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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (622999)	8/5/2011 12:37:45 PM
From: Sdgla	1 Recommendation Respond to of 1579899

CHARLES KRAUTHAMMER AUGUST 5, 2011 12:00 A.M. The Solution A three-stage compromise to reduce the debt on a scale never before seen Conventional wisdom holds that the congressional super-committee established by the debt-ceiling deal to propose further deficit reduction will go nowhere. I’m not so sure. There is a grand compromise to be had. It does, however, require precise sequencing. To succeed it must proceed in three stages: TAX REFORM True tax reform that removes loopholes while lowering tax rates is the Holy Grail of social policy. It appeals equally to Left and Right because, almost uniquely, it promotes both economic efficiency and fairness. Economic efficiency — because it removes tax dodges that distort capital flows (and thereby diminish productivity) while cutting marginal tax rates (thereby spurring growth). Fairness — because a corrupted tax code with myriad breaks grants deeply unfair advantage to the rich who buy the lobbyists who create the loopholes and buy the lawyers who exploit them. Which is why the 1986 Reagan-Bradley tax reform was such a historic success. It satisfied Left and Right, promoted efficiency and fairness, and helped launch two decades of almost uninterrupted economic expansion But didn’t that agreement take years to hammer out? Yes. Today, however, the elements are already laid out by the Simpson-Bowles commission. The super-committee doesn’t have to reinvent the wheel. It simply has to make choices. REVENUE NEUTRALITY Every dollar of revenue raised by stripping out a loophole is to be returned to the citizenry in the form of lower tax rates. Initial revenue neutrality avoids ideological gridlock over tax hikes and ensures perfect transparency during any later alterations of that formula. Start with the obvious boondoggles, from the $6 billion a year wasted on ethanol subsidies to your Democratic perennials — corporate jets, oil-company breaks, etc. That’s the fun part. Unfortunately, whacking that piñata yields but pennies on the dollar. The real money is in the popular tax breaks: employer-provided health insurance, mortgage interest, and charitable contributions. Altering some of these heretofore politically untouchable tax breaks would alone be a singular achievement. I’d suggest abolishing the health-care exclusion, which encourages wasteful medical spending. I would also gradually abolish the mortgage-interest deduction. Start by excluding second homes and mortgages greater than, say, $500,000. Lower that threshold by $100,000 chunks as the housing market meets certain threshold indexes of recovery. As for charitable contributions, here I go soft. I’d leave the deduction intact on the Madisonian grounds that subsidizing private charity — donations to institutions chosen by the citizens, not the state — disperses power and strengthens civil society, the principal bulwark against state domination. Your preferences will be different. So will the super-committee’s. It doesn’t matter. What’s important is to make choices that are deep, radical, and revenue-neutral. But, you say, is not the committee’s mission to reduce debt? This, as yet, does nothing. Correct. But it’s the indispensable premise for achieving the ultimate in debt reduction: THE GRAND BARGAIN Once you have serious revenue-neutral tax reform in place, the ideological horse-trading that is required for massive deficit reduction — tax hikes versus entitlement reform — can begin. Republicans will resist the former, Democrats the latter. But tax-reform-first makes possible the compromise that eluded John Boehner and Barack Obama. Boehner was willing to increase revenues by $800 billion. Obama was reputedly ready to raise the Medicare age and change the Social Security cost-of-living formula. Remember: Tax reform will already have slashed rates radically. In one Simpson-Bowles scenario, the top rate plunges to 23 percent. Conservatives could at that point contemplate increasing net revenues by slightly tweaking these new low rates, say, back to Reagan’s 28 percent, still much lower than the current 35 percent and Obama’s devoutly desired 39.6 percent. The deviation from revenue neutrality would yield new tax receipts for the Treasury, in addition to those resulting from the economic growth stimulated by the lower rates. Democrats would have to respond by crossing their own red line on entitlements. That means real structural changes. That means raising the Medicare and Social Security ages, indexing them to longevity (until 70 becomes the new 65), and changing the inflation formula. Perhaps even means-testing Social Security (after one has recouped what one originally paid in). The result of such a grand bargain would be debt reduction on a scale never before seen. World confidence in the American economy would rise dramatically. Best of all, we would be back on the road to national solvency. It can be done. In three months. In three stages. — Charles Krauthammer is a nationally syndicated columnist. © 2011 the Washington Post Writers Group.

To: TimF who wrote (622999)	8/5/2011 12:53:57 PM
From: Alighieri	Read Replies (2) \| Respond to of 1579899

How much the economy is hurt by transfering that money to the feds (actually % of GDP of spending might be a better measure, because if the feds don't tax it, they have to borrow it also pulling it out of the economy, or they have to "print" it pushing harmful inflation). How much was it hurt in the 90s, or during periods of much higher marginal rates during which we had very good economic conditions? You guys are slave to an dogma that has as many exceptions in time as it does support. I think it's fair to say that there are many more factors to a thriving economy than taxation... Right...why are you arguing with me? Because your wrong, and about an important issue. What am I wrong about? The chart is clear... 1 - Your chart only shows income taxes. Ok...total revenue below...even more obvious...it takes almost 20 years to get back to 1999-2000 revenue...taxes have been gutted...you can't possibly argue with the data. 3 - Your chart supports my point. You had a recession and slow recovery and tax revenue was down. Then the recovery picked up steam and revenue went up to more normal levels, then you had a deeper recession and another slow recovery and the revenue was pushed down lower than it was in the previous drop, then the future years going forward (with the projections assuming economic growth) and the revenue gets up to a high level again. Here's a shocker...GDP never shrinks until 2009...and then only a little. So your point doesn't add up. bea.gov Al