November 25, 2011

Wesley Smith Notes Pro-Embryonic, Anti-Adult Stem Cell Research Bias in Geron Corp. Coverage

WesleySmith2011On November 15 (at NewsBusters; at BizzyBlog), I compared how two of the leading wire services, Reuters and the Associated Press, covered the announcement by Geron Corp. of its decision to halt the first government-approved clinical trial involving embryonic stem cells. Reuters fairly noted that “teams working with adult stem cells — a less ambitious area — are making good progress.” While one could quarrel with the characterization of adult stem cell research as “less ambitious” (unless you throw in cloning, which is what sometimes seems to be embryonic researchers’ primary area of intrigue), its “good progress” descriptor was fair. Meanwhile, the Associated Press’s coverage of the same story failed to even recognize the existence of adult stem cell research.

Wesley Smith, a senior fellow at the Discovery Institute’s Center on Human Exceptionalism and an influential prolife author, has observed that the establishment press has largely come down where AP did. A Friday Catholic News Agency item elaborates (bolds are mine):

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Agreeing With Krauthammer in Principle, But Not on ‘Loopholes’

Filed under: Economy,Taxes & Government — Tom @ 3:32 pm

The Washington Post columnist, Fox News all-star and one-man public broadcasting liberal meme wrecking crew draws the important distinction in his Friday column between attempts by Republicans to raise federal tax collections compared to that on which Democrats insisted, but plays it a little too fast and loose with an important and heavily abused term (bolds are mine):

The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. For example, the Toomey plan eliminates deductions by $300 billion more than the reduction in tax rates “cost.” Result: $300 billion in new revenue.

The Simpson-Bowles commission — appointed by President Obama and endorsed by Coburn — used the same formula. Its tax reform would lower tax rates at a “cost” of $1 trillion a year while eliminating loopholes that deprive the Treasury of $1.1 trillion a year. This would leave the Treasury with an excess — i.e., new tax revenue — of $100 billion a year, or $1 trillion over a decade.

Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.

Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue. This is perverse in three ways:

(1) Raising rates gratuitously slows economic growth, i.e., expansion of the economic pie for everyone, by penalizing work and by retaining inefficiency-inducing loopholes.

(2) We’re talking pennies on the dollar. Obama’s coveted repeal of the Bush tax cuts would yield the Treasury, at the very most, $80 billion a year — offsetting 2 cents on the dollar of government spending ($3.6 trillion). (and far less than 10% of projected future-year deficits — Ed.)

(3) Hiking tax rates ignores the real drivers of debt, which, as Obama himself has acknowledged, are entitlements.

Has the president ever publicly proposed a single significant structural change in any entitlement? After Simpson-Bowles reported? No. In his February budget? No. In his April 13 budget “framework”? No. During the debt-ceiling crisis? No. During or after the supercommittee deliberations? No.

Krauthammer is of course completely right that Obama’s and the Supercommittee’s non-compromising positions insisting that tax increases which would raise marginal income-tax rates makes a complete mockery of their claim to be the least bit interested in a bipartisan solution.

I’m not inclined to dig into what Senator Toomey wanted (partially because I’m not sure it’s even available, as the Supercommittee’s discussions were kept secret), but it’s important to remember that what many politicians describe as “loopholes” are really “legitimate out-of-pocket expenses.” A real loophole occurs when there is income which should be taxed but isn’t, or when there are deductions which don’t represent legitimate out-of-pocket expenses. If you deny deductions for legitimate out-of-pocket expenses as a sop to Washington types who insist on calling them “loopholes” when they’re not, that also leads to misallocations of capital.

Further, and perhaps more crucial, if the way of dealing with “loopholes” encompasses phasing out deductions for higher income earners while leaving lower income earners alone — a very common tax code trick — what you’ve really done is increase marginal tax rates. Here’s an easy illustration with a high-earning person with $1 million in taxable income:

  • Under current law, on each $10,000 in additional taxable income, this person would pay $3,500.
  • If you restructure a currently allowed deduction so that he or she loses $1 of that deduction for each $5 reported above that $1 million, an additional $10,000 earned would create $12,000 more in taxable income (the $10K itself plus $2,000 resulting from lost deductions).
  • The result would be $4,200 in additional tax (35% x $12,000), or an effective marginal rate of 42% on the additional $10,000 earned.

So if Toomey had said, “Let’s close this ‘loophole’ while also lowering the top nominal rate to 33%,” that would help those who aren’t claiming the deduction involved. But it would leave the person just described with a marginal rate of 40% on the next $10,000 earned (33% x $12,000 = $4,000, which is 40% of $10,000). To the extent that lower rates encourage high earners to earn more taxable income, collections would probably hold steady or might increase. But the person illustrated might decide (especially after considering state and local marginal tax rates and the 2.9% Medicare tax which has no income ceiling) that the effort involved in earning the next $10,000 income just isn’t worth it, in which case the extra amount heading to the federal treasury would be zero.

Again, I don’t believe we’ll ever fully know the details of what the Republicans proposed — which is why Krauthammer in my opinion cannot be sure that his column’s description of their goal as “loophole elimination” is accurate.

CBO: The Stimulus Didn’t Work, and Has Done Long-Term Damage

Filed under: Economy,Taxes & Government — Tom @ 8:44 am

Not that it’s really news to anyone who isn’t still drinking the Keynesian kool-aid, but even those who are, including the Congressional Budget Office, have figured out that the American Recovery and Reinvestment Act, otherwise known as “the stimulus plan,” was, to borrow a term from a separate failure, a clunker.

Here are some of the specifics cited in a Wednesday Investor’s Business Daily editorial:

The CBO Quietly Downgrades Obama’s $825 Bil Stimulus

… The new report finds, for example, that the stimulus may have added as little as 0.7% to GDP growth in 2010 — when spending was at its peak — and created as few as 700,000 new jobs.

Both are down significantly from the CBO’s previous worst-case scenario.

The report also lowered the best-case estimate for added growth in 2010 to 4.1% from 4.2%.

In addition, the CBO says the extra infrastructure money didn’t boost growth as much as it previously claimed, because states reacted by spending less out of their own budgets on highways.

So in other words, the CBO now says it’s possible that the stimulus had virtually no meaningful effect on growth and employment despite its massive price tag.

All this comes after the CBO increased that price tag to $825 billion from its initial $787 billion — a 5% hike.

Adding insult to injury, the new report also says the stimulus will hurt economic growth in the long run because of “the resulting increase in government debt.”

In our view, even the CBO’s downgraded estimates are too high, because they’re still based entirely on Keynesian economic models that simply assume extra government spending results in added economic growth.

… what we actually got was the worst recovery since the Great Depression.

The bolded second-last paragraph in the above excerpt calls for revisiting a point which can’t be made often enough — The now-deceased author of the model upon which CBO relied to estimate the stimulus’s impact said it shouldn’t be used in the current circumstances:

Arthur Okun is known mainly for Okun’s Law, which describes a linear relation between percentage changes in unemployment and percent changes in gross national product. It states that for every percentage point that the unemployment rate falls, real GNP rises by 3 percent. Okun’s Law was based on data from World War II to 1960. He cautioned that the law was good only within the range of unemployment rates—3 to 7.5 percent—experienced in that time period.

The unemployment rate, which was 7.6% in January 2009 and 8.5% in February 2009, has never been below Okun’s prescribed 7.5% since Barack Obama become president.

Friday Off-Topic (Moderated) Open Thread (112511)

Filed under: Lucid Links — Tom @ 7:00 am

Positivity: Giffords serves turkey at air base

Filed under: Positivity,Taxes & Government,US & Allied Military — Tom @ 6:00 am

From Tucson:

Nov. 24, 2011

Congresswoman Gabrielle Giffords served a Thanksgiving meal on Thursday to Air Force personnel in her first constituent event since she was shot in the head in January, her office said.

Giffords dished out turkey with tongs as she stood between Brigadier General Jon Norman and her husband Mark Kelly, said Giffords’ spokesman Mark Kimble.

The event at Davis-Monthan Air Force Base was expected to draw more than 400 people, mostly U.S. Air Force personnel, retired service members and their families.

Giffords was shot on January 8 at an event for constituents at a Tucson supermarket. College dropout Jared Loughner has been charged in the shooting spree that killed six people and wounded 13, including Giffords.

She is living in Houston, where she is receiving therapy. She arrived in Tucson on Tuesday to spend the holiday with friends and family.

Base officials had originally invited a member of Giffords’ staff to take part in the annual Thanksgiving dinner, but when Giffords heard of it she decided to go herself, her office said. …

Go here for the rest of the story.