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Politics : Moderate Forum -- Ignore unavailable to you. Want to Upgrade?

To: tsigprofit who wrote (4059)	10/17/2003 1:23:06 PM
From: Ron	Respond to of 20773

"What we have here is a form of looting." So says George Akerlof, a Nobel laureate in economics, of the Bush administration's budget policies — and he's right. With startling speed, we've blown right through the usual concerns about budget deficits — about their effects on interest rates and economic growth — and into a range where the very solvency of the federal government is at stake. Almost every expert not on the administration's payroll now sees budget deficits equal to about a quarter of government spending for the next decade, and getting worse after that. Yet the administration insists that there's no problem, that economic growth will solve everything painlessly. And that puts those who want to stop the looting — which should include anyone who wants this country to avoid a Latin-American-style fiscal crisis, somewhere down the road — in a difficult position. Faced with a what-me-worry president, how do you avoid sounding like a dour party pooper? One answer is to explain that the administration's tax cuts are, in a fundamental sense, phony, because the government is simply borrowing to make up for the loss of revenue. In 2004, the typical family will pay about $700 less in taxes than it would have without the Bush tax cuts — but meanwhile, the government will run up about $1,500 in debt on that family's behalf. George W. Bush is like a man who tells you that he's bought you a fancy new TV set for Christmas, but neglects to tell you that he charged it to your credit card, and that while he was at it he also used the card to buy some stuff for himself. Eventually, the bill will come due — and it will be your problem, not his. Still, those who want to restore fiscal sanity probably need to frame their proposals in a way that neutralizes some of the administration's demagoguery. In particular, they probably shouldn't propose a rollback of all of the Bush tax cuts. Here's why: while the central thrust of both the 2001 and the 2003 tax cuts was to cut taxes on the wealthy, the bills also included provisions that provided fairly large tax cuts to some — but only some — middle-income families. Chief among these were child tax credits and a "cutout" that reduced the tax rate on some income to 10 percent from 15 percent. These middle-class tax cuts were designed to create a "sweet spot" that would allow the administration to point to "typical" families that received big tax cuts. If a middle-income family had two or more children 17 or younger, and an income just high enough to take full advantage of the provisions, it did get a significant tax cut. And such families played a big role in selling the overall package. So if a Democratic candidate proposes a total rollback of the Bush tax cuts, he'll be offering an easy target: administration spokespeople will be able to provide reporters with carefully chosen examples of middle-income families who would lose $1,500 or $2,000 a year from tax-cut repeal. By leaving the child tax credits and the cutout in place while proposing to repeal the rest, contenders will recapture most of the revenue lost because of the tax cuts, while making the job of the administration propagandists that much harder. Purists will raise two objections. The first is that an incomplete rollback of the Bush tax cuts won't be enough to restore long-run solvency. In fact, even a full rollback wouldn't be enough. According to my rough calculations, keeping the child credits and the cutout while rolling back the rest would close only about half the fiscal gap. But it would be a lot better than current policy. The other objection is that the tricks used to sell the Bush tax cuts have made an already messy tax system, full of special breaks for particular classes of taxpayers, even messier. Shouldn't we favor a reform that cleans it up? In principle, the answer is yes. But an ambitious reform plan would be demagogued and portrayed as a tax increase for the middle class. My guess is that we should propose a selective rollback as the first step, with broader reform to follow. Will someone be able to find the political sweet spot, the combination of fiscal responsibility and electoral smarts that brings the looting to an end? The future of the nation depends on the answer. -- Paul Krugman nytimes.com

To: tsigprofit who wrote (4059)	10/18/2003 2:56:52 PM
From: Ron	Respond to of 20773

Another interesting article. I don't agree with all of it, but he makes some good points. Forbes has been harping about America's lag on the internet for some time now..for example: you can get broadband 3 times faster in Korea, for a third of the price. Why is that? Anyway, FYI Can America Compete? Rich Karlgaard, 10.13.03 Wildly cheap technology, the Internet and global pricing arbitrage have shaped the business landscape of the 2000s. Can America compete on this turf? Yes, say some, but at a steep price. That price being the outsourcing of jobs to countries where labor costs are cheaper, or the elimination of those jobs altogether. Ever more powerful computers, software and telecom provide the means for job automation higher and higher up the value chain. Early evidence supports this sour view. The U.S. has shed 2.7 million manufacturing jobs during this decade alone. That number pales beside the potential loss of white-collar jobs during the next ten years. Marc Benioff, founder of Salesforce.com, told CFOs at a recent FORBES conference that 25 million U.S. jobs are headed for Bangalore, or places like it, during the next ten years! Robyn Mere-dith, a FORBES editor based in Hong Kong, who has her eyes trained on robust, ravenous China, guesses 30 million jobs. Imagining all those laid-off white-collar workers, Sun Microsystems CEO Scott McNealy says "the sky will be darkened with consultants." Optimists don't believe a word of it. And history backs them. A century ago 40% of the American labor force toiled on farms. Today we produce more food with 1/20 of the labor, and the descendants of those 19 out of 20 who were tilling the soil in 1903 have graduated to less backbreaking work at higher pay. Who will be right about American jobs in the 21st century? Will the jobs disappear and never come back? Or will America, once more, summon its creative energy and replace those jobs with even better ones? I think we can replace the lost jobs with better ones. But here's the caveat: We will do it only if the power of the American worker is unleashed. And this is where I have my doubts. Low Road vs. High Road Right now, America's public policy is out of whack with the needs of its economy and workers--and the workers know it. As a rough proxy, look at President Bush's poll numbers. They've been dropping by the week. This has little to do with Iraq. People whosquabble with Bush over Iraq have opposed him since Jan. 20, 2001. But since this summer a crucial 15% of the voters who otherwise like Bush and support him on Iraq have turned against him. Why? Job worries, mostly. Bush needs to address this voter concern directly or he'll suffer the same fate as his father, who looked similarly clueless during a period of "jobless recovery." The President can take one of two roads, of course: the high or the low. The low road would be to shake his fist at foreigners and promise to put a stop to job outsourcing. He could cut H-1 visas and promise to impose tariffs--of course, he'd be too smart to call such policies protectionism. Better to couch them in terms like "fair trade." The high road? It's a set of policies that removes barriers to entrepreneurship and business formation and makes it easier to be self-employed. Picture yourself as suddenly unemployed. What would you want? A handout from the government? (Yeah, right, as if that would support your mortgage and college bills.) A bogus "job retraining" program taught by a counselor who knows zip about business and markets as they exist in 2003? No, you'd want a dazzling home office. One equipped with extremely high bandwidth to better research your opportunities. You'd also want great mobile phone service, along with BlackBerry-type devices to help you be in touch with opportunities. And you'd want to be able to expense these necessary items on your tax returns. Forget depreciation schedules, however accelerated. Will Congress ever wake up? Accelerated depreciation is better than nothing, I suppose, but it's nevertheless out of touch with today's need for speed. Also, it creates paperwork for the sole proprietor. FICA taxes hit the self-employed very hard. You, as the suddenly self-employed (one of those consultants darkening the skies), would want--and by justice ought to have--the ability to opt out of that FDR-era creaker. Sunset the FCC The big policy issue is bandwidth. America's telecom system is badly broken. It's saddled with the highest taxes--outside of tobacco and liquor--and regulated with a fervor that only a French dirigiste could appreciate. Yet have you heard President Bush utter word one about it? I haven't. Maybe he said something and it was buried under his proclamations to save steel jobs in electoral-vote-rich Pennsylvania. I don't know. What I do know is this: The country that invented the Internet--that would be us--now has some of the slowest Internet access rates of any major developed country. Per-capita last-mile bandwidth in South Korea is 20 times ours. Northern Italy now trumps the U.S. Italy? I am writing this column in my room at the Grand Hyatt in Shanghai, China. When I hook up to the room's Ethernet connection, a typical Web page appears quicker than with any U.S. hotel connection I've seen. What can President Bush do? He can kill the FCC. He can say: "The distinctions between voice and data and between local and long distance are no longer meaningful. Therefore, we will stop regulating them as such. I am declaring that on Jan. 1, 2005 there will be a new dawn for American telecom. We will abolish the regulation of bandwidth over 1 megabit per second and unleash the creative powers of our people. Thanks to you, I have every faith that the U.S. will resume its proper place in the world economy." forbes.com