Larry Summers wants more U.S. exporters. But how?

President Obama's chief economic advisor, Larry Summers, today laid out the CliffsNotes version of the administration's plan for a revitalized U.S. economy.

In a speech at the Peterson Institute, Summers said:

"The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally oriented and less fossil-energy-oriented, more bio- and software-engineering-oriented and less financial-engineering-oriented, more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population."

More export-oriented? That sounds good, except it’s exactly what most of the rest of the world is trying to work toward, or maintain. We could get there with a steep devaluation of the dollar, but that would enrage our chief creditors, including China.

Another way to get there is to give incentives to people with capital so they’ll want to fund new export-focused businesses or expand existing exporters.

Unfortunately, by being "less oriented to income growth that disproportionately favors a very small share of the population," you’re potentially taking away incentives from the people who have the capital that new businesses need.

It’s all a question of the right balance, of course. The proposed 5.4% surtax on million-dollar incomes to fund healthcare reform may seem fair to many Americans, but there’s no denying that it would mean the rich would have that much less capital to put to work in the real economy.

-- Tom Petruno

Comments

[AnnS]

Unfortunately, by being "less oriented to income growth that disproportionately favors a very small share of the population," you’re potentially taking away incentives from the people who have the capital that new businesses need.

It’s all a question of the right balance, of course. The proposed 5.4% surtax on million-dollar incomes to fund healthcare reform may seem fair to many Americans, but there’s no denying that it would mean the rich would have that much less capital to put to work in the real economy.

__

Absoute HOGWASH and a flat out LIE about taxes, taxable income and business investment.

The additional taxes on the upper 2% of households would NOT affect their ability to put money into a real business which creates a product and a job.

The new tax level would be on "Adjusted Gross Income" of personal income taxes.

"Adjusted Gross Income" is all income - deductions.

Putting money into a business - buying land, building a building, buying equipment, hiring employees - is ALL DEDUCTIBLE as business expenses.

Any money the upper 2% chose to sink into a real business - as opposed to gambling on Wall St that some greater fool will buy some stock from them for more than they paid - is a DEDUCTION AGAINST INCOME. Any money they upper 2% puts into a real business would not be subject to the additional - or in fact ANY - tax.

This columnist, to paraphrase Mark Twain, merely repeats the "lies, damn lies and [greater lies] " of the right wing wackos who believe that greed is good, everyone esle can be damned since they got theirs and selfishness is the highest goal of mankind.

High marginal brackets on the very upper incomes work in forcing them to put their money into deductible items (creating a business and thus jobs) rather than spending the money on more baubles and trinkets and toys.

It worked beautifully in the 1950s when the very top mraginal bracket was 90% (incomes then over $4,000,000 which would be like $20,000,000 today.) Rather than pay the taxes, the upper 1/10th or 1/100th choose to take the money and use it to create businesses, products and jobs - all of which they could deduct.

Creating a business and paying the expenses to get it going has always been once of the best tax deductions going. Difference between the past 10 years and the 1950s, it that the upper 1/10th of 1% didn't think saving 15% of every dollar on their tax bill worth the work of creating a business. They did think it worth the effort in the 1950s and even 1960s when they would save 70 -90% of evey dollar in taxes.

[Karen Hurtz]

I agree with AnnS's comment - the article is crap. If the rich don't think it's fair, they can always try being poor (recently translates to middle class) instead.

[Oops]

AnnS@July 17, 2009 at 03:15 PM:

"Absoute HOGWASH and a flat out LIE about taxes, taxable income and business investment. The additional taxes on the upper 2% of households would NOT affect their ability to put money into a real business which creates a product and a job."

My goodness, where do these people come from?

If I put my money into my business to create a product and a job, my business expenses are deductable.

If I loan you some of my money so *you* can put it into a "real business which creates a product and a job", my loan is not deductable.

If you sell me a share of your business (stock..) so you will have more money to put into creating a product and a job, my purchase is not deductable.

So I guess what you're saying is that only people rich enough to pay for their own business should be allowed to run one, not people who are really good at it but not rich enough. What a great idea -that- sounds like!

[T.M Self]

It seems to me that the question isn't how to import but what to import. Not long ago, we imported raw materials ,like cotton, agricultural products, machinery, electronics and other manufactured goods. We exported innovation, expertise, advice and even capital. The past few years, it seems the fastest growing exports have been jobs. Surely, Larry Summers is not calling for us to export more of these.

[Tom Petruno]

@AnnS: All fair points. My focus was on the many high-income-earners who wouldn’t start a business directly themselves but would consider providing venture money, including via IPOs or via “angel” investing. That capital is going to come out of after-tax income or existing wealth.

Also, raise tax rates high enough and some money undoubtedly will flow away from equity investments and into tax-free muni bonds. Good for states and cities, but not the kind of investment that creates new businesses.

BTW, this may be the first time anyone has accused me of being right-wing.

Tom Petruno

[ernst blofeld]

@oops
There are many ways to structure business investments so that expenditures are deductible versus the loan scenarios that you envision. One way is an S-Corp. Basically the S-corp's income and/or losses are passed thru to its shareholders who then report those items on their tax returns. This works extremely well for start-ups and new ventures. You need to read up on S corporations before you post your nonsense drivel.