Two worlds ready or not
Simon Johnson at Baseline Scenario notes that (bolding mine)
On the fringes of the World Economic Forum meeting in Davos this week, there was plenty of substantive discussion – including about the dangers posed by our “too big to fail”/”too big to save” banks, the consequences of widening inequality (reinforced by persistent unemployment in some countries), and why the jobs picture in the U.S. looks so bad.
But in the core keynote events and more generally around any kind of CEO-related interaction, such themes completely failed to resonate. There is, of course, variation in views across CEOs and the people work intellectual agendas on their behalf, but still the mood among this group was uniformly positive – it was hard to detect any note of serious concern.
Many of the people who control the world’s largest corporations are quite comfortable with the status quo post-financial crisis. This makes sense for them – and poses a major problem for the rest of us.The thinking here is fairly obvious. The CEOs who provide the bedrock of financial support for Davos have mostly done well in the past few years. For the nonfinancial sector, there was a major scare in 2008-09; the disruption of credit was a big shock and dire consequences were feared. And for leaders of the financial sector this was more than an awkward moment – they stood accused, including by fellow CEOs at Davos in previous years, of incompetence, greed, and excessively capturing the state.
But all of this, from a CEO perspective, is now behind them. Profits are good – this is the best bounce back on average in the post-war period; given that so many small companies are struggling, it is reasonable to infer that the big companies have done disproportionately well (perhaps because their smaller would-be competitors are still having more trouble accessing credit). Executive compensation at the largest firms will no doubt reflect this in the months and years ahead.
In terms of public policy, the big players in the financial sector have prevailed – no responsible European, for example, can imagine a major bank being allowed to fail (in the sense of defaulting on any debt). And this government support for banks has translated into easier credit conditions for the major global corporations represented at Davos.
The public policy issue of the day, from the point of view of such CEOs, is simple. There needs to be sufficient fiscal austerity to strengthen public balance sheets – so that states can more effectively stand behind their banks in the future, and to keep currencies from moving too much. Leading bankers, in particular, insisted on the paramount importance of providing unlimited government support to their sector during 2008-09; now they insist with equal or greater vigor that support to all other parts of society be curtailed.
This is where cognitive dissonance creeps in. Most CEOs feel that the provision of general public goods is not their responsibility, although they are very happy to help guide (or capture) the provision of public goods specific to their firm.
For the big multinational companies current US trade policy also works quite well. What is not talked about are conditions for US companies that are mainly domestic.
Defense
Option 1 Introduce Minimum Out-of-Pocket Requirements Under TRICARE For Life
Energy
Option 2 Transfer the Tennessee Valley Authority’s Electric Utility Functions and Associated Assets and Liabilities
Option 3 Reduce the Size of the Strategic Petroleum Reserve
Natural Resources and Environment
Option 4 Prohibit New Enrollment in the Conservation Stewardship Program
Option 5 Limit Enrollment in the Conservation Reserve Program
Agriculture
Option 6 Reduce the Premium Subsidy in the Crop Insurance Program
Option 7 Reduce by 20 Percentage Points the Share of a Farmer’s Base Acreage Eligible for USDA Payments
Housing Credit
Option 8 Lower the Loan Limits on Mortgages Guaranteed by Fannie Mae and Freddie Mac
Option 9 Increase Guarantee Fees Charged by Fannie Mae and Freddie Mac
Education
Option 10 Eliminate Subsidized Loans to Graduate Students
Option 11 Change the Interest Rate Structure for Student Loans
Health
Option 12 Add a “Public Plan” to the Health Insurance Exchanges
Option 13 Limit Medical Malpractice Torts
Option 14 Adopt a Voucher Plan and Slow the Growth of Federal Contributions for the Federal Employees Health Benefits Program
Option 15 Convert the Federal Share of Medicaid’s Payment
Option 16 Reduce the Floor on Federal Matching Rates for Medicaid Services
Option 17 Consolidate and Reduce Federal Payments for Graduate Medical Education Costs at Teaching Hospitals
Option 18 Raise the Age of Eligibility for Medicare to 67
Option 19 Impose Cost Sharing for the First 20 Days of a Stay in a Skilled Nursing Facility Under Medicare
Option 20 Require a Copayment for Home Health Episodes Covered by Medicare
Option 21 Reduce Medicare Costs by Changing the Cost-Sharing Structures for Medicare and Medigap Insurance
Option 22 Increase the Basic Premium for Medicare Part B to 35 Percent of the Program’s Costs
Option 23 Reduce Medicare’s Payment Rates Across the Board in High-Spending Areas
Option 24 Eliminate the Critical Access Hospital, Medicare-Dependent Hospital, and Sole Community Hospital Programs in Medicare
Option 25 Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Medicare Part D for Low-Income Beneficiaries
Retirement and Social Security
Option 26 Base Cost-of-Living Adjustments for Federal Civilian and Military Pensions and Veterans’ Benefits on an Alternative Measure of Inflation
Option 27 Base Social Security Cost-of-Living Adjustments on an Alternative Measure of Inflation
Option 28 Link Initial Social Security Benefits to Average Prices Instead of Average Earnings
Option 29 Raise the Earliest Eligibility Age for Social Security
Option 30 Raise the Full Retirement Age in Social Security
Option 31 Lengthen by Three Years the Computation Period for Social Security Benefits
Option 32 Apply the Social Security Benefit Formula to Individual Years of Earnings
Options That Would Increase the Deficit
Option A-1 Extend the Requirement for States to Provide Transitional Medical Assistance
Option A-2 Permanently Extend Cost-Sharing Assistance for Qualifying Individuals Under Medicaid
Option A-3 Increase Social Security Benefits for Workers Who Have Low Earnings Over a Long Working Lifetime
Defense
Option 1 Introduce Minimum Out-of-Pocket Requirements Under TRICARE For Life
Energy
Option 2 Transfer the Tennessee Valley Authority’s Electric Utility Functions and Associated Assets and Liabilities
Option 3 Reduce the Size of the Strategic Petroleum Reserve
Natural Resources and Environment
Option 4 Prohibit New Enrollment in the Conservation Stewardship Program
Option 5 Limit Enrollment in the Conservation Reserve Program
Agriculture
Option 6 Reduce the Premium Subsidy in the Crop Insurance Program
Option 7 Reduce by 20 Percentage Points the Share of a Farmer’s Base Acreage Eligible for USDA Payments
Housing Credit
Option 8 Lower the Loan Limits on Mortgages Guaranteed by Fannie Mae and Freddie Mac
Option 9 Increase Guarantee Fees Charged by Fannie Mae and Freddie Mac
Education
Option 10 Eliminate Subsidized Loans to Graduate Students
Option 11 Change the Interest Rate Structure for Student Loans
Health
Option 12 Add a “Public Plan” to the Health Insurance Exchanges
Option 13 Limit Medical Malpractice Torts
Option 14 Adopt a Voucher Plan and Slow the Growth of Federal Contributions for the Federal Employees Health Benefits Program
Option 15 Convert the Federal Share of Medicaid’s Payment
Option 16 Reduce the Floor on Federal Matching Rates for Medicaid Services
Option 17 Consolidate and Reduce Federal Payments for Graduate Medical Education Costs at Teaching Hospitals
Option 18 Raise the Age of Eligibility for Medicare to 67
Option 19 Impose Cost Sharing for the First 20 Days of a Stay in a Skilled Nursing Facility Under Medicare
Option 20 Require a Copayment for Home Health Episodes Covered by Medicare
Option 21 Reduce Medicare Costs by Changing the Cost-Sharing Structures for Medicare and Medigap Insurance
Option 22 Increase the Basic Premium for Medicare Part B to 35 Percent of the Program’s Costs
Option 23 Reduce Medicare’s Payment Rates Across the Board in High-Spending Areas
Option 24 Eliminate the Critical Access Hospital, Medicare-Dependent Hospital, and Sole Community Hospital Programs in Medicare
Option 25 Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Medicare Part D for Low-Income Beneficiaries
Retirement and Social Security
Option 26 Base Cost-of-Living Adjustments for Federal Civilian and Military Pensions and Veterans’ Benefits on an Alternative Measure of Inflation
Option 27 Base Social Security Cost-of-Living Adjustments on an Alternative Measure of Inflation
Option 28 Link Initial Social Security Benefits to Average Prices Instead of Average Earnings
Option 29 Raise the Earliest Eligibility Age for Social Security
Option 30 Raise the Full Retirement Age in Social Security
Option 31 Lengthen by Three Years the Computation Period for Social Security Benefits
Option 32 Apply the Social Security Benefit Formula to Individual Years of Earnings
Options That Would Increase the Deficit
Option A-1 Extend the Requirement for States to Provide Transitional Medical Assistance
Option A-2 Permanently Extend Cost-Sharing Assistance for Qualifying […]
Defense
Option 1 Reduce the Growth in Appropriations for the Department of Defense
Option 2 Cap Increases in Military Basic Pay
Option 3 Increase Medical Cost Sharing for Military Retirees Who Are Not Yet Eligible for Medicare
Option 4 Limit the TRICARE Benefit for Military Retirees and Their Dependents
Option 5 Increase Cost Sharing for Pharmaceuticals Under TRICARE
Option 6 Consolidate the Department of Defense’s Retail Activities and Provide a Grocery Allowance to Service Members
Option 7 Replace the Joint Strike Fighter Program with F-16s and F/A-18s
Option 8 Cancel the Navy and Marine Corps’ Joint Strike Fighters and Replace Those Aircraft with F/A-18E/Fs
Option 9 Cut the Number of Aircraft Carriers to 10 and the Number of Navy Air Wings to 9
Option 10 Cancel the Expeditionary Fighting Vehicle
Option 11 Delay Fielding of the Army’s Ground Combat Vehicle
Option 12 Terminate the Medium Extended Air Defense System Program
Option 13 Terminate the Precision Tracking Space System Program
All Discretionary Activities Other Than Defense
Option 14 Reduce Growth in Appropriations for Agencies Other Than the Department of Defense
Energy
Option 15 Eliminate the Department of Energy’s Grants to States for Energy Conservation and Weatherization
Option 16 Reduce Department of Energy Funding for Energy Technology Development
Natural Resources and Environment
Option 17 Eliminate Federal Grants for Wastewater and Drinking Water Infrastructure
Option 18 Increase Fees for Use of the Inland Waterway System
Commerce
Option 19 Eliminate the International Trade Administration’s Trade Promotion Activities or Charge the Beneficiaries
Transportation
Option 20 Limit Highway Funding to Expected Highway Revenues
Option 21 Eliminate Grants to Large and Medium-Sized Hub Airports
Option 22 Increase Fees for Aviation Security
Option 23 Eliminate Intercity Rail Subsidies
Option 24 Eliminate the Transit Starts Programs
Community and Regional Development
Option 25 Create State Revolving Funds to Finance Rural Water and Waste Disposal
Option 26 Drop Wealthier Communities from the Community Development Block Grant Program
Education and Social Services
Option 27 Eliminate Certain Grant Programs for Elementary and Secondary Education
Option 28 Restrict Pell Grants to the Neediest Students
Option 29 Eliminate Funding for National Community Service Programs
Option 30 Eliminate the Senior Community Service Employment Program
Option 31 Reduce Funding for the Arts and Humanities
Health
Option 32 Finance the Food Safety and Inspection Service Through Fees
Option 33 Reduce or Constrain Funding for the National Institutes of Health
Income Security
Option 34 Increase Payments by Tenants in Federally Assisted Housing
Veterans’ Benefits and Services
Option 35 End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8
Administration of Justice
Option 36 Reduce […]
Revenues
Individual Income Tax Rates
Option 1 Increase Individual Income Tax Rates
Option 2 Raise Tax Rates on Capital Gains
Individual Income Tax Base
Option 3 Use an Alternative Measure of Inflation to Index Some Parameters of the Tax Code
Option 4 Gradually Eliminate the Mortgage Interest Deduction
Option 5 Limit or Eliminate the Deduction for State and Local Taxes
Option 6 Curtail the Deduction for Charitable Giving
Option 7 Limit the Tax Benefit of Itemized Deductions to 15 Percent
Option 8 Include Employer-Paid Premiums for Income Replacement Insurance in Employees’ Taxable Income
Option 9 Include Investment Income from Life Insurance and Annuities in Taxable Income
Option 10 Tax Carried Interest as Ordinary Income
Option 11 Tax Social Security and Railroad Retirement Benefits in the Same Way That Distributions from Defined-Benefit Pensions Are Taxed
Option 12 Reduce Limits on Contributions to Retirement Plans
Option 13 Replace the Tax Exclusion for Interest Income on State and Local Bonds with a Direct Subsidy for the Issuer
Individual Income Tax Credits
Option 14 Modify or Eliminate the Child Tax Credit
Option 15 Eliminate Certain Tax Preferences for Education Expenses
Social Security Payroll Tax
Option 16 Increase the Maximum Taxable Earnings for the Social Security Payroll Tax
Option 17 Expand Social Security Coverage to Include Newly Hired State and Local Government Employees
Corporate Income Tax Rates
Option 18 Increase Corporate Income Tax Rates by 1 Percentage Point
Option 19 Set the Corporate Income Tax Rate at 35 Percent for All Corporations
Taxation of Income from Businesses and Other Entities
Option 20 Repeal the “LIFO” and “Lower of Cost or Market” Inventory Accounting Methods
Option 21 End the Expensing of Exploration and Development Costs for Extractive Industries
Option 22 Extend the Period for Depreciating the Cost of Certain Investments
Option 23 Repeal the Deduction for Domestic Production Activities
Taxation of Income from Worldwide Business Activity
Option 24 Eliminate the Source-Rules Exception for Exports
Option 25 Tax the Worldwide Income of U.S. Corporations As It Is Earned
Option 26 Exempt Active Foreign Dividends from U.S. Taxation and Change the Tax Treatment of Overhead Expenses
Consumption Taxes and Excise Taxes
Option 27 Impose a 5 Percent Value-Added Tax
Option 28 Increase Excise Taxes on Motor Fuels by 25 Cents
Option 29 Increase All Taxes on Alcoholic Beverages to $16 per Proof Gallon
Health Care Provisions
Option 30 Accelerate and Modify the Excise Tax on High-Cost Health Care Coverage
Option 31 Increase the Payroll Tax Rate for Medicare Hospital Insurance by 1 Percentage Point
Option 32 Repeal the Individual Health Insurance Mandate
Other Taxes and Fees
Option 33 Impose a Fee on Large Financial Institutions
Option 34 Reinstate the Superfund Taxes
Option 35 Impose a Price on Emissions of Greenhouse Gases
Options That Would Increase the Deficit
Option […]