Pence opposes tax deal

Mike Pence, who is increasingly becoming my first choice for President, came out against the tax deal last night (NRO - The Corner).

Pence supports making the 2001/2003 tax reductions permanent, and opposes unfunded unemployment benefits (I’m guessing he’s not happy with the ornaments either).  He also noted that the Republican House (which takes office in less than three weeks) will pass a bill to make the lower taxes permanent: “We’ll do it. We’ll send it to the Senate if this bill falters. There’s always time to do the right thing.”  I’d also submit the Senate, where the Democrats’ majority will be cut by two-thirds, is far more likely to go along with that than it is now.

Cross-posted to VV

Will Japan re-energize Obama on the CCP?

The Obama Administration’s reaction to Stalinist North Korea’s attack on the democratic South was traditional, conventional, and weak. Once again, the Chinese Communist Party was able to position itself as the supposedly reasonable regional power trying to get a handle on their crazy ally – even though it has to this day refused to criticize Kim Jong-il and his crew. That said, Zhongnanhai has been unable to get policy concessions out of the president yet, and what Japan is about to do with its National Defense Policy Guidelines may get the White House to snap of out its post-attack stupor.

According to the Financial Times (UK), Japan’s military will release the aforementioned guidelines later this month, and they will call for a major shift in military policy.

Officials and analysts say the keenly awaited National Defence Policy Guidelines will signal a historic refocusing of Japan’s army and other forces toward securing the line of small islands in the southern Nansei chain that stretches from Japan’s main islands toward Taiwan and are seen as threatened by China’s rapidly growing military power.

Among the islands in the Nansei chain are Okinawa and the Senkakus, the latter of which are claimed by the Communists (they call them the Diaoyus).

The implications of this are numerous, and none are good for the CCP.

Within Japan, it means a maturing of the Democratic Party of Japan – recently elected to power on a platform that included cozying up to the Communists. According to an analyst quoted by the FT, a recent incident with a fishing boat from mainland China woke up the DPJ and the military top brass about the threat from the CCP. The long-governing Liberal Democratic Party had moved in an anti-Communist direction under Junichirio Koizumi (the last LDP leader to win an election – in 2005). Now the DPJ is joining its rival.

Regionally, the CCP may find itself repeating recent history – and not in a good way for the Communists. Last year, Zhongnanhai tried to take advantage of apparent American weakness by declaring the entire South China Sea for itself. Several American allies, including Indonesia, cried foul – and much to everyone’s surprise, America joined them. Just weeks ago, President Obama himself called for India to be made a permanent member of the Security Council. Now, Japan will be heavily reinforcing an island chain that at present includes a large (and locally controversial) American military base.

If Okinawa is now a regional front-line island, the US military may not be so unwelcome. Or more likely, a strong Japanese military presence may allow the US to pull out of Okinawa entirely, thus replacing an unpopular foreign power with a strong domestic military presence dedicated to defending the homeland, while the Pentagon can score an unexpected boon to reallocate or contribution to overall deficit reduction.

I sincerely doubt the CCP was hoping for that.

In any event, Obama, whatever one thinks of him, is clearly the most multilateral president America has had in a long time. As I noted earlier, this has led to a focus on our more well-known allies in Europe – most of whom are wheezing social democracies increasingly unwilling to defend themselves from regional and global threats.

However, in Asia, America’s allies are more practical – and the CCP threat is more pressing and immediate. As such, Obama’s instincts have lead him to be tougher on Zhongnanhai then previous Administration’s in the South China Sea. Unfortunately, the refusal to accept the reality of the CCP-North Korea alliance (i.e., that it’s a tool Zhongnanhai uses to pry democratic nations apart) afflicts Seoul and Tokyo as much as it does Washington. However, the Communists have no such deflection at the ready where the Nansei-Sankakus are concerned.

If Japan really does shift its military posture (the report has not yet been released) and Washington stands with Japan as it did with Indonesia, the Obama Administration’s unnamed-containment policy may be back on track.

Cross-posted to the China e-Lobby

Romney whacks tax deal

I must admit, when I saw that Mitt Romney took aim at the tax compromise (NRO - The Corner), I was initially encouraged to support it.

Then I read Romney’s column (USA Today), and I must admit, I think – finally – he understands supply-side economics.

Here’s the money quote (emphasis added):

In many cases, lowering taxes can actually increase government revenues. If new businesses, new investments and new hiring are spurred by the prospects of better after-tax returns, the taxes paid by these new or growing businesses and employees can more than make up for the lower rates of taxation. But once again, because the tax deal is temporary, a large portion of this beneficent effect is missing. What some are calling a grand compromise is not grand at all, except in its price tag. The total package will cost nearly $1 trillion, resulting in substantial new borrowing at a time when we are already drowning in red ink.

In other words, tax cuts that focus on encouraging businesses to form or expand can grow the economy in a way demand-based tax cuts cannot, but only if they are permanent; otherwise, businesses won’t see the long-run benefit, and will hold back expansion (or entrepreneurs will hold back from starting up firms).

Now, whether these tax cuts can “pay for themselves” is a question that has clouded their actual importance (history, BTW, says they can, but they’re usually asked to pay for themselves plus additional spending sprees, which they certainly can not do).  In fact, tax cuts like these, because they affect supply and not demand, can be couple with spending cuts and still bring economic growth (without inflation).

Romney doesn’t go into that detail, but he does note that the expiration date on the tax cuts drains them of their economic value.  Meaning they won’t grow the economy, to say nothing of government revenues.

Like Romney and Jim DeMint, I’d rather these tax cuts were permanent.  Like them, I’d prefer the unemployment extensions were covered with spending reductions elsewhere.  I certainly have no use for the ethanol subsidies and other ornaments that decorate this.

The more I think about it, the less I like it.

Cross-posted to BD

Down goes Democare

Judge Henry Hudson declared the mandate to buy health insurance unconstitutional today (NRO – The Corner).

Cross-posted to VV

UPDATE: Judge Hudson’s opinion is here.  I should note that Riley is mistaken based on this part of the ruling:

The Court will sever Section 1501 from the balance of the ACA . . . 

So clearly, His Honor found something in Democare for severance.  However, without the mandate to buy insurance, Democare as a policy collapses like a house of cards.

Tim Watson 1, Me 0

Fellow VV bloger Tim Watson, the man behind I’m Surrounded by Idiots, has soured badly on the Republican Party.  He’s convinced the new crop of GOP elected officials were turn out to be just as weak and pork-loving as the prior ones.  I’m usually more optimistic about the party than Tim is.

Well, over the weekend, Tim’s file added Exhibit N, as is Kristi Noem: Congresswoman-elect from South dakota, Teabrewer fave, . . . and defender of ethanol subsidies (Say Anything via From On High).

Score one for you, Tim.

Cross-posted to VV

Mike Pence far from gushing about tax deal

Congressman Mike Pence had this to say to the Washington Examiner about the tax deal:

I would say that Republican support for this deal is tenuous at best and any efforts to make the tax burden heavier would make Republican support less likely.

Meanwhile, Daniel Foster confirms – albeit without a linked source – that ethanol subsidies are in the deal.  I never like being neutral on anything (especially as a blogger, it is not a natural position), but moving myself to “yes” on this keeps getting harder.

Cross-posted to VV

In basketball years, that’s still a long time

Largely under the radar (in today’s NBA, there’s Boston, Miami, L.A., and under the radar), the New York Knicks have beaten a slew of bad teams and are 14-9.

In case anyone’s wondering how rare that is (what do you mean, you don’t?) the last time the Knicks were five games over .500 – ever – was at the end of the 2000-01 season (they finished 48-34).  That’s over nine years ago. The last time the Knicks were this good . . .

• Jim Gilmore was Governor
• Jim Jeffords and Jim Webb were Republicans
• Rudy Giuliani was still Mayor of New York
• Sarah Palin was in her second term as Mayor of Wasilla
• Barack Obama was in his second term as a State Senator in Illinois
• Yugoslavia was still a country
• and, finally and poignantly, the Twin Towers were still standing

Now, the Knicks have been beating bad teams for the most part, but in prior years, they’d lose to bad teams.  Surprisingly (at least to me when I read it), they’re also 3-5 against teams with winning records.  Not great, but not terrible either.

After Friday’s Wizards game, the schedule is full of winning teams for the Knicks.  By mid-January, if they’re still on the north side of .500, this could be a very special season.

The government bubble

John Taylor and John Cogan have a very important Wall Street Journal op-ed on what the Obama Stimulus did, or to be more precise, what it didn’t do.  The critical point:

The bottom-line is the federal government borrowed funds from the public, transferred these funds to state and local governments, who then used the funds mainly to reduce borrowing from the public. The net impact on aggregate economic activity is zero . . .

The lesson is to beware of politicians proposing public works and other government purchases as a means to stimulate the economy. They did not work then and they are not working now.

Odds are Keynesians will quickly respond that transfer to state governments and actual public works purchases are not the same thing – something on which they were fairly quiet when they helped the president sell the stimulus last year. 

There is something else, though, that has been overlooked: the Stimulus essentially became a vehicle for states and localities to temporarily deleverage themselves (i.e., reduce their debt levels), but they’ll either have to “releverage” when the money runs out or engage in the retrenchment that the stimulus delayed.

In other words, the president’s stimulus has created at government bubble, in which state and local governments look healthier than they really are.

The “dot-com bubble” led to the recession of 2000-1; the housing bubble led to the Great Recession. What will be the result of the inevitable popping of the government bubble?

Cross-posted to BD

Tax deal may revive ethanol subsidy

Charles Grassley says the ethanol subsidy will - in some way, shape, or form – be part of the tax deal (Des Moines Register).

Jim DeMint looks a lot smarter this afternoon.

Cross-posted to VV

DeMint to oppose the deal

South Carolina Senator Jim DeMint has the same problems with the tax deal that I do – and he’s decided they’re show-stoppers (Hugh Hewitt via Reuters).

I’m glad the President recognizes that tax increases hurt the economy. I mean, I guess that’s progress. But frankly, Hugh, most of us who ran this election said we were not going to vote for anything that increased the deficit. This does. It raises taxes, it raises the death tax. I don’t think we needed to negotiate that aspect of this thing away. I don’t think we need to extend unemployment any further without paying for it, and without making some modifications such as turning it into a loan at some point. It then encourages people to go back to work. So there’s a lot of problems with it. I mean, and frankly, the biggest problem I have, Hugh, is we don’t need a temporary economy, which means we don’t need a temporary tax rate. A permanent extension of our current tax rates would allow businesses to plan five and ten years in advance, and that’s how you build an economy.

DeMint even went far enough to say he was OK with shifting the discussion to next year.  Of course, Boehner would be Speaker and DeMint would have more friends in the Senate.

I think it’s more likely that DeMint will try to add spending reductions and some rate permanency to the deal first (Harry Reid trying to do favors for his state’s casinos opened the door for that).  The Club for Growth has the same objections DeMint does.  This could get very interesting, and could lead to an even better deal.

Cross-posted to VV