Posts Tagged ‘deficit’

THE GREAT GAME REDUX

Thursday, November 29th, 2012

Consider this possibility. The President is not concerned about the next four years and his legacy arising therefrom. His time frame is much longer. Let’s say 24 years. His legacy will take that much time to develop. All he has to do is keep his voting coalition together. If future candidates can count on 95% of the black vote and majorities among women and other minority groups, they will be elected. President Obama knows how to do this. He is very good at it. Electing future Presidents with this strategy will bring him immense power whether he is President or not.

Given the above, what is his short term goal? To keep his voters’ support. Over a long time. Does addressing the Fiscal Cliff help in this goal? Much better to go over the cliff and blame it on the other party, his successful strategy the previous four years. People will feel the pain of poor economic policy, but they will blame it on the Republicans. That keeps the mid-term election in play, and allows him to start – now – shooting for 2016.

Further, going over the cliff increases tax revenue greatly by taxing the middle class. And whose fault is it? Not his, under this scenario. The fault will lie with the Republicans. And a lot more tax revenue is needed if government spending is to stay at the President’s preferred 24% of GDP. Or maybe higher.

Right now it seems the Republicans are executing his play book. Far better to pass the “millionaire” tax in the house, and then check to the raiser.

Jim Hirshfield

Government Spending

Sunday, May 20th, 2012

Federal government spending is of necessity limited by the amount of economic growth in the country.

to The Editor of the Seattle Times. Fixing the Federal deficit.

Saturday, November 26th, 2011

Your Nov 25th editorial says “the solution to multi-trillion dollar [federal] deficits has to be a mix of revenue and spending cuts . . .” Like most people, it appears you do not do math. Here it is, briefly. These numbers are from the N Y Post article of August 28, 2011. The President wants a 13% tax increase (from 35 to 39.5%) on rich people. In 2009 people reporting over $1 million in taxable income paid $200 million in taxes. Static analysis computes a 13% increase as bringing in $26 million – a bit over $2 billion per month. From other sources I believe the same analysis of incomes over $250,000 brings in some $6 billion per month. The deficit in August was $160 billion. Average for the year is expected to be roughly $130 billion per month.

So let’s see. Will $6 billion be an important part of reducing a monthly deficit of $130 billion? That doesn’t even pass the smirk test. But here is the important part. In a 15 trillion economy ($15 billion times a thousand), even a small decrease in economic activity arising from this tax increase could have much greater impact than the $6 bil a month collected and recycled by the government.

So Obama’s tax increase will have little effect on deficit reduction, but a potentially significant impact on GDP if it motivates wealth to sit on the sidelines. Of course the entire analysis assumes that you understand government recycles money but does not create jobs. If you on the other side of that assertion, then you have a lot more math to do.

Jim Hirshfield