Playing DC is done to raise money to ship to the battleground states.

http://www.nj.com/news/ledger/index.ssf?/base/news-0/109747026189560.xml

More Things Change, More Things Stay Same

It's said that the more things change, the more things stay the same. On several fronts, that seems to be the case in this prez election. Bush is Bush, and Kerry, well, Kerry is whatever the Kerry folks [ie, politico ops] think is right for that moment, for that group of folk.

In today's WPost, Mallaby writes [ http://snipurl.com/9p9n ]. Here's an excerpt:

... And yet, on this overarching "what next" question, Bush is right. He is right that the best defense against terrorism is offense: Given the vast variety of targets from which terrorists can choose, the "homeland security" alternative is hopeless. He is right that preemptive war is a necessary option, and that we won't always know all of the facts about the threats we are preempting. And he is right, however unfashionable it may be to say so, that nation-building can be successful. ...

... But if you are willing to read the tea leaves on how Bush and Kerry would prosecute the next phase in this war, then Bush comes out better. His gut instincts on terrorism are right -- and Kerry, by assailing the president's foreign policy record at every turn, seems to be saying that those instincts are not his own ones. ...
//end of excerpt//

Did you catch the NYT Mag writeup on Kerry? The Senator's reference to terrorism as a "nuisance" had radio folk chatting up a storm [ http://snipurl.com/9p9q ] -- especially out in NYC, on 770 am.

Amazingly, the Senator has once again handed Bush some juicy material for the next debate. Kerry has increasingly become "packaged" --thanks to the Clinton folks who recently joined the fledgling campaign-- and that has, in part, resulted in voter confusion [ie, no Kerry gains].

The Ds would have everyone believe that much is wrong with the Bush admin and policies. But, Kerry is still trailing Bush. In fact, in a few states, Bush's lead has increased. The Ds have offered a weak candidate and it shows, over and over. Maybe the Ds will have better luck in '08.

Lastly, there was Sunday's WPost lead oped: "Sen. John F. Kerry frequently speaks of Afghanistan as if it were just another of Mr. Bush's foreign policy disasters. But Afghanistan's reconstruction should not be a partisan or diplomatic football." One word: Yup.

###

Probably the only place they can sell out.

Mellencamp canceled his appearance here in Miami. He claims it was due to the hurricanes. Nothing to do with the dismal ticket sales.

Right.

Well, I expect Kerry to raise capital gains taxes (long & short term). Actually I expect him to make the tax changes retroactive to the beginning of 2005. I at least expect him to try, whether he can get it through Congress is a different matter.

If Kerry wins, I will sell all my stock, take all my gains as taxable income, and start from scratch. I might keep my losses to offset future stock earnings at a higher rate.

Hmm, if a lot of investors are as clever as me (not too difficult) the stock market may move oddly mid November...

Robert

With so many icons of the U.S. entertainment industry dancing and singing their hearts out in support of Senator Kerry and his nuanced foreign policy, you'd think that it would be absolutely unanimous in France, hmm?

Think again. I just finished watching the U.S. DVD release of the French film "Bon Voyage" that portrays France's WWII policy of appeasement. It's actually a pretty hilarious farce, but the historical message nonetheless comes across loud and clear.

I've reviewed it briefly here.

The "Billionaires for Bush" should have hired a real improvisational actor as their front man. Instead, it's just some guy who thinks he can act. I heard the "Phil T. Rich" character on the radio last month. He was a call-in guest on the Laura Ingraham program, I think. (Sorry I can't be more specific.)

I remember thinking that he had a few pretty good lines. "Why throw good money at bad people?" That's not a bad one-liner. Could have been moderately funny satire, if they had used a real actor. But this guy's delivery was lousy. His affected "rich man" voice was phony and irritating; he had no comic timing, and when he had to respond to questions rather than recite his prepared text, he tanked. Laura (or whoever the radio hostess was) ate the poor fella's lunch.

I am enjoying the irony of all of the hollowwoodheads dancing and prancing for Kerry. One of the direct impacts of him raising taxes, are the sales of entertainment, ie movie tickets will go down. I find it delightful that these people are dancing to the tune of self inflicted bullet wounds.
Of course there is already a boycott list growing in this country that many of these god like entertainers are joining and will feel the pain, oh the pain!
After the elections, and the fury has somewhat died down many of these folks will find their menu of meals will contain crow.

Oh, and Bill, you're right there in Washington. Where is your coverage of the Nudegate scandal?

Kerry apparantly intends to raise capital gains and dividend taxes for those making over 200k a year, so the guy working for his cash still gets hit harder than the guy living off his wealth.

http://www.johnkerry.com/issues/economy/fiscal_responsibility.html

Relevant quote:

"Restore the capital gains and dividend rates for families making over $200,000 on income earned above $200,000 to their levels under President Clinton. "

Bill,

Concerning the last line, have you read Bill Whittle's latest essay?

Haha! I was wandering through L'Enfant Plaza station right around then. Yesterday was a beautiful day, that's for sure.

Does the bus say "Wake up everybody"?

For some reason I hear an echo of "wake up white people." But then my sense of humor has been a little off for a while...

Bill, you may not have a lot of economics education, but you've just more or less enumerated the classic supply-side vs. demand-side argument. You, as a Republican (even if In Name Only), are a supply-sider. I am a demand-sider (I'm not an economist either, but I did go to business school and economics has always fascinated me).

In my view, it's really very simple: supply side economics, even though it's associated with "trickle-down" theory, really doesn't take into account that a truly free market really is like flowing water, and fighting against it is like trying to paddle up a waterfall. If people want something, and make their desire clear to people who are capable of supplying it, and the people who desire that thing have something that the suppliers want, then the goods will flow.

Take drugs as an example. As long as there is demand for drugs, and the profit margin is so high, people will attempt to find ways to produce, transport, and sell them. So the war on drugs, for example, is an uphill battle (hence the waterfall analogy). While an incentive to produce and sell illegal drugs exists, people will try to do it. If no one wanted cocaine, then no one would grow it.

None of this is very complicated, and I'm sure you already understood it, but that's why people argue against the war on drugs. Now, to connect back to the wage issue, it's basically the same principle. The Republicans are right to point out that lowering taxes on rich people and corporations can stimulate the economy by freeing up cash for investment. The problem is, that only works IF the tax rate is high enough to create a disincentive to investment in the first place, AND if the reduction is substantive enough to cross the "incentive" threshold.

And even then, you have to consider the demand side of the equation no matter what. If there's no perceived demand gap (i.e., supply is not meeting demand) then where's the incentive to invest? The warm fuzzy feelings that CEOs get from helping the economy? AND.... even if the demand gap exists, purchasing power has to increase concurrently with increased supply in order to fill it. In other words, people have to be able to buy what they want.

THEN there's one more factor to consider: disposable income, meaning income left over after living expenses are paid. People at the low end of the income scale have little or none, while at the high end, most income is disposable. Therefore, a tax cut means much less to someone who's already wealthy, whereas to a poor or lower-middle-income person it translates directly into increased consumer spending. Put it in numerical terms:

Lower income:
$1 of tax cuts = $1 of increased consumer spending

High income:
$1 of tax cuts = $0 (or a negligible fraction) of increased consumer spending

Now, that equation does ignore the potential for increased investment, but even then, it won't be the whole dollar that gets invested. Depending on environmental risk factors, and more importantly, perception of risk factors, some percentage will be saved and some might be invested. It's not a sure thing. That doesn't make it an invalid measure per se, but in my opinion, it's one that would be much better used to accelerate growth during good economic times rather than as a preventive measure during a period of potential recession.

What bothers me about the Bush team's policies is that they clearly understand the idea that nothing stimulates the economy like consumer spending: that's why in the immediate aftermath of 9/11, they told everyone to go shopping. So why not target the tax cuts primarily to the lower end and get a dollar-for-dollar increase in economic activity?

Don't assume that that's a loaded question, either: I'm not saying it's sinister, just that I disagree with it. I do think it's very possible, even likely, that the Bush team has put political considerations ahead of sound economic policy, but that doesn't make them evil, it just makes them politicians. Politicians that I don't want making economic decisions.

As for "none of it makes a whit of difference when a suitcase nuke lights off in NY or DC", well, I can't really argue with the logic of that statement by itself. I don't think it's a very likely scenario at all, and I certainly don't think Bush's policies reduce the likelihood of it happening in the short term. Even if I acknowledge your premise from a previous thread that the quest to spread democracy in the Middle East might work some day, it's not going to be any time soon, and in the meantime, there are a lot more suitcase nukes available in the former Soviet Union than there are in Iraq, Iran, or Syria. I really don't get why that hasn't been as central of an issue in this campaign. Does it seem less threatening to you?

Walter -

Great economics treatise, thanks. I'm somehow intuitively aware of these concepts, but I'm largely an economics rube and it's good to have them spelled out. The interesting thing is, I'm caught between acknowledging some of the criticisms of the levers Bush used (reductions of the dividend and cap gains taxes to stimulate the market vs. pushing consumer spending) and having a natural affinity for embracing economic and tax policy that benefits me.

Being middle class, I may not benefit as much as a billionaire does, but I can certainly make smart moves to play the system, and I have more opportunity to do this under Bush's plan than say, Clinton's. Granted, everything was gold during Clinton's term, but any honest broker needs to admit that this was because of heady times after a major technological innovation, not any magical economic policy instituted by the govt.

The other thing about economics - it's an art. I've watched very esteemed economists endorse Bush's approach, and I've seen (admittedly more, perhaps 6.5/10) esteemed economists deride it. But the fact is, the room for equivocation, and the unique host of novel intersections of economic factors (low interest rates, low inflation, high debt, increased productivity resulting in structural changes in job growth, etc.) all kind of put a big question mark on the whole enterprise of economic prognastication. Which makes it an artful lurch to go with your gut, much like the decisions about terrorism. Which leads me to ...

I certainly don't think Bush's policies reduce the likelihood of it happening in the short term.

Exactly. But here's where my analysis comes in - I don't see a huge difference in anything that either candidates' policies will do that can save us in the short term.

The genie's out of the bottle, and if fate has set us on a path that will bring a nuke detonation in a major urban center in the next decade, nothing will do much to stop it. A matter of chance.

But I'm thinking strategically. We are on the cusp of exponential technological advancement the likes of which the world hasn't fully grasped yet. Splitting atoms? Old. Try nanotechnology, genetic engineering, you name it. And the fundamental democratization and viral nature of information is making the threshold between a scientist in a government weapons lab and a maniac in his basement very thin indeed.

So Bush, kerry, you name it, my real assessment is that the future looks bleak, no matter how you slice it.

But here's the thing about Bush - his advisors grasp this as a very bleak, strategic problem. And what they are essentially doing is rolling the dice that the aggressive assertion of American power to remake societies towards pluralism that naturally diminishes radical elements, while we still have the natural advantage, is our only shot at realistically influencing the survival of Western Civ and perhaps humanity as a whole.

In many ways it's flawed, it's certainly a long shot, but from where I'm sitting, it's the best option available.

We've got to push change, while we can. Do nothing? The conclusion is written. Do something? 25% shot of making it through the 21st century.

It may seem arrogant to delicate sensibilities, but any honest, through read of history should be instructive that there's no place for delicacy in success. Delicacy is an exquisitely, painfully modern concept.

Hope that makes sense.

PS - there's a whole 'nother argument that you could make about how the Bush Admin's fiscal irresponsibility endangers the effort to remake the world for the better ...

Fareed Zakaria made it rather well, in fact.

[quote]So why not target the tax cuts primarily to the lower end and get a dollar-for-dollar increase in economic activity?
[/quote]

Which tax bracket would you be aiming this cut at?

People in the lowest bracket don't pay much in taxes, and get back more than they paid. You can't really "cut" their taxes anymore, unless you start talking about eliminating the payroll tax entirely for this group. Plus, they still don't have a whole lot of cash for descretionary spending.

People in the upper brackets are going to have more cash on hand for descretinary spending, and frankly, I don't think anyone owes almost 40% of their income to the federal government.

I am only a simple soldier and not an economist, but it seems to me Walter glosses over an important area. He states, "Depending on environmental risk factors, and more importantly, perception of risk factors, some percentage will be saved and some might be invested." I think too many people forget that even "saving" is investing, unless you stuff it in the mattress or bury it in the back yard. Don't banks have more money to loan to businesses and individuals if their deposits are up? Doesn't having more money in peoples hands tend to stimulate the economy, whether they use it to purchase goods and services, invest it, or just "save" it? Like I said, I am just a simple soldier and have no training on economics - other than knowing it is better to have money than not.

Pete:

First of all, I'm not "glossing over" anything at all. If I missed something, it's either because I just didn't think of it or because I have thought of it and don't consider it important. In this case:

Don't banks have more money to loan to businesses and individuals if their deposits are up?

I have thought of it, and you're forgetting to consider a couple of important factors:

1) Banks have a reserve requirement, I think around 20-25% of total deposits, meaning that that percentage of the money that's been deposited can't be loaned out. This is intended to prevent total loss in case of economic catastrophe... such as, for example, the stock market crash of '29. To put it simply, this is entirely consistent with my point: out of one dollar saved, 20-25% of it (at least) will not be involved in economic activity, whereas out of one dollar given back (or never taken from) lower-income consumers, 100% (or near enough) will be used to purchase goods or services.

2) Even considering the reserve requirement, you are right to say that banks will have more money available to loan. But if no one is investing because of environmental risk factors or economic slowdown, then who's borrowing? Again, it's a matter of supply and demand: banks may have a greater supply of money, but if no one is demanding it, then it doesn't get used for economic activity.

Defensive Walter. The man qualified his comment.

Take a half a clonazepam.

Wow! Great discussion and very educational. All I can say is that the proof I need for Bush's economic policy is in the pudding. Aside from all other debatable factors (ie., when recession began) there was the beginning of a recession, the towers fell plummeting our stock market 2000+ points. We had boardroom scandals and industry changes resulting in outsourcing of jobs. And yet today the stock market is back up over 10000, unemployment is at 5.4% where it was in 1996 under Clinton's 'great' economy, and the WSJ editorial pointed out in yesterday's paper that entreprenurialship is climbing and accounts for lower job growth numbers. I need no convincing because my husband and I just opened our own consulting firm. Walter, you're expertise is awesome, and Bill, I value your opinion, but the most persuasive argument for Bush's economic policies is the current economic health in spite of all the pitfalls which could have produced high joblessness, high cost mortgages, and a stock market below 8000. Can't his critics give him some credit for that?

but the most persuasive argument for Bush's economic policies is the current economic health in spite of all the pitfalls which could have produced high joblessness, high cost mortgages, and a stock market below 8000. Can't his critics give him some credit for that?

I do give him credit - he took action and has produced results. But the really relevant criticism focuses on long-term factors. Bush believes taht lowering the tax burden will stimulate enough growth to take care of long-term debt and demographic shifts that will stress things like social security, all of which could cripple our economy.

It's not a horrible bet, but it's a worrisome one nonetheless. Plunging the country into deep debt to get some growth could be compared to maxing out your credit cards to renovate your house. Pleasurable and with benefit, yes, but dangerous if you don't continue getting promotions and salary raises in your job that will maintain your lifestyle and pay down the interest.

That being said, the United States has an excellent resume ... though some young punks named India and China just graduated from and Ivy League school and are looking to put a fork in us.

(End of lame metaphor)

I admit the policies in place are reactionary - is there room for faith that since Bush's reactions to immediate problems were accurate, that perhaps his long term approach may be accurate as well? On the other hand, Kerry's tax plan does look like an economy killer.

Walters' theory places entirely too much emphasis on consumer spending. Consumer spending is the one thing that can respond rapidly to changes in tax policy, so it is always the focus of tax cuts during periods of slow or negative GNP growth.
His $0 spent theory is also absurd. Sales of luxury items have skyrocketed, growing much faster than the sales of lower priced equivalents. The same is true in the housing market, where sales of high end homes are up, as are sales of second/vacation homes. People are also renovating their houses, with new aditions, fancy kitchens and other amenities. I hired a guy to put in a new slding glass door (via Lowes). He was a 26 year old who made $170 the year before, with no college degree.

The reality is that high taxes are a restraint on all trade, including business to business trade, which is much slower to respond to the tax cuts, but is a massive portion of the economy. When taxes are high, investors demand a higher pre-tax return on investment, which leads corporations to curtail spending, and cut jobs. The boom of the 90's was driven by stock market success, which lead to increased investment by business, in people and equipment, which made individuals wealthier and drove demand for both consumer and business consumables. The Bush policies are designed to forge a new Bull market, which will help drive everything else. Kerry would be a disaster.

Update: it's $170K

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