Well yesterday the first big leak emerged from LA-LA as to their initial thoughts as to how to balance the budget and eliminate the fiscal deficit. Funny, I though that was part of the package for which tThe Leader signed on. Silly me. As you probably remember, he turned the whole thing over to a 14 person commission co-chaired by Erskin Bowles, Jimmy Carter's former chief of staff and the Wyoming Wing Nut with 12 guys named Schwartz along for the ride. Confidence this does not inspire and the belief that somehow partisian politics is going to be left at the door defies creedence. But, on with the show.
Apparently they have discovered that health care costs loom big in the future deficits citing the CBO numbers that have the rise to 10% of GDP by 2035. Of course CBO projections are derived from the numbers it gets from the administration which everyone knows are crap and therefore in this area it's the well-know principal of garbage in, garbage out which means these guys aint goin' near that one.
Of almost equal size today is the defense budget totaling about 4.65 of GDP but with fighting two wars, the Chinese looking uglier by the minute, Korea del Norte in probable chaos over the next few years and the ever-present Iran, cuts here are in areas where angels fear to tred. (By the by, my REALLY smart daughter-in-law who is a big shot accountant in the DOD says there's no damn way anybody REALLY knows how much is being spent but that's another tale).
There are other hard cases as well not too much less unimportant so like all of these commissions the deal is to find something everybody dislikes, build support behind that and WHAMMO, hang it from a tree.
Which brings us to leak #1. Reportedly, the proposed victim here is the tax exemption for mortgage interest which as you good folks remember was mentioned in this very spot not three weeks ago as a candidate for removal from the tax code BUT in the context of comprehensive tax reform. In LA-LA, the latter portion of the scheme got overlooked. The concept is that this deduction really favors "the Rich" as they are the one's who get the greatest advantage: the bigger the home the bigger the deduction (although in previous tax "reforms" the amount is somewhat capped. Now we all know EVERYONE hates the rich so here's the perfect spot to really nail 'em. There is very little doubt as to from what end of the political horizon comes this idea: given an administration that is totally driven by ideology to the total lack of understanding of the financial consequences that could result from such a policy enacted in a vacume, the genesis of this is quite apparent. The Leader and Valerie are pushin' this one.
Consider this if you will. You might have noticed that the real estate market has been under some pressure as of late and that valuations on single unit residences have, ah, slipped(?) in the past couple of years. The value of higher priced homes tends to be more greatly connected to the tax advantages afforded home mortgages so if the talked about change was to be enacted without an off-setting revision of other portions of the code, the effect would undoubtably be a further or permanent reduction of home values across the board but certainly in the higher priced range. So what, you say. Now's the time to get rid of this break for the rich as home prices are now at their lowest level and from one standpoint you would be correct. But you might also wish to consider what would happen to assessed values of real estate? And you might also wish to keep in mind that is those assessments upon which real estate taxe are based and that from the stand point of the states, real estate taxes are not unimportant...think schools, teacher's saleries (all contractual), public services and a miriad of other things that would still require revenue. In short, you are looking at local and state fiscal catastrophies, but dumb is as dumb does.
I think the time might be approaching when we have to tell the pols to stop hinding behind stupid commissions and start doing what they were sent to D.C. to do, or as the gal in Nevada put it, "Man up!" Total tax reform is the beginning for all of this. If we don't get that we get nothing
****************************************
Correction and Explaination: Yesterday I mentioned that The Suit had proposed a cap on current account surpluses of 4%. The question was asked, "4% of what?" The answer is 4% of GDP Good question, my bad
No comments:
Post a Comment