Even the old Reagan people are worried about the Tea Party lawmakers. Bruce Bartlett:
As the almost inevitable debt default is perhaps only weeks away, Wall Street types are finally becoming nervous. They should have known that supporting a bunch of not-too-bright, ignorant Tea Party members to Congress was not going to work out well. I tried to warn them.
David Stockman was for four years Ronald Reagan’s OMB head. His job was to sell Voodo/trickle down/supply side economics. At some point he realized it was all nonsense and quit. Yesterday he had an op ed in the NYT where he took on both parties. He was critical of Obama because he only wanted to raise taxes on the wealthy, and I think he’s right if debt reduction is really something we want to do, much of his criticism was directed at Paul Ryan’s unicorn and fairy dust proposal.
Representative Ryan fails to recognize that we are not in an era of old-time enterprise capitalism in which the gospel of low tax rates and incentives to create wealth might have had relevance. A quasi-bankrupt nation saddled with rampant casino capitalism on Wall Street and a disemboweled, offshored economy on Main Street requires practical and equitable ways to pay its bills.
Ingratiating himself with the neo-cons, Mr. Ryan has put the $700 billion defense and security budget off limits; and caving to pusillanimous Republican politicians, he also exempts $17 trillion of Social Security and Medicare spending over the next decade. What is left, then, is $7 trillion in baseline spending for Medicaid and the social safety net — to which Mr. Ryan applies a meat cleaver, reducing outlays by $1.5 trillion, or 20 percent.
Trapped between the religion of low taxes and the reality of huge deficits, the Ryan plan appears to be an attack on the poor in order to coddle the rich. To the Democrats’ invitation to class war, the Republicans have seemingly sent an R.S.V.P.
The class war has always gone on but it increased in intensity while Stockman was manager of OMB – that’s what supply side economics is all about. But until recently it was a subtle war. But with supply side economics and obvious failure and the election of “conservative” mental midgets like Ryan it is no longer subtle.
In reality Ryan’s plan doesn’t reduce the deficit once you take away the unicorns and fairy dust it just redistributes the wealth upwards. I think Stockman may get that:
So the Ryan plan worsens our trillion-dollar structural deficit and the Obama plan amounts to small potatoes, at best. Worse, we are about to descend into class war because the Obama plan picks on the rich when it should be pushing tax increases for all, while the Ryan plan attacks the poor when it should be addressing middle-class entitlements and defense.
I do disagree with Stockman when he suggests that means testing Social Security and Medicare benefits. There are not enough rich people to make any difference.
Stockman does nail it here:
The culprit here was the combination of ultralow rates of interest at the Federal Reserve and ultralow rates of taxation on capital gains. The former destroyed the nation’s capital markets, fueling huge growth in household and business debt, serial asset bubbles and endless leveraged speculation in equities, commodities, currencies and other assets.
At the same time, the nearly untaxed windfall gains accrued to pure financial speculators, not the backyard inventors envisioned by the Republican-inspired capital-gains tax revolution of 1978. And they happened in an environment of essentially zero inflation, the opposite of the double-digit inflation that justified a lower tax rate on capital gains back then — but which is now simply an obsolete tax subsidy to the rich.
There is a myth that Wall Street creates capitol. The reality is that 99% of the trades on Wall Street create no new capitol – it is little more than a casino. A casino that can cause economic havoc. So tax capitol gains at the same rate or more than ordinary income. I would go a step further – a tax on stock transactions that don’t create new capitol. That could shut down the casino. Gambling is not free market capitalism.