Republicans' "No Child Left Un-Indebted" Initiative
This Sunday's NY Times Magazine has a lot of interesting stuff in it, but this dialog with Deborah Solomon and Connie Mack, in a section of the magazine entitled Taxing Issues, was priceless, in addition to going to the heart of what I find so reprehensible about our current fiscal problems in this nation. Connie Mack, for those of you who don't follow this sort of thing Mack was one of the lead honchos on Bush's tax-reform panel. A republican and a retired U.S. Senator, he had these wonderful tidbits to share with all of us (note: my comments within the following are bracketed, [ ], and boldfaced):
Indeed, he is still calling for tax cuts. He would like to eliminate the estate tax permanently.
I think there is a likelihood that Congress will deal with that issue before this term comes to an end. I would vote to eliminate, as we refer to it, the death tax. I think it's an unfair tax.
Really? I think it's a perfect tax. The idea behind it was to allow people to postpone paying taxes until they die, at which point they presumably no longer care. Why do you call it unfair?
Well, let's say, if you are in the farming business and you have the desire to pass this farm on to your children. The problem is that when your parents die, you have to come up with cash to pay the estate tax. One thing you don't have is cash. You've got plenty of land. So I just don't believe it's a fair tax.
That strikes me as a red herring. The issue is not really small farms, but zillion-dollar estates made up of stocks and bonds.
I don't know what the percentage breakdown is. I still go back to the same notion that these individuals who have accumulated these resources have paid taxes on them many times in their life, and then to say, when you die, now you pay more taxes on it? There is a limit.
[Given his role with "tax reform" I'm hard pressed to believe that Mack isn't familiar with the percentage breakdown on this. Those affected by the "Estate Tax", or in the words of spinmeisters who love to mislead the average Jane and Joe, the "Death Tax", amount to less than 5% of the overall population. Those affected have overwhelmingly benefited from tax breaks in the course of their amassing their wealth - especially now with the tax breaks that Bush has put in place for income specifically tied to stocks and bonds - and people who inherit farms, etc., are hardly the representative population affected by this tax. Of course Connie Mack's progeny would likely have to grapple with this tax were it still in place, as would be the case for the vast majority of our politicians - they don't mention that.]
Well, the U.S. government has to get money from somewhere. As a two-term former Republican senator from Florida, where do you suggest we get money from?
What money?
The money to run this country.
We'll borrow it.
[That's right, he said we'll borrow - not scrimp and save, but rather put ourselves in a position where we're beholden to other nations for the money we need. Of course scrimping and saving means we have to increase taxes, and God forbid we do that. It's just simply better to borrow what we need ... uh huh.]
I never understand where all this money comes from.
When the president says we need another $200 billion for Katrina repairs, does he just go and borrow it from the Saudis?
In a sense, we do. Maybe the Chinese.
[We borrow from the Chinese - awesome. The one full-fledged and notable communist country on the planet (yes, there are others, but please ...), and we're going to go to it with our hats out for a loan. Wild - he actually admits this, I mean I must be totally not understanding something here.]
Is that fair to our children? If we keep borrowing at this level, won't the Arabs or the Chinese eventually own this country?
I am not worried about that. We are a huge country producing enormous assets day in and day out. We have great strength, and we have always adjusted to difficulties that faced us, and we will continue to do so.
[Wow, I mean this is where the crux of the "No Child Left Un-Indebted" program comes from. We're a great country with enormous assets and great strength (i.e. if we don't get what we want we threaten to kick some butt with that oversized military the Republicans have come to be so fond of over-using), and the heck with having to actually pay for our adventures or whatever, we can just borrow the money and defer the cost of whatever we're borrowing for into the future. I remember when it was the Democrats who were the ones accused of being fiscally irresponsible - if I used Connie Mack's guide to how to "fiscally manage a country" for my personal life, I'd be living off of credit cards and loans, and then handing the bill over to my daughter.]
posted by James at 5:00 PM
5 Comments:
I'm not entirely sure how the estate tax works in the US. In Canada, for things like stocks and bonds, investments etc. the death of the owner is treated like a "sale" to the heirs. In other words, if the deceased owned 20,000 shares of "XXX" company that he/she bought at $1 a share, and they were worth $2 a share when he/she died, the estate (deceased) would pay normal capital gains taxes on the $1 a share profit. When the heir eventually sells the shares, he/she would pay capital gains taxes on the difference between their "purchase" price ($2 a share) and whatever they actually sold it for.
However, there is no "death" tax as such, ie: paying tax on the total value of the estate.
I have a really hard time understanding how the US is willing to put their economy into the hands of a foreign nation, which is essentially what they are doing in borrowing the vast amounts that they currently do. Isn't that what eventually brought the USSR down?
AC,
Here it's a flat cut of the value of the estate for estates over a set value, which is pretty high, in fact way higher than the average American will ever go (this doesn't include insurance, which falls into a different situation which isn't taxable). Of course we Americans like to think that any one of us are likely to die rich, regardless of how unrealistic that expectation is, and otherwise the Republicans, who by and large have fought the estate, a.k.a. "death" tax, have done a good job convincing a wide swath of people that would never be affected by this that they would be - Mack's bs about selling the land is a typical case of deception.
While hardly laying claim to a strong historical sense of the Soviet Union's economic history, I don't think what brought that country down was rampant borrowing. The underpinnings of that country's economy on the whole were never strong, and the overall inefficiencies and misplaced priorities associated with how the economy was managed, along with the heavy focus on defense as opposed to providing directly for the people, were what undid the USSR. We're not facing that sort of situation here, but a legitimate concern/question is when is borrowing too much, especially when you're so ridiculously committed to not raising taxes to pay for things when the money is due, and regardless of however much is due where do we get off passing our debts off to our kids?
I can't disagree with the fact that the ecomony of the USSR was highly inefficient. But with the arms race combined with poor economic performance, they did spend their way into bankruptcy. What disturbs me is that the US is putting itself into the position of weakness. I doubt that this has escaped China, who will most certainly use the leverage that this gives them at one point or another.
The idea of passing debts on to the children is repulsive to me. So is the idea of putting the whole country into a position of weakness in regards to what will probably be the next big challenge, China.
I guess it's how one looks at it ... technically the USSR wasn't financially beholden to anyone, unlike the U.S. which is putting itself into hock to anyone willing to buy our debt, like China. With the USSR is was more akin to running the engine into the ground without checking to see if there was oil to keep the thing running - with the factors you point out lo and behold the engine was way past empy on the oil-dipstick.
As for putting itself into a position of weakness, and especially the issue of passing on debt, I couldn't be more in agreement with you, and frankly it torques me to even think about it.
Well, these guys don't seem to think that debt matters. I believe that Cheney was actually quoted as saying that at one point.
Hearing all the "rah rah, I'm such a patriot, I support Bush and the war in Iraq" that has been going on over the past few years, one has to wonder if it has occured to these people that the "patriotic war in Iraq" has put the US at the mercy of it's lenders, notably Saudi Arabia and China.
When you start seeing things like China getting oil concessions in Angola because they have agreed to ship several million of their "political prisoners" there to do civil construction work, these workers will have no right of return to China btw, it's pretty obvious that they are taking a very long term view. Essentially, given the level of incompetence in places like Angola, they are colonizing one of the biggest and most promising West African oil countries.
The softwood lumber dispute with Canada now has the Canadian government looking for other markets for their goods, including some of their oil. Who is there knocking at the door? China again. I was thinking about this the other day, Canada had a huge influx of people from Hong Kong who took Canadian citizenship before it was handed over to the Chinese. The majority of these people settled or established themselves in the West, British Columbia and Alberta. Probably not so coincidently, 8 years later the Chinese are now looking to buy what are the two major export goods coming out of BC and Alberta. Wood and oil.
Personally, I think that the Chinese have been quietly laying down their chess pieces for years, and I have no doubt at all that investing massively in US dollar debts is one of them. Whether they get them all into place and one day say "checkmate" remains to be seen.
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