The big tax cut proposals

6757856139_a3988deaff_zPresident Trump is releasing details of his tax cut proposals.

He would significantly raise the standard income tax deduction from $6,300 for an individual and $12,600 for married couples.  Exactly how much has not been released, but in his campaign Trump suggested $15,000 for an individual and $30,000 for families.

He would also cut the corporate tax rate from 35% to 15%.  Other breaks are also in the works.

This would be a huge tax cut for both individuals and businesses.  Most of us would love that.  The problem is, what would it do to the federal deficit?

UPDATE:  We now have more details about Trump’s proposed tax plan.  Go here.  Briefly, the standard deduction would double, the seven brackets will go down to three (10%, 25%, 35%), the estate tax and the alternative minimum tax will go away.  But tax deductions will end except for mortgages, retirement savings, and charitable giving. [Read more…]

Budget deal gives White House everything it wanted

The House of Representatives, which controls the nation’s purse strings, is dominated by Republicans.  But they just agreed to a budget deal that includes $680 billion in new spending and special-interest tax cuts.  The White House is claiming total victory.  The deal gives the Obama administration what it wanted on Obamacare, immigration, and the environment.  Planned Parenthood will keep its government funding.  Pretty much the only thing Republicans got in return was an end to the ban on oil exports.  Rush Limbaugh is calling for the Republican Party to be disbanded. See this for details.

UPDATE:  The House adopted the budget.

UPDATE:  So has the Senate, and the President has signed it.  Look, this budget does some good things, like give more money to the military, including giving troops a raise.  But it’s a return to the old deficit spending, reversing the budget reforms (for example, the agreement to balance new spending by making cuts elsewhere) of a few years ago.

[Read more…]

Federal money for airports without planes

As the federal government howls over the impending spending cuts that go into effect tomorrow, we learn about some of the appropriations that the sequester will not touch.  That right-wing rag The Washington Post tells about an airport in my native Oklahoma that gets $150,000 of federal money a year even though it has no planes.  There are actually 88 airports like that throughout the country.  (This one is over by where my brother lives.  I wonder if he has been there to see his federal tax dollars at work.) [Read more…]

Government debt now greater than the whole economy

Factoid buried in a Washington Post graph caption:

The federal debt of the United States — including debt owed to the public and to parts of the government itself, such as the Social Security Fund — climbed to $15.22 trillion on Dec. 30. That marked the first time since the 1940s that the national debt was larger than the American economy, as measured by the gross domestic product. Since Dec. 30, the debt has increased an additional $4 billion.

via New year, more debt – The Washington Post.

From giveaway to takeaway

Economy columnist Robert Samuelson sees our government having to transition from a “giveaway” mode, which dominated over the last half century with politicians doling out benefits and tax breaks, to a “takeaway” mode, in which many of such goodies have to be taken away.  Samuelson says, however, that the politics of doing so are just not possible.

Any resolution of the budget impasse must repudiate, at least partially, the past half-century’s politics. Conservatives look at the required tax increases and say, “No way.” Liberals look at the required benefit cuts and say, “No way.”

Each reverts to scripted evasions. Liberals imply (wrongly) that taxing the rich will solve the long-term budget problem. It won’t. For example, the Forbes 400 richest Americans have a collective wealth of $1.5 trillion. If the government simply confiscated everything they own, and turned them into paupers, it would barely cover the one-time 2011 deficit of $1.3 trillion. Conservatives deplore “spending” in the abstract, ignoring the popularity of much spending, especially Social Security and Medicare.

So the political system is failing. It’s stuck in the past. It can’t make desirable choices about the future. It can’t resolve deep conflicts.

An alternative theory is that we’re muddling our way to a messy consensus. All the studies and failed negotiations lay the groundwork for ultimate accommodation. Perhaps. But it’s just as likely that this year’s partisan scapegoating implies more partisan scapegoating. Political leaders assume that financial markets won’t ever choke on U.S. debt and force higher interest rates, stiff spending cuts and tax increases.

At best, this is wishful thinking. At worst, it’s playing Russian roulette with the country’s future.

via A country in denial about its fiscal future – The Washington Post.

 

Just printing more money

Historian Richard Striner proposes a solution for our economic woes:

Using the monetary methods of Lincoln, updated to employ the inflation-fighting tools of the Federal Reserve, we could pay for a faster recovery and a great many worthy projects without higher taxes, without more national debt, and believe it or not, without inflation. How? By letting Congress exercise a little-known power that is used (very quietly indeed) by the Federal Reserve: the power to create new money.

If you’re skeptical about this assertion, ask Federal Reserve Chairman Ben S. Bernanke. In an interview with 60 Minutes on March 15, 2009, Scott Pelley asked Bernanke to state the cost to American taxpayers of the Fed’s attempts to prop up banks.

Bernanke: “It’s not tax money. The banks have accounts with the Fed … so, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money.”

Pelley: “You’ve been printing money?”

Bernanke: “Well, effectively.”

If the Federal Reserve can create new money, couldn’t Congress do the very same thing? The answer is yes, and here’s the precedent: the Legal Tender Act of 1862, in which the Republican-controlled Congress authorized creation of “United States Notes,” known as greenbacks, that were printed up and spent into use.

via The American Scholar: How to Pay for What We Need – Richard Striner.

He is serious.  His reasoning about how this could work defies excerpt, so read it yourself.