Category Archives: The Talk

The Talk: Tax Increases or Class Warfare?

The Talk: Tax Increases or Class Warfare?
September 22, 2011

Chip Lebovitz: The president finally released a concrete deficit reduction plan Monday. Taking a populist stance, the president’s plan features GOP opposed tax increases including one specifically on millionaires called the “Buffett Rule,” named after the billionaire hedge fund manager who suggested the idea in a recent New York Times op-ed. What’s your take on the president’s proposal Ross?

Ross Freiman-Mendel: The president has once again proven that he’s either woefully lost or willfully destructive with the economy. Senator Tom Coburn said it best: “The plan is a giant tax increase [with] maybe 81 billion in cuts and 1.45 trillion in revenues.” The best example is the “Buffett Rule,” is nothing but class warfare and political posturing at the expense of job creation.

Chip Lebovitz: The plan just represents what I find to be the current political reality. Republicans would have seized on any concessions the president had thrown out in his opening offer and pulled him past where a natural agreement should lie. The Buffett Rule, however, is anything but class warfare – it’s an idea supported by the people suggested by a member of the truly rich. The basic thrust that the extremely wealthy should pay as much in taxes as someone from middle class – hardly an unfair notion.

Ross Freiman-Mendel: And with what authority can Mr. Buffett speak, when he has relied on bailouts — i.e. Goldman and Bank of America — to make his investments successful? A tax is fundamentally a punishment; President Obama proposes we should take more from rich people because they’re successful and have more of something. But ideology aside, the plan is terrible economics, because the government now demands a share of capitals gains only 2.5 years after Bernanke went to infinite and beyond to pump up the “wealth effect” for the richest 1% of Americans. That’s contradictory.

Chip Lebovitz: That’s a bold statement on the nature of taxes; basically, you are declaring that the payroll tax is punishing people for wanting to have Social Security. Turning back to Mr. Buffett, his investments would still be an overall success with or without the government bailouts of Goldman Sachs and Bank of America. If anything, he realizes the value of government preventing a complete economic meltdown – instead of a very large scale one – and feels that maybe he and his fellow millionaires might contribute a bit to help the government balance its budgets after it took the time to support their industry. Furthermore, the timing of this tax plan is in fact its best part; most economists support stimulus now to get the economy going with long term deficit reduction to prevent a ballooning of debt to GDP over the long run.

Ross Freiman-Mendel: But you haven’t responded to the impacts on the wealth effect. When you say “a bit” that’s totally disingenuous; increasing the tax on capital gains could cut actually income for those invested in the stock market by 25 percent, encouraging all to exit the market at the current lower rate capital gains rate of 15 percent and forcing more downward pressure on the stock market. Crash anyone? I’m all for “smart” stimulus now, but all this plan does is continuing to make the country inhospitable to business and economic growth in the name of “fair share.”

Chip Lebovitz: That’s because the wealth effect isn’t even relevant here. David Backus, an NYU economist, showed that the wealth effect, when people perceive their money is more valuable then it is, isn’t visible in stock prices. But regardless, Republican leadership has ruled out tax reform, the best revenue raising concept, for super committee consideration. How else you would you raise revenue to help balance the deficit.

Ross Freiman-Mendel: I (and I believe basically every member of the Federal Reserve, including the Chairman himself) respectfully will question David Backus’ claim, because the wealth effects applies directly to the stock market. I see two great ways to raise revenue. First, have Mr. Buffett (and his cohort Mr. Gates) donate 90% of their wealth to the Treasury, and second, implement tax reform that closes loopholes and brings individual rates down across the board.

Chip Lebovitz: Speaker Boehner has ruled out tax reform, and a vast majority of Mr. Buffett’s wealth has been marked off for charity. You’re points however sum up an irresponsible view of debt reduction, “Either let someone else do it, or push it down the road so it’s not your problem.” At least the president is trying to create a comprehensive solution now that doesn’t gut a major entitlement or two.

Ross Freiman-Mendel: Any attempt to solve our debt with lots of revenue and pathetic spending cuts implies the president wants to fund current spending levels. As I’ve said before, the he will continue to punt the can down the road, but one day it obstinately will remain motionless. That’s when our real problems will begin.

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Source: Dave Makes

The Talk: A Trip to the UN

The Talk: A Trip to the UN
September 16, 2011

Ross Freiman-Mendel: The Palestinian Authority (PA) might appeal to the United Nations Security Council (UNSC) on September 20th to seek recognition for statehood. The PA hopes to receive at the very least legitimacy from the international community and the ability to participate in all the conventions and bodies of the UN. Chip, where do you stand in this debate?

Chip Lebovitz: Where I stand on the debate belies the significance of the Palestinian Authority’s decision. There is no reason that the Palestinians shouldn’t be allowed to take their case to the UN and, in fact, it is a brilliant strategic move – most likely forcing the U.S to veto a Security Council resolution. In a sense, it’s a win-win for the PA, a veto isolates Israeli support as solely stemming from the U.S. and simultaneously strengthens the Palestinian negotiating position. A successful vote establishes legitimacy for the Palestinian state.

Ross Freiman-Mendel: The PA has indeed staged a successful publicity stunt. The UN continues to cheapen its legitimacy with and respect for Israel. Unfortunately, the Palestinian Authority is uninterested in a negotiating position; interest would imply that the PA is committed to peace, when in fact they strive for existential destruction. To the dismay of Israel’s enemies, the international community will have little bearing in convincing Israel to negotiate on indefensible terms.

Chip Lebovitz: That’s the inherent problem though with the American public’s position on the whole matter – it has no nuance. Seventy-three percent of Palestinians wants peace with the Jewish people, according to a 2010 Haaretz (an Israeli newspaper) poll, while 76 percent of Americans think that the Arabs want the opposite, to destroy the Jewish state. That’s a huge and depressing knowledge gap. The PA’s decision is wrong because it is a unilateral action that in the end may provide the PA with a temporary boost in negotiating power, but will in the end, just seed more long-term resentment between the two countries. What needs to happen is a return to the negotiations that the president had supported earlier in his presidency.

Ross Freiman-Mendel: There are polls and there are actions; Haaretz found 73 percent of Palestinians want peace, yet that Palestinians have been offered that — 1967 plus swaps — three times at Camp David in 2000, Taba in 2001, and Olmert-Abbas negotiations in 2008 to no avail. Having departed from the previous Turkish, Jordanian, British, and Egyptian rulers of yore, the Israelis gave the Palestinians sovereign territory in the form of Gaza, and in came “Iranian sponsored rulers [that] have devoted all of their resources to turning it into a terror base.” Peace has failed because one side has been intransigent, and successful negotiations will not happen until the PA comes to the table willing to make mutually agreed upon swaps.

Chip Lebovitz: Don’t conflate time periods and I’m not so sure the “moderate” Mahmmoud Abbas counts as an Iranian sponsored ruler. Most people I’m sure would agree that former PA leader Yassir Arafat was foolish to walk away from the Camp David deal, but Abbas is not Arafat. Right now, Israel is being increasingly isolated in the international community, in part due to a drop in Arab support stemming from the Arab Spring. Maybe part of the PA’s intransigence is due to Israeli obstinacy – refusing even the president’s request to stop building settlements in the West Bank.

Ross Freiman-Mendel: I wouldn’t characterize Abbas, who agreed to join in a unity government with Hamas as a “moderate.” I’d like to reference my opening argument, citing the possibility of peace only after the Palestinians Authority abandons its commitments for the destruction of the Jewish state. Israel is in a really unfortunate position, surrounded by enemies on all sides and friends “only ambivalently committed to its security.”

Chip Lebovitz: I wouldn’t characterize more than $2 billion in aid per year plus unmatchable access to the world’s greatest military as ambivalent commitment. The problem here is you are suggesting that the solution is in essence what the PA is doing by taking the vote to the UN: unilateral action. Peace processes require buy-in from both sides.

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Photo Credit: Ashitakka

The Talk: A Feast of Presidential Jobs Plans

The Talk: A Feast of Presidential Jobs Plans
September 9, 2011

Chip Lebovitz: This week America was treated to a jobs plan trio. GOP president candidates Jon Huntsman and Mitt Romney began the week by tossing their plans in the ring, only to be followed up by the actual president outlining his plan in front of a joint session of Congress last night. Which of the three plans did you find to be the most convincing?

Ross Freiman-Mendel: Obviously of the three, Huntsman and Romney have more conservative bents, thus I value their plans over Obama’s. Considering the specifics, Huntsman demonstrates the greatest understanding of what needs to be done. Romney’s plan is too timid and, considering his weak performance in Massachusetts, I put little faith in vague promises of spending cuts.

Chip Lebovitz: You’ve missed the main thrust of these plans, and it’s important to put these plans in context – they are campaign plans. They aren’t suppose to focus on the granular in order to avoid staking out damaging positions that might hurt them in the general election. Do you think that wanting to end the Alternative Minimum Tax, one of the most popular tax breaks, is going to go over well for Huntsman in a general election? Furthermore, you also missed the point of Romney’s plan; it’s more a veritable stew of tax cuts and more oil drilling than spending cuts, only guaranteeing $20 billion a year: no vague promises there.

Ross Freiman-Mendel: Of the two plans, Romney’s is more vague and affords him more wiggle room. On tax reform, for example, he says that he’s in favor of it “in the long run” and outlines only nominally how those reforms would manifest. That’s instructive. In contrast, Huntsman provides Krauthammer-esque specifics (a plus for me)! Regardless of what Romney promises — and citing one specific doesn’t obscure the fact that the plan is generally vague — his record in Massachusetts pales in comparison to Huntsman’s; if he can’t perform the task as Governor, why should I believe he’ll do it as the president?

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The Talk: Ideas for Reviving the Economy

The Talk: Ideas for Reviving the Economy
September 2, 2011

Ross Freiman-Mendel: The president will deliver his much anticipated, albeit controversial, jobs speech this Thursday. What are you looking for Chip?

Chip Lebovitz: I think the speech needs to be put in context. The general consensus is there is little chance that House Republicans will pass any of his proposals, giving the president two options. Either the president pulls a Harry Truman and offers up a veritable cornucopia of 1990’s Republican ideas, and uses that to prove that the Republicans are more interested in defeating the president than governing, or he offers a big picture jobs plan couched in a long term deficit relief plan. Spending now, cuts in two years – jobs now, deficit reduction when the economy starts to recover.

Ross Freiman-Mendel: Neither will work for the president. He already hurt himself politically, with this ill-advised scheduling gaffe. Ezra Klein said it best; the speech will suggest the usual but do manifestly nothing.

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The Talk: No Hysteria Over Obama’s Speech on Syria

The Talk: No Hysteria Over Obama’s Speech on Syria
August 19, 2011

Charles Lebovitz: Let’s move beyond the continental United States this week. President Obama finally called for Syrian despot Bashar al-Assad to resign. Was this the right move by the president?

Ross Freiman-Mendel: Yes. I often struggle with my “Ron Paul non-interventionist under no circumstances leanings” and remembering the massacres in Rwanda, for example. While I support the president’s condemnation, the United States should go no further in intervening in Syria, unlike how they have in Libya.

Chip Lebovitz: Blanket policies on any subject worry me for their lack of flexibility; however, the president’s Syria policy has been well thought out. He left most of the heavy lifting to his very popular Secretary of State Hilary Clinton, and he worked to limit the Assad regime through sanctions while not riding lone ranger all over the toes of allies, like Turkey. Pragmatically, pushing for Assad’s departure any earlier would have likely achieved nothing but diminishing the power of the United States.

Ross Freiman-Mandel: Fair enough, Chip. It’s important that Turkey, and not the United States, takes the lead on the issue. While the international community will press for Assad to step down, the United States can and should do it at little to no cost with soft power and diplomacy. In the face of massive budget cuts this year, our resources can’t sustain a fourth war and increased global intervention.

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The Talk: Minnesota Vice

The Talk: Minnesota Vice
August 12, 2011

Ross Freiman-Mendel: Iowa State University was home to the third Republican debate last night. Chip, what struck you the most about last night’s proceedings?

Chip Lebovitz: How much the candidates value a good performance at the Ames Straw Poll this Saturday. Middling candidates like Tim Pawlenty and Rick Santorum had two credible options in the debate to increase their stature — attack Mitt Romney the front runner or attack Michele Bachmann the straw poll leader (Romney is not actively taking part in the straw poll). All the candidates piled onto Bachmann, signifying that they think an Ames victory Saturday is more important then making up ground in the national polls.

Ross Freiman-Mendel: I think that’s a slight oversimplification, but true none the less. The debate last night was politics as performance at its best — Pawlenty played the rich card against Romney and Gingrich cleverly rebuked the Fox panel on more than one occasion. I thought Bachmann’s performance was underwhelming, and at points she seemed an empty metallic grey suit.

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The Talk: Congressional Recess and the Economic Mess

The Talk: Congressional Recess and the Economic Mess
August 5, 2011

Chip Lebovitz: The debt ceiling crisis has been finally defused, or at least, temporarily disarmed. Congress has fled the capitol for its August recess. With unemployment over 9 percent, how should the president be trying to get the country back on track?

Ross Freiman-Mendel: Having just turned 50, the president should probably just celebrate his birthday. The most effective thing that he can do at this point is nothing — this vacation could be the least destructive weeks of his presidency. In all seriousness though, the name of the game when Congress and the president return will be the economy.

Chip Lebovitz: Think more proactively: the name of the post-recess game may be the economy, but the unemployment numbers determine the score. The president has a couple of options moving forward to help bolster the flagging economy. A smart first step would be to demand a resolution to the recent Federal Aviation Administration shutdown. 75,000 workers should not remain unemployed because members of congress are more focused on their recess and fundraising than actually running the country.

Ross Freiman-Mendel: Again, Congress remains divided on the FAA issues, with both houses having offered different plans. The president displayed his immaturity as a negotiator and inability to lead during the debt-ceiling debate, so I don’t expect much from him. With a failed attempt at stimulus, can you be more specific in what the current administration can do?

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