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Top 992. Jul 27, 2000 5:42 AM

» Rande - Econ Watch:

Econ Watch:

2Q ECI comes in at 1.0% (1.1% expected)
June Durable Goods up 10% (-.1% expected)

ECI, more important of the two, is fine, especially since the govt. started including signing bonuses and stock options for the first time. The durable goods number is a big surprise, but it was skewed by a surge in transportation (aircraft) and defense orders.

-- posted by Rande

Kudlow: Everyone Else Cuts Taxes

Top 993. Jul 27, 2000 6:31 AM

» Rande - Excellent piece by Lawrence Kudlow over at CNBC.

Excellent piece by Lawrence Kudlow over at CNBC.com. Have to stop and think, in this election year, what kind of administration is most likely to perpetuate the counter-productive class warfare policies of the past....

Shoving class warfare and other liberal nostrums aside, German Chancellor Gerhard Schroeder and his Social Democratic Party (SDP) have managed to pass a broad-based tax cut that is worthy of Ronald Reagan and would make any American supply-sider proud.

The top individual tax rate will be slashed to 42 percent from 53 percent, while the corporate tax is to be reduced to 38.6 percent from 56 percent. As well, the 50-percent capital gains tax on sales of corporate cross shareholdings will be abolished.

The incentive effects from the considerable hike in after-tax returns to work effort and investment could raise future German economic growth from its anemic 2-percent rate in the 1990s to something more on the order of U.S.-style 3- to 4-percent growth in the next decade.

What's more, substantial tax cuts represent a major shift by the center-left German government away from Europe's traditional old model of tax, spend, and regulate social welfarism. Instead, this supply-side retooling pushes Germany into a new model of dynamic entrepreneurship that will be capable of effectively competing in the new global technology economy. Chancellor Schroeder's u-turn toward growth will surely trigger like-minded tax reform in France, Italy and the Netherlands. New moves to deregulate labor markets and financial services are sure to follow.

Rising productivity and investment returns will also boost demand for the sagging euro currency on world exchanges. As the increased availability of goods and services absorbs the money supply, euro-land inflation will be virtually zero.

Ironically, at the recent G-8 meeting held in Okinawa, Japan, Bill Clinton was the only head of state not contemplating major tax cuts. Japan has already implemented a Reagan-style fiscal package, and the economic recovery results are gradually taking hold.

In the run-up to next year's Canadian elections, both the Liberal party and the Canada Alliance party are offering tax cut programs. Even Russian President Vladimir Putin is pressing for a 13-percent flat tax.

While Mr. Clinton continues to preach his brand of reverse-Robin-Hood tax-cut demagoguery (allegedly robbing the poor to help the rich), Congressional Democrats are deserting the White House in droves in order to support Republican proposals to eliminate the estate tax, end the marriage penalty and expand super-saver IRAs and 401(k)s. The super-saver bill attracted 182 Democratic votes. This is progress.

Against the backdrop of massive budget surpluses as far as the eye can see, the 100-million-strong Investor Class -- including its 67-percent likely voter participation rate -- has propelled tax cuts toward the top of the list of public concerns. In the zeitgeist of our long-wave technology boom, more and more of the unrich aspire to get rich. But almost no one today wants to punish the rich.

Mr. Clinton's old Democrat class-warfare opposition to tax cuts has not only become a big political loser, it also risks a decline of U.S. competitiveness in the global race for capital. In world financial markets, money flows to the highest inflation-adjusted after-tax return.

Clinton-Gore opposition to tax cuts misses this point entirely. Their policies to expand entitlements and subsidize narrow slices of the population through targeted tax credits, as well as an obsessive over-reliance on debt reduction, is a prescription for stand-pattism that risks ceding world economic leadership to others in the 21st century.

If tax cuts are such risky schemes, then why are they popping up all over the world? What do Japan, Canada and the Europeans seem to know that the U.S. administration doesn’t?

That tax rates matter. That it must pay to invest, produce, take risks and create wealth. When tax rates on these growth-inducing factors are cut, then they are supplied in abundance. And that's the heart of prosperity.

-- posted by Rande

Top 994. Jul 27, 2000 6:38 AM

» Kirk - Silly me.

Silly me...

I thought our tax rates were ALREADY tons lower than in Europe. Not sure about Japan, but I wouldn't wish their anemic economy on anyone.

Tax cuts are great, we just can't do it too quickly or we undo all the benefits of gridlock, i.e. paying down the National Debt which makes credit and cost of capital lower. Greenspan agrees with me (actually, I agree with him, but lets not get too technical here.)

-- posted by Kirk

Top 995. Jul 27, 2000 6:51 AM

» Rande - Greenspan is clearly on record as preferring tax cuts to more sp

Greenspan is clearly on record as preferring tax cuts to more spending. If you believe that Congress will not spend the bulk of the surplus, then I want some of whatever it is you're smoking. As for tax rates here being still lower than much of Europe (about equal to Great Britain), it is the direction that is important. The estate tax may be getting all the press, but what we really need is an elimination of the capital gain tax as well as tax on income and dividends -- we discourage savings and encourage spending with this taxation on investment. A lowering of the marginal income tax rates is in order as well. Whenever the cost of capital is lowered, the value of capital increases. The resulting growth and productivity will raise all boats, including government revenue.

When, exactly, was it that so many became brainwashed about tax cuts being "risky?" Madison Avenue couldn't have done a better job.

-- posted by Rande

Top 996. Jul 27, 2000 11:44 AM

» Jon_Chance - Rande

The sheeple became brainwashed in the 1996 election by the constant matra of Clinton/Gore and the media of "risky tax cuts that would blow a hole in the budget." This continues today. Never understand why people don't look at the trillion dollar surplus as a trillion dollars of our money that the government has obtained through overtaxation and should not have and does not need.

-- posted by Jon_Chance

Top 997. Jul 27, 2000 1:02 PM

» SteveT - Taxes

Taxes

I am not in favor of the Government spending the surplus. I am surprised, it looks like we are going to have surpluses. How would this plan work? If we get a surplus of $1 Billion next year, use the Billion to pay down the Debt. Next year what would the Interest be a 1 Billion, about 60 Million give or take. Use the 60 Million for tax breaks next year. In the following year use the 60 Million for more tax breaks + the Interest payments for year 2 that we would have had to pay had we not paid down debt. Don’t know what the number would be but it presumably would be another 60 Million or maybe a little less. And so on and so on… Just maybe we can have it both ways. It seems to me after several good years we could end up with a smaller Debt and substantial tax cuts. I am thinking if we could get something along these lines started the tax cuts could compound in our favor. I would not be surprised if I am missing something here but it would be interesting to here someone more learned than I tear into this concept.

-- posted by SteveT

Top 998. Jul 27, 2000 1:26 PM

» joe_fabitz - OT.......Kinda glad

OT.. Kinda glad to see Ask Rande, Kirk, and Ask Mark as the current top 3 of the discussion list. would be so nice to get to Phase IV and rid radio man discussion group from appearing on the discussion list!!!

-- posted by joe_fabitz

Top 999. Jul 27, 2000 1:29 PM

» Rande - If we lived in an ideal world, the surplus would not be spent on

If we lived in an ideal world, the surplus would not be spent on some pet projects in the home states of the most influential congressmen, it would divided into thirds with 1/3 going to debt reduction, 1/3 going to Soc Sec and Medicare shore-up, and 1/3 going to tax cuts. Since we still live in the real world, where wasteful federal spending is the most likely outcome, we need to fight for every dime of tax relief we can get.

-- posted by Rande

http://www.suite101.com/discussion.cfm/2...

Top 1000. Aug 7, 2000 9:19 AM

» Kirk - No More Posts here

Please go to the next thread to "Ask Rande" a question.

Here is the URL:

Thanks and Congratulations to Rande for this popular thread!

-- posted by Kirk