Arthur Laffer (of the Laffer Curve): Tax Hikes and the 2011 Economic Collapse
Op-Ed in the WSJ yesterday:
On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.
Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there’s always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.
Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe “double dip” recession.
And, as if Laffer was writing the screenplay to Atlas Shrugs on Wall Street, from the NY Post this morning:
Fast Eddie’s play: Hedge mogul beats DC in slick $64M tax scheme
Billionaire hedge fund mogul Eddie Lampert has outsmarted lawmakers and come up with a way around a planned tax hike on earnings for hedge funds and private equity firms — saving himself about $64 million.
The 47-year old financial whiz side-stepped the likely higher tax bill by having his Greenwich, Conn., hedge fund firm, ESL Partners, distribute roughly $837 million in stock to him personally last week — a move that will allow him to pay the lower capital gains tax rate compared to the higher regular income tax rate had the fund distributed cash.
…
Of course, Lampert’s hedge fund firm may have made the distribution for a number of reasons and his spokesman Steve Lipin declined to comment. Still, the pros say it sure looks like a snub at lawmakers’ plans to raise his tax bill.
…
Street insiders expect a parade of financial titans to follow Lampert’s lead, which could throw a wrench in lawmakers’ plans to plug the deficit with additional tax revenue.
Oh, Washington, you are adorable.
First, you got Iran dodging sanctions like a butterfly. Now, this.
Well, they didn’t get to be called Masters of the Universe for being stupid.
NYT: Web of Shell Companies Veils Trade by Iran’s Ships
From the front page:
On Jan. 24, 2009, a rusting freighter flying a Hong Kong flag dropped anchor in the South African port of Durban. The stop was not on the ship’s customary route, and it stayed only an hour, just long enough to pick up its clandestine cargo: a Bladerunner 51 speedboat that could be armed with torpedoes and used as a fast-attack craft in the Persian Gulf. The name painted on the ship’s side as it left Durban and made for the Iranian port of Bandar Abbas was the Diplomat, and its papers showed that it was owned by a company called Starry Shine Ltd. Both the name and provenance were of recent vintage. Six months earlier, the Diplomat had been the Iran Mufateh, part of a fleet owned by the state-owned Islamic Republic of Iran Shipping Lines, known as Irisl.
Must read. (+ NYT’s interactive and video)
Guardian: HBO film about Neda beats regime’s censors
Viewers in Tehran complained of jamming and power cuts on Wednesday and yesterday evening when the Voice of America Persian TV network broadcast the documentary For Neda , featuring the first film interviews with the family of the 27-year-old. The 70-minute film, made by HBO and being screened in the US this month, has rapidly gone viral in Iran in the run-up to next Saturday’s anniversary of the disputed elections. It is now available on YouTube.
Iran’s intelligence ministry is reportedly due soon to release its own documentary to complete the removal of “ambiguities” surrounding the murder and provide “new evidence” about what it has called the west’s version of events. Neda’s family were under pressure to co-operate with the official documentary but refused to do so.
It’s not clear whether the official film is the same as one produced earlier this year by Iranian state TV, which suggested that Neda was an agent of the US and Britain who staged her own death and poured blood on her face. (HA!) The BBC’s Tehran correspondent, Jon Leyne, was also blamed for her killing before being expelled.
HBO says it took the unprecedented decision to pre-release the film for Iranian audiences because of its relevance in the run-up to the anniversary of the polls.
If the photo of nonplussed pedestrians seen here is any indication, Tina Teens was right. No one really cares.
An allegory for the Obama administration’s Hope and Change™ foreign policy approach to dealing with rogue elements?
Go with me on this:
As seen above, Shepard Fairey’s new mural on Deitch Wall at Houston Street in New York City, erected to drum up business for Fairey’s line of posters and t-shirts at his pop-up store around the corner, was recently bombed with graffiti.
For reference, Fairey is the artist behind the famed Obama “Hope” poster made iconic during the 2008 Presidential campaign:
Despite Fairey’s fame and reverence and despite signs put up asking not to spray graffiti on the mural, some rogue elements, in this case graffiti artists, tagged it anyway. Not at all a comment on Fairey’s work, but what a pointed analogy to the response Obama’s soft, “outstretched hand,” charm offensive approach to dealing with the likes of North Korea and Iran during the first year and a half of his administration. In what was hailed by the high-minded as so refreshing and evolved compared to Bush’s “big stick” approach has after sixteen months been shown to be naive, at best, an abject failure, at worst (though we may not have witnessed the true worst consequences yet). It’s almost comical if the topic weren’t the long-term stability of the free world.
Relying essentially on hope to deter Kim Jong Il and the mullahs in Iran from asserting themselves by pursuing nuclear arms is about as responsible and watertight a strategy as BP drilling an oil well a mile below the surface of the Gulf of Mexico without much, if any, of a contingency plan. And we know how angry Obama is about what’s taking place in the Gulf, rightfully so.
Well, Mr. President, just as your patience has worn thin regarding the lack of progress in the Gulf, so, too, has that of many Americans with the way you’ve handled what is a far more existential issue. Hope is not an acceptable strategy. You’ve treated these rogue players like misbehaving children in need of a time out. And like that child wanting to see just how far they can push before being rebuked, they’ve responded continuously by flipping the bird.
You believed you could “just talk” them into capitulating action. Your high-mindedness led you to think they would meet you halfway on the moral high road, that they simply disliked your predecessor and their response to the West would shift on January 21. You thought you could deal rationally with irrational actors. You thought the “power of your own eloquence” would be enough to bring them over to your side.
Newsflash: you were wrong.
North Korea, somewhat hilariously, launched a test missile the same day you gave a speech to the UN on denuclearization.
And nearly six months after your stated “we’re-super-duper-serial-this-time-you-better-listen-to-us-or-else” line in the sand (and nearly a year since issuing the warning), Iran has done nothing but press forward on their nuclear plans.
I fear you are a laughingstock in certain circles around the world and that’s not how the Leader of the Free World should be regarded.
It’s okay to say it: there are some bad actors in the universe. And they’re usually not quiet about letting you know their sinister intentions. Dennis Miller sardonically opined recently that when you’re at a cocktail party and you start talking to a guy at the punch bowl and the first words out of his mouth are “I’m here to usher in the new caliphate,” you walk away, don’t extend your hand.
Mr. President, it’s not cute anymore. Again, the caption above to the photo of New Yorkers walking blithely by Fairey’s new mural encapsulates perfectly what most Americans are starting to, if they didn’t already, believe about your continued failed policy and, if your appointed Secretary of Defense is to be believed, lack of contingency. Days after an attempted bombing in Times Square (of the non-graffiti variety, and capping a noted increase in the number of such incidents, successfully executed or not since you’ve taken office), you might forgive residents and visitors of this city and the country as a whole for being a little angry, if not just dismissive of your strategy that has earned you zero ground with and only seems to have galvanized our enemies.
Now, it’s not too late to step back from this stance, and please don’t let pride be what keeps you from doing so. A damaged ego is far less important than the safety of the world’s citizens in the grand scheme of things. Far more will label you pragmatic than will accuse you of being a flip-flopper.
Mr. President, I’m actually encouraged by much of your foreign policy. I don’t know what Faisal Shahzad said to authorities, but it seems to have stirred up a sense of urgency within your administration. You started saying “terrorism” again…vs. “man-made disasters.” You’ve essentially kept to the Bush playbook down to the letter in Iraq. You’ve put a renewed focus on Afghanistan. Guantanamo is still open, as it should be. Just last Sunday, AG Holder even suggested a need to revise the use of Miranda rights when dealing with hostile actors, even when on U.S. soil. But for your brush-ups with Israel, one might mistake your stance on these issues with your predecessor’s.
Concerning the “rogue-est” of the rogues, however, perhaps it’s time you were as angry about threats to your own citizens and allies as you are about threats to crawfish.
This is an older clip from 2007 of security forces in Iran beating an unarmed youth on a busy street right in front of a crowd of people.
I remember when I first saw it back then and thinking how I could never really imagine this happening in New York City.
Could you?
Photo: Outdoor cafe in the West Village (below)
Iranian Cleric: Promiscuous Women Cause Earthquakes
“Many women who do not dress modestly … lead young men astray, corrupt their chastity and spread adultery in society, which (consequently) increases earthquakes,” Sedighi was quoted as saying by Iranian media. He is Tehran’s acting Friday prayer leader. “What can we do to avoid being buried under the rubble? There is no other solution but to take refuge in religion and to adapt our lives to Islam’s moral codes. A divine authority told me to tell the people to make a general repentance. Why? Because calamities threaten us,” he said.
The one thing I’ll miss when this regime is drop-kicked into oblivion: the comedy.
Ahmadinejad: U.S. facing isolation from the world
Ahmadickejad has written a letter to Obama, calling on him to cooperate with the Islamic Republic. “Obama has only one way to remain in power and be successful; this way is Iran.” “Once [the U.S. was] at the height of glory. Now they are collapsing. They have many economic and cultural problems. They have security problems in the world and their influence in Iraq and Afghanistan is vanishing.”
In 2006, he wrote an 18-page letter to George W. discussing religious values, history and international relations. That was the first publicly acknowledged communication between leaders of the two nations since 1980 just after the Islamic Revolution.
Again, another flashback to a post of mine from last year before the election:
And a bonus zinger for you kids…
Ahmadinejad claimed that his statement on “wiping Israel off the face of the map” was mistranslated and he simply meant that the country, the experiment of Israel would fail and be “erased from the pages of history,” a la the U.S.S.R.
To that I say, fine, Mahmoud, but then to co-opt your line:
The Islamic Republic of Iran will be erased from the pages of history.
Not by force, but by the sheer will of its people to rise up against an irresponsible, inept, and corrupt regime that has retarded the nation’s path of modernity for the last thirty years. The measures taken by the ruling class are at odds with too many desires, rights, and dignities of a free people.
This experiment is a failure.
Quote me.
No translation required.
See also:
Iran is not at all inhibited about meddling
May 18, 2009: Next year’s State of the Union Address should be interesting
(via hackiran)
Both leaders said they shared the view that Iran must not be able to build nuclear weapons, and President Obama said for the first time that by the end of 2009, he would be able to assess whether his diplomatic outreach to Iran had worked.
“By the end of the year I think we should have some sense as to whether or not these discussions are starting to yield significant benefits,” he said, “whether we are starting to see serious movement on the part of the Iranians. If that hasn’t taken place, then I think the international community will see that it’s not the United States or Israel or other countries that are seeking to isolate or victimize Iran. Rather, it is Iran itself which is isolating itself.”
From May 18, 2009:
Political Punch: Disagreements for Barack and Bibi
OK.
6 Months.
Next year’s State of the Union Address should be interesting.
Our lives begin to end the day we become silent about things that matter. In the end, we will remember not the words of our enemies, but the silence of our friends.
Dr. Martin Luther King, Jr.
