Moody's Worried US Tax Cuts Could Become Permanent(pay more taxes or get screwed?)

Money News ^ | 12/07/10

[TigerLikesRooster]

Moody's Worried US Tax Cuts Could Become Permanent

Tuesday, 07 Dec 2010 01:37 PM

Moody's Investors Service is worried the extension of U.S. tax cuts agreed by President Barack Obama and Republican leaders could become permanent, hurting U.S. finances and its credit ratings in the long run.

Steven Hess, Moody's lead sovereign analyst for the United States, said on Tuesday doesn't foresee any change in the U.S. AAA ratings in the next 18 months to two years. He is, however, concerned about "what's going to happen in two years," when the extensions are set to expire again.

"The timing two years from now will be very complicated from a political point of view, with presidential elections in November 2012," Hess told Reuters in an interview.

[TigerLikesRooster]

P!

[TCH]

Screw them, their “rating,” and their manipulation.

[econjack]

Good grief...and these are supposed to be smart people?! Any time there has been sustained and significant tax cuts (e.g., Kennedy, Reagan, Bush), gov't tax receipts increased, not decreased. Gees, even the rating services are buying into the Left's BS. The lesson for these idiots to learn: We know how to spend our money better than the gov't does, and in the process, we augment consumer demand, resulting in more sales, resulting in more hiring, and so on. Come on, guys, fire up a neuron or two and do more than just fog a mirror...

[Pelham]

” Any time there has been sustained and significant tax cuts (e.g., Kennedy, Reagan, Bush), gov’t tax receipts increased, not decreased. “

While that has achieved some sort of status as received truth it isn’t accurate. All of these administrations had significant deficit spending which gooses an economy. You have to factor out deficit spending, the natural business cycle, and some other factors to determine the impact of tax rate reductions. Calculating the effects of tax cuts is not as simple as subtracting the gross tax receipts of 1981 from 1989.

Lawrence Lindsey’s study validated the actual predictions of Reagan’s economists, which is that the tax cuts wouldn’t lose as much revenue to the Treasury as static analysis predicted. Economic growth recouped some 60 cents of each dollar cut. The point of the tax cuts was to grow the economy, not to generate increased tax revenue. The optimum tax rate for economic growth is not the same as the optimum tax rate for tax collection. The initial Reagan program included spending cuts for a reason, and that is because the tax rate reductions were expected to result in reduced Treasury revenue.

[April Lexington]

The debt mongers are taking over the world! Apparently, we now all live just to support public debt. The Goldman Sax gets the fees and the public is enslaved...

[who_would_fardels_bear]

In what rational universe should the US now deserve a AAA rating? Moody's, as with MBS's during the real estate boom, is already lying about our credit worthiness.

And you can bet that when the political/financial screws are applied Moody's will continue to find that the US's credit rating is a stellar AAA.

Moody's should be happy. The more our real credit rating differs from the politically correct one, the more bribes they can request in return for services rendered.

[BenKenobi]

What does a triple a ranking mean?

[Uncle Miltie]

Moody’s is also ignorant of the Laffer Curve.

[FreedomPoster]

It is amazing how many apparently smart, supposedly educated people don’t understand Laffer, and make all sorts of silly statements when discussing this issue.

Now, with that said, eventually you move to the left of the inflection point of the Laffer Curve, and overall tax receipts will decrease with a decrease in tax rates. But I don’t think we are there, for a variety of reasons, and believe if this tax increase is allowed to occur, it will decrease receipts.

And from a bigger picture, if we ask: What else do we need to do to get the economy rolling again besides not raise taxes?, people need to start talking about regulatory costs. We are ridiculously over-regulated.

[Texas resident]

Moody’s is just another member of the “educated way beyond their intelligence” club.

[redgolum]

The money needs to come from somewhere. We need to cut spending and probably raise taxes.

[redgolum]

The money needs to come from somewhere. We need to cut spending and probably raise taxes.

[econjack]

I think I remember Lindsey’s report, but I’m not sure. I do remember that he was sacked by Bush because of his war cost projections. I also think he has recently come out for tax cuts, saying it’s the only way out of this recession. Finally, what was the time span to recoup the 60% on the dollar tax cut? It would seem to me that a fairly long period of time is needed to assess the full impact on the cut, especially with respect to long term investment.

[Non-Sequitur]

Any time there has been sustained and significant tax cuts (e.g., Kennedy, Reagan, Bush), gov't tax receipts increased, not decreased.

And in all cases so did the deficit. So the real issue is not that tax rates are so low but why is government spending so high? Attack that.

[econjack]

Right. The key is that, with the exception of the inflection point of the Laffer Curve (i.e., first derivative equals zero), there are two tax collection points for each tax rate. (See: http://finxknowledgeatcbsdu.wordpress.com/2008/03/12/laffer-curve-inside-out/) That is, a marginal tax rate of 17% brings in just as much revenue at a rate of 80%, mainly because of tax avoidance issues. However, another reason is that, with lower rates, people will work more because they get to keep more. This is a fly in Obama’s soak-the-rich plan.

[econjack]

No. We need to cut spending a lower taxes to get this engine working again. People respond with greater effort when they get to keep a greater share of their efforts. See: http://finxknowledgeatcbsdu.files.wordpress.com/2008/07/lc-1.gif?w=300&h=202

[econjack]

Agreed. There should be a tax cut and a spending decrease to get a long run boost to the economy. (The spending multiple for the gov’t is always one less than the private expenditures multiplier. That is, you get more bang for the buck when the private sector gets to keep and spend its own money.) Plus, following such a policy in Washington would give a huge boost to the credibility of politicians and might even suggest they're not idiots after all.

[FreedomPoster]

Yes, I don’t even need to look at your link to understand what you are saying, and I agree wholeheartedly.

[redgolum]

But we have so much debt, that isn't really practical.

The reality is that taxes are going to have to increase, and spending is going to have to radically decrease. Think no SS, Medicare, overseas military, etc. There is no money, and a huge amount of debt