Saturday, August 9, 2014

Bring back the wise old men

When will this country once again be guided by older men, wise in the ways of the world, and not by academics with pipe dreams and magical solutions conjured by spending and monetary "stimulus?" For example: a man like George Shultz, whose op-ed in today's WSJ, "How to Get America Moving Again," speaks in simple terms of powerful, market-based solutions that could revitalize our economy. Here I summarize a few:

"Cleanse the personal income tax system of deductions and lower the marginal rate on a revenue-neutral basis."

Stop taxing corporations' foreign earnings twice, and lower the corporate tax rate to a more competitive 20%.

Simplify the overly complex regulations that make running a business so difficult and costly.

Make monetary policy more predictable by making it rules-based.

Reform (and in the process save) Social Security by adjusting benefits by prices, not wages, and by applying the change only to those under the age of 55. Increase the normal retirement age, and
"when workers reach age 65, stop any payroll deductions and employer contributions to encourage them to stay in the labor force. Their pay will increase and they will be less costly employees. Incentives work."

(As a 65 year old retired person I am painfully aware of the additional 15.3% marginal FICA tax I would face on self-employed income up to $114K, on top of the federal, state, and medicare taxes I'm already paying. It's a powerful disincentive to work.)

Allow insurance companies to offer high-deductible catastrophic healthcare policies, and encourage the use of health-saving accounts. (I note in addition that powerful free-market forces could be unleashed by a simple change to the tax code that allowed everyone, not just employers, to deduct healthcare insurance expenses.)

"We must have a robust military capability. And then we need to conduct ourselves in a credible way."



12 comments:

ronrasch said...

Beautifully expressed,Scott, our country is ready for mature leadership that honors the practices that made us a great country

PD Dennison said...

We cannot implement these simple and powerful, good ideas because each takes power away from government and returns it to the citizens.

The people who benefit from government are large in number and power. They control the government and the debate (media).

Nothing will change, other than getting worse. The US is becoming Europe/S. America. It will not be stopped in the near future.

ClamPuddingPaddler said...

I have admired your economic commentary since first reading you in 2008. You cut through the fear-mongering babble of the financial media with reality-based commentary and opinion. But your blind spot about conservative policies is as big as ever.

Obamacare (flawed as it is) is basically a conservative, market-based approach to our country's health care problems. In spite of years of dire predictions, there are no death panels, no massive job losses, no business-killing taxes, only 8+ million people with insurance and more business for health insurers.

Why are the states with the worst standards of living, health care coverage, environmental records and poverty rates most often conservative politically? The most recent example being Kansas, which has been experimenting with the purest conservative policies ever since Brownback took office, but is now the worst mid-western state in job creation and the quality of life is deteriorating.

The percent of federal revenues coming from corporate income taxes is about 10%, lower than it was in the 60's and 70's when corporation formed a much smaller portion of our economy. The average ACTUAL corporate tax rate is about 12% and corporate taxes represent about 2.6% of GDP, which is 11th lowest out of the 27 wealthiest nations. I don't need to go on about the large corporations (like GE) who pay no taxes at all.

As we sit in the sixth year of Obama's term, the stock market is strong, job creation is pretty good and we are close to becoming energy independent--all things very counter to the dire predictions of conservatives everywhere. One cloud on the horizon is the possibility that conservative voices like John Bolton and John McCain could draw us back into disastrous and costly war again--great for parts of the economy, but terrible for our country.

PerformanceSpeaksForItself said...

Hard to see middle-class America giving up the mortgage interest deduction. Or the charitable deduction. Or agreeing to the taxation of profit-making religious institutions. I.e., It's a bunch of pots complaining about the kettle being black. Since everyone is getting pork somewhere, there will never be across the board reform (absent a benevolent dictator).
And what/where are all these "overly complex regulations that make running a business so difficult and costly"? I'd like ONE example that doesn't have to do with health, safety or environment. Do you think the people in West, Texas benefited from Texas' war on regulations? Would the nuclear power industry benefit from less regulations, and if it did, do we really want to go down that path? "Reducing regulations" has become a conservative cure-for-what-ails-ya, and is extremely short-sighted.

Benjamin Cohen said...
This comment has been removed by the author.
Benjamin Cohen said...

My complaint about Schultz's editorial is that he did not recommend cutting the corporate income tax to zero and also cutting the one trillion dollars a year in USA national security outlays in half.

Benjamin Cohen said...

I just had a great idea:

The level of corporate income taxes and national gasoline taxes will be determined by Shultz and Grannis.

These will be the only funds used to financed national security outlays.



steve said...

We cannot implement these simple and powerful, good ideas because each takes power away from government and returns it to the citizens.

Could NOT be more correct. Our pols SUCK, top to bottom. and guess what? the PEOPLE elect them! they bitch and moan and elect the same jackasses year in year out. Idiocy is doing the same thing over and over and expecting a different result.

Matthew Grech said...

I'm with Steve and with Ben Cohen. We know what produces prosperity: stable money, low(er) taxes, sensible regulations. This has been known for decades.

But both parties want big gov't, the Dems so they can engage in intentional inefficiency, the GOP so it can dole out favors through "defense" spending.

While I recognize that many financial metrics have improved over the last five years - the deficit as a percentage of GDP is a stunner - one development has worsened over the recent past. We can blame the politicians all we like. But I think a potentially ominous development has occurred: the people want big government. They're either too stupid to realize that it is bad for them (on the whole) or they're in some way comforted by the perceptions that big govt provides. Either way, they seem to be getting the govt they deserve. And I'm having trouble seeing how this changes for the better in a meaningful way.

Unknown said...

Age of selected nation's Founding Fathers (and one Mother) in 1776:

Alexander Hamilton, 21
Betsy Ross, 24
James Madison, 25
Thomas Jefferson, 33
Benedict Arnold, 35
John Hancock, 39
Thomas Paine, 39
Patrick Henry, 40
John Adams, 40
Paul Revere, 41
George Washington, 44
George Mason, 50
Samuel Adams, 53
John Witherspoon, 53
Benjamin Franklin, 70

More here:
http://allthingsliberty.com/2013/08/ages-of-revolution-how-old-1776/

Of the most prominent ones, only Franklin was over 60. Otherwise it was largely a youth rebellion.

sgt.red.blue.red said...

"(As a 65 year old retired person I am painfully aware of the additional 15.3% marginal FICA tax I would face on self-employed income up to $114K, on top of the federal, state, and medicare taxes I'm already paying. It's a powerful disincentive to work.)"

Can't you set up a corporation, and pay yourself a dividend out of the corporation?

William said...

Ed Yardini today

"The latest earnings season is almost over, with 91% of S&P 500 companies having reported their Q2-2014 results. The latest blend of actual and estimated earnings shows a growth rate of 9.6% y/y. That’s up from the low of 5.9% at the start of the earnings season during the week of July 10. It is also up from the first quarter’s growth rate of 5.3%.

The solid gain isn’t surprising given the 6.0% (saar) growth in nominal GDP during the second quarter. It was up 4.1% on a y/y basis. What is surprising is the earnings gain during the first quarter, when nominal GDP fell 0.8% (saar). However, earnings were still up 3.3% y/y.

S&P 500 revenues are driven by global nominal GDP, with the US accounting for a significant portion of that total, of course. S&P 500 forward earnings rose to record highs yet again last week for the S&P 500/400/600.

For the S&P 500, forward earnings was $128.22; it is converging toward the 2015 consensus estimate of $133.69 (as of last week), which has been edging higher recently.

http://blog.yardeni.com/