I last saw Hank Paulson, Bush’s new pick to be Treasury Secretary, when we were at college together. He was a football player. I wasn’t. That was 38 years ago. If I remember correctly, when he graduated he went to work in the Nixon White House, which seemed a bit odd to me at the time.
He has his work cut out for him. The dollar is sliding. The deficit is growing. The economy is cooling. Wall Street may give two cheers to have one of their own at the helm at Treasury, but I don’t really think the Street gives two hoots. Paulson’s nomination doesn’t alter the economic fundamentals. Bush continues to spend like there’s no tomorrow, while cutting taxes (mostly on the rich). Global capital markets don’t care who’s Secretary of Treasury. They see huge U.S. government expenditures and even bigger coming up (read baby boomers start retiring and get Social Security and Medicare) without revenues to support them, and they recognize that the nation’s IOU (the dollar) is therefore going to be worth less and less.
The only serious question is whether the dollar drops quickly — in which case hold your hats and expect a surge in inflation, sky-high interest rates, and an economy in the tank — or drops gradually (in which case the standard of living of the typical American gradually declines). The only serious remedy is to cut unnecessary spending (corporate welfare, farm price supports, earmarked pork, the Medicare drug benefit that subsidizes big pharma) and raise taxes on the only people who are doing well in this country, who are earning well over $200K a year. I won’t hold my breath waiting for Bush to do these things.
Good luck, Hank.
A RESPONSE: Opie is looking only at federal income taxes (as does the IRS, in its various calculations of who pays what). Include all other taxes — especially sales, payroll, user fees et al. — and lower-income people are paying a larger portion of their earnings to the government than are upper-income people. As to income taxes, the rich (earning over $200K a year) are a smaller portion of their incomes than they have at any time since the start of World War II. The only reason their payments total up to be a large percent of revenues from income taxes is the rich are taking home the largest slice of the nation’s total income than at any time since the 1920s (and by some measures, the 1890s). Shift your gaze from income to wealth and it’s even crazier. Bill Gates alone owns more assets than the bottom fifty percent of Americans put together.