Paul Krugman On What To Tax (Not Everything But That's What He Wants) and New Bloomberg Info on Fed Bailouts

 The following is a draft for the American Thinker
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Oh geez, here we go again.  New York Times columnist and Democrat mouthpiece masquerading-as-an-economist Paul Krugman has penned a new plan on how the federal government can snatch up some more revenue.  Per usual, Krugman is shaking his Princeton pom poms for an increase in tax rates.  And guess which class of people he wants to raise taxes on? No, it isn't the 46% who don't pay a dime of income taxes.  It's those monocle wearing, worker enslaving capitalists of course!

So why is Krugman in favor of raising taxes in a severe recession despite the objections from not only every major school of economic thought but also his idol John M. Keynes? 

Nonetheless, at some point we’ll have to rein in budget deficits. And when we do, here’s a thought: How about making increased revenue an important part of the deal?

At some point?  Excuse me if I'm just the least bit skeptical of Mr. "alien hoax’s” sincerity of genuinely wanting to make substantial cuts to the deficit; let alone the federal debt.  Even so, no group is more ripe for tax plundering than the super rich as Krugman points the wallet snatchers known as the IRS in their direction.

Once upon a time America was a middle-class nation, in which the super-elite’s income was no big deal. But that was another country.

The I.R.S. reports that in 2007, that is, before the economic crisis, the top 0.1 percent of taxpayers — roughly speaking, people with annual incomes over $2 million — had a combined income of more than a trillion dollars. That’s a lot of money, and it wouldn’t be hard to devise taxes that would raise a significant amount of revenue from those super-high-income individuals.

You can almost picture the saliva dripping from Krugman's mouth when he types "a combined income of more than a trillion dollars."  Even if Uncle Sam did the unthinkable and siphoned off another $1 trillion from the private, productive economy, that wouldn't even cover three fourths of the annual deficit in 2011.  With the deficit set to continue its upward streak for decades to come, another $1 trillion injection into government coffers starts to lose its ripple effect within just a few years.
At least Krugman, being a Nobel Laureate, recognizes that completely soaking the super rich would literally destroy economic progress reliant on capital accumulation.  That's why he calls for a return to the 70% tax rate despite evidence that high income earners hardly ever paid such a grotesque rate:

For example, a recent report by the nonpartisan Tax Policy Center points out that before 1980 very-high-income individuals fell into tax brackets well above the 35 percent top rate that applies today. According to the center’s analysis, restoring those high-income brackets would have raised $78 billion in 2007, or more than half a percent of G.D.P. I’ve extrapolated that number using Congressional Budget Office projections, and what I get for the next decade is that high-income taxation could shave more than $1 trillion off the deficit.

The key phrase here is off the deficit.  No mention of the federal debt.  No mention of projected deficit increases.  Just a fairy tale assumption that extra tax revenue won't be used by politicians to buy more votes. 
Next Krugman endorses what the puppet masters behind Occupy Wall Street, bankrolled by George Soros, have been dreaming of: a tax on all financial transactions known as the Tobin Tax:

And then there’s the idea of taxing financial transactions, which have exploded in recent decades. The economic value of all this trading is dubious at best.

Considering that humans act to fulfill ends, its quite a stretch for a Nobel Prize winning economist to claim that financial transactions have "dubious" economic value.  Broken down, all these transactions are is the conveyance of information.  The quicker market information is dispersed, the sooner productive assets and services are put into more efficient use.  The impact from such a phenomena can't be calculated in lieu of it disappearing all together.  If such transactions held no value, then why would traders utilize them in the first place?  Krugman takes it a step further:

In fact, there’s considerable evidence suggesting that too much trading is going on. Still, nobody is proposing a punitive tax.

In typical Krugman style, he mentions evidence of a suspicious claim without actually citing it.  What really constitutes "too much trading" and how can such a suggestion even be measured?  And sorry Paul, all taxes are punitive no matter how much divinity you think blesses the halls of Congress.

But wouldn’t such a tax hurt economic growth? As I said, the evidence suggests not — if anything, it suggests that to the extent that taxing financial transactions reduces the volume of wheeling and dealing, that would be a good thing.

Talk about misinterpreting cause and effect.  Krugman sees financial trading and the invention of instruments such as mortgage backed securities as another sector not yet completely wrapped in the patronizing leash of government regulators.  He often regards these transactions as destructive while citing their contribution to the financial crisis.  What Krugman deliberately avoids mentioning is that these instruments were a response to over regulation of an industry that is the lifeblood of capitalism.  When regulators, drunk on their own authority, make profit seeking more difficult, alternative avenues of profitability are sought.  Derivatives, mortgage backed securities, et al. were only the outcome of an overreaching government.  In an effort to justify the taxes, Krugman mentions countries like Hong Kong and Singapore, which rank as more economically free than the U.S., already impose financial transaction taxes.  What he really means is that despite these barriers on the free flow of information, Hong Kong and Singapore still have dynamic economies due to adopted free market measures.  Don’t expect such an admission however as it flies in the face of the progressive narrative.

Another week, another Paul Krugman article trumpeting tax increases and demagoguing the rich.  The man won’t rest till taxpayers are milked dry and the economy devolves back into serfdom.  Heaven save us if Krugman’s policies are actually put into action.

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 Last August, Bloomberg news revealed some uncovered details from its hard fought "right to know" request it launched against the Federal Reserve and its actions in the wake of the financial crisis.  The $1.2 trillion bailout kept both U.S. and foreign banks from going through the unthinkable: actually facing the consequences of their financial losses.

Today, Bloomberg has revealed more information from the "right to know" request which suggests that taxpayers paid a bigger price than was originally let on.  Somehow, I remain not at all surprised.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

 The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

$7.77 Trillion

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”

This report comes on the heels of a Wall Street Journal piece that details how banking insiders are briefed on the Fed's upcoming policy manuevers before they are made public:

Hours after an Aug. 15 meeting with Federal Reserve Chairman Ben Bernanke in his office, Nancy Lazar made a hasty call to investor clients: The Fed was dusting off an obscure 1960s-era strategy known as Operation Twist.

The news pointed to a boom in long-term bonds.
It was a good call. Over the next five weeks, prices on 10-year Treasury bonds soared, offering double-digit returns in an otherwise dismal year.  By the time the Fed announced its $400 billion Operation Twist on Sept. 21, the window for quick profits had all but slammed shut.

Ms. Lazar is among a group of well-connected investors and analysts with access to top Federal Reserve officials who give them a chance at early clues to the central bank's next policy moves, according to interviews and hundreds of pages of documents obtained by The Wall Street Journal through open records searches. Ms. Lazar, an economist with International Strategy & Investment Group Inc., wouldn't comment for this article.

New York Federal Reserve Bank President William Dudley also meets regularly with investors, both in his office with individuals and in committee groups. The New York Fed, one of 12 regional banks that constitute the Federal Reserve System, has the strongest ties to investors because it conducts the Fed's bond-market transactions.
Mr. Dudley, who also is vice chairman of the Federal Open Market Committee, which sets the nation's monetary policy, acknowledged the discussions could give the misperception that investors with access to Fed officials have an advantage.

Over the past two-and-a-half years, Mr. Dudley has had dozens of private meetings, according to his calendar, which lists SAC Capital Advisors, Citadel Investment Group, Duquesne Capital Management, and Tudor Investments, among others. Lloyd Blankfein, chief of Goldman Sachs Group Inc., and Mr. Fink, of BlackRock, also had private meetings, according to Mr. Dudley's calendar.
These investors employ strategies tied to interest-rate policy and economic trends—making snippets of information as subtle as head nods and body language extremely valuable.

Just as Hayek taught, power centers attract the kind of people who are more than willing to exploit centralized authority for personal gain.  Central Banks have always been a tool for insiders to gain an edge on competitors; we just have explicit proof now.  With the Fed expected to purchase more mortgage backed securities in the first quarter of 2012, don't expect much protest from these reports.

In other news, it looks like Barney Frank is retiring from Congress.  I can only assume he is going back to drug dealing and running a prostitution ring out of his apartment so I am more than happy to see him going back to making an honest living.  And who could forget all his classic moments such as my favorite: