REALITY CHECK

Anyway, following on what I said yesterday, CNBC this morning gave more than their usual 20 seconds to a tax debate between a Dem and a Repub congressman. Somewhat surprisingly, the cantankerous Mark and the luscious Erin tore the Repub a new one for the seeming contradiction between his complaints about not wanting to raise taxes on the "rich" and the desire to reduce the deficit. Setting aside for a moment the fact that neither of them took any notice of the fact that the straight line estimates of the GAO as the amount of new revenue gained upon the raising of taxes are NEVER correct and ALWAYS inflated, the comments show tha folly of trying to argue against the class warfare aspect of the present tax code. Even intelligent, experienced financial reporters don't get it.

The issue is not who pays what percentage of their income to the federal government (or the state governments for that matter) but what is the best method by which to grow the revenue pile. To be sure, increasing expenditures must be addressed even the thought-to-be untouchable entitlements. Keep in mind, these were created by law; they can be reduced or frozen by law. The method is not in question; the will certainly is. THE question is how best to create growth and this hodge-poge of unreadable, non-understandable loop-hole riddled nonsense is not the way.

Another consideration: a moment can't go by without some dope of a pol getting on tv and proclaiming that we must "create demand for the consumer" and the best way to do that is another stimulus and we need to pay for that with new taxes...yada,yada,yada. Crap. At the same time my ol' buddy Chuck Schumer is knocking the crap out of his party's Sec Tres., The Suit, up on Capitol Hill yesterday over the value of the YUAN. Memo to Chuck: Create consumer demand and all your little consumers will toddle off to Wall Mart to spend your give-away. Chuckie-baby, Wal Mart gets 95% of it's goods from China. You haven't accomplished a damn thing except feeding the Chinese growth engine with even more fuel while we languish in last century's economy. Growth not consumption is the only answer and no one on either side of the aisle sems to have recognize that as of yet.

Higher taxes, increased regulation and the resulting loss of incentive these policies produce is not the way to foster growth. I do not deny we need the revenue but the present tax code is not the vehicle by which we can achieve that goal. A radical upheavel must be had if we are to have any chance of success, coupled with an austere fical policy and a retinking of our monetary policy beginning with the role of the Fed. This will not be easy nor will it be painless, but it must be done. We'll talk about the Monetary bit next week after what is shaping up to be a great weekend of college football. Hope I make it through.