Tax wars

November 21, 2010 · Posted in The Capitol · Comment 

(Paul)

Matthew Continetti of the Weekly Standard takes a look at the current Democratic “tax strategery.” The Democrats say they want to increase taxes only on households making more than $ 250,000 a year. Yet, despite their control of Congress and the White House, they have done nothing to make this tax structure a reality. As a result, notes Continetti, “businesses, entrepreneurs, financial planners, tax preparers, and taxpayers have no certain idea of what they’ll be expected to pay the IRS come January.”

According to Continetti, the current Democratic strategy is to extend current middle class tax rates “permanently” while setting an expiration for upper-income rates. From the Democrats’ perspective, this approach makes plenty of sense. Raising taxes on the “rich,” which includes small businesses, is politically dangerous now, while the economy stagnates. The Dems likely would be far better off trying to soak the “rich” later on when (1) the issue is no longer coupled with tax rates for the those who make less than $ 250,000 and (2) the economy, one hopes, has improved.

Perhaps for this reason, Republicans in the House and Senate are standing firm against “decoupling,” Continetti reports. In addition, he says, more than a few Democrats, senators from red states in particular, may well stand with them.

If so, the Democrats will face quite a dilemma. To keep the current tax rates in place for everyone, with no expiration dates, would violate liberal principles and constitute a legislative defeat. But to refuse to extend the current rates would present a substantial risk that the Dems will be blamed for everyone’s taxes going up and for the economic consequences of raising taxes in a weak economy.

The Republicans face some risk in this scenario too. The Democrats will note that they were willing to keep current tax rates for everyone except the “rich,” but that the Republicans insisted on protecting their favorite constituency.

This argument may well have some legs with the public, especially if the economy doesn’t pick up. My sense is that incumbent legislators from both parties will feel considerable heat if Congress defaults into across-the-board tax raises.

But the biggest risk would be incurred by President Obama. He still “owns” the economy in the public’s view. It would, I think, be astonishingly stupid if, in Continettit’s words, “the same team that brought you Obamacare [were to] produce, through its inaction, the largest tax increase in history.”




Power Line

Tax wars

November 21, 2010 · Posted in The Capitol · Comment 

(Paul)

Matthew Continetti of the Weekly Standard takes a look at the current Democratic “tax strategery.” The Democrats say they want to increase taxes only on households making more than $ 250,000 a year. Yet, despite their control of Congress and the White House, they have done nothing to make this tax structure a reality. As a result, notes Continetti, “businesses, entrepreneurs, financial planners, tax preparers, and taxpayers have no certain idea of what they’ll be expected to pay the IRS come January.”

According to Continetti, the current Democratic strategy is to extend current middle class tax rates “permanently” while setting an expiration for upper-income rates. From the Democrats’ perspective, this approach makes plenty of sense. Raising taxes on the “rich,” which includes small businesses, is politically dangerous now, while the economy stagnates. The Dems likely would be far better off trying to soak the “rich” later on when (1) the issue is no longer coupled with tax rates for the those who make less than $ 250,000 and (2) the economy, one hopes, has improved.

Perhaps for this reason, Republicans in the House and Senate are standing firm against “decoupling,” Continetti reports. In addition, he says, more than a few Democrats, senators from red states in particular, may well stand with them.

If so, the Democrats will face quite a dilemma. To keep the current tax rates in place for everyone, with no expiration dates, would violate liberal principles and constitute a legislative defeat. But to refuse to extend the current rates would present a substantial risk that the Dems will be blamed for everyone’s taxes going up and for the economic consequences of raising taxes in a weak economy.

The Republicans face some risk in this scenario too. The Democrats will note that they were willing to keep current tax rates for everyone except the “rich,” but that the Republicans insisted on protecting their favorite constituency.

This argument may well have some legs with the public, especially if the economy doesn’t pick up. My sense is that incumbent legislators from both parties will feel considerable heat if Congress defaults into across-the-board tax raises.

But the biggest risk would be incurred by President Obama. He still “owns” the economy in the public’s view. It would, I think, be astonishingly stupid if, in Continettit’s words, “the same team that brought you Obamacare [were to] produce, through its inaction, the largest tax increase in history.”




Power Line

Talking to Your Kids About Star Wars

November 18, 2010 · Posted in The Capitol · Comment 

The gang at Asylum have prepared a PSA:

Here are some sobering facts about the world today: Every day, millions of kids go to sleep having never been introduced to Chewbacca, and, worse, countless more think Greedo shot first.

We here at Asylum want to make sure you and your child have an open and healthy conversation about Jar Jar and the differences between a “good trilogy” and an “uh-oh trilogy.”

“Because no one should live in a world where Han didn’t shoot first.”




Outside the Beltway

Currency wars and conventional wisdom

November 17, 2010 · Posted in The Capitol · Comment 

Yesterday I received one of those "Q and A" e-mails that think tanks
use to promote their views from the Carnegie Endowment yesterday. The first
question was: "What is the danger that a currency war could break out?"

Obviously the premise of this question is that there
is no such war at present. But wait a minute. The IMF says that China is
manipulating its currency. That means that China is constantly buying dollars in the global currency markets in
order to keep the dollar’s value artificially high versus the Chinese yuan. It
further means that China is doing this in order to indirectly subsidize its
exports and to accumulate large dollar reserves. Nor is China the only player
of this game. South Korea, Taiwan, Singapore, and even, upon occasion, Japan also
intervene in currency markets to be sure that their export industries remain
"competitive."

The intervention is always aimed at keeping the
value of those currencies versus the dollar somewhat lower than market forces
would dictate. In other words, these countries are all subsidizing their
exports into the U.S. market and into the markets of other countries like
Canada or Australia or Norway, for example, that have freely floating
currencies. This subsidization is a beggar-thy-neighbor  policy that aims to create jobs at home by expropriating
those of the importing countries. It is a strike at the competing industries in
floating currency markets that would be competitive in the absence of the
currency manipulation.

Now what would you call this — a currency war
maybe?  Well, according to Carnegie Encowment economist Uri Dadush, you’d be wrong if you did. Dadush says that while there is a
significant risk of a currency war breaking out, we’re not there yet.
Apparently that can only happen if the U.S. decides to play tit for tat.

An even better example was the story that I’m sure
many of you saw on the front page of yesterdays New York Times business section
titled, Few Jobs Seen in a Weaker Dollar. I was particularly
interested in this story because it had run originally in the International
Herald Tribune
and had contained a quote from, well, me. Naturally when I saw
it again in the Times, I turned eagerly to the inside jump page to see my name
in print once again.  So you also know
how disappointed I was to see that my name and quote had disappeared from the
Times edit of the story.

According to the Times version all economists share
the view that a weaker dollar — meaning no currency manipulation by China or
others — would have little if any affect
on either the U.S. trade deficit or U.S. job creation. So, whereas the Dadush was saying that we’re not yet in a currency war, the Times was saying
that maybe there is a war, but even if the currency manipulators stopped their
attack, the effect on the U.S. economy would be negligible. So, maybe we’re not
at war, but if we are, don’t worry about it. This is the conventional U.S.
economic wisdom as handed down by two pillars of the establishment.

The Times essentially said that exchange rates no
longer have much effect on trade flows because global companies produce in most
of the major markets into which they sell and do not change production
locations in response to currency shifts.

In the original Herald Tribune article, I noted that exchange rates are
prices and that to argue that prices don’t matter is to argue that capitalism
doesn’t matter. Obviously, the apostles of the conventional wisdom at the Times
thought my comment undercut the preferred story line too much and removed it.
Or maybe they just had to cut the length of the article and my comments just
inadvertently wound up on the cutting room floor. Who knows?  But it doesn’t really matter, because the
story was so obviously incomplete to anyone at all familiar with global
production and marketing as to make one wonder if there are any editors left at
the Times.

Look, of course, global companies produce in a lot
of different markets. Toyota produces in Japan and in the U.S. for example. But
Toyota sells more cars in the U.S. than it produces in the U.S. and so do
Nissan, Mercedes Benz, and BMW. Apple produces some things in the U.S., but the
bulk of the products Apple sells in the U.S. are made in Japan, Korea, Taiwan, and
China. If this were not the case, how would the United States have chronic
trade deficits of over $ 600 billion? Does the Times think that Toyota would not
move more of its production to the U.S. if the yen doubled in value versus the
dollar? If Toyota did move more production here, would that no create U.S.
jobs? What am I missing here?

FP Passport

Currency Wars rap battle

November 13, 2010 · Posted in The Capitol · Comment 

The Taiwanese animators strike again, taking on the currency wars and the Nobel Peace Prize controversy:

The scary panda even has a cameo, unleashing a "smorgasbord of pain" on some Norwegian beauty queens.

Hat tip: Matt Yglesias

FP Passport

Fragments From The Wars

November 13, 2010 · Posted in The Capitol · Comment 

Battlespace9_0

Eliza Williams previews a London photography show, Battlespace, presenting an "unsanitized view" of the conflicts in Iraq and Afghanistan. From the exhibit's catalogue text:

These photographs were made in Afghanistan and Iraq, but they don’t claim to depict either country. They are glimpses of an alternate reality built upon those countries. The images do not provide a comprehensive account of these wars, or an understanding of these nations or their peoples. They are fragments, seen in off-moments behind the walls of concrete super-bases, or outside them, through night-vision goggles and ballistic eye shields. …

The battlespace is not solely defined by map lines or grid squares, but also in the areas of perception and illusion. … In this shifting, human terrain, there are no facts or truths, only competing agendas. … Unpleasant, complex, or off-message images are filtered by both sides, and war stories are recycled through the echo chamber.

(Image: Battleplans, Operation Rock Avalanche. Afghanistan, 2007. By Balazs Gardi)





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The Daily Dish | By Andrew Sullivan

Fragments From The Wars

November 13, 2010 · Posted in The Capitol · Comment 

Battlespace9_0

Eliza Williams previews a London photography show, Battlespace, presenting an "unsanitized view" of the conflicts in Iraq and Afghanistan. From the exhibit's catalogue text:

These photographs were made in Afghanistan and Iraq, but they don’t claim to depict either country. They are glimpses of an alternate reality built upon those countries. The images do not provide a comprehensive account of these wars, or an understanding of these nations or their peoples. They are fragments, seen in off-moments behind the walls of concrete super-bases, or outside them, through night-vision goggles and ballistic eye shields. …

The battlespace is not solely defined by map lines or grid squares, but also in the areas of perception and illusion. … In this shifting, human terrain, there are no facts or truths, only competing agendas. … Unpleasant, complex, or off-message images are filtered by both sides, and war stories are recycled through the echo chamber.

(Image: Battleplans, Operation Rock Avalanche. Afghanistan, 2007. By Balazs Gardi)





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Add to digg
Add to Reddit
Add to Twitter
Add to del.icio.us
Add to StumbleUpon
Add to Facebook




The Daily Dish | By Andrew Sullivan

A Celebration of 35 Years of Michael Walzer’s Just and Unjust Wars

November 8, 2010 · Posted in The Capitol · Comment 

(Kenneth Anderson)

I am privileged this week to be in attendance at a marvelous conference at NYU celebrating the 35th anniversary of Michael Walzer’s Just and Unjust Wars, with Professor Walzer himself in attendance, and a host of luminaries among moral philosophy, law, and other fields.  I don’t really have internet access at the conference, and the papers are all in preliminary form, but if you want to know much of my thinking about Just and Unjust Wars, I have many posts on the subject — many of them trying to tease out exactly what kind of theory I think Walzer offers, set against the range of ethics of war positions, over at my now-abandoned, archival blog.  (Search the Walzer posts.)  I think I will do a series of Walzer related posts here, if I can get internet access, drawing on the conference and my earlier blog posts.  Kudos to Joseph Weiler, Gabby Blum, and Ian Scobbie for pulling this marvelous conference together.

I do have a paper at this conference — on drones, but not really on the law of targeted killing and drone warfare.  (Yale’s Paul Kahn is kind enough to serve as commentator on Wednesday.)  Tentatively titled, “Every death a targeted killing,” it aims to ask, speculatively, what effects a fully realized technological and legal and moral regime of targeted killing using drones would look like.  What would be the features of such a condition for conflict?  It does not attempt to address this for all conflicts — but suggests that, in the special case of counterterrorism, it enables the growth of an “intelligence-driven” form of conflict that individuates every killing, rather than targeting an undifferentiated mass of combatants.  If one takes that from a moral standpoint, targeted killing has the same proportionality rules as any other weapon, then it pays exactly the same heed to non-combatants; by contrast, it pays far more attention to the status and role of combatants.  The paper is in early draft form, in any case, so will get revised before I even post a working draft to SSRN.




The Volokh Conspiracy

Currency Wars Also Have Unintended Consequences and Collateral Damage

November 4, 2010 · Posted in The Capitol · Comment 

By Gerald P. O’Driscoll

The Fed’s planned purchases of $ 600 billion of long-term Treasury bonds were targeted for domestic problems, but are having international consequences. The expansion of the Fed’s balance sheet drives down the foreign-exchange value of the U.S. dollar, and (same thing) forces other currencies to appreciate in value.

Emerging markets with high short-term interest rates will attract “hot money” flows. These flows are not stable sources of funding, and disrupt the small capital markets in these countries. Long-term, the appreciation of their currencies harms their competitiveness in global goods’ markets.

Brazil has already imposed capital controls and other emerging markets may follow. The Chinese in particular have reacted sharply.  According to a Reuters dispatch, Xia Bin, adviser to China’s central bank, said another financial crisis is “inevitable.” He added that China will act in its own interests.

In short, the Fed’s actions have undone whatever good came out of the G20 meetings. Any hope for cooperation on currency values and financial stability is out the window. There are potential spillovers in other areas of global cooperation.

Currency wars, like other wars, have unintended consequences and collateral damage.  Some countries will predictably react by imposing capital controls.  Moves to curb imports can follow. Monetary protectionism leads to trade protectionism.

However it might like matters to be, the Fed cannot simply act domestically.  It has reached the useful limits of further easing.

Currency Wars Also Have Unintended Consequences and Collateral Damage is a post from Cato @ Liberty - Cato Institute Blog


Cato @ Liberty

Lego Star Wars Reimagined

November 3, 2010 · Posted in The Capitol · Comment 

A reboot of the Star Wars franchise in Lego:




ProfessorBainbridge.com

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