Otter's Book Club

[otterinbham 0]

"Age Of Turbulence," by Alan Greenspan.

Yes, it's a book about economics.

Yes, it's an autobiography of sorts.

No, it's anything but dull.

However, it is a really a fascinating account of a very long, distinguished career as an economist. The man has been an insider to the Nixon, Ford, Reagan, Bush, Clinton, and Bush administrations, and adroitly managed the country's and the world's economy through some major crises and prosperity.

It starts out detailing how he got his start in economics (by the way, he played sax with Stan Getz in a big band in the 40s, due to a medical deferment in World War II), and works its way through how he rose to become the most influential economist of our time after Milton Friedman. At the same time, he offers a great deal of wisdom on the effect of government policy on the economy as a whole.

Some interesting surprises. He describes himself as a Libertarian/Republican. At the same time, he is very generous to Gerald Ford and to Bill Clinton (Who really was a disciplined economic conservative. Greenspan says he was very surprised and gratified by this), and quietly and unanswerably eviscerates the current president. On the whole, I found the book extremely interesting, and an indispensable read for the coming election.

[Tigermike 3,055]

Funny you should post this, I started reading the book last week. What I have read so far has been interesting.

[RunInRed 16,492]

and to Bill Clinton (Who really was a disciplined economic conservative. Greenspan says he was very surprised and gratified by this), and quietly and unanswerably eviscerates the current president.

Otter -- I'm curious what you thought about Clinton's tax policies and his handling of the economy in general in the 90s. We all know about the track record - it's speaks for itself. But what really fascinates me about this election (and all elections really) is that most conservatives want to eviscerate Dems for wanting to "raise taxes" and for being "tax and spend liberals" yet both Clinton and Obama have essentially advocated on the campaign trail for returning to Clinton's tax structure of the 90s which included balanced budgets and surpluses to pay down the debt.

One disclosure - I think Obama is dead wrong if he wants to raise the capital gains tax (he still has not committed to a figure). I get his point (Titan has made it as well) - that some very wealthy people are basically skirting ordinary income taxes and only paying 15% on the majority of their income. So Obama generally talks about this tax in terms of fairness - but I'm still not too excited about a cap gains tax in excess of 20 b/c a lot of "ordinary" income earners incur the tax on unordinary transactions as well.

My general thought is I don't have a problem of returning to the tax levels of the 90s IF the new revenues are used to:

1) Continue to fund middle class tax cuts

2) Invest in a real and viable alternative energy source

AND

1) PAY-GO is enforced

2) Any surpluses are used to pay down the debt

[otterinbham 0]

and to Bill Clinton (Who really was a disciplined economic conservative. Greenspan says he was very surprised and gratified by this), and quietly and unanswerably eviscerates the current president.

Otter -- I'm curious what you thought about Clinton's tax policies and his handling of the economy in general in the 90s. We all know about the track record - it's speaks for itself. But what really fascinates me about this election (and all elections really) is that most conservatives want to eviscerate Dems for wanting to "raise taxes" and for being "tax and spend liberals" yet both Clinton and Obama have essentially advocated on the campaign trail for returning to Clinton's tax structure of the 90s which included balanced budgets and surpluses to pay down the debt.

One disclosure - I think Obama is dead wrong if he wants to raise the capital gains tax (he still has not committed to a figure). I get his point (Titan has made it as well) - that some very wealthy people are basically skirting ordinary income taxes and only paying 15% on the majority of their income. So Obama generally talks about this tax in terms of fairness - but I'm still not too excited about a cap gains tax in excess of 20 b/c a lot of "ordinary" income earners incur the tax on unordinary transactions as well.

My general thought is I don't have a problem of returning to the tax levels of the 90s IF the new revenues are used to:

1) Continue to fund middle class tax cuts

2) Invest in a real and viable alternative energy source

AND

1) PAY-GO is enforced

2) Any surpluses are used to pay down the debt

The interesting thing about the Clinton record is that, aside from his increasing the tax rate, he was an economically conservative president. Essentially, whatever Alan Greenspan recommended, Clinton did. I think a legitimate argument is that a Republican congress elected in 1994 forced him to be that way, but even before then, Greenspan exerted a moderating influence.

From a budget discipline standpoint, I really didn't have an issue with Clinton. He raised taxes at the conclusion of a recession which, in my very humble opinion, probably retarded true economic growth until 1995 and beyond. The heightened tax rate also created budget surpluses which, had tax rates remained in effect, would have erased government debt in a few short years. So Greenspan's contention is that the tax rates Clinton implemented were not causing long-term damage, as long as they would be eventually lowered again.

That being said, Greenspan rightfully points out that the government would have then had a different kind of problem had higher tax rates remained--what to do with the huge surpluses. It's more than a question of fiscal soundness. It becomes a question of the American government actually having to plow the surpluses into investments and the economy, which could have had quite the opposite effect of what was intended. After all, government is an inefficient manager of resources, whereas the private sector could have put the surplus money to much better use. So Greenspan felt the tax rate needed to have been reduced, but at the same time blasts Democrats and Republicans alike for allowing the consensus fiscal discipline to fall apart by the late 90s. I have to admit that it was an all-around depressing read.

Bush gets roundly spanked by Greenspan for his total inattention to government spending. While he always writes in a measured way, you can read between the line and feel the outrage. Here is the best Fed Chairman in history, the man who carefully guided the American economy through one of its greatest economic booms while navigating through several dangerous crises, witnessing his hard won achievements squandered by the Bush White House. As Greenspan points out, Gerald Ford was able to rein in a freewheeling Democratic Congress by wielding the VETO stamp decisively during his term. Bush, on the other hand, never saw a spending bill that he didn't like out of a Republican congress.

Getting back to Clinton, we have no idea what kind of president he might have been if his healthcare plans had been implemented. I think he would have gotten a far worse grade on the economy. But because the American people rightfully gave the convoluted scheme a big thumbs down, Clinton played the hand he was dealt, which probably gave him a much better legacy than if he had implemented his own agenda. I do think it interesting that Clinton was a huge proponent of NAFTA, which really ran counter to the political opinions of his base. However, NAFTA has been an overall positive for the country.

PAY-GO, by the way, gets a good deal of positive ink, the result of both Bush 41 and Clinton doing a good job of responsibly managing government spending. However, that was totally abandoned during the late 90s as Clinton was far too distracted by the Lewinsky Scandal.

[RunInRed 16,492]

So taking all other points off the table for a second (healthcare, foreign policy, etc.), if Obama were to keep all current tax levels intact, except for the ordinary income tax bracket on earners making more than 250k (increase from 35% to 39%) would you have objections?

As for fiscal discipline, Obama has pledged to enforce PAY-GO.

[otterinbham 0]

So taking all other points off the table for a second (healthcare, foreign policy, etc.), if Obama were to keep all current tax levels intact, except for the ordinary income tax bracket on earners making more than 250k (increase from 35% to 39%) would you have objections?

As for fiscal discipline, Obama has pledged to enforce PAY-GO.

Right now? Absolutely. The economy is in far too fragile a shape to sustain a large tax hike. While I believe that the economy is picking up steam (I'm using my own client activity as the best indicator I have, as well as what they're experiencing out in the market), I believe that far too many households are stretched way too thin by the drop in home prices. Given that a large proportion of homeowners in the Northeast, California, the upper Midwest, and Florida no longer have equity in their homes, it really curtails their ability to pay a larger tax bill. After all, while 250K sounds like a veritable torrent of money to people in the South, that's squarely middle class in the sections of the country most hurt by the housing and credit crunch. By jacking up tax rates by that percentage, you are hampering economic recovery in the regions that need relief the most.

Pledging to enforce Pay-Go is laudable. But that's only half the equation. Essentially without slashing spending or at least holding it at current levels, all you're doing is pledging to raise taxes for whatever raft of social programs gets passed during the next session of Congress. Yet we cannot pay for what Congress has passed in the past several years, and Medicare and Social Security are about to hit critical mass.

[RunInRed 16,492]

I get your cost of living points for some urban areas but come on, 250k is more than middle class every where in this country. I don't buy that argument.

As for PAY-GO, by definition, spending would only be approved if there were funds to pay for it. So I don't get the half-the-equation point you are trying to make.

Last question, if you don't want to adjust the upper income bracket, where do you suggest the money come from to solve the problems you identified, plus fund infrastructure investments, alternative energy investments, meet military needs, etc.? I know I know...eliminate the prescription drug plan?

[otterinbham 0]

I get your cost of living points for some urban areas but come on, 250k is more than middle class every where in this country. I don't buy that argument.

As for PAY-GO, by definition, spending would only be approved if there were funds to pay for it. So I don't get the half-the-equation point you are trying to make.

Last question, if you don't want to adjust the upper income bracket, where do you suggest the money come from to solve the problems you identified, plus fund infrastructure investments, alternative energy investments, meet military needs, etc.? I know I know...eliminate the prescription drug plan?

The Prescription Drug Plan would be the very first thing on my list, followed by the Farm Bill, subsidies to Big Oil, the Ethanol boondoggle, several other programs. Personally, I'm having a hard time getting behind an alternative energy investment program, chiefly because I believe that there already exists a very strong nascent grassroots movement in place.

Government intervention means that a solution is dictated based on the needs of the farm states or whatever constituency has the upper hand. Meanwhile people such as Warren Buffett have already pegged alternative energy as the next great investment boom (and possibly bust), with capital practically sluicing into the doors of solar and wind energy companies even as we speak. No, you can't stroll into Wal-Mart and buy solar panels for your house quite yet, but the acquisition costs are plummeting by the month. Why on earth would you want the government to get into the middle of all that?

Now, your argument on PAY-GO is well taken. However, I think you're looking at it from the perspective of prudent fiscal management, believing that Congress is not authorizing something if there's not enough revenue to pay for it. I, on the other hand, smell a rat in the form of wanting something badly enough and raising taxes to pay for it. It's a completely different dynamic, and that mindset is how Lyndon Johnson got this country into such a gigantic pickle to begin with.