Tuesday, January 24, 2012

Short takes: Romney tax returns show that it's good to be rich; Eurozone finance ministers want Greek bondholders to settle for rates below 4%; U.K debt at record levels

My it's good to be rich and unemployed. Mitt Romney, who is both, finally released his tax returns which revealed that the an makes big dollars off his investments, but pays very little in taxes compared to the average working stiff.

Bowing to pressure from his primary opponents, and hoping to diffuse a potential big issue in the fall, Romney released his tax returns for the past couple of years. It shows that he earned over $21 million on his investments. But because of the current U.S. tax laws, he only paid a tax rate of around 14 percent, lower than most Americans, and much lower than most middle class workers.

Romney's returns show what many suspected: the leading candidate for the GOP nomination has not earned a salary in years, yet is raking in big dollars due to his wealth. But because his earnings come from investments, rather than a paycheck, he pays less in taxes on that money.

"You'll see my income, how much taxes I've paid, how much I've paid to charity," Romney said during Monday night's debate, according to the NY Daily News story. "I pay all the taxes that are legally required and not a dollar more. I don't think you want someone as the candidate for President who pays more taxes than he owes."

European finance ministers demanded that private bondholders must accept a deal to be paid interest rates on Greek debt at a rate below 4 percent. The chief negotiator for the private bondholders, Charles Dallara, walked out of talks on Saturday when an agreement seemed to be in place to pay 4.25 percent, but then was informed that Euro leaders wanted the rate below the 4 percent level.

While the NYT report headlined Permanent Rescue Fund Seems Nearer in Europe, the view from Europe is that the rejection of the deal "sets the stage for a Greek default when a 14.4bn euro matures on March 20", said the Athens News.

If your national debt is large the way to reduce it is to cut spending, right? But if one is in recession, and the lack of tax income is reducing revenue, then cutting spending threatens to make the debt level even higher, right?

Well, that second question is at the heart of the battle between opposing economic philosophies. Keynesians such as Paul Krugman have argued that one can not promote austerity at a time of great recession without making the situation worse, and actually growing one's debt. Austerity proponents, who are in charge in most European nations, and here in the U.S., say that one must cut spending first.

In the U.K. the theory is being put to the test.

Today the Guardian reported that Britain's national debt has risen above £1 trillion for the first time ever, despite austerity measures instituted by the conservative government - a government that shows no signs of backing away from its austerity programs.

"[This] shows the unsustainable level of spending this country built up over the past few years, and shows why it is critical for our nation's future that we deal decisively with the deficit," a Treasury spokesman said, the Guardian reported.

Despite the austerity measures, and the rising debt levels, a recent Guardian/ICM poll shows that the government of David Cameron is actually more popular now, with 40 percent support versus 35 percent for the Labour Party.