Obama’s Special Interest Politics
It has occurred to me that no one this side of Paul Krugman would offer the kind of idiot answers to those capital gains tax questions posed by Charlie Gibson that candidate Barack Obama did in the most recent Democrat debate. It is an act of rhetorical kindness to call Obama’s answers about the income of private equity partners lame in the face of clear evidence that raising capital gains tax rates actually lessens federal revenues. Fortunately, we have the Wall Street Journal to clear the air and explain candidate Obama’s apparent economic ignorance. It’s not that Barack Obama is so stupid. It’s that he is doing the bidding of one of his fiercest special interest supporters, the Service Employees International Union, and its boss, Andy Stern.
For more than a year, the head of the powerful Service Employees International Union has been running a political campaign against private equity firms to allow him to organize workers at the companies they own. This month in California, the SEIU suffered a major setback when a bill that would have restricted state pension fund allocations to sovereign wealth-backed private equity firms was shelved by lawmakers. The measure was Mr. Stern’s brainchild, and its ostensible purpose was to target sovereign wealth funds in countries with spotty human rights records.
The real impetus for the bill, however, was to help the SEIU organize employees of ManorCare, a nursing home chain owned by the Carlyle Group private equity firm. Kohlberg Kravis Roberts, another private equity outfit and owner of the Hospital Corporation of America, has also been a major target of Mr. Stern’s campaign.
The SEIU wanted to ratchet up the pressure on Carlyle and others by cutting off two gigantic sources of private equity capital: the California Public Employees’ Retirement System (Calpers) and the California State Teachers’ Retirement System (Calstrs), which manage $240 billion and $167 billion of assets, respectively…
Calstrs and Calpers estimated that their funds would lose a combined $7.5 billion in the first five years alone under Mr. Stern’s bill…
…Calpers and Calstrs have had the sense and wherewithal to push back against the SEIU’s bullying. As they see it, Andy Stern’s war on private equity would kill the goose that lays golden eggs for their retirees. His bill would have prevented them from maximizing their returns, which happens to be their fiduciary duty. It’s also what’s best for working families.
In other words, Obama’s attacks on the income of private equity partners are nothing more than a not-so-subtle form of political pressure from Andy Stern and the SEIU via candidate Obama… a quid pro quo in exchange for that union’s continued political support.
As economist Don Luskin has noted, a visit to the SEIU website shows just how committed the union is to the election of Senator Obama, and why Obama, for his part, feels obliged to attack the private equity industry at the behest of his union master.
Barack Obama has spent the past year preaching “change” and his “new style politics” but the simple fact is he is just another, inexperienced liberal politico doing the bidding of his union bosses. There is nothing “new” about another round of special interest class warfare from the radical Left.
WOOF,
Standard deviations? Regressions? Chi-square? Whatever nonsense are you talking about now? Remove all the zeros and a mere child could do the math. The CBO on which you and others on the Left unwittingly rely said that the cut in capital gains tax rate would result in a $27 billion reduction in revenue. Instead revenues came in some $26 billion higher than originally predicted… an “insignificant” error of over 42%!!!
And this happened not just once, but both times the cap gains rate was cut… once under a GOP administration and once before under a Democrat.
That ain’t Voodoo, WOOF. And it ain’t statistical analysis or econometric modeling. It’s arithmetic! Perhaps you should learn some.
WOOF,
More rhetorical nonsense! Don’t you know when to retire gracefully and go lick your wounds?
1. Where’s your proof that this is so?
2. From what point do you start to determine just how much revenues would have been collected? And how exactly are those projections arrived at? After all, CBO and JCT projections have already been thoroughly discredited. Got anything authoritative to rely on instead?
This would be true ONLY in a fantasy world in which the assets in question always increase in value and never, ever decrease. Furthermore, like CBO and JCT (hardly a compliment!) you are assuming a static, rather than dynamic model. That is, you assume that everything else is equal. But as Luskin and Clifton have clearly demonstrated, everything else is NOT equal. The increase in the supply of capital alone changes all such decisions.
Finally, let me remind you that when Mr. Bush proposed to privatize a portion of Social Security, on a purely voluntary basis, you were one of the most strident in opposing the idea by reminding us that markets do not always go up, but experience downturns as well… Exactly the opposite of what you now imply in relation to capital gains taxes.
“Pay me now at a lower rate” does not always translate into lost revenues later, as you’ve stated. Just ask the guy whose house appraised at $600,000 2 years ago, but won’t even bring an offer of $500,000 today. Or, if you prefer a Democrat example, ask the guy who didn’t sell Amazon.com or Global Crossing before the dot com bubble burst in late 1999.
What the hell are you talking about? I thought the discussion was on tax revenue, which Bat One clearly demonstrated was increased by cutting capital gains taxes rather than decreased as projected by the sources you cited to back up your claim that extending the tax cuts would decrease revenue. So, if the facts don’t support you, change the subject?
Game over woof. You lost and you’re quickly moving from pathetic loser to drooling morn status.
Wow! It finally loaded for me. Screw fair market value, is it even legal for a union (not a PAC) to go into the tank for a particular candidate? I always thought that they were allowed to endorse certain issues, but not (necessarily) candidates.
Let’s start, as does economist Don Luskin here, with CBO’s 2003 Budget and Economic Outlook, published in January of that year, before the Bush tax (rate) cuts of 2003 were enacted. Table 3-5 on page 60 listed estimates of $60 billion in anticipated capital gains tax revenues in 2004 and $65 billion in 2005.
The January 2004 CBO Budget and Economic Outlook lists reduced estimates of $46 billion for 2004 and $52 billion for 2005, which means CBO was forecasting a decrease in capital gains tax revenues of $27 billion from a two year total of $125 billion to a new total of only $98 billion for the same two year period.
Now to the 2006 CBO Budget and Economic Outlook Report, Table 4-4 on page 92 to see just what really happened. In 2004, capital gains liabilities totaled $71 billion and for 2005 the total capital gains tax liabilities totaled $80 billion.
While CBO had estimated a drop of $27 billion because of the capital gains rate cut from $125 billion to $98 billion, the Treasury actually took in $151 billion, $26 billion more than had originally been forecast by CBO BEFORE the rate cut was enacted!
As Luskin put it exuberantly,
Nor is the 2003 capital gains tax rate cut the only example of such a “cut” not “costing” the Treasury lost revenue, but actually increasing the tax revenue taken in. And the Congressional Budget Office (CBO) is not the only agency with bogus estimates and conclusions regarding tax rate cuts.
This from the July 2005 Report to the American Family Business Institute by economist Daniel Clifton, “LEARNING FROM HISTORY: JCT’S STATIC SCORE CAN NOT DETERMINE THE REAL REVENUE EFFECT OF REPEALING THE ESTATE TAX”
Capital gains revenues projected by CBO to be $55 billion, $65 billion, and $75 billon respectively for 1997, 1998, and 1999, actually came in at $79 billion, $89 billion, and $111 billion.
For anyone interested in the statistical arcana, Clifton’s study explains in some detail why CBO estimates have been so consistently unreliable in under-estimating the revenue gains from capital gains tax rate cuts.
The CBO 2002 paper on “Capital Gains Taxes and Federal Revenues” cited by WOOF does have one interesting point to recommend it, however,
This is true insofar as cap gains are not, yet, indexed for inflation. Clearly they should be. But there are instances when capital gains are taxed when “earned” rather than when realized, and clearly this is NOT as it should be.
The Congressional Budget Office estimates, by their own published figures, were wrong, as are those who rely on them. Charlie Gibson’s statements regarding capital gains tax (rate) reductions were correct, as were his questions of Senator Obama… who blew it!
When I checked it 15 minutes ago, they had Obama’s picture pasted all over their site. You’d have thought it was an Obama campaign site.
Which brings up another question… I wonder what the fair market value of such a website endorsement is, and if it has been properly reported to the Federal Election Commission at that value, as required by federal law?
Source documents, please!
Later.
“A National Healthcare Union”
Gee, I wonder if any deals have been struck in our impending Nationied socialized medicine fraud coming down the pike?
http://www.seiuhealthcare.org/nationalunion/Default.aspx
Ha, it would seem that all this sudden attention has crashed the SEIU web servers. Hopefully, it will give them a little scare to see that so many people have suddenly taken an interest in their activities.
WOOF,
I have appointments at the gym and a MA class afterwards, but I would not miss an opportunity like this to prove your Brookings and CBPP talking points memo dead wrong.
In the meantime, perhaps you would find out who some of those so-called experts are… besides CBO… and the specific CBO document(s) your talking points memo refers to.
You might also explain why CBO is considered to be non-partisan when Director Orszag was appointed just last January… by Speaker Pelosi?
WOOF,
Bogus figures??? I don’t think so. If you look real, real carefully, you’ll see that the CBO report you wrongly offered in support of the incorrect conclusions originally stated list the very same numbers for the very same years that I cited via Luskin and Clifton. The numbers are what they are. It is your conclusions, and CBO’s of course, that are in error… just as I said they’d be.
As R108 has been saying here for months, the difference is between the static analysis model used by CBO, and foolishly relied on by those of you on the economics-illiterate Left, and the more realistic dynamic analysis model, which more accurately takes into account the effect of the lowered cost of capital on the economy as a whole and on those making investment decisions within the private sector.
Unlike the thought processes at CBO and JCT, folks in the real world do not make decisions in a theoretical vacuum. Which explains why Don Luskin and Dan Clifton are consistently right, while the folks at CBO, and you, are consistently wrong.
WOOF,
Now you’re sulking! And trying to change the subject as well. You’ve been proven wrong, using exactly the same numbers from Treasury and CBO that you were relying on. Be a man about it, and acknowledge your defeat.
As for this,
The idiot who wrote that, most likely a liberal Democrat, ought to fired for stupidity alone. Obviously, when the CBO’s projection is for a 21% drop in revenue ($27 Billion) and the actual tax liability for the same period is a 20% increase ($26 billion) above the initial forecast, that’s a swing of $53 billion or 42.4% of the original, pre- rate cut two year forecast. And you would offer that a 42.4% increase in tax revenue “…has no bearing on the accuracy of CBO’s forecasts”???
May I suggest that some other subject would be more suitable for your knowledge base and analytical skills. Fingerpaints, for example!
Finally, about those deficits… Even an average high school student, condemned to a government/union run public puddle of educational indifference, can understand that equations have, by definition, two sides. Thus, if a budget is out of balance, clearly more is being spent than is being taken in. Reduce
the increase in spending while increasing the growth of revenue with pro-growth policies such as cuts in the marginal tax rates, and the deficit goes away.
Finally, please don’t let your angst at being proven wrong about cap gains tax rate cuts effect your honesty in other areas. That $9 trillion you referred to is not the deficit, but the cumulative increase in the national debt, and it represents an easily sustainable 2.4% of GDP. As I suggested before, these discussions aren’t going to get any easier for you if you don’t know what you’re talking about.
WOOF said, Voodoo economics and then said, tax cut enacted in 2003 would cost $100 billion over the next decade
A tax cut that costs money. That IS voodoo economics WOOF.
The question is why you support this “Voodoo economics”.
The proof in the pudding is the
9 Trillion dollar deficit.
Of which most comes from the voodoo economics you whole-heartedly support. You may call it the “Great Society”, but it’s really just voodoo economics.
You’re not fooling anybody here WOOF.
Just as it is troubling that conservatism has become a Satanic cult bent on practicing ritual human sacrifice and dismemberment in Iraq for the next 100 years…
Lunatic alert!
Ah, for the good old days when p-man just spammed us with the same nonsense over and over! Now, it has a whole new line of nonsense!
At best, Wright is a stranger to the truth. Just as it is troubling that conservatism has become a Satanic cult bent on practicing ritual human sacrifice and dismemberment in Iraq for the next 100 years, so too is it disturbing that a cult on the left thinks they can curse America and lie about it or that we are to supposed to admire them for the way they curse us. Well in that case, dm U too! And in the words of FUtus, the sitting VP, fu as well.
Bat against the bogus figures people The Congressional Budget Office (CBO), the Joint Committee on Taxation. Congressional Research Service, the Bush Treasury Dept.
Lonely at the top?
Stick with your apologists.
The proof in the pudding is the
9 Trillion dollar deficit.
Voodoo economics
No Free Lunch on the Curve
Excuse me for writing deficit instead of debt.
You can cite all the simple math and chi-square standard deviation regressions, the economy is still the proof in the pudding.
The
Treasury agrees.
http://www.cbo.gov/doc.cfm?index=3856&type=0
where do I send the bill?
Revenue gains from tax rate cuts are a small fraction of the revenues that would have been collected had rates been untouched.
When gains taxes are lowered entities take advantage of the opportunity to maximize gains, revenues go up. If Congress talked about lowering gains rates next year, revenues would go down this year as entities held off selling.
In the long run gains are realized through sales.
Pay me now at a lower gains rate translates into lost revenue later.