Alan Blinder is a distinguished economist who insists on misleading the public about economic matters. The latest affair is found in Blinder’s Op-Ed, “A Speedy Recovery Depends on More Aid: Will Trump Deliver?” wherein Blinder deliberately misleads his readers about the economy and the road to recovery. Here are some of his statements:
“Mr. McConnell is a roadblock to more relief funds.” It wasn’t McConnell, but Pelosi who refused to talk. McConnell put forth a relief package but because it did not include the extra state and local bailout funds desired by Pelosi, Pelosi would not even consider it. Yet, Blinder omits this. The assertion that McConnell is the one who is a “roadblock” is not only a difference of opinion, it’s an outright lie.
“Senators and the public need to understand that it was CARES and the rest that propped up the economy “artificially” as the virus was pulling it down.” The economy is not artificially propped up. It is well on it’s way back to where it was prior to COVID. In fact, just a paragraph prior to this one, Blinder notes that the recovery has been V-shaped, yet he suggests here that the relief given by CARES somehow wasn’t real relief. And if relief packages are indeed “artificial props”, why does he want another one? But what’s even worse is that Blinder, an economist mind you, believes so much in the CARES Act, but if anything, CARES restricted economic growth in the economy by paying people not to work and reducing incentives to work, so the recovery that we have experienced is despite the CARES Act, not because of it.
“Americans are suffering from the tragic results of the Trump administration’s malign neglect of the virus.” Nothing could be more politically upside down. Trump was the first to restrict travel while the Dems screamed it was wrong to do so. Likewise, his vaccine programs have been aggressive enough to produce multiple vaccines that are now being implemented in the public. Blinder puts the blame on Trump, yet it was the states, not Trump, who imposed the lockdowns — many excessive and some still ongoing — that have shuttered industries and businesses. Some of these will never recover, yet the economic consequences of prolonged shutdowns are real, and rest squarely on the shoulders of states.
“State and local governments, which are on the front lines in the battle against the virus, urgently need several hundred billion dollars in federal aid. They must balance their budgets.” Here’s the biggest falsehood. Blinder fails to mention that many states and local governments were in economic dire straits prior to COVID as a result of profligate spending and fiscal mismanagement, and this irresponsibility directly affects those particular governments’ recovery efforts today. The states with the biggest budget problems pre-COVID are the ones begging for the biggest bailouts. They are also the ones who have implemented some of the harshest and irrational lockdowns that have made things even worse. What’s more, these same governments have steadfastly refused to institute common sense restrictions on themselves such as freezing pay, furloughing workers, etc. It’s egregious, but Blinder just wants to paper over that part by calling for “balanced budgets.” None of these people who spent recklessly never cared for balanced budgets prior to now. And without changing spending habits nor making drastic cuts to the budget in the future will go right back to being in the hole.
“These folks have pretty straightforward needs: cash income, food, shelter and health care. The federal government knows how to provide these things.” This is cringe-worthy. Blinder forgets that it’s the American people who are the source of economic prosperity and he forgets that it is their taxpayer money earned through hard work and ingenuity.
This article reveals that Blinder really is a shill for the Democrats, and used his column to mislead people into believing that bailing out states and local governments is the only way our economy is to be “saved.” But it makes virtually no economic sense to spend massive amounts of taxpayer funds to cover up fiduciary irresponsibility. It would be reckless for Congress to commit any more money to such endeavors. McConnell knows this. We know this. Just about everyone knows this except for those leaders and governments who have never shown themselves to be accountable with someone else’s money — which is how they got in their financial budget shortfalls in the first place.
Those are not leaders. Blinder does a disservice to his readers by espousing some of the worst economic fallacies that will ultimately hurt, rather than help, fellow Americans.
One of the most outrageous and economically stupid measures to pass on Election Day came out of San Francisco: a new tax called the “Overpaid Executive Tax.” It’s really as bad as it sounds. This law levies a .1% surcharge on any company in San Francisco whose top executives earn 100 times more than the “typical worker.” It was enacted as a means to fight against pay inequality, but all it does is show how incompetent its proponents really are.
It’s worth noting that this tax applies to both publicly traded companies and private companies within San Francisco and it ensnares both local companies and large companies that conduct business within the city. What’s more, it’s completely arbitrary. What are you comparing when you say 100x or 200x the typical local worker? Does that mean on an hourly basis? Does it mean a part time typical worker compared to a high level overtime executive? Do you include overtime? Do you include benefits? It’s a virtually impossible number to calculate. And even if you did have a number to calculate, why is it 100x and not just 50x? Let’s say you compare a high tech company with a retail company such as a supermarket. The supermarket will have a lot of lower wage workers, whereas a tech company will have a lot of higher paid workers. It’s comparing apples to oranges in an effort to get someone to “pay their fair share.”
I hope this has the economically expected effect of them losing a lot of money and business, which is obviously the opposite of what San Francisco probably wants during a pandemic. Current companies will likely change their hiring plans to eliminate or reduce the amount of lower-lever/lower paid workers. Likewise, companies considering doing business in San Francisco will undoubtedly hesitate or entirely change their mind. Why do business in a locality that is particularly anti-business with such ridiculous rules. Furthermore, this surcharge is basically not a tax, it’s a forced donation (because those affected have the option of leaving if they want to). It puts a responsibility on the company to leave San Francisco because the tax affects all the shareholders of the company. This also means that any company that doesn’t leave San Francisco because the tax applies to them is someone who is ultimately abusing their shareholders to whom they have a fiduciary responsibility.
This tax is utterly meaningless and it just shows that people proposing this are so economically ignorant that they should be embarrassed. The problem is that the people on the Left who come up with such ridiculous ideas are never actually embarrassed by that ignorance.
One of the most overlooked yet troubling aspects of Biden’s plan is his doubling of the Global Intangible Low-Taxed Income (GILTI) tax. GILTI taxes items that generate foreign income and profits owned by American companies with foreign affiliates. This is troubling, because GILTI taxes American companies on income that has virtually nothing to do with anything in the United States. It’s bad enough that the current tax rate is 10.5%; Biden wants to raise this to 21%.
The tax laws of every developed country – except the US – provide that their companies do not pay tax on earnings from outside their country. Thus a German company earning money from activities in China or the UK pay taxes only to that jurisdiction – not to Germany. The US always taxed US companies on earnings from abroad, as soon as that money was returned to the US. That created a pretty stupid situation, encouraging these companies to leave this money outside of the US, and invest it in foreign, non US ventures.
The GILTI tax was created as part of the Tax Cuts and Jobs Act (“TCJA”) of 2017 as part of the attempt to fix this situation. What the TCJA did was require that all companies with foreign operations have to pay a penalty tax on all the money accumulated abroad, going back to the ‘80s; this rate was low and spread over 8 years. In exchange for it, the idea was that US companies would now be on par with other countries, in a territorial formation. In other words, pay a low tax on the money the US company never repatriated, repatriate it, and then in the future, you don’t pay tax on it, thereby discouraging profit shifting.
But Congress lied. In addition to paying the upfront tax at a low rate and thereby getting a tax for the future, they couldn’t help themselves. They added the GILTI tax, so now it’s taxed whether it’s repatriated or not. And this is bad. Congress reneged a little bit, because the GILTI is a relatively low tax but because it is worldwide, and now they have to pay tax every year on these foreign profits. So companies paid upfront and now they have to pay this tax every year — albeit at a low rate — so now it’s worse.
Now what Biden is suggesting with the GILTI tax is basically fraudulent. People paid that upfront fee so not to have to pay taxes — and now with this proposed 21% rate — is like fraud against American international companies. The 2017 tax act required an upfront benefit that got future benefits, now Biden wants to take away the future benefits.
GILTI puts American companies operating abroad at a competitive disadvantage. The foreign affiliates already have to pay a penalty tax just to be on equivalent footing with other companies abroad (companies that don’t have to pay the GILTI tax here, mind you). GILTI then tacked on a 10.5% tax and now Biden wants to double it — when it should be ZERO.
Biden’s plan to double GILTI goes hand-in-hand with his overall plan to tax U.S. businesses (he also wants to raise the corporate tax rate to 28% and add a 15% minimum tax based on profit reported on financial statements.) Going after businesses is already bad policy and his desire to double GILTI shows his ignorance and his willingness to further erode American competitiveness.
The amount of money Biden’s plan will raise is relatively insignificant (roughly $300 billion over the next ten years) but his attack on businesses is mean-spirited; it hurts our country by making our domestic companies less able to compete abroad in foreign markets. Nevermind that foreign income shouldn’t even be taxed at all! How can Biden justify raising taxes in a way that will make the United States less competitive and will reduce jobs? Increased taxes are a disincentive towards investing and job creation and will only hurt our economy.
Now that Biden has been elected President, it’s important to take stock of what tax changes are likely to be coming. Merrill Lynch did a good job putting together a side-by-side comparison of current tax law in four areas: income, estate, social security, and corporate, and then possible changes in those areas according to Biden’s campaign tax plans. The summary is below.
It is notable that in just about every instance, there will be a tax increase under Biden’s plans. How this will impact the economy, jobs, wages, and investments remains to be seen.
