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View Full Version : Tax hikes, the S&P (and Romney)



Soflasnapper
08-11-2011, 06:53 PM
One thing that isn't widely discussed is the attitude of S&P to tax hikes.

They apparently love them (as green-eye-shade types tend to), and up until just before now, always assumed (as CBO projections always must also assume) that the extended Bush tax rate cuts will end-- FOR ALL BRACKETS-- when they expire. This ending of those cuts is scored at about $3.8 trillion in additional revenues to the Treasury over a 10-year period.

Now, what is NOT so clear is whether they wanted an ADDITIONAL $4 trillion on top of that, or whether that would have been enough in total (and since maybe the tax rate cut would be extended, this was in its place). Either way, they wanted, and expected, that this revenue-loser would be ended, and based their numbers on that. The fact that it looks highly unlikely in the current political situation is something they mention as part of their new calculus in downgrading the credit rating. Which is to say, something the GOP is mainly very much against, is something that S&P REQUIRES to show the government is serious.

Back in the day, then-Gov. Romney felt the same way:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Republican presidential hopeful Mitt Romney bragged this week that he, during his one term as Massachusetts governor, improved his state’s credit rating. The point, of course, was to draw a contrast with developments at the national level, with U.S. debt being downgraded last week.

What Romney didn’t mention was how he improved his state’s credit rating. The Wall Street Journal had this report:

…Mr. Romney had an advantage that Mr. Obama sorely wanted but could not get from Congress: tax increases and the closing of tax “loopholes.”

Documents obtained by The Wall Street Journal Wednesday through the Freedom of Information Act show the Romney administration’s pitch to S&P in late 2004 included the boast that “The Commonwealth acted decisively to address the fiscal crisis” that ensued after the terrorist attacks of 2001. Bulleted PowerPoint slides laid out the actions taken, including legislation in July 2002 to increase tax revenue by $1.1 billion to $1.2 billion in fiscal 2003 and $1.5 billion to $1.6 billion in fiscal 2004; tax “loophole” legislation that added $269 million in “additional recurring revenue,” and tax amnesty legislation that added $174 million. The final bullet: “FY04 budget increased fees to raise $271 million yearly.”

In other words, Romney boasted about tax increases, which in turn improved his state’s finances, and ultimately impressed Standard & Poor’s. At the time, Romney was only too pleased to rely on a fiscal policy that mirrors what Democrats in Washington are proposing now. It’s the exact opposite of the course the former governor is currently taking on the campaign trail — before the debt-ceiling agreement, Romney “applauded” the radical “Cut, Cap, and Balance” measure and demanded that taxes be left alone. Whether the credit-rating agencies liked it or not was irrelevant.

Also note, Politico ran with the same story late yesterday.

Gov. Mitt Romney lobbied the credit ratings agency Standard & Poor’s in 2004 to raise his state’s credit rating in part because Massachusetts had raised taxes during an economic downturn two years earlier.

The claim was part of a presentation to the ratings agency obtained by POLITICO under a state freedom of information law from the Massachusetts Executive Office of Administration and Finance…. Romney’s case to S&P is a far cry from the anti-tax absolutism of the Republican Party he hopes to lead.

There are two angles worth noting here. The first is, I wonder how the Wall Street Journal and Politico got the same story on the same day. Both articles cite FOIA requests, but I wouldn’t be surprised if a rival campaign tipped off the media outlets about the idea. Indeed, note that the articles are out today — the same day as a major debate in Iowa and just a few days before the Ames Straw Poll.

The other point is, one of Romney’s ongoing problems is that he was a relatively sane, moderate governor. Much to his chagrin, Romney is haunted by his record of mainstream governing, which he is now scrambling to pretend never happened, as he denounces everything he said and did during his only tenure in public service.

It’s kind of sad to watch.
by Steve Benen, at the Washington Monthly site</div></div>

LWW
08-12-2011, 02:01 AM
The $3.8T is a myth.

When you base your conclusion on a myth, you will always be wrong.

Soflasnapper
08-12-2011, 06:11 PM
A myth believed in by S&P, wrongly or rightly.

Gayle in MD
09-14-2011, 10:29 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">One thing that isn't widely discussed is the attitude of S&P to tax hikes.

They apparently love them (as green-eye-shade types tend to), and up until just before now, always assumed (as CBO projections always must also assume) that the extended Bush tax rate cuts will end-- FOR ALL BRACKETS-- when they expire. This ending of those cuts is scored at about $3.8 trillion in additional revenues to the Treasury over a 10-year period.

Now, what is NOT so clear is whether they wanted an ADDITIONAL $4 trillion on top of that, or whether that would have been enough in total (and since maybe the tax rate cut would be extended, this was in its place). Either way, they wanted, and expected, that this revenue-loser would be ended, and based their numbers on that. The fact that it looks highly unlikely in the current political situation is something they mention as part of their new calculus in downgrading the credit rating. Which is to say, something the GOP is mainly very much against, is something that S&P REQUIRES to show the government is serious.

Back in the day, then-Gov. Romney felt the same way:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Republican presidential hopeful Mitt Romney bragged this week that he, during his one term as Massachusetts governor, improved his state’s credit rating. The point, of course, was to draw a contrast with developments at the national level, with U.S. debt being downgraded last week.

What Romney didn’t mention was how he improved his state’s credit rating. The Wall Street Journal had this report:

…Mr. Romney had an advantage that Mr. Obama sorely wanted but could not get from Congress: tax increases and the closing of tax “loopholes.”

Documents obtained by The Wall Street Journal Wednesday through the Freedom of Information Act show the Romney administration’s pitch to S&P in late 2004 included the boast that “The Commonwealth acted decisively to address the fiscal crisis” that ensued after the terrorist attacks of 2001. Bulleted PowerPoint slides laid out the actions taken, including legislation in July 2002 to increase tax revenue by $1.1 billion to $1.2 billion in fiscal 2003 and $1.5 billion to $1.6 billion in fiscal 2004; tax “loophole” legislation that added $269 million in “additional recurring revenue,” and tax amnesty legislation that added $174 million. The final bullet: “FY04 budget increased fees to raise $271 million yearly.”

In other words, Romney boasted about tax increases, which in turn improved his state’s finances, and ultimately impressed Standard & Poor’s. At the time, Romney was only too pleased to rely on a fiscal policy that mirrors what Democrats in Washington are proposing now. It’s the exact opposite of the course the former governor is currently taking on the campaign trail — before the debt-ceiling agreement, Romney “applauded” the radical “Cut, Cap, and Balance” measure and demanded that taxes be left alone. Whether the credit-rating agencies liked it or not was irrelevant.

Also note, Politico ran with the same story late yesterday.

Gov. Mitt Romney lobbied the credit ratings agency Standard & Poor’s in 2004 to raise his state’s credit rating in part because Massachusetts had raised taxes during an economic downturn two years earlier.

The claim was part of a presentation to the ratings agency obtained by POLITICO under a state freedom of information law from the Massachusetts Executive Office of Administration and Finance…. Romney’s case to S&P is a far cry from the anti-tax absolutism of the Republican Party he hopes to lead.

There are two angles worth noting here. The first is, I wonder how the Wall Street Journal and Politico got the same story on the same day. Both articles cite FOIA requests, but I wouldn’t be surprised if a rival campaign tipped off the media outlets about the idea. Indeed, note that the articles are out today — the same day as a major debate in Iowa and just a few days before the Ames Straw Poll.

The other point is, one of Romney’s ongoing problems is that he was a relatively sane, moderate governor. Much to his chagrin, Romney is haunted by his record of mainstream governing, which he is now scrambling to pretend never happened, as he denounces everything he said and did during his only tenure in public service.

It’s kind of sad to watch.
by Steve Benen, at the Washington Monthly site</div></div> </div></div>


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