[Vilo!]

and credit crisis

Unless we want to inflate our way out with additional government spending of money we do not have, which will require taking on more and massive amounts of debt to be passed on to future generations, this is the time to just say no.

If we are serious about adopting the changes necessary to make this contraction produce long-term positive effects on the market we must:

1. Reduce government spending by 15% across the board over the next four years.

2. Reduce corporate taxes from 35% (world's 2nd highest) to 25% with targeted incentives to create new, high paying jobs.

3. Freeze personal income taxes at current levels so proper tax planning can occur.

4. Have a capital gains tax holiday for any company or individual who purchases distressed real estate from a lender to clean up the lender's balance sheet.

5. Ease the "mark to market" rules now in place to provide breathing room for lenders.

6. Ease the capital requirement currently in place at the banks.

Not one of these suggestions requires a dime of tax dollars and thus doesn't have a snowball's chance in Phoenix to be implemented. That does not, however, diminish the effectiveness they would have in setting the stage for future growth and prosperity in America.

Market cycles do and will happen as long as there are markets. One can only hope we as a nation accept that fact and plan accordingly. Then and only then can politicians, who are attempting to play economists, go back to protecting and defending the constitution as their job description outlines.

Politicians will only prolong the pain they wish to eliminate. History and gravity can be ignored temporarily but will never be stopped.

Nothing would send a stronger signal that America is serious about the future. We have already witnessed what the world thinks about our panicked "solution" of throwing money at the problem. Foreign investors ran to gold and treasuries last week in unprecedented numbers. Short-term treasuries have not seen these prices since the London Blitz in 1940. Millions around the globe moved money to safe havens.

The system desperately requires a fresh injection of confidence, NOT debt. These steps will restore confidence only as the world can depend on fiscal responsibility from the world’s largest debtor. Confidence is more important than capital.

Source


Anybody say "Nay?"

[redcarpet]

I say nay, to the tax cuts. US business hardly ayes any taxes. Many need to be raised. Cutting any is ludicrous.

[Rancid]

I would say Yay,

however i would amend the income tax freeze, such that income taxes are cut by 5% - 10% across the board, and then frozen.

[Vera Politica]

There is nothing substantive with that plan. Just a bunch of numbers....
"decrease govt spening by 15% across the board" - what the hell does this mean?

[Harmattan]

People who support tax decreases should say which services they want to be cut.
Please, don't just throw some "we should just" or "I'm sure that", look at the actual numbers and then say us what you want to cut to reach 15%.

[Rancid]

People who support tax decreases should say which services they want to be cut.

Ok, slash the arts endowment, slash the department of education, slash the IRS, slash. shut down the ATF and DEA for starters

[U184]

NAY

[Gravy]

1. Obamas plans will kick the shit out of a mere 15% reduction of government spending....so that will easily be obtained.

2. and 3. Our current tax system generates a certain amount of revenue every year. If you cut taxes in the way that is described here, then the sales tax will have to escalate to make up for the difference.

4. This is a great idea. But they would have to redesign the capital gains tax laws because it differs from investors to families. Someone else on this forum presented a similar idea a couple months ago. It would help swallow up some of the property that is killing the banks.

5. Havent they already done that?

[Rancid]

1. Obamas plans will kick the shit out of a mere 15% reduction of government spending....so that will easily be obtained.

What in the hell are you smoking?

Obama is going to increase spending, not reduce it.

2. and 3. Our current tax system generates a certain amount of revenue every year. If you cut taxes in the way that is described here, then the sales tax will have to escalate to make up for the difference.

what?

How about cut spending, and taxes, and stop putting the country into more debt. The debt is going to kill us in the long run.

[Vilo!]

Obama is going to increase spending, not reduce it.

Seriously, the Chinese are shown to be a bit more serious in their recession recovery efforts than this Obama stimulus package.Their spending somewhere in the trillion double digits. This stimulus package doesn't have enough juice to actually stimulate real job growth.It's amazing to me how barack--being someone of supposed shrewd intelligence--could not even get Jim Kramer to agree with the package.

[Gravy]

In the long run he intends to decrease it. My bad. Sorry.

His website says....Obama believes that a critical step in restoring fiscal discipline is enforcing pay-as-you-go (PAYGO) budgeting rules which require new spending commitments or tax changes to be paid for by cuts to other programs or new revenue.

[Harmattan]

Ok, slash the arts endowment, slash the department of education, slash the IRS, slash. shut down the ATF and DEA for starters

Your goal : 15% of 2600 billions is 390 billions
ATF : roughly 1 billion
DEA : about 2.5 billions
National Arts Endowment : 0.15 billions
IRS : 11 billions (How much of it can you slash ?)
Education : 68 billions (All of it ? Is it really useless ?)

Seems like you still have a long way to go...

Seriously, the Chinese are shown to be a bit more serious in their recession recovery efforts than this Obama stimulus package.Their spending somewhere in the trillion double digits.

Yes, and I bet they will subside it by selling some of their dollars reserves. I wonder how it will affect your currency.

[Dave]

The big room for cutting spending is defense and entitlements. It would be tricky to cut either without making the economy even worse than it already is, although intelligently structured perhaps one could have a net positive impact. I would say that any defense spending that we can immediately translate into spending on civilian infrastructure would be worth it, however. Defense factories that manufacture armored fighting vehicles could perhaps manufacture traction system instead, for instance. The wars in Iraq and Afghanistan, along with our overseas bases, could be seriously drawn dawn with little adverse impact on any elements of our domestic economy, with mostly positive benefits due to the huge savings.

That's not to say we shouldn't cut other wasteful spending where possible, but let's be real here--the economy is hooked on government spending and anyone thinking that slashing government spending to the bone is a simple solution to our problems is flying a kite. We also can't just focus on federal spending. Many state and local governments are now in serious fiscal trouble, and most state constitutions bar deficit spending. The federal government could best help them out by deporting illegal aliens.

Eliminating idiotic tax rules, onerous regulations, and diversity statutes would have a much more positive short term impact by unleashing lost productivity. And while this wouldn't be popular with anyone, perhaps moving from a 40 hour work week to a 44 hour one would help.

That said, regarding Mr. Smith's solutions specifically:

1. Reduce government spending by 15% across the board over the next four years.

I think this is reasonable, as long as we are very careful with what we cut and don't heavily "front-load" the cuts. The cuts must be gradual, and intelligently targeted with the aim of actually expanding private sector output rather than simply being anti-government.

2. Reduce corporate taxes from 35% (world's 2nd highest) to 25% with targeted incentives to create new, high paying jobs.

Corporate taxes should be slashed even lower, and they should cease to apply to overseas earnings as they do now. We don't even derive all that much revenue from corporate taxes, and the extremely high rate strongly discourages investment here in America. Perhaps worse, the treatment of overseas earnings prevents companies from repatriating those profits.

3. Freeze personal income taxes at current levels so proper tax planning can occur.

What does this mean? Freeze the current rates, or freeze revenues at this level? I don't agree with either solution. Freezing rates, not necessarily at the current level, is a good idea in that it does facilitate long-range planning, but I think this is somewhat overrated in that the rates have not changed in a dramatic way since 1980. I think simplifying the tax code would have a much bigger impact.

4. Have a capital gains tax holiday for any company or individual who purchases distressed real estate from a lender to clean up the lender's balance sheet.

Better idea: abolish the capital gains tax (except perhaps on speculation) altogether. It doesn't bring in that much revenue, reduces the marginal productivity of capital, and reduces the available profits for reinvestment. For distressed assets I think we may need a recreation of something like the Resolution Trust Corporation.

5. Ease the "mark to market" rules now in place to provide breathing room for lenders.

Definitely agree. Many banks are currently illiquid because of this. Change to a rolling three year average.

6. Ease the capital requirement currently in place at the banks.

Insane. The capital requirements are already dangerously low and are a big part of the reason we're in this mess. Much of the banking sector is arguably INSOLVENT as well. If anything capital requirements need to go up. Let the FED create money if there is a liquidity crisis.

[Rancid]

Your goal : 15% of 2600 billions is 390 billions
ATF : roughly 1 billion
DEA : about 2.5 billions
National Arts Endowment : 0.15 billions
IRS : 11 billions (How much of it can you slash ?)
Education : 68 billions (All of it ? Is it really useless ?)

Seems like you still have a long way to go...

i really don't feel like going through it all here. i was looking at the massive list of federal agencies, and only picked these as a start.

i don't know what's up with that wink face you keep posting. It's not witty or cleaver, or funny.

[Harmattan]

i really don't feel like going through it all here. i was looking at the massive list of federal agencies, and only picked these as a start.

i don't know what's up with that wink face you keep posting. It's not witty or cleaver, or funny.

That wink was a mere translation of my face when I rode your posts. I am a smiling man. Like it or not.

You see, I always see the same things in my own country, and I think it's true in any country (at least in West) : most of people think the government should reduce taxes. Really, this seems to be some kind of universal constant, or maybe a western one. Now, when you ask people what we should remove, most of them mention negligible little things here and there, totally irrelevant regarding the ambitioned cuts, or just pretend that everything could be magically twice cheaper. So, anytime I hear someone claiming we should reduce taxes, I dig things up with them and realize that, 90% of the time, they're about totally clueless on reality, despite usually high education levels, and would not either accept the changes required to achieve those taxes cut.

Now, it's interesting to see that Dave, as opposed to you, went straight to the point : the military budget. Obviously, if you want to reduce by 15% the government spendings, which is a big cut, you have to look the main spendings : Medicare (21%), Social Security (21%), Defense (20%), 20 other percents being due to debt and other mandatory spendings. You didn't. Dave did. It's not you didn't want to enter into the details.

No wonder you were pissed off by that wink.

[Rancid]

oh yea, defense is bloated as hell too.

[savemysanityplease]

If you look up "effective tax rates on US corporations" on Google, you will find a plethora of studies that show that most of the large US companies pay an effective rate of around 17.5%. The statutory rate is really before "loopholes". This "after loophole" rate is really lower or comparable to our foreign competitors.

[Dave]

Our foreign competitors have lower loophole rates as well, and achieving said effective tax rate requires a byzantine network of specialized deductions which are uneconomic. The effective tax rate is also generally not achievable by smaller corporations. Lastly, and perhaps most importantly, we have extremly unattractive tax rules on the depreciation of capital investment.

[Zerogouki]

slash the arts endowment, slash the department of education, slash the IRS, slash. shut down the ATF and DEA for starters

You forgot the Department of Health and Human Services.