“Raising Revenue by Punishing Achievement

Published September 19, 2011 | O'Reilly Factor | Bill O'Reilly


By Bill O'Reilly

It was more of the same from President Obama on Monday, demanding a tax increase on wealthy Americans and corporations in order to cut the enormous federal debt.

PRESIDENT OBAMA: Explain why somebody who is making $50 million a year in the financial markets should be paying 15 percent on their taxes when a teacher making $50,000 a year is paying more than that, paying a higher rate. They ought to have to answer for that.

Well, Mr. President, I do have an answer. Of course I do.

No. 1, you are talking about long-term capital gains tax, currently at 15 percent. But you and your pal Warren Buffett never say that. You equate the 15 percent cap gains tax with the federal income tax. That is not fair. That's because capital gains tax is levied on profits from invested money that has already been taxed.

Let's take me for example. I pay 35 percent in federal income tax. Some of my take-home pay is invested, and if I make some money on the investment, the government takes 15 percent of it away, or more if I make the profit in less than a year. Let's see: 35 percent plus 15 percent on profits; a nice return for the feds on my sweat equity.

OK, let's continue, Mr. President. If I lose money on my investments, a good possibility, you only allow me to deduct $3,000 a year. Therefore, my risk in investing is substantial. Now you want to up the ante on my winnings, but you don't say how much because the stock market will go nuts if you do. With all due respect, the tax the rich deal is bogus, as I'll demonstrate in a moment.

One more thing, Mr. President. In August of 2009, you said this:

OBAMA: The last thing you want to do is to raise taxes in the middle of a recession because that would just suck up and take more demand out of the economy and put businesses in a further hole.

Correct. So let me ask you: What's changed in two years? The economy is still awful and unemployment's even higher. So why have you changed your mind about a tax increase on the affluent and business?

Here's the unintended consequence of Mr. Obama's revenue enhancing plan, and I must tell you I want the feds to get more revenue. I don't want to starve them, as some people do. We need a robust military, a good transportation system and protections all over the place. But if you tax achievement, some of the achievers are going to pack it in.

Again, let's take me. My corporations employ scores of people. They depend on me to do what I do so they can make a nice salary. If Barack Obama begins taxing me more than 50 percent, which is very possible, I don't know how much longer I'm going to do this. I like my job, but there comes a point when taxation becomes oppressive. Is the country really entitled to half a person's income?

Finally, this fair share garbage has got to stop. Right now, taxpayers with incomes above $1 million represent just 0.2 percent -- not 2 percent, 0.2 percent -- of all income tax returns. Yet the million-dollar babies pay 21 percent of all the federal income tax.

Fair share, Mr. President? You make the call.”

“That guy is pretty awesome. Uh, altho you are aiight sometimes Noncon, I mean in this instance they guy in the article. And, uh, most certainly I don't suggest our commander in chief, as you could well assume.....”

“Nealz Nuze

Posted: 9:20 a.m. Monday, Sept. 26, 2011
A lesson for the tax the rich crowd

By Neal Boortz

Here’s more ammo for you when discussing taxes with your lib and prog friends or co-workers. Most of them cannot seem to wrap their brains around the idea that if you lower taxes, you actually generate MORE revenue. Instead, they preach this “tax the rich!” mantra because it sounds cool and it satisfies a primeval quest for revenge . Unfortunately for them, the numbers are not on their side.

Now, let’s talk about capital gains taxes. These evil taxes have come to the forefront of debate as of late because of Warren Buffett. I’ve explained how Warren Buffett does not pay a lower income tax rate than his secretary; he pays an entirely different tax – capital gains tax. And yes, the rate of capital gains is lower (for some) than income tax rates. But all that might change, if Democrats get their way. It will be just another way for them to nail those evil rich investors! From Forbes …

In 1997, Congress was considering a cut in the capital gains rate from 28% back down to 20%. The Joint Tax Committee (JTC) estimated that as a result revenues would increase by $7.8 billion from 1997 to 1999, but the tax cut would produce a loss of $28.8 billion over the following 7 years, for a net loss of $21 billion over the 10 year period.

The actual numbers after the tax cut was passed showed an increase of $84 billion over the pre-tax cut projections for 1997 to 2000. Despite an almost 30% cut in the rate, capital gains revenues rose from $62 billion in 1996 to $109 billion in 1999.

Similarly, when Congress considered cutting the capital gains rate again in 2003, from 20% to 15%, the JTC estimated that this would cause a loss of revenue of $5.4 billion from 2003 to 2006. But after Congress passed the tax cut, capital gains revenues increased by $133 billion during those years, as compared to the pre-tax cut projections. As Dan Clifton of the American Shareholders Association said, “There is no excuse for this $138 billion error.” Capital gains tax revenue doubled from 2003 to 2005 despite a 25% cut in the tax rate.”

“[i]'Capital gains tax revenue doubled from 2003 to 2005 despite a 25% cut in the tax rate.” Low cap gains rates are like heroine, you must keep lowering them or the economy does exactly what is happening now -- depression. Spoiled brat investors are addicts and you are obviously a drug dealer that didn't meet the demand.”

“The rich selling houses at twice to three times their worth can generate lots of taxes for a few years.......... THEN YOU GET WHAT WE HAVE NOW.

Can't you she what an economy really is? !!!GO GOLD MONEY GO!!!”

“Sorry to take so long to respond to BillO's Stinker that Conformist posted last week. I don't know how I missed it.

What Obama is proposing isn't raising taxes on capital gains, it changing the tax code to treat carried interest as regular income.

Right now hedge fund managers enjoy preferential tax treatment on a portion of their income. Typically, they are paid 2 and 20: 2% on capital under management which is taxed as ordinary income (current top rate of 35%) and 20% of the returns on the fund - the carried interest. Carried interest is treated as capital gains in our tax code so this portion of their income is currently taxed at 15%. They aren't investing their own money. They have no capital at risk and won't pay a penalty if the fund losses money. The carried interest portion of their income is payment for their labor. It should be taxed as ordinary income. I think its a good idea to give managers a stake in the performance of the fund but other taxpayers shouldn't subsidize their activity.

Frankly, the argument that capital gains should be taxed at a lower rate than ordinary income is pretty weak but that money buys pretty good lobbyists and politicians. That's an argument for another day.

BillO made a pretty lame argument that capital gains taxes amount to double taxation. He says if he invests his take home pay that has already been taxed at 35% he shouldn't have to pay taxes on the gains from those investments. That's a pretty silly argument, even from BillO.

He then goes on to argue that raising the top income tax rate to 50% would make successful people give up on the idea of earning money and just go lie on the beach or take a long loofah bath.

First of all, I hadn't heard anyone talking about raising the top rate to 50% (an idea I endorse, incidentally). Secondly - o'really?!! - CEO's and professional athletes would give up the chance to earn and keep millions of dollars if they had to pay a higher percentage to help support their country? Is he serious?

He finishes by saying how unfair it is that people who earn most of the income in America should pay most of the taxes. The top 0.2% that he moans about actually receive much of their income from capital gains and therefore pay a lower effective rate than their fellow citizens. Cry me a river BillO.”

“Did Mr. Buffett ever send that check to the IRS?”

“I see where you're at with that Rev, but all that money being given to our government .... for what? Too much pissin' it away in fraud, waste, and abuse (to use a military term). If I'm a Billionaire, paying half of all I earn to our wonderful government, you think I'm going to feel great about it? Providing for too much of the masses that shouldn't be provided for? No sir, I'd find another country to "provide" for, that's what I'd do.

For the flat tax ppl, does the math actually work out? I mean, say every single household making 30k and above, pay 20% (or 15 or 17 or whatever), including billionaires and paying that too on cap gains, would the math work out? Would that sustain a fairly large, REASONABLE-sized US government?

Could we really simplify our tax to that degree? You have to admire Cain's attempts at simplifications, no? With his 9-9-9 thing.”

“....other members of the Lucky Sperm Club who have given little ..........


Is this what the Tax Crowd believe?..

say it aint so please

THE RICH HOLD SPECIAL PLACE IN AFFECTIONS OF G.O.P.
By Cynthia Tucker | Cynthia Tucker � Sat, Sep 24,

When I was a kid, rich people were just, well, rich people. They weren't endowed with superhuman traits or placed on pedestals to be worshipped by the lumpenproletariat. They weren't believed to hold special keys that turned the universe.

They were properly viewed as individuals who had acquired their wealth in different ways and deployed it to different ends. We understood that some among the wealthy were like Bill Gates and others were like Donald Trump.

Always suckers for Horatio Alger stories, we reserved unabashed admiration for those who rose to riches through sheer resolve and hard work. We respected those who used their money to help the needy, to endow local charities, to build schools, libraries and playgrounds.

And we whispered about those scions of privilege who found no wholesome outlet for that priceless inheritance, but who burned through it with their relentless consumption of everything bigger, faster, more intoxicating. Theirs were cautionary tales, examples of the old cliche that "money can't buy happiness."

That was a while back, before Republicans -- always protectors of the wealthy and powerful -- hit upon a strategy for re-branding the rich as the people who make the world go 'round. Now, we are told, the wealthy are to be revered as "job creators" -- no matter whether they use their money to create jobs or havoc. And if President Obama raises their taxes, the world will spin wildly off its axis and the apocalypse will follow.

That means the Hollywood Kardashians, the family who give new meaning to the word "infamous," are to be treated as economic saints who cannot be asked to contribute a penny more to the nation that has made them so fabulously rich. The same goes for all the celebutants, trust fund babies and other members of the Lucky Sperm Club who have given little but received a lot.

You gotta give credit to the modern-day GOP. Since Newt Gingrich and consultant Frank Luntz rose to power, the Republicans have excelled at propaganda, twisting words beyond recognition in pursuit of political ends. They've been remarkably successful at selling bad ideas in bright packaging, peddling snake oil in shiny foil paper.

Among my favorites is the phrase "death tax," which Republicans deployed against the estate tax in the 1990s. They succeeded in persuading average working folk that the "death tax" was a greedy grab for the savings they had scraped together to leave for their heirs. (Some seemed to believe it was actually a tax on the dying.) In fact, the estate tax -- then and now -- is paid by a tiny group of the richest Americans. That includes very few family farms or businesses.

Last week, GOP pols dutifully pulled out the tried-and-true "class warfare" to criticize President Obama's proposal to raise taxes on the rich. That canard has been around since at least the 1930s, when the wealthy and powerful used it to pummel Franklin Roosevelt over his New Deal.

(It's funny how the phrase is never used to describe any number of proposals that would shortchange working stiffs. Michele Bachmann and Rick Perry, for example, have both suggested that working-class households ought to pay more in federal income taxes. Why isn't that "class warfare"?)

According to House Speaker John Boehner, Obama has aimed his plan squarely at the nation's vaunted "job creators," who can't be expected to restore the economy if their taxes are raised even a little. So Kim Kardashian would lay off her team of hairstylists and personal shoppers?

Of course, that's just nonsense. If there were any connection between higher taxes for the wealthy and job creation, the Clinton years would have seen high unemployment while the Bush years would have produced widespread prosperity. In fact, as we all remember, the opposite was true.

And, so far, most Americans remember that. Polls show that voters overwhelmingly favor Obama's plans to call for a bit more sacrifice by the richest among us, who have profited most from what this country has to offer.

But don't think the GOP will give up on a bad product. They will keep peddling their voodoo economics, hoping to find more takers. And why wouldn't they? They've grown powerful defending the interests of the powerful, so they're not likely to stop.

(Cynthia Tucker, winner of the 2007 Pulitzer Prize for commentary, is a visiting professor at the University of Georgia. She can be reached at cynthia@cynthiatucker.com.)

..”

“Nice nimrod... Cynthia Tucker huh? It's certainly obvious she's a "liberal college professor"(sic). Not exactly an ideal candidate for helping America be American.”

“Cynthia Tucker; Another Progressive Racist

Posted by Steve Markowitz on July 5, 2010
http://enduringsense1.wordpress.com/2010/07/05/cynthia-tucker-another-progressive-racist/”

“The ACORN ‘Useful Idiot’ Club Welcomes Cynthia Tucker

- Matthew Vadum Monday, June 27, 2011

http://www.canadafreepress.com/index.php/article/37932”

“Cynthia Tucker calls us all Racists… Again….Yawn

http://americanandproud.net/2010/09/cynthia-tucker-calls-us-all-racists-again-yawn/”

“She is spot on.”

“NoProb if rose is serious, you surely need no more proof than that.

Rose, you Rev need to move to Europe. That'll learn ya.”

“Editing must not be my strong-suit. That should have said "Rose, you AND Rev need to move to Europe....."”

“change the bucket to tax cuts and the boat floats duh even with the top wood removed duh

”

“Cynthia Tucker seems to have hit a nerve.”

“...and this is the place that should_'_ be calling her one...”

“�From the land of fat and stupid...�
roseymonster
9:58:11 AM
9/28/11


”

“

http://www.daybydaycartoon.com”

“May I remind yawl.

http://www.ctj.org/pdf/oecd201106.pdf”

“UC, so what?”

“

Four Deformations of the Apocalypse

By DAVID STOCKMAN


IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation�s public debt � if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 � will soon reach $18 trillion. That�s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation�s wealthiest taxpayers be spared even a three-percentage-point rate increase.

More fundamentally, Mr. McConnell�s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts � in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance � vulgar Keynesianism robed in the ideological vestments of the prosperous classes.

This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.

The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit � the combined shortfall on our trade in goods, services and income � has reached nearly $8 trillion. That�s borrowed prosperity on an epic scale.

It is also an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves. Just let the free market set currency exchange rates, he said, and trade deficits will self-correct.

It may be true that governments, because they intervene in foreign exchange markets, have never completely allowed their currencies to float freely. But that does not absolve Friedman�s $8 trillion error. Once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors.

In fact, since chronic current-account deficits result from a nation spending more than it earns, stringent domestic belt-tightening is the only cure. When the dollar was tied to fixed exchange rates, politicians were willing to administer the needed castor oil, because the alternative was to make up for the trade shortfall by paying out reserves, and this would cause immediate economic pain � from high interest rates, for example. But now there is no discipline, only global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve.

The second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40 percent of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party�s embrace, about three decades ago, of the insidious doctrine that deficits don�t matter if they result from tax cuts.

In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration�s hastily prepared fiscal blueprint, however, was no match for the primordial forces � the welfare state and the warfare state � that drive the federal spending machine.

Soon, the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget � entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans� fiscal religion.

Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.

By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too � signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.

The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008.

But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could never have survived, much less thrived, if their deposits had not been government-guaranteed and if they hadn�t been able to obtain virtually free money from the Fed�s discount window to cover their bad bets.

The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.

It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans � paid mainly from the Wall Street casino � received two-thirds of the gain in national income, while the bottom 90 percent � mainly dependent on Main Street�s shrinking economy � got only 12 percent. This growing wealth gap is not the market�s fault. It�s the decaying fruit of bad economic policy.

The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing � as suggested by last week�s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it�s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach � balanced budgets, sound money and financial discipline � is needed more than ever.”

“Good read. Thanks, V.”

“Ohhhhhhhh, it's the Republican's fault---I never would have guessed.

Read the article....same blame game....never about out-of-control spending or anyone else to blame....yaaaawn....”

“Would you believe 50% blame? Wait, what side am I oWn? Which side are you oWn? Which side is which side?”

“I'm guessing you didn't read it Nonconformist.

Do you know who David Stockman is? He's about as "Republican insider" as you can get. It might be wise to pay attention to what he has to say.”

“You guessed wrong and yes, I do know who he is.”

“Since you claim to have read it, I wonder how you came to summarize it the way you did.

He has plenty to say about the spending side of the budget equation.”

“Plenty???”

“You seem to have trouble with absolutes:


same blame game....never about out-of-control spending or anyone else to blame....yaaaawn....�
Nonconformist”

“Well I wouldn't exactly call it a problem.”

“No of course not.

I happen to disagree with Stockman's stated position on cutting middle class social spending but I don't pretend he hasn't made the case.”

“for once, I agree with a comic you've posted, Stovie. I can't help but laugh my ass off at the lefty hipsters who mock capitalism but are in the front of the line at the apple store every time a new iphone is released...”

“They are not against Capitalism they are against Corrupt Capitalism. When the government was first offered at auction to the top bidder, government became the slave to biz, something yawl know about.”

“

The Bipartisan March to Fiscal Madness

By DAVID A. STOCKMAN


IT is obvious that the nation�s desperate fiscal condition requires higher taxes on the middle class, not just the richest 2 percent. Likewise, entitlement reform requires means-testing the giant Social Security and Medicare programs, not merely squeezing the far smaller safety net in areas like Medicaid and food stamps.

Unfortunately, in proposing tax increases only for the very rich, President Obama has denied the first of these fiscal truths, while Representative Paul D. Ryan, the chairman of the House Budget Committee, has contradicted the second by putting the entire burden of entitlement reform on the poor. The resulting squabble is not only deepening the fiscal stalemate, but also bringing us dangerously close to class war.

This lamentable prospect is deeply grounded in the policy-driven transformation of the economy during recent decades that has shifted income and wealth to the top of the economic ladder. While not the stated objective of policy, this reverse Robin Hood outcome cannot be gainsaid: the share of wealth held by the top 1 percent of households has risen to 35 percent from 21 percent since 1979, while their share of income has more than doubled to around 20 percent.

The culprit here was the combination of ultralow rates of interest at the Federal Reserve and ultralow rates of taxation on capital gains. The former destroyed the nation�s capital markets, fueling huge growth in household and business debt, serial asset bubbles and endless leveraged speculation in equities, commodities, currencies and other assets.

At the same time, the nearly untaxed windfall gains accrued to pure financial speculators, not the backyard inventors envisioned by the Republican-inspired capital-gains tax revolution of 1978. And they happened in an environment of essentially zero inflation, the opposite of the double-digit inflation that justified a lower tax rate on capital gains back then � but which is now simply an obsolete tax subsidy to the rich.

In attacking the Bush tax cuts for the top 2 percent of taxpayers, the president is only incidentally addressing the deficit. The larger purpose is to assure the vast bulk of Americans left behind that they will be spared higher taxes � even though entitlements make a tax increase unavoidable. Mr. Obama is thus playing the class-war card more aggressively than any Democrat since Franklin D. Roosevelt � surpassing Harry S. Truman or John F. Kennedy when they attacked big business or Lyndon B. Johnson or Jimmy Carter when they posed as champions of the little guy.

On the other side, Representative Ryan fails to recognize that we are not in an era of old-time enterprise capitalism in which the gospel of low tax rates and incentives to create wealth might have had relevance. A quasi-bankrupt nation saddled with rampant casino capitalism on Wall Street and a disemboweled, offshored economy on Main Street requires practical and equitable ways to pay its bills.

Ingratiating himself with the neo-cons, Mr. Ryan has put the $700 billion defense and security budget off limits; and caving to pusillanimous Republican politicians, he also exempts $17 trillion of Social Security and Medicare spending over the next decade. What is left, then, is $7 trillion in baseline spending for Medicaid and the social safety net � to which Mr. Ryan applies a meat cleaver, reducing outlays by $1.5 trillion, or 20 percent.

Trapped between the religion of low taxes and the reality of huge deficits, the Ryan plan appears to be an attack on the poor in order to coddle the rich. To the Democrats� invitation to class war, the Republicans have seemingly sent an R.S.V.P.

Washington�s feckless drift into class war is based on the illusion that we have endless time to put our fiscal house in order. This has instilled a terrible budgetary habit whereby politicians continuously duck concrete but politically painful near-term savings in favor of gimmicks like freezes, caps and block grants that push purely paper cuts into the distant, foggy future. Mr. Ryan�s plan gets to a balanced budget in the fiscal afterlife (i.e., the 2030s); the White House�s tactic of accumulating small-fry deficit cuts over the enormous span of 12 years amounts to the same dodge.

Such fiscal jabberwocky ignores the fact that we have experienced a recession every five years or so for the last six decades; that the budget is now exposed to even more frequent and amplified cyclical turbulence amid the aftershocks of the financial crisis; and that the United States does not have a divine right to issue any amount of interim debt that suits the ideological convenience of the two parties.

Nevertheless, the Democrats are immobilized because Keynesians insist on kicking the budgetary can down the road until cyclical �demand� has in their estimation fully recovered, while Republicans sit on their hands because supply-siders insist on letting the deficit fester until tax cuts work their alleged revenue magic.

A generation ago, such spurious ideological conceits would never have taken root, because deficits had adverse consequences like rising interest rates or an outflow of monetary reserves.

But for decades now, the central banks of the world have been giving policymakers a false signal that sovereign debt is cheap and limitless. Functioning like monetary roach motels, central banks have become a place where Treasury bonds go in but never come out � thereby causing bond prices to be far higher and interest yields much lower than would obtain in a market that wasn�t rigged.

Indeed, the Fed and currency-pegging central banks in East Asia and the Persian Gulf have absorbed nearly all of Uncle Sam�s multitrillion-dollar spree of debt issuance. Moreover, about $4.6 trillion, or more than half of all debt held by the public, is now sequestered in central banks � paid for with printing-press money.

Even central banks cannot defy the canons of sound finance indefinitely, however. Japan will buy less Treasury paper as it turns inward to recover from the wrath of nature. Likewise, China will drastically curtail its currency pegging and related Treasury bond purchases in order to suppress the rip-roaring imported inflation and speculative bubbles now engulfing its domestic economy. And unless the Fed wants to ruin the value of the dollar, it will need to keep its promise to get out of the bond-buying business, too, when its second round of quantitative easing ends in June.

With the central banks no longer ready to buy, the Treasury market will once again be driven by real investors � many of them likely to demand higher interest rates owing to the heightened fiscal risks recently highlighted by Standard & Poor�s. Ominously, the biggest and baddest of these real investors, the quarter-trillion-dollar Pimco Total Return Fund, has already thrown down the gauntlet by selling Uncle Sam�s paper short.

INTEREST rates have been falling for 30 years, but Pimco�s short call could well mark a generational reversal. If so, rates will continue to rise, and the fiscal time frame will be abruptly foreshortened from the distant foggy future to the Treasury�s borrowing needs in the here and now. Then the abject deficiencies of the dueling budget plans will be self-evident.

By 2014, for example, the Ryan plan does not save a dime from the $2.2 trillion baseline for Social Security, Medicare and national security spending. Then it extends all the Bush tax cuts at a cost of $350 billion while instructing the states to reduce spending for the poor by $100 billion and the Congress to slice domestic discretionary spending by 25 percent. That toxic brew is likely to find few takers � even at a Mad Hatter�s tea party.

The latest iteration of the Obama plan is little better. By 2014, it would generate $70 billion from taxing the rich and perhaps $30 billion from the president�s belated call to re-examine our over-financed military but virtually nothing from freezes on domestic programs or from Medicare reimbursement reforms.

So the Ryan plan worsens our trillion-dollar structural deficit and the Obama plan amounts to small potatoes, at best. Worse, we are about to descend into class war because the Obama plan picks on the rich when it should be pushing tax increases for all, while the Ryan plan attacks the poor when it should be addressing middle-class entitlements and defense.

In the real world, however, the global bond market is already rumbling � and around the corner, a fiscal conflagration surely lies.”

“�for once, I agree with a comic you've posted, Stovie. I can't help but laugh my ass off at the lefty hipsters who mock capitalism but are in the front of the line at the apple store every time a new iphone is released...�
FepsisPormosa
5:26:04 PM
10/06/11

I'm sorry peps. I'll try not to do it again. I know how traumatic that must have been. ;-)”

“Do we really believe that we should protect tax breaks for those who have already made it - while we tell our children to take on more debt to get an education, or tell our seniors that they will have to get by on less?

- Elizabeth Warren”

“LMFAO! This again???”