What Are These Folks Doing?
The House voted 272-162 Tuesday to "permanently repeal the estate tax as Republicans and Democrats in the Senate intensified work on a compromise that could clear that chamber," the Wall Street Journal reports. "Before approving the estate-tax repeal, the House voted 194-238 to reject a measure offered by" Rep. Earl Pomeroy, D-N.D., "that would have raised the exemption to $3 million per person."
Meanwhile, Brad DeLong reports quotes from a recent IMF report on the industrialized nations (or should I say industrialised?)
The [IMF] forecasts that the US current account deficit will grow slightly to 5.8 per cent of gross domestic product this year, with little improvement thereafter. Germany and Japan are both forecast to have surpluses close to 3½ per cent of GDP. “The US external deficit has so far been financed relatively easily, aided by continued financial globalisation,” the report said. “However, the demand for US assets is not unlimited... a continuing sharp rise in US net external liabilities will carry increasing risks.” As well as the possibility of a disorderly decline in the dollar, the fund identifed the possibility that inflation pressures lead to a spike in US interest rates, and the high and volatile oil price as key risks to the global outlook. The Bush administration's pledge to halve the US fiscal deficit is not credible, (my emphasis -GK) owing to a number of items left out of the budget arithmetic, and “insufficiently ambitious” in any case, the report said....DeLong goes on to excoriate the WaPo editorial board for being critical of Baker and Rosnick and standing by the punditry's shibboleth that Social Security is our major crisis that has to be dealt with now. DeLong writes:
Dean Baker and David Rosnick have been making the completely obvious and unexceptionable point that Social Security ranks, at best, third in urgency and severity among America's fiscal problems. The most urgent and severe problem is the fallout from Bush's 2001 and 2003 tax cuts that once again destabilized the financing of the American government. The second most urgent and most severe problem is the medium- and long-run financing of the government's health-care programs: Medicare and Medicaid.
Dean and David make the obvious and unexceptionable point that a government that cared at all about making good fiscal policy would be tacking the big and urgent problems that threaten to cause significant economic damage in the next two decades. It makes no sense to focus on Social Security when there are bigger and more urgent fish to fry. They point out that one aim of the Bush focus on Social Security is to keep there from being serious discussion of--or attempts at solutions to--the bigger and more urgent problems.
Now everybody who is even half-informed knows that this is the case: their points are obvious and unexceptionable. When Treasury Secretary John Snow goes to Wall Street, people there ask him why the government isn't tackling the important stuff: the current deficit and health care. Snow has no answer: his only response is that Social Security is Bush's priority, and so that is what the government is going to focus on.
Don't forget tax deferments Brad!. The Senate is working on an estate tax compromise? Only 194 people could be found to vote for Pomeroy's amendment? How many Democrats are in the House? Clearly the answer is - whatever their Party registration, less than 194 Democrats are in the House. In fact, I'd venture a guess that less than 162 Democrats are in the House.
It's not simply that eliminating the estate tax is back economic policy - ideally you want to have a broad tax base with low rates since the inefficiencies of taxation grow geometrically. Narrowing the tax base means we need to have higher overall rates on what we do tax.
It's not simply that eliminating the estate tax is bad ethical policy - by what measure can we come to understand how a Democrat, who should be inclined to support equal opportunity and to oppose inherited wealth, privilege and social advantage, would instead think that wealth in amounts over $3 million can be passed from generation to generation as income not subject to taxation? Meanwhile workers are subject to payroll taxes above what the government needs and Republicans indicate absolutely no willingness to pay these people back for this? Don't tell me this income has already been taxed. The dollars that comprise the wages I earn from my employers were also taxed before they went into the central university pot that pays my salary. They were the income dollars of my students.
But it is also that no one has suggested how we are going to pay for the extension of these tax cuts. Not one dime. The least the GOP could do is propose some way of paying for these tax deferments - because that is what they are. We already have deficits are far as the eye can see. The budget deficit and the current account deficit are the number one pressing (yes crisis even) policy issue we face. And existing financial projections don't even take into account the extenstion of these tax cuts (deferments - excuse me).
So, while the President parades around the country talking about the Social Security crisis, his Party back in Washington continues to pilfer the general funds of the government and hasten not just the coming crisis in Social Security but also the financial crisis that will result when the dollar collapses and interest rates go through the roof.
Democrats won't win the White House until they can at minimum come to an understanding that unanimity on the issues of inheritance taxes and PAYGO rules are obligatory. It's no wonder people don't know what Democrats stand for since the Party rarely stands united for anything that broad numbers of people might care about. Standing united on Senate rules, filibustering anti-abortion judges, and affirmative action don't quite cut it Peoria.