean should be adjusted every two years to reflect the most recent data, and the graduated rates should be percentages of the mean, so that both growth and inflation is computed into the system to avoid stealth taxation or stealth tax avoidance.
I. Don't view Corporations as cash cows to fund all your government activities. Corporations are fictional entities we create to encourage risk. As fictional entities they are both highly mobile and highly adaptable, so taxing corporations is rather like trying to catch a greased pig.
The way to deal with corporations is:
A. Surcharge the products they sell as an access to markets tax. The more they sell to us the more they pay. Thus if they are a domestic corporation that sells mostly overseas, they pay little tax, encouraging them to stay here even if our labor costs are higher. Domestic corporations and foreign corporations get treated equally so it is difficult for other countries to lure away our corporations by offerring lower tax rates.
B. Have some sort of retained earnings tax so Corporations can't stockpile huge amounts of cash. Any cash they have been sitting on for more than two years has to be either kicked out to shareholders as dividends, paid to employee's, or they are taxed. The longer the corporation holds funds, the higher the tax. As we have seen since the crash a few years ago, Corporations have not been investing in new enterprises that create jobs, they have been stockpiling cash or buying back their own shares (which is really a way of paying income to the people who own their shares, or share options, without their having to pay taxes). The lack of enthusiasm among corporations for investing in new ventures that creat jobs has been a big contributing factor to our languishing economic recovery.
C. Stock options as a compensation for Corporate employee's should be taxed just like any other ordinary income at the value of the stock at the point it vests. Stock options began because people thought it would motivate management to care about the long term success of the Corporation. But it is pretty clear that generally corporate management no longer pays much attention to long term planning, everything they do is about pumping up the Corporate share price in the short term to make their options as valuable as possible because that is what is best for them personally.
However, we should also create a mechanism where stock options could be treated beneficially under the tax law if the options go into a trust that provides the employee can't touch the principal until 7 years after the employee leaves the company. This would make stock options a more viable tool to motivate managers to plan for the long term health of the Corporation.
D. All of these are reasonable steps to require from Corporations in return for the huge benefit society confers by granting limited liability. Limited Corporate liability imposes major costs on society, we should be compensated for those costs and we should design tax law to shape corporate compensation schemes to guide their behavior towards conduct that benefits society, not just the owners of the Corporation.
II. Go back to steeply graduated income tax rates. Basic Government funding should come mostly from people. Government should be to serve the people, the people should therefore support the government to the extent they benefit.
A simple fact is that the more assets you have the more benefits you get from government. On top of that allowing wealth to concentrate in a few hands undermines the purchasing power that drives a healthy economy. Concentrated wealth makes the rich relatively richer but in reality they are poorer than if the wealth is more dispersed because there is less money circulating in productive parts of the economy.
So income tax rates should meet the following criteria:
1. Be based on computations of the mean income of a full time worker in this country. People up to that mean pay a modest tax. Above the mean rates should increase until they become very high on people who make a lot of money. The wealth of the wealthy is protected by Government, they should pay the lions share of costs of the institutions that provide that protection.
2. The mean should be adjusted every two years to reflect the most recent data, and the graduated rates should be percentages of the mean, so that both growth and inflation is computed into the system to avoid stealth taxation or stealth tax avoidance.
Subscribe to:
Posts (Atom)