Deal or no deal? That is the question that still hasn't been answered.
But remember, no deal is better than a bad deal. Obama is still holding firm thus far in the face of the Repugnicans who want to slash our social safety net to give millionaires and billionaires more undeserved and unnecessary tax breaks. And Boehner seems to be sweating bullets. If no deal is reached, it will not lead to financial Armageddon like the right-wing plutocrats claim. The so-called "fiscal cliff" is really not a cliff at all--it's more like a staircase. The full effect of the tax hikes (which occur on next year's income) and automatic spending cuts (which are phased in over a period of a few months) will not be felt right away, which clearly gives Obama the upper hand especially after January 1, 2013. No wonder Boehner and his ilk are so nervous.
Even more importantly, the budget deficit is actually NOT the biggest economic problem our nation is facing. The more pressing issue, of course, is the jobs deficit--the whopping 9 million Americans that are still out of work at the end of 2012, five years after the recession officially began (December 2007) and over three years after the recession officially ended (June 2009). We are clearly stuck in a vicious cycle of persistently high unemployment and inadequate consumer and aggregate demand (remember that one person's spending is another person's income and vice-versa). Remember that 70% of our entire GDP is consumer spending, and 20% is government spending. And cutting the budget deficit too much too soon (at least by traditional means) would only make the jobs deficit worse, and the relative lack of revenue from the still-struggling economy is one of the biggest drivers of the budget deficit. Basically, any significant tax hikes on the bottom 90% of Americans and/or any significant cuts in non-defense spending would only hurt our economy and make our future deficits (and national debt) that much worse in the long run. If it turns out that these hikes and cuts must be done, and that is a very big "if", then they must be postponed until our economy is back to normal (i.e. two consecutive quarters of 3% GDP growth or higher and less than 6% unemployment). Congress, you have been warned, so don't drink the Repugnican Austerity Kool-Aid.
Wednesday, December 12, 2012
Thursday, December 6, 2012
Stoned in Seattle
Today is truly a historic occasion. In Washington State, the initiative that legalized cannabis goes into effect, marking the first time any US state fully legalized the herb since it was federally banned in 1937. In Seattle, there was plenty of celebration of this occasion, with hundreds of people toking up under the Space Needle. Colorado also legalized it as well, and that goes into effect on January 5, 2013 December 10, 2012 (see update below). In both states, the first legal retail outlets for weed are scheduled to be set up in early 2014 as the new laws are phased in. Looks like Cypress Hill finally got his wish in two states, even if California was not one of them.
Of course, cannabis is still illegal under federal law, and it is still not clear exactly what the Feds will do. While they say they will still enforce the current law, the situation is very similar to how NY ended alcohol Prohibition in 1923, ten years before national Prohibition was repealed. Basically, the only ones enforcing it there were the feds, and they did not have nearly enough manpower or resources to do it alone (and they still don't). That spelled the beginning of the end for Prohibition, and we hope that is true this time around for cannabis as well. We will be closely watching this story as the next few months progress.
For the record, the TSAP supports full legalization of cannabis in all 50 states as well as federally. By that we mean it should be taxed and regulated in a manner similar to alcohol and tobacco, with an age limit of 18, and no one should be arrested or jailed for simple possession of small amounts. Growing one's own weed (within reason) should be treated like growing one's own tobacco or brewing one's own beer, and passing around a joint should be treated like passing around a tobacco cigarette or a bottle of beer. Driving under the influence of cannabis should be treated the same as driving under the influence of alcohol, though the penalties should reflect the fact that the latter is far more dangerous than the former. And we hope this will all become reality sooner rather than later.
UPDATE: On December 10, Colorado Governor John Hinckenlooper signed an executive order that made the initiative currently official. Thus, cannabis possession is now legal in both states for all people over the age of 21, while sale remains at least technically illegal for now pending the creation of a regulatory framework for such sales.
Of course, cannabis is still illegal under federal law, and it is still not clear exactly what the Feds will do. While they say they will still enforce the current law, the situation is very similar to how NY ended alcohol Prohibition in 1923, ten years before national Prohibition was repealed. Basically, the only ones enforcing it there were the feds, and they did not have nearly enough manpower or resources to do it alone (and they still don't). That spelled the beginning of the end for Prohibition, and we hope that is true this time around for cannabis as well. We will be closely watching this story as the next few months progress.
For the record, the TSAP supports full legalization of cannabis in all 50 states as well as federally. By that we mean it should be taxed and regulated in a manner similar to alcohol and tobacco, with an age limit of 18, and no one should be arrested or jailed for simple possession of small amounts. Growing one's own weed (within reason) should be treated like growing one's own tobacco or brewing one's own beer, and passing around a joint should be treated like passing around a tobacco cigarette or a bottle of beer. Driving under the influence of cannabis should be treated the same as driving under the influence of alcohol, though the penalties should reflect the fact that the latter is far more dangerous than the former. And we hope this will all become reality sooner rather than later.
UPDATE: On December 10, Colorado Governor John Hinckenlooper signed an executive order that made the initiative currently official. Thus, cannabis possession is now legal in both states for all people over the age of 21, while sale remains at least technically illegal for now pending the creation of a regulatory framework for such sales.
Monday, November 12, 2012
Now, About that "Fiscal Cliff".....
With President Obama's re-election already won, the next hurdle to face is the so-called "fiscal cliff", which is a set of tax hikes and spending cuts that will automatically occur on January 1, 2013 if no action is taken. While such a thing would clearly reduce the deficit, the Congressional Budget Office predicts that it would also likely trigger another recession given the already weak economy. Specifically, it would be the middle-class tax hikes and some of the spending cuts that would be the real problem, not the tax hikes on the rich. However, if we don't address the deficit at all, then we're in financial trouble as well, at least in the long run. And to top it off, the debt ceiling will have to be raised yet again in late January or early February. Seems like we're stuck between the proverbial rock and a hard place, between the devil and the deep blue sea.
Not really, though. As UC Berkeley professor Robert Reich so cleverly points out, the real problem is House Speaker John Boehner and the rest of the Repugnicans in Congress who are willing to play chicken with the economy. They will apparently do anything to avoid even a modest tax hike on the top 1% of Americans, even if it means ruining our country's credit rating and/or crashing the economy. Basically, everyone's ox would get gored except the ultra-rich if the Repugnicans had their way.
The best thing for Obama to do is to start out bold and aim high, rather than start out with a compromised position. According to Robert Reich, this means the following:
1) Raise taxes on the rich--by a LOT. Enough so the average millionaire would pay an effective rate of about 55% after all deductions and credits, as it was 60 years ago. (The top marginal rate would have to be at least 70%, and every dollar above the first million would have to be taxed at 50% or more)
2) Create a 2% wealth tax on the net worth of the top 0.5% of Americans.
3) Create a 0.5% financial transactions tax.
4) Raise the capital gains tax to match the rate on ordinary income, and cap the mortgage interest deduction at $12,000 per year.
5) Eliminate special tax preferences and subsidies for Big Oil, Big Pharma, Big Agro, Wall Street, and so-called "defense contractors."
6) Last but not least, let the Bush tax cuts expire for incomes between $250,000 and $1 million.
Doing all of these things would reduce the deficit by $4 trillion over the next ten years (the same as what Simspon-Bowles proposed), but without cutting any vital programs or raising taxes on the middle class. This is the crucial difference between what Professor Reich proposes and what the Repugnicans propose. And it wouldn't crash the economy, as the best studies have shown.
While Professor Reich acknowledges that some sort of compromise is inevitable, he also notes that any such "grand bargain" to avoid the cliff must contain the following stipulation: any sort of tax hike on the middle class and any sort of spending cut must only be permitted with a triggering mechanism of two consecutive quarters of 6% unemployment or lower and 3% GDP growth or higher. This caveat would ensure that we really are out of the woods before sucking any significant amount of aggregate demand out of the economy, echoing Keynesian economic theory. It is also very important to note that, unlike last time, progressives actually have the upper hand right now--so let's not squander it. No deal is still better than a bad deal.
Of course, there are other ways of accomplishing a similar or even greater deficit reduction, as the TSAP has repeatedly proposed. In fact our own proposals would eliminate not just the deficit, but the entire national debt as well. But much of what we have proposed dovetails rather nicely with what Professor Reich suggests, and that is an excellent start. What better time than now?
Not really, though. As UC Berkeley professor Robert Reich so cleverly points out, the real problem is House Speaker John Boehner and the rest of the Repugnicans in Congress who are willing to play chicken with the economy. They will apparently do anything to avoid even a modest tax hike on the top 1% of Americans, even if it means ruining our country's credit rating and/or crashing the economy. Basically, everyone's ox would get gored except the ultra-rich if the Repugnicans had their way.
The best thing for Obama to do is to start out bold and aim high, rather than start out with a compromised position. According to Robert Reich, this means the following:
1) Raise taxes on the rich--by a LOT. Enough so the average millionaire would pay an effective rate of about 55% after all deductions and credits, as it was 60 years ago. (The top marginal rate would have to be at least 70%, and every dollar above the first million would have to be taxed at 50% or more)
2) Create a 2% wealth tax on the net worth of the top 0.5% of Americans.
3) Create a 0.5% financial transactions tax.
4) Raise the capital gains tax to match the rate on ordinary income, and cap the mortgage interest deduction at $12,000 per year.
5) Eliminate special tax preferences and subsidies for Big Oil, Big Pharma, Big Agro, Wall Street, and so-called "defense contractors."
6) Last but not least, let the Bush tax cuts expire for incomes between $250,000 and $1 million.
Doing all of these things would reduce the deficit by $4 trillion over the next ten years (the same as what Simspon-Bowles proposed), but without cutting any vital programs or raising taxes on the middle class. This is the crucial difference between what Professor Reich proposes and what the Repugnicans propose. And it wouldn't crash the economy, as the best studies have shown.
While Professor Reich acknowledges that some sort of compromise is inevitable, he also notes that any such "grand bargain" to avoid the cliff must contain the following stipulation: any sort of tax hike on the middle class and any sort of spending cut must only be permitted with a triggering mechanism of two consecutive quarters of 6% unemployment or lower and 3% GDP growth or higher. This caveat would ensure that we really are out of the woods before sucking any significant amount of aggregate demand out of the economy, echoing Keynesian economic theory. It is also very important to note that, unlike last time, progressives actually have the upper hand right now--so let's not squander it. No deal is still better than a bad deal.
Of course, there are other ways of accomplishing a similar or even greater deficit reduction, as the TSAP has repeatedly proposed. In fact our own proposals would eliminate not just the deficit, but the entire national debt as well. But much of what we have proposed dovetails rather nicely with what Professor Reich suggests, and that is an excellent start. What better time than now?
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