Relevant and even prescient commentary on news, politics and the economy.

No More Deficits

The IRS has come up with a clever plan to offset the deficit-creating effects of the Bush tax cuts: More scrutiny of the poor!

The Internal Revenue Service is planning to ask more than four million of the working poor who now claim a special tax credit to provide the most exhaustive proof of eligibility ever demanded of any class of taxpayers….The I.R.S., trying to prevent errors and cheating, says it needs greater proof of eligibility months before people claim the credit on their tax returns because its efforts to find errors through audits after the fact have not worked. Treasury officials estimate that $6.5 billion to $10 billion is lost to improper payments each year…President Bush has praised the tax credit. But his administration has also complained about fraud, and the president has asked Congress for $100 million and 650 new employees to identify potentially erroneous claims before any money is paid out. There is a similar effort with federally subsidized school lunches.

The program they are referring to is the Earned Income Tax Credit (EITC), a program both sides of the aisle have long applauded. The logic of the EITC, as opposed to welfare, is that it increases rather than decreases the benefit of working. Suppose a person could work or not work. If they work then they get $1000; if they don’t work, they get $600 in welfare benefits. That makes the pecuniary value of work $400, and it costs the government $600 per person who decides not to work. The EITC turns this math around, by paying poor people (only those with children, I think) to work. Say we give $300 to every family that works under the EITC, while still offering $600 in benefits for the unemployed. Then by working, this hypothetical person gets $1300 a month total, which is $700 more than what they get by not working. Since $700 is a lot more than $400, more people will choose to work. And for each person that works instead of taking the $600, the government saves $300 (the difference in the $600 cost of welfare benefits vs. the $300 cost of the EITC). So discouraging use of the EITC could actually end up costing the government more money, not less (though EITC costs come out of the Federal budget; a large part of welfare benefits is paid out of state coffers). To understand the type of dollars the IRS is looking at, the total cost of the EITC is around $30b or so, about 1/10th of the deficit this year.

AB

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Brokaw and the Man

BROKAW: Why not fold in some of the U.N. inspectors to this effort, not turn it over to them, but make them a part of it? Would that help with the credibility, do you think?

THE PRESIDENT: I think there’s going to be skepticism until people find out there was, in fact, a weapons of mass destruction program. One thing there can’t be skepticism about is the fact that this guy was torturous and brutal on the Iraqi people. I mean, he brutalized them, he tortured them, he destroyed them, he cut out their tongues when they dissented. And now the people are beginning to see what freedom means within Iraq. Look at the Shia marches, or the Shia pilgrimages that are taking place.

The world will see that the United States is interested in peace, is interested in security and interested in freedom.

BROKAW: But it is important to find the weapons of mass destruction, or the evidence that he had a massive program underway, isn’t it?

THE PRESIDENT: Yes. I think we will. I’m pretty confident we will.

Full transcript at NYT. Note that in his response to the inspectors question, Bush never mentions weapons inspectors, just the brutality of Saddam. I’m looking forward to the 2004 debates:

LEHRER: President Bush, unemployment has reached a 12 year high under your administration, the stock market remains lackluster, deficits are at record levels, and your only substantive economic policy remains more upper income tax cuts. If elected, what is your plan to help the economy and does it involve programs other than tax cuts?

THE PRESIDENT: Jim, I’m glad you asked that question. Until April of 2003, the Iraqi people were horribly oppressed by the evil dictator, Evil Saddam Hussein. He even had rape rooms — rape rooms — Jim. Now the people of Iraq are free from the evil dictator, Saddam Hussein, and his evil, evil regime.

Ok, I’ve wandered a bit into fantasy land, Jim Lehrer would never ask the president that question. But somehow I suspect that if he did, this would be the answer.

AB

UPDATE: Typos corrected 4/26

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Dammit,

Moralistic right wingers can really piss me off (In this case, I’m not talking about Sen. Santorum, though I should be). But that just makes it more fun to watch them fall, Jimmy Swaggart style. From Joe Conason, an update on the status of Richard Delgaudio (full story in the Washington Post). Delgaudio was one of the people who brought Paula Jones to the public eye; as Conason explains, “Delgaudio literally brought Paula Jones to public attention in 1994. That was when one of his fundraising fronts, the “Legal Affairs Council,” paid her travel and hotel expenses to appear at the Consevative Political Action Committee conference in Washington, where she gave a brief account of the indignities she had allegedly suffered years before.” [This may be when he first learned that if you pay people who are in dire straights then they will do things that you want them to, an acquired skill that he would soon put to further use].

What’s he been doing since then? Mostly conservative fundraising and PAC activity. Oh, and also using some portion of the proceeds thereof to pay minors to get naked in hotels, reports the Washington Post: “Delgaudio was charged with taking sexually explicit photographs of a 16-year-old girl. He paid the girl — a single mother and high school dropout — by the hour for photo shoots at the Deluxe Plaza Motel in Baltimore, according to court documents and Baltimore City Police Detective Randy Wynn, who investigated the case.” Jackass. The judge instructed him to not visit the prostitute-ridden area around the Deluxe Plaza Motel anymore and gave him two years probation.

At sentencing, Delgaudio’s attorney told the judge that Delgaudio “plans to donate $5,000 to help ‘young mothers in great need.’” Delgaudio piped up and said “actually, Your Honor, that’s exactly what I was doing in the hotel when the police came in”. Ok, I made that last part up, but the rest is true. But seriously, maybe Delgaudio should just stay away from young mothers in need.

AB

P.S. Also via Conason, it seems like Santorum can’t tell the difference between sex between consenting adults and sex with dogs. Go read it.

UPDATE: I’m a day late and a dollar short; Atrios had the Degaudio story on Tuesday.

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Bush in Ohio Explaining the Dire Need for Tax Relief

In Mr. Voinovich’s home state yesterday, Bush said

“Some in Congress say the plan is too big. Well, it seems like to me they might have some explaining to do. If they agree that tax relief creates jobs, they why are they for a little-bitty tax relief package? If they believe tax relief is important for job creation, they ought to join us and join this administration and join many in Congress and have a robust package that creates enough work for the American people.”

But what if they don’t agree that these tax cuts create jobs? What if they believe that their stimulative effect is outweighed by the negative effect of expectations of future deficits? It almost seems like Bush is making Voinovich’s case for him. And, $350b is not really “little-bitty”, though it is fun to hear the President say that.

AB

P.S. Interesting trivia from the same article: no Republican has ever been elected president without carrying Ohio.

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California Consumption Tax Gambit?

As a few loyal readers may recall, this blog was started largely in response to serious discussion in the 2002 Economic Report of the President of phasing out income taxes in favor of consumption taxes (see the “Consumption Taxes, parts 1, 2, 3, 4, 5″ in the sidebar). I’ve since wandered a bit, but allconsumptiontaxesallthetime.blogspot.com doesn’t seem like a great way to generate traffic. Anyway, unless implemented very carefully, as something much more refined than a national sales tax, a consumption tax would be an extremely regressive form of taxation. Why? The poor, almost by definition, consume most of their income and therefore would pay taxes on all their income. As wealth and income rise, less of income is devoted to consumption, so under a consumption tax, the wealthy pay less of their income in taxes.

Why the flashback? At his new home, CalPundit has a report on the politics surrounding the state’s massive budget deficit. In a nutshell, Democrats can’t increase taxes without a 2/3 majority, which they lack. Republicans are adamantly opposing tax increases, in spite of the $35b shortfall (see my earlier post on state deficits here). But the Democrats don’t need a super-majority to implement fee increases (Kevin defines a fee for us: “[it's a tax] that goes toward mitigating things that harm the health of Californians.” Well and good, but where it gets interesting is when Kevin speculates that this might be a bit of brinksmanship on the part of Democrats:

Are the Democrats serious? Or are they just trying to propose something so horrific that Republicans have no choice except to buckle under and get down to serious negotiating?

To which I’d add, “or is this giving Republicans exactly what they want?” In fairness, I think the typical California Republican is more moderate than the average Republican, so in this instance he might be right. But it’s a bit risky to assume that Repblicans would, given a choice between progressive (or at least neutral) income taxes versus regressive consumption taxes, be horrified by the latter and opt for the former.

AB

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Next Target of Club for Growth Ads?

As you’ve probably heard, the Club for Growth, a fairly extreme supply-side organization, launched ads against Olympia Snowe of Maine and George Voinovich of Ohio. The ads are in response to the two senators saying they would not back, and would in fact actively oppose, a tax cut over $350b. Said Steven Moore, president of the Club for Growth, in what appears to be an ongoing bid to become the Harry Belafonte of the right: “These Franco-Republicans are as dependable as France was in taking down Iraqi dictator Saddam Hussein.” The ads even picture Sen. Voinovich in front of a French flag (Snowe’s ad may also have a French flag; I haven’t seen it), scenes of victory in Iraq, and the like, before concluding with a message imploring Senator Voinovich to back Bush’s plan.

And yesterday, the markets reacted favorably when Bush said “I think Alan Greenspan should get another term.” While he was eventually won over to the initial Bush tax cut after initially appearing skeptical, as recently as February of this year Greenspan voiced concern over deficits (see here too) and tied deficits to higher interest rates. In mid-2002, Greenspan also expressed opposition to further tax cuts. Can we really have a Franco-Republican in charge of the nation’s money supply?

AB

UPDATE: TBogg has a post up on the “still stupid” Greens and their inability to relent on the claim that Republicans and Democrats are just alike (apparently, their heads have remained up in the sky, or perhaps up some less pristine place, for the last 2.25 years). As the Salon story TBogg quotes indicates, the Greens plan to target Progressive Democrats like Barbara Boxer in an attempt to run them out of office make them run to the left. TBogg concludes that “It’s gotta be the hemp. I blame it on the hemp…..” What does this have to do with Steven Moore and the Club for Growth? Well, CFG does have one redeeming virtue: like the Greens, they target moderates in their own party for primary challenges, in this case attempting to make them tack hard right. Also like the Greens, CFG really only ends up hurting the causes they care about. There’s only one possible implication for rational Greens: stop donating to the Green Party and start giving to the Club for Growth.

UPDATE: On Wednesday, Greenspan said, “The president and I have not discussed this, but I greatly appreciate his confidence. If President Bush nominates me and the Senate confirms me, I would have every intention of serving.”

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Has Anyone Read this Book?

In 1998, Chief Justice Rehnquist published a book, All the Laws But One, on the subject of civil liberties and the writ of habeas corpus. I hadn’t heard of this book until I came across this:

Chief Justice Rehnquist talked about his latest book on U.S. Supreme Court history, All the Laws But One, a book about wartime civil liberties. In 1861, with the survival of the United States in jeopardy, Abraham Lincoln responded to the national threat by suspending the writ of habeas corpus, a traditional bulwark of individual liberty. Lincoln’s decision reveals a conflict in the practice of American democracy, and in this absorbing new study the Chief Justice of the United States examines the inevitable clash between the demands of a successful war effort and the compelling need to protect civil liberties. Taking his title from Lincoln’s speech before Congress defending his suspension of the writ, William H. Rehnquist relates how the exigencies of wartime have strained civil liberties. The decisions made by a wartime government are unlike those made in times of peace, and here the Chief Justice guides the reader through the various wartime policies–and the legal decisions that followed: the Lincoln administration’s prosecution of civilians before military tribunals (as well as of the alleged conspirators in the Lincoln assassination); the criminalization in World War I of speech inciting resistance to the draft; the forcible relocation of Japanese-Americans in World War II; and the imposition for nearly three years of martial law in Hawaii. Each of these instances illustrates the Roman dictum Inter arma silent leges, “In time of war the laws are silent”; but as Rehnquist argues, that silence alternates with voices raised in defense of civil liberties.

1998 being part of the Clinton Years, I’m curious as to what Rehnquist’s veiws were at the time and how they compare to the PATRIOT act provisions. mailto: angrybearblog@yahoo.com. Is it worth a read?

AB

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Thinking About 2004?

Bush’s advisors are. Here are some highlights:

“…Bush’s advisers have drafted a re-election strategy built around staging the latest nominating convention in the party’s history, allowing Mr. Bush to begin his formal campaign near the third anniversary of the Sept. 11 attacks” [remember the use of photos of Bush from Air Force One after 9/11 in Republican fundraisers?] “…they are prepared to spend as much as $200 million”.

“…For the next 18 months, Mr. Bush’s explicitly political appearances will be limited almost exclusively to fund-raisers and tending-the-vineyard visits to important political states like New Hampshire.”

“…Already, the president’s travel schedule is emphasizing states that will prove pivotal in the 2004 election. He went to Missouri last week and is heading for Ohio this week. Since those trips are presented as official White House travel, they were not billed against Mr. Bush’s re-election campaign.”

“…the Republican National Committee, at the direction of the White House, has methodically distributed information intended to discredit his possible challengers and has set up a full-fledged research effort into their backgrounds”. [Click here to read about this in action.]

AB

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The Daily Show

I’ve been meaning for some time to do a post about how sad it is that the most cutting analysis of politics, at least on TV, is on The Daily Show (Comedy Central), not Fox, MSNBC, or CNN. Alas, the Nation beat me to it. It’s worth watching, particularly the first ten minutes, and since Comedy Central plays it about 7 times per day, it should be easy to catch. Link to The Nation story via TBogg.

AB

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