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August 21, 2011

STEPHANIE SALTER: The Economy: One complex, thorny, bedeviling issue

No matter how much time and energy I spend trying to understand the Hydra we blithely call “The Economy,” I often worry that its mystery will forever elude me. Then I remember: I am in impressive company.

Or haven’t you noticed that people who spend their lives studying and analyzing The Economy — people who can quote Keynes and Friedman and who have been showered with prestigious economist awards — are all over the place when it comes to identifying what is really wrong, let alone offering a few cures?

Consensus? It seems to be as common as confirmed UFO sightings.

Granted, The Economy is, surely, one of the most complex and thorny issues ever to bedevil this or any developed country. (Not that you would surmise that from the crushing quantity of amateur analysis and simple remedies being proffered from every nook and cranny of society.) But when true experts do weigh in, they tend to agree only on the complexity. Causes and cures inspire lines to be drawn, sides to be taken and veiled insults to be tossed back and forth.

From the cheap seats, where ordinary beings look on, the dueling learned opinions can be confusing, frustrating, depressing, numbing or all of the above.

Recently, listening to an NPR news program, I was eager to hear two powerhouse economists talk about what ails domestic job growth and what can be done to make the patient better. The experts were John Taylor, a professor of economics at Stanford University and a senior fellow at the Hoover Institution, and Joseph Stiglitz, a Columbia University professor who teaches business and economics and won a Nobel Prize in the field in 2001.

Their only substantial point of agreement was that the President of the United States could do more to promote job growth.

Stiglitz said the federal economic stimulus package worked by helping us avoid a catastrophic meltdown and keep unemployment from hitting 12.5 or 13 percent. Taylor said the stimulus failed because people and states didn’t spend the money the feds gave them, they just “put it in their coffers … You can’t see any impact on the infrastructure or other things that were supposed to happen.”

Stiglitz said the stimulus should have been bigger and we need another round of it. Taylor said the stimulus hindered economic growth and President Obama needs to stop talking about tax increases because it makes businesses, investors and consumers worry. Taylor said people should acknowledge that Congress and the president have made “some progress.” Stiglitz said he is “very pessimistic” about the economy and sees no real growth before 2015 “or beyond.”

At the end of the program, what did I have? Answers? No, I had two stellar economists who are no closer to agreeing on a way out of this mess than two drunks are in an argument at a bar. (I did wish I could ask Professor Taylor how he would measure the economic impact of hundreds of Indiana public school teachers’ jobs that were saved in 2010 by $113 million in federal stimulus money. Or the effect on Hoosier motorists of $500 million-plus in stimulus funds for Indiana highway projects.)

So, how about the expertise of an ultra-successful Capitalist? A day after the Stiglitz-Taylor standoff, Warren Buffett wrote a piece for the New York Times op-ed page that was headlined, “Stop Coddling the Super-Rich.” The headline was ironic because Buffett really might have more money than God; Forbes pegs him as the third-wealthiest person in the world, worth about $50 billion.

In the column, he revealed that he paid $6,938,744 in federal income tax and payroll taxes last year. That sounds like a lot, he wrote, but it is “only 17.4 percent of my taxable income,” a lower percentage “than was paid by any of the other 20 people in our office.” Middle class earners and the working poor are even more unfairly burdened, he said.

Buffett’s point was that the current U.S. tax code allows the super-rich, like him, people who “make money with money,” to get big breaks that actual wage earners don’t get. Raising the tax rates on this mere 0.3 percent of the U.S. population — the 236,833 folks who earned more than $1 million in 2009, and the 8,274 who earned more than $10 million — would not solve the nation’s debt crisis, he wrote, but billions and billions would be netted to help reduce it.

Buffett addressed the popular argument that higher tax rates will scare away the rich from investing: “I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.”

Buffett’s efforts at debt mitigation were met in several corners with suspicion and ridicule. As conservative commentarian Pat Buchanan responded on MSNBC: “Why doesn’t he set an example and send a check for $5 billion to the federal government?”

Tim Tankard, a guest columnist in the Kansas City Star, was typical of many Buffett critics. He invoked the Boston Tea Party and accused the billionaire executive of not knowing his American history. He ignored Buffett’s complaint that the earnings of mega-rich investment managers are classified as “carried interest” and taxed at a lower rate than ordinary income. Instead, Tankard theorized that Buffett’s tax rates “are probably lower due to the billions of dollars he has contributed to the Bill and Melinda Gates Foundation, a charity and no doubt a tax dodge.” Tankard also warned that Buffett’s proposal “will wreak havoc on small business owners and family farms,” but he added, in parentheses, “(Please, don’t ask me to explain that, ask your Congressman.)”

Of course. Why didn’t I think of that? Ask someone in Congress. Unlike economists, the House and Senate have always been calm, objective and reliable sources for information about complex and thorny issues that bedevil this or any developed country.

Stephanie Salter may be emailed at SalterOpinion@g.mail.com.

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