First, and oldest, is a bit from Gwynne Dyer (which was put out around Sept. 23, when Bush was still leading in the polls). But that's not our interest here:
"The US dollar is going the way that went as it lost its place as the world's reserve currency," said Jim Rogers, the Wall St wizard who in 1973 co-founded the Quantum Fund, one of the first and most successful hedge funds, in a recent interview. "I suspect there will be exchange controls in the US in the foreseeable future ... Whoever is elected President is going to have serious problems in 2005-06. We Americans are going to suffer." Why?...
It's the combination of the two deficits that is potentially lethal. The US has got away with running a big trade deficit for most of the past 20 years because foreigners, mostly in Asia and Europe, kept on investing in the US, and that huge inflow of foreign capital largely covered the deficit. They invested in the US not because it was the world's fastest-growing economy (it wasn't), but mainly because the US dollar was seen as the safest currency, the world's "reserve currency" in which other countries settle their debts even with each other. ..
Foreign investors hold about US$8 trillion ($12 trillion) in US securities, and everybody realises that a concerted move to bail out of them would trigger a collapse of the dollar and the destruction of their investments. On the other hand, everybody also knows that the first investors to get out will save most of their money, and the laggards will lose most of theirs. It is a highly unstable situation.
Next, there is this somewhat cryptic post from Atrios's blog yesterday...which is explained when you go to the links...over to the conservative publication National Review, where, in the economic version of "Ketchup is a vegatable," NR stafffer Donald Luskin did indeed write:
Be that as it may, there is no unique virtue to inflation-adjusting — except that it makes all changes in income look worse, which well serves the liberal agenda of the Times’s economic reporting during an election year. As long as Johnston is applying his own adjustments to statistics he obtained from the Internal Revenue Service, why not adjust for effective tax rates (which fell over the period) or for non-cash forms of compensation (which rose). Simple: because those adjustments make changes in income look better.
Sounds reasonable, right? Except for the fact that when you do add these things up, the answer's the same: wage earners at most ends of the scale still wind up with less money.
The last article in this confluence of financial information under the radar because of the Kerry debate afterglow is this bit from the NY Times:
Major features in the $145.94 billion tax cut package signed by President Bush on Monday, with the estimated 10-year cost of each item:
--Extend the $1,000 child tax credit through 2009. Cost: $61.57 billion.
--Extend marriage penalty relief through 2008. Cost: $15.69 billion.
--Extend the expanded 10 percent tax bracket through 2010. Cost: $29.36 billion.
--Extend relief from the alternative minimum tax for one year. Cost: $22.58 billion.
--Accelerate refundability of the child credit for low-income families for one year. Cost: $1.99 billion.
--Extend the corporate research and development tax credit until the end of 2005. Cost: $7.6 billion.
--Extend the authority to issue New York Liberty Zone bonds for development of lower Manhattan. Cost: $486 million.
--Extend tax incentives for investment in the District of Columbia. Cost: $522 million.
--Extend for one year a tax credit for the production of electricity from wind, biomass and poultry litter. Cost: $1.16 billion.
--Extend for one year a tax credit for qualified electric vehicles. Cost: $5 million.
Now these seem like worthy things to do and/or tax preference, but without some make-up in revenues (like, say, higher marginal rates on the top 1% of earners, adjusting for inflation), the scenario predicted by Dyer only gets that much closer to reality.
And in that scenario, your "tax cuts" don't matter a damned bit, because inflation will have eaten your tax cuts away. At some point in all of this, the rest of the world is going to say, "Hey, the American government doesn't have any 'full faith and credit' anymore."
Which gets to my next point: there ought to be a "global test" for tax cuts...to justify a tax cut, a President should be able to look America's creditors in the eye and be able to justify how we're going to pay them back in real money, not funny money.