Taxes and Growth

In response to the budget plan by Paul Ryan and the GOP which cuts taxes by $4 trillion, both Charles Blow in the New York Times and Walter Mondale in the Washington Post attempt to clarify the issue of taxes and growth. The question is whether Americans can do the math, or whether they are still deluded by either sound bite ideology or simple ignorance of economic facts, rather than theories.

The TEA Party likes to claim that Americans are "taxed enough already." Yet, as Mondale points out, taxes are at their lowest rates in forty years - and, consequently, is government revenue which leads to deficits and debt at both the state and federal level. Sadly, too many voters don't see the connection, and they are reluctant to pay for what they want ... and that's precisely because politicians and leaders have convinced them they are already paying for what they don't want.

Obama versus Ryan

Let's be clear - I am not enamored of Obama's deficit reduction plan and budget for 2012. While the message and philosophy of his speech was honest and fundamental to promoting "the general welfare" of the United States, the plan falls short in several areas of necessary spending cuts and tax revisions. However, while Obama's plan disappoints me, Ryan's plan is, in my opinion, far worse. The Path to Prosperity is a specific budget cutting proposal, no doubt. However, the assumptions it makes about future growth and prosperity are ideological and naive at best, but more likely reckless.

The audacity of crying bankruptcy and slashing social spending is simply wrong when it is being balanced by $4 trillion in tax cuts. If the problem is being broke and not having enough money, the answer is most definitely not to cut revenue further. Of course, the Ryan plan is taking that course on the misguided notion that the US can't tax the "job creators" as Colorado representative Mike Coffman calls them. Keeping the 01/03 tax cuts has no definitive impact on job and economic growth. It simply doesn't. That ideology has been discredited time and again. Increased demand grows jobs, and investors create new businesses whenever they want. There is no shortage of investment capital right now, and no shortage of business who could hire people. And it's not taxes that are preventing that from happening.

Obama's plan on the other hand is not clear enough on the tax increases that need to happen. But the deductions problem is pretty clear. Deductions are meant to ease the tax burden of people whose living allowance margin is thin. And the more deductions they have, they greater chance they will buy a house or purchase consumer goods. That's simply not the case with people earning more than a million dollars. They need no incentive to spend their extra cash. They spend whenever they want. Arguing that fewer deductions means these people have less money to hire people and start business is simply wrong and ideologically bullheaded.

Thus, I predict that Obama can win the next election with this plan - and I think the Democrats can even take back some lost seats. But that doesn't mean I think it's a great plan. It's simply not the disaster that Mr. Ryan presents. As I've noted before, you can't trust economic policy from a man who rants about the high corporate tax rates and seems willingly naive to the idea of corporate tax deductions.

Taylor Swift Gone Wild

Just out of curiosity - because my kids are such fans - I checked out the price and availability of concert tickets for Taylor Swift's show on September 27 at the Pepsi Center in Denver. I was initially surprised to see tickets were still available. And then I was shocked to see the cheapest - and worst - seat available .... at the back of the venue ... in the nosebleed seats .... on the venue's website .... not from scalpers ... were ... $125 each. Gasp!

That is, in my opinion, completely beyond the pale.

Taylor Swift is a phenomenally talented musician and a seemingly very genuine young woman. I am impressed with her songs and her public demeanor, and I don't question my children listening to her music. "But, Girl, you concert prices are out of control." Taylor is forgetting where she came from. And she is forgetting who her fans are. And she is neglecting to take an active interest in the business side of her career to ensure that regular folks have a reasonable shot at sharing in her live performance of the songs they made popular enough for her to charge whatever she wants.

Professional sports is no different. A lifelong St. Louis Cardinals fan, I was supremely disappointed in the stalemate between Albert Pujols and the team over his next - and final contract. Reports claim he expects to be the highest paid player in the league and that equates to a 10-year, $300 million contract. That is a bit ridiculous - especially because he will be in his forties at the end of the contract. This is as a member of the same team as Stan "The Man" Musial - a player who once signed his contract without looking at it, and when the press asked him if he wanted to review it first, he said, "I'm getting paid to play ball. I'm sure it's fine."

Let's hope the air someday goes out of the entertainment bubble, and prices return to a reasonable rate. But I'm not holding my breath.

Economics Plans

The White House says President Obama is set to release his budget and/or deficit reduction plan sometime this week. If that's the case, then both David Brooks and Fareed Zakaria are correct about the Ryan Plan forcing the discussion and throwing down a gauntlet on government budgets that must be addressed. Yet, I still far that Zakaria and Brooks are far too generous in identifying the bill as courageous and forward-thinking. It's still too naive in terms of growth and the role of tax rates, and it is simply unconscionable in terms of the faith it plays with the free market and insurance companies concerning health care for the elderly.

Yet, my gut instinct tells me that the President's plan is going to be equally naive concerning spending. And he is going to lose the battle on taxes if he keeps targeting as low as earners making more than $250,000. While I do feel that amount is comfortably wealthy, it is not an vast sum of money, especially in places like New York and California. He could certainly argue for higher rates on people in the million dollar tax brackets and address the revenue problem more rationally. Better yet, it should, as both the Wyden-Gregg and Ryan Plan argue, focus predominantly on the deductions. Certainly, we can come to consensus that the mortgage deduction is a reasonable tax break for many Americans, but it is unnecessary for people making more than 500 Gs, or for purchasing more than one residence.

So, if we could focus on that. We'd be getting somewhere. Broaden the base, flatten the rates, narrow the deductions for all, end them for the top 20%, and be done with it.

Pepper Spray & Eight-Year-Olds

By now, you've probably read about the unruly eight-year-old boy who was pepper sprayed and cuffed by school police officers in a Denver suburb. I know, I'm still trying to get my mind around it as well. Yet, arguably, this story is much more complex than you might initially think.

Everything in my adult/teacher/parent mind tells me that there is no reason to pepper spray an third grader. My son is eight, and short of him having a gun, I can't think of any situation where I couldn't restrain him, even taking away from him a "sharpened stick" like the boy in the story was wielding. Some middle school and high school kids might be reasonable targets for pepper spray or even a taser if they are "threatening school personnel" and "throwing TVs and desks" at a door behind which the teachers had barricaded themselves. But an eight-year-old?

Yet, the district superintendent has defended the action as not only "legal" but in the best interest of the safety of the boy. Police officers are trained to take down the most dangerous and aggressive of people, and there is every reason to think that in restraining and removing the child, he could have ended up with bruises or a broken finger or wrist or arm or a concussion. And we can predict the lawsuits coming from that. In fact, the boy's mother wondered why the police didn't just talk to him as they had done on the two other occasions when they had been called to deal with this child.

And therein lies the complexity.

Clearly, this child is a problem. And previous "talking" may have led to the escalation, as the boy has learned he can get what he wants. The mom - who does not come off well in interviews - has clearly failed in almost every aspect of parenting. And she has burdened her son with issues he will struggle with for years. She claims doctors have refused to medicate him because it's not a medical problem. I agree. It's a parenting problem. And while the boy "never acts that way at home," I'd conclude it's because he gets everything he wants. My guess is the boy comes home each day and sits on the couch for hours watching SpongeBob or playing video games while his mom brings him every bit of junk food his heart desires. I'd guarantee homework is not an expectation in that house.

Thus, the boy was subdued, cuffed, and transferred to an alternative school for behavior disabled schools. Well, that's certainly appropriate, albeit about ten referrals and two police visits too late.

Oh, that we could have some discipline for mom as well.

The Ryan Plan and the Future

The Ryan Plan ..... hmmmmm.

The Ryan Plan is a starting point.

The Ryan Plan is the end of effective government.

The Ryan Plan is visionary and courageous.

The Ryan Plan is draconian and shortsighted.

"The Ryan Plan isn't perfect, but it's forcing Americans to confront reality ..."

"The Ryan Plan is simultaneously ridiculous and heartless."

I don't know what to think of the 2012 budget proposal from Wisconsin congressman Paul Ryan, but it makes me uneasy. And I don't like to feel uneasy about plans the government is making. At the same time, I've been feeling uneasy about the growing debt and deficit since about 2003 (unlike many who suddenly found God on government spending in 2009). In response to the budget, which Ryan is somewhat smugly calling a "Pathway to Prosperity," and which is a more concise version of the "Roadmap to the Future" he published two years ago, liberals and conservatives are weighing in. David Brooks and Paul Krugman of the New York Times have offered some contrasting commentary on the Ryan Plan, and Matt Miller of the Washington Post has criticized the plan with specific numbers breakdowns from the Congressional Budget Office.

The Ryan Plan intends to cut $4 trillion over the next decade from the budget and make sweeping changes to the way the government funds health insurance for the poor, disabled, and elderly through Medicaid and Medicare. Basically, the plan would retain Medicare for all people 55 and older, and would shift to a $15,000 voucher to buy health insurance in retirement after that. It would turn federal funding of Medicaid into "block grants" to states which they would fund according to their own plans and abilities. It would balance the budget by ... wait for it .... 2040. And it would accomplish all of this by making no cuts to military spending. It would accomplish this by not raising taxes. And it would accomplish this by lowering the unemployment rate to about 3%. That number, it should be pointed out, is a projection from the Heritage Institute - a rather ideological group who is basing the projection, not on numbers from the GAO or CBO, but on theories about supply side economics.

Overall, I concede Brooks' point that the Ryan Plan is a bold starting point. But I hope that's all it is. Because it truly is a ridiculous plan. No one on the recent debt commission has rationally argued that we can fix our long term deficit problems without raising some taxes. Ultimately, a revision of the tax code can lower some taxes, raise others, and close loopholes. And social insurance in the form of Medicare and Social Security could and should be fixed through simple means testing and more credible indexing. Beyond that, any proposal that doesn't seek to cut military spending or agricultural and corporate subsidies is either incredibly naive, myopically ideological, or just disingenuous.

We'll see.

Reverse-Read Poem - Lost Generation

Working on a "multi-genre" research project with my class today, and a student introduced to the idea of a "reverse-citation poem" - one that can be read forward to reveal one message and backwards to reveal the opposite message. Fascinating.

Here's the example he shared. It's called "The Lost Generation" by Jonathan Reed:

Supply Side Shortcomings

It's no surprise that the business and economic news of the week is focusing on how the United States' economy is recovering and growing, yet it is not producing significant job growth. In fact, despite stronger economic gains than world trading partners, other countries are outpacing the United States in putting people back to work. The growth in the US is seen in a robust stock market and a corporate profit report that reveals profits setting records and operating at a twelve percent gain over the numbers prior to the recession. The reality is that American workers are more productive, and companies which shed jobs during the recession have realized they can make due with fewer workers. And so they will.

This realization leads to serious questions about the promotion of supply side economic policies as a way of generating job growth. The basic question is this: Who can argue that job growth is the goal of any business? In reality, it's not. Certainly, the correlation between increased business leading to a need for more workers is relevant. However, because labor costs are the greatest cost for most businesses - and that only increases as benefits' costs rise - no business is actively looking for a way to hire more people as its goal.

Expanded market share and profits are the goal of any business. Increasing sales and production while limiting costs is the predominant focus. If a company can increase profits without increasing labor or costs, it will - it must. Thus, to argue that governments can implement pro-job growth policies - especially in terms of taxes - defies basic economic sense. The current growth of the US economy validates this - albeit this is a simplified explanation.

To argue that a tax policy will spur more hiring makes no sense. Supply is only increased to meet demand. A generous business tax policy does not increase demand, and it's ambiguous that any tax cut will increase demand in any specific business sector. The economy and the spending habits and productions needs of the economy are far too complex. The economy is an emergent system, and identify specific factors of emergent system is not really possible, at least from a tax policy standpoint.

The Dark Side of Reform

When Steven Leavitt published Freakonomics years ago, he raised some eyebrows - and blood pressures - by arguing statistics reveal that teachers and sumo wrestlers are among the professions most likely to "cheat." The high stakes "testing" and "ranking" of each profession was indicated as the likely factor.

Now, in the DC public schools - the domain of reformer Michelle Rhee who blamed low standardized test scores on poor teachers protected by unions and tenure - it appears more data supports Leavitt's argument. In an investigative story in USA Today, the examination of rising test scores and student achievement is linked to an unusually high number of erasure marks on students tests - erasures which revealed huge percentages of wrong answers being changed to correct ones.

We should all be disappointed in this reality - but we should view it with an intent to understand the broader message. If true, the teachers of these "diligent self-checking students" should not be excused or exonerated because the pressure to show results led to poor decisions. However, this story should influence the discussions about standardized tests which are "high stakes" for schools and teachers, but zero stakes for students. And the mythical panacea of "merit pay" based on such tests must also be scrutinized.

Teen Athletes Eating Right

On numerous occasions each year, I rant about the importance of healthy eating, especially during the teenage years. From the pizza and cookies for lunch to the random snacks of donuts and chips to the way students sit casually sipping a sugar-filled Powerade, too many young people eat for crap these days. In fact, they are eating crap these days. And there is no doubt these habits will have negative long term repercussions on their health. Yet, the prevalence of low-quality processed foods is ubiquitous, and despite my rants and a semester in health class, students aren't really getting the education they need.

However, there is hope. And a recent local news feature gives my hope that my rant just might be making an impact. The fitness section of the Denver Post spotlights two local teen athletes who have seen the light. These two young men battled weight problems for years until they made the decision to beat the battle of the bulge. One of the students was a freshman in my Honors English class four years ago - and I was shocked when he came to see me last fall at the start of his senior year. He'd lost fifty pounds and was the captain of his varsity basketball team - one of the top programs in the state.

This story is great news, and it's exactly the type of story we need about young people. Yet, I worry about opposition to health information. Despite the best of intentions, the First Lady Michelle Obama has been targeted with endless criticism for attempting to promote healthier foods in schools. Certainly, it's mainly political - though it's veiled in the guise as an "assault on freedom." That, by the way, is patently ridiculous. And, hopefully more schools and kids and parents will begin to pursue healthier choices.

High fives to these young men for being an inspiration to us all.

Corporate vs. Public

Jon Stewart "gives up."

In a informative sketch, Stewart once again expresses dismay about the GOP-led campaign against public workers as "budget busting" leeches, while ignoring any sense that our corporate tax structure is integrally linked to the fiscal crisis. This is an argument that simply doesn't seem winnable by Democrats - and neither Stewart nor I can figure out why.

How many times have I heard conservative pundits and politicians decry our outrageous corporate tax rate - "highest in the industrialized world" - while completely ignoring (or being shamefully clueless) about the discrepancy between tax rates and taxes paid. Yes, the corporate tax rate is officially 35%. But NO corporation pays anywhere close to the rate .... and 2/3 of US corporations pay no corporate income taxes. That's none. Zero. And to make matters worse, the top earning corporations receive additional tax benefits in the from of subsidies and rebates.

The Daily Show
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It is astonishing, I know. How can such a profoundly corrupt system be completely lost on voters and Republican congressman? And I get the criticism of the Democrats. It is absolutely valid. Liberal leaders do try to accomplish too much, and they are reasonable targets for out-of-control public spending. But this double-standard is just too much for an unaffiliated, moderate voter like me.

I sympathize with Stewart, and I wonder how Democrats can be so clueless about educating the public on this. Unless they don't really want to. What would be wrong with a series of commercials - especially during elections - that is committed to exposing the corruption of the system? Why is that so hard? Where are the Democratic versions of the Koch brothers?

Revenue or Spending

In the ever-going state budget discussion here in Colorado, conservative columnist John Andrews argues in the Denver Post that Colorado doesn't have a revenue problem and should, surprisingly, emulate states like Wisconsin and Texas. My thoughts:

In a column addressing the budgetary challenges facing Colorado, the recommendation that we adopt our tax system from Texas is quite baffling, especially for someone who's generally pretty well informed about issues of politics and government. Texas is currently facing a projected $27 billion shortfall in 2012, which aligns it squarely with the budgetary disasters in states like California and Illinois. This fiscal tsunami is in spite of increased job growth and business relocation to Texas in the past decade. Thus, Texas - which has no "out-of-control spending" and an austere, Colorado-like budget, is clearly inhibited by a revenue problem.

The revenue problem is no different than in Colorado. Certainly, as he notes, spending in Colorado has increased over the years. Yet, his criticism is ignoring a myriad of factors that lead state spending to expand - increased population, increased wear and tear on infrastructure, natural disasters from epic storms to massive fires to uncontrolled pine beetle devastation, greater demands on education for expanded testing and security and special education, rising demands of Medicaid and public health as private sector workers face increasing premiums or lose benefits while wages remain stagnant, etc. Simply put, as the years go on, costs go up. They always have - that's why I used to pay less for everything, and now, even with wages increases, costs have gone up. The economy is so much more complex than Andrews' knowledge of it, and his inability to look beyond a basic prejudice toward taxes is the foundation of the state's revenue problem.

And then we turn to Andrews' mythologized "Reagan" reference as "visionary" in terms of deficits? That's the same Reagan who cut revenue and ballooned not only the deficit but the national debt. That's the same Reagan who sought to repair the budget with eleven subsequent revenue increases between 1983 and 1987, and still left a debt and deficit that cost his successor a second term.

As an educator who urges to my students to be "people on whom nothing is lost," I am worried by voters like Andrews who take an ideological, rather than pragmatic, real-world approach to the budget. His naive recommendations simply validate one of Winston Churchill's greatest insights:

"The best argument against democracy is a five-minute conversation with the average voter."

Coloradan's votes on Ref C & D, their rejection of 60, 61, & and 101, and their election of John Hickenlooper over a notoriously inept and rather clueless GOP field seem to indicate they're not as naive as his friends at CUT (Colorado Union of Taxpayers) and the Independence Institute.

But I still worry.