The editors of the Washington Post have come out against the idea of indexing the capital gains tax that has been floated:
We don’t necessarily object, in principle, to indexing capital gains to inflation. During a period of high and persistent inflation, it might be both unfair to investors and bad for the economy to tax, say, stock profits, as if the dollars you sold the stock for were worth the same as the dollars you bought it with. (Ordinary income-tax brackets, after all, are indexed to inflation so as to protect wage earners.) This was a problem in the 1970s when inflation was in the double digits and the maximum rate on long-term capital gains was nearly 40 percent.
Today, though, inflation has been running at 2 percent or below for about a decade, and the maximum capital-gains rate is 23.8 percent. The unfairness to investors, and the distortion to the economy, from failing to levy the tax on only the inflation-adjusted value of the gain are relatively small. Compared with the government’s need for revenue, they are truly trivial. In other words, it may be that current law permits the government to collect a bit more from the wealthy than it could under ideal inflation-proofed conditions — and that’s just fine.
The editors, the Trump Administration, and, I guess, leaders in Washington more generally are treating two distinct problems as though they were one.
The first problem is that the demands for spending are growing very rapidly. The second is that the economy isn’t growing as rapidly as the demands for spending.
The Trump Administration’s and the Republicans’ solution to the second problem is to cut taxes. They believe they can incentivize economic growth to a point at which it exceeds the demands for spending.
The editors’ of the WP and the Democrats’ solution to the first problem is to raise taxes. They apparently believe that our only problem is not enough revenue.
I don’t believe that we can grow out of this problem. We must grow and control spending. Controlling spending means controlling health care costs. Controlling health care costs means reducing consumption and reducing health care sector incomes.
If solving these problems were easy, we’d already have done it.
Of course we should control spending. It’s the problem, period, full stop. The rest is technical gobbledygook.
The notion that “the Republicans solution†is to lower taxes is your obvious bias showing. It’s not a solution. It’s a desperate but ineffective attempt to limit spending.
You know, we take companies that at their core are good enterprises, then reset their trajectory. That’s really what we do. One of our tools in the standard issue tool kit is simply to shut off the spending stream for one or two years. Howls and wailing usually follow, especially from the sales department. But these enterprises tend to survive (Snicker) because we are sufficiently observant to know when we are too close to doing harm.
Government, and politics, has no such acumen. Howls and wailing work. And hence we have a spending problem. It’s not rocket science.
Over the last 40 years Republicans in Congress have done practically nothing to reduce spending. They have eliminated no federal departments and the only major program to be eliminated is AFDC. They have increased spending, particularly on defense. Most recently they have proclaimed major spending (like SSRI and Medicare) off limits for cuts. They have cut taxes three times. It is what the caucus can agree on.
Saying that isn’t bias. It is a statement of fact.
I hold no brief for establishment Republicans, Dave. Surely you know that by now. But perhaps you should take a step back and consider the tone of your commentary. Democrats have never seen a spending proposal they didn’t like, and endorse. Republicans at times push back. I realize it’s small consolation, but that’s why I’m pro smaller government all the time.
I come here to exercise my brain, out of respect and admiration for your generally very wise and thought provoking commentary and that of a few commenters, and to poke a few people in the ribs. At the risk of repeating myself, you might want to consider why Republicans have adopted a Dem-light stance, and your associated observations.
I think there really are some Republicans who want smaller government, but when they have a choice between stating in power and cutting spending, they choose to stay in power. Democrats Tax and Spend. Taxing is not popular. Spending is popular. Republicans Cut taxes and Spend. Both of those are popular. It just isn’t sustainable. To be clear, Republicans do have somewhat different spending preferences than Democrats, but there just isn’t much evidence, other than their words, that they will spend less.
Controlling health care costs is the key. Trump ducked the whole attempt by the GOP to try to repeal and replace. Absolutely no leadership at all. One of the worst performances by an executive on a major initiative I have seen.
Steve
“But perhaps you should take a step back and consider the tone of your commentary. Democrats have never seen a spending proposal they didn’t like, and endorse. Republicans at times push back. I realize it’s small consolation, but that’s why I’m pro smaller government all the time.”
Personally, I didn’t find anything wrong with the tone of the commentary.
I would just add that Republicans are selective in their push-back. To me, they are not operating based on core principle any more than the Democrats are. And I think their pro-business roots have grown to be more pro-corporatist over time.
If the party as a whole is actually standing on and, more importantly, voting on, principle, then I’m not seeing it.