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The Real Fiscal Cliff
Conrad Black published a piece today in National Review Online that insightfully chronicles the true and the phony fiscal cliffs. On the real cliff he writes:
But, as I among many others have recounted here and everywhere, economics in a sophisticated economy like that of the United States is half Psychology 101 and half Grade 3 arithmetic. But no one, including the learned debaters last week, at this point seems to have grasped that both tests will be flunked, unless the avoidance of the fiscal cliff includes measures that radically cut the deficit and end the unspeakable fraud of 70 percent of the country’s $1 to $1.5 trillion federal deficit being covered by phony notes cyber-clicked into existence from the Treasury’s 100 percent subsidiary, the Federal Reserve. No test of psychological confidence will be passed by this charade, nor any test of Grade 3 arithmetic either. The administration swaddles itself in a few weeks of a record-breaking rise in economic-growth and tax-collection rates. But this is only three weeks, and applies to a built-in annual budget deficit of $1.5 trillion on top of an accumulated national debt that took 232 years to get to $10 trillion in 2008 and made it to $16 trillion this year. (And there are still 5 million fewer people working in the U.S. than there were four years ago.)
The answer to the Zakaria-Krauthammer exchange is that the party that addresses this problem seriously and effectively will be the growth political party of the next ten years or more. If a Damascene bolt of lightning galvanizes the incumbent president and he, even after all the false starts, makes a comprehensive compromise proposal for entitlement reform — including a radical overhaul of Obamacare, stretching out entitlements to correspond to actuarial expectations and means-testing the payments, keeping income taxes down but closing down some of the free rides and raising sales and transaction taxes on non-essential spending, and tax-incentivizing work that adds value and does not just indulge society’s self-important disdain for work in primary and secondary industry — he will be acclaimed as the transformative president he seeks to be and his party will reap the benefit for years to come.
If he holds to his indicated course, though, America will hit the wall and the Republicans will be asked to implement the program Obama should enact now. The United States is in a shocking condition. Both parties are responsible; both will be required to assist in a drastic course correction, and only the party in the White House can lead. It will happen, because it must, and the U.S., unlike much of post-war Europe, does not have a collective death wish; though careful scrutiny is sometimes necessary to be confident of that.
The entire piece is worth reading.
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