Nevertheless, Ideal Candidate believes that the actual candidates need to be clear. What do they mean by "fiscal conservative?" In what way are federal deficits wrong? Are they always wrong? Or only wrong in times of economic prosperity and OK when private markets are in turmoil? When thinking about the national debt, should we add to it for some things (investments) and not others (permanent wars)?
One of the three candidates, Mr. Leibowitz, clarified his meaning, after he read where Ideal Candidate was headed with questions. He said he favored capital budgeting and cited the Schuylkill Valley Metro (more on this later) as the kind of infrastructure project that "would pay for itself." That's encouraging. Ideal Candidate urges the other two candidates to make clear where they stand. Once they do, we will be able to judge better which is the Ideal Candidate to take on Gerlach on the economy, whose own confusion on the subject of federal deficits and taxes stems from a very different political disease (he never met a tax cut or privatization scheme he didn't like).
Dean Baker, one of Ideal Candidate's favorite economists, takes the (usually) saintly Bill Moyers to task in his blog Beat the Press for presenting distorted information about the federal budget deficit. Particularly important is Baker isolating for criticism Blackstone Group founder Pete Peterson's role over many years in building a "bipartisan movement" to "reform Social Security."
One of the generals in this army is Peter Peterson, an incredibly rich investment banker who has garnered tens of millions of dollars of tax breaks that allowed him to pay a lower tax rate on his earnings than school teachers and firefighters pay on their earnings. Peterson was most recently in the public eye for lobbying Congress to protect the "fund manager tax subsidy." However when he is not lobbying Congress to protect the tax break that has allowed him and other very wealthy people to evade billions of dollars of taxes, Mr. Peterson is lobbying Congress to cut Social Security. He has repeatedly told audiences that "I don't need my Social Security" (after getting hundreds of millions in tax breaks, who would?), which he then uses as a justification for cutting Social Security benefits for tens of millions of workers who have paid for them. Mr. Peterson started the Concord Coalition, which has cutting Social Security as a top agenda item. He is also starting a new foundation devoted to this purpose. His track record earned him a solo appearance on Bill Moyers Journal a few years back, in which he got the opportunity to go his tirade against Social Security and other government programs without any correction from experts who understood the issues. Moyers again opened his show tonight to deficit fear mongers, again without any rebuttals from experts with knowledge of the issues.
The Concord Coalition program is the wrong type of "fiscal conservatism." As a condition for winning our support for their nominations, our candidates for 6PA should be heard loudly to say the Concord Coalition is wrong.
Ideal candidate's ideal platform (Talking Points, below) states clearly that the federal budget process needs to be reformed so that we can distinguish better between annual appropriations that should be balanced against tax revenues on an annual basis (government worker salaries, paper clips etc.) and those investments which should be paid for over the longer useful life of the asset they financed (rail systems, schools, hospitals etc.). In short, the federal government needs some sort of capital budgeting. Every state and local governmental level has a system for accounting for capital outlays separately. Since the 1950's the federal government has not. That's a political choice, not a consitutional limitation. Its time this gap is closed.
3 comments:
As I hope you can beat Gerlach, please beef up your talking points:
I'm not sure what that "..support for China-India-Russia economic cooperation" means, but it definitely needs some elaboration. Russia's actions of late have been very dangerous, anti democratic and in need of our attention.
When you say "Secure continued payment of private pension benefits", do you mean more than PBGC currently does? If we are going to involve government and the taxpayer (I'm a "fiscal conservative"), it should be for the middle class down.
"Limit power of private equity and hedge funds to “tax” the productive enterprises through outrageous fees and up-front distributions, high-stakes “leveraged” bets on energy and essential commodities and other abusive practices" - just exactly how would you plan to do this? We definitely need to regulate hedge funds and private equity, but government should not control their fees. The biggest problem, outside of regulation, is the outrageous treatment of "carried interest" being taxed at 15%. The leverage issue is why we are going to be dealing with this economic mess for years.
Number 2 of your immediate enactments cannot be done. You cannot enact a "A complete temporary freeze on mortgage foreclosures while medium-term measures are taken to restructure the mass of mortgage-backed securities and collateralized debt obligations weighing on the US financial system". It will be impossible to pull them apart. While all the proposals to freeze interest rates on ARM's etc. sound good they will only increase interest rates for new applicants and make housing less affordable. However, you have touched on the financial/economic issue of the next couple of years - securitization. Just wait until the public starts hearing about "credit default swaps" and "counter party risk". Subprime will seem small potatoes. Close to ideal, hope one of the two left is near you on issues.
I'm glad your commenting. This will be interesting.
By "limit the power," I do not mean legislate the details of private contracts between private equity and their investment targets or legislate directly an end to the 2 and 20 compensation structure for hedge funds. However, the FED has a great deal of power to regulate financial markets to control the use of leverage in these types of transactions. Without leverage, the bubbles do not get created in the first place. This is the single biggest point. If the the OTC markets for credit had been subject to the margin rules as the traditional exchanges, we would be facing a much smaller problem today. The second big area is restoring the Glass Steagal prohibitions on egregious conflicts of interest that are created when the "investment superstores" represent the public (by hawking public securities), advise management, make conventional loans, invest as a principals through hedge funds, and act as counterparties in exotic financial trades. We should also look at SEC disclosure rules and the bankruptcy laws as means of carving back some of the power that big private pools of capital have amassed to dictate term sheets. You mention closing the "carried interest" loophole. By doing this we would restore some "fairness" to the tax code, but we would not be reforming the system itself, which is what needs to be done.
Agreed. The carried interest issue is small compared to the issues you address. The problem is lack of regulation all around (and I don't really like regulation) as hedge funds now essentially act as banks (you are familier with the term shadow banking system) without regulation, capital requirements, etc. This issue will possibly have more impact on our economy over the next couple of years than any other. While the FED can regulate, they can't stop the credit contraction which has begun. It will be a long hard road. The regulation you talk of is badly needed to get us back on track however. My question is, how do you put this in the ideal candidates stump speech? The Republicans took control of the system by controlling the language. Democrats have been terrible at this. Hopefully we can get an ideal candidate for the 6th that can take back the advantage.
Post a Comment