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

The “JOBS” bill today

Simon Johnson points us to more information on the JOBS bill (see link) and a Senate vote today:

As it currently stands, the “JOBS” bill now before the Senate would gut investor protection in the United States. The title of the bill is a complete misnomer – anything that weakens investor protection makes it more risky to invest in companies and increases the cost of capital to honest entrepreneurs. (For more background on the bill and links, see this piece.) 

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Specifically, Senator Reed’s amendment would close or limit a major loophole that will allow large companies to avoid registering with the SEC (and therefore escape much regulation). The Reed Amendment would clarify how to define “shareholders” for the purpose of determining if a business is so widely owned that it must register with the SEC. Under the Amendment, the count should be based on beneficial owners of the shares, i.e., real people. The goal is to prevent evasion of the SEC registration threshold through “nominal” owners holding the shares for large numbers of beneficial owners. Big companies like H.R. 3606 – they will be regulated less and if the cost of capital rises for start-ups, that actually helps them. The Chamber of Commerce, the American Bankers’ Association, and the Independent Community Bankers of America have all weighed in heavily against the Reed Amendment – the idea of escaping SEC scrutiny greatly appeals to them.

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Making the United States More Like Greece

Simon Johnson at Baseline Scenario writes in Making the United States More Like Greece:

One of the big problems in Greece over the past decade or so is that the government was not honest with its data. Various people assisted in the matter – including Goldman Sachs with respect to some debt issues – but ultimately this was a political decision at the highest level. The people running the country decided to conceal the true nature of their budget and their debt. This deception ended up costing the country dearly – completely undermining its credibility under pressure and making it much harder to turn the fiscal and economic situation around.

In the modern United States, cutting taxes leads to lower revenue and larger budget deficits. There are no two ways about this – as Ronald Reagan discovered in the early 1980s. (In our new book, White House Burning, we go through the evidence on this point in detail, including important work by Greg Mankiw, former top economic adviser to George W. Bush and now working with Mitt Romney, which confirms that cutting taxes in the U.S. will lower revenue.)
But many Republicans feel that this is not true – in my conversations with them, for example in congressional hearings over the past year, the conviction seems to be that the research on this topic is bad science, even when done by Republicans. But convincing the CBO to abandon its proven and sensible approach to budget scoring has been difficult.

The solution currently under consideration is simple in its elegance – and downright frightening in its implications.

Simon points us to via this post that was ungated at his request at Tax Notes.

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