American Politics 1

Definitions of Conservatives and Liberals:

I feel the need to define what I mean by Conservative and Liberal here.

Conservative:

1. Fiscally Conservatives: These are the conservatives who won against Obama in the first deficit reduction bill. They believe in deficit reduction, lower taxes, a balanced budget, free trade, and deregulation.

Lower taxes -- Although they may have first begun with the idea of lower taxes for all, now they mainly support lower taxes for the wealthy, namely those making $315,000 or more ($250,000 after itemized deductions works out to about $315,000). These wealthy citizens received these tax cuts during the Bush Administration, and recently, during the deficit reduction talks, the liberals strongly tried to get rid of these tax cuts. This would have given America about 25% of the money that it needed in reducing the deficit. Again, this is a tax increase on what wealthy Americans make in addition to $315,000. They would have been taxed the same way as before on the first 315,000. This proposal to generate new revenue by increasing taxes on wealthy American on money that they made on top of $315,000 was rejected by fiscal conservatives.

What really frustrates me is that all that the liberals had on the table was this one tax revenue. The conservatives probably argued that the tax revenue would mean nothing, that the rich would retreat to tax shelters, tax loopholes, etc. They probably argued that during the Reagan Whitehouse, there were sharp cuts in taxes for the rich and yet, the government had more tax revenue than before because corporations stopped housing their corporations offshore, because corporations did not retreat to tax loopholes or shelters, because they stopped keeping their money in Swiss Bank accounts, etc. Obama probably bought this argument, and that's why he did not even involve the liberal leaders in the discussions at first. The conservatives further argued that the rich would probably use the extra money to create new jobs, which Obama had failed in doing.

The financial sector is now about 41% of the US economy. It is a sector in which the US has a competitive advantage over many other nations. It is the fastest growing sector of the US economy. It is a funny sector in terms of taxes. Hedge Fund Managers, as Nicolas Krystof notes, pay only about 20% in taxes. These are the people who, at the top level, literally make billions of dollars. Capital gains tax on stocks is only 15% percent, comparative low compared to Europe.

When conservatives talk about creating new jobs, I believe that they are talking about new jobs in the financial sector, but these jobs, most of them, are not really working-class jobs. Many of them involve making rich people richer. Maybe a job as a bank teller is a job that working class person can take, but, in general, the jobs are for highly qualified professionals. Also, it is hard to say whether new jobs will be created in the financial sector or whether one individual will take on more clients or customers. After it, it is very much a bear markets.

Free Trade - If we lived in a free trade world, this would be a great idea. If the whole world were a free market economy, this may work great. The fact is that most of Europe and all of Asia has tariffs which prohibit free competition. In China, the tariffs are very high on foreign imports. In Japan, I think American cars are marketed as Yuppy cars for the young and affluent. Yes, there is NATO and yes there are roads being built toward a world that is a free market economy. History, though, cannot be ignored. Asia is very aware of past history. Whether it is the Japanese, the English, or any other power, they don't really like the idea of another culture dominating their economy.

Balanced Budget -- I really don't know what this means. What if there were another unavoidable cause of war like 9/11/2011? Would the fiscal convervatives have lowered taxes? How? George Bush did this and it caused the deficit to balloon.

Deregulation -- If the market were only truly free, then you could let market forces decide which businesses were truly the best. The businessman who best understood the market forces and how to shape them in her favor would be the winners of the business world. You're right, maybe there won't be monopolies since the people who formed the best businesses would decide to share the market. But in an atmosphere in which loans are hard to get for small businesses and big business gets much more local or federal government support than small businesses, I think that small businesses will die out in the end.