How politics is ruining the economy
by Anthony Stasi
Apr 24, 2012 | 2628 views | 0 0 comments | 12 12 recommendations | email to a friend | print
As part of a larger university panel discussion forthcoming, I have been discussing the issue of the welfare state with a colleague, an economist from Norway.

Our conversations in the last few weeks have revolved around taxes, mortgages, and economic management. Last week, economists Arthur Laffer and Stephen Moore penned an article about how the president’s proposed taxes on the wealthy are dangerous to the economy.

They dispute the president’s claims that tax cuts have not ushered in economic growth. Politics and economics are different, and it is our politics that is ruining our economics.

The Buffett Rule, which would tax the rich more heavily, works politically. There are people on both sides of the aisle that think that taxing the very wealthy is a way to recover economically. More Democrats support the idea than Republicans, but that is because it works for them politically.

The Buffett Rule may be a little extreme, as it puts millionaires into a 30 percent tax bracket (and that is only federal tax), but it is not the rule that is bad, it’s the language.

When Ross Perot ran for president in 1992, he was talking about the same thing. Part of his plan was to raise taxes, yet few people accused Perot of socialism. Not even his opponents accused him of trying to make the United States more like Europe. Why do critics do this with the president?

The president uses language like “the wealthy have to pay their fair share.” This suggests that they have been doing something wrong, something unfair. Perot followed every call for tax hikes with the assurance that added revenue from taxes would go directly to cutting the deficit, that is what Washington should be doing.

There are not that many millionaires (one percent?), so why is there so much opposition to the Buffett Rule? It’s not the millionaires, but the potential millionaires, that tend to put up speed bumps. Americans are always next...next to be rich, next to win the lottery, etc. Scare the “next” and you can lose an election.

If the president made it clear that all additional tax revenue would go directly to deficit reduction, he may get less opposition. If the critics of supply-side economics would recognize that cutting taxes

does spur economic activity, it just needs to be targeted properly, both policies could live alongside each other.

In cities, for example, cutting sales taxes does spur growth. Keeping the capital gains tax low does encourage activity in our markets. The language, however, is that supply side is a policy geared for the wealthy, but there are times when it works as an economic policy for all of us...just not all the time.

Norway is a large oil-producing country. They tax these companies at very high rates (more than 70 percent of revenue). I asked my colleague if Norway is afraid of losing these companies to countries with lower tax rates. “Then let them go,” he said in his Norwegian accent. “They never go. It’s been 30 years.”

The United States is not built on the philosophy of daring companies to go elsewhere. And we have more people to employ than Norway does. But paying our debt might be good enough reason to strategically use both tax philosophies in different places.

Hurtling Towards Earth

In 1985, former Giants and Dodgers pitcher Hoyt Wilhelm was inducted into the National Baseball Hall of Fame. A former boss and I wound up debating whether the knuckleball was a legitimate enough pitch for a Hall of Famer.

I thought then, and I still do today, that a pitcher that can get hitters out and win games without scuffing the ball or doing anything illegal, is no different than a flame throwing power pitcher.

The Tribeca Film Festival is featuring a documentary about the knuckleball, appropriately titled Knuckleball. It focuses on the Mets’ R.A. Dickey and former Red Sox pitcher Tim Wakefield.

Knuckleballers are never going to be the aces of pitching staffs, unless there is a truly desperate team with no other strong arms, but they do set up the rest of the staff and it is a mystery that all teams do not have a knuckleballer someplace in their system for this purpose.

For many pitchers, Dickey in particular, the pitch was a way to salvage a once promising career. The reason why a documentary about the pitch is interesting is because it is not only effective in getting

hitters out, but it has transformed careers, which is a story we all like.

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