An unsurprising bit of news broke this past week–some highly respected experts screwed up.
A few years back economists Kenneth Rogoff and Carmen Reinhart claimed that countries with high debt loads suffered slow growth rates. Their research was used to justify draconian spending cuts in Europe. But it turns out Rogoff and Reinhart flubbed their numbers in a big way, and Keynesians like Paul Krugman have been having a grand old time gloating over it. But just because Roghoff and Reinhart were wrong doesn’t mean Krugman is right.
Every year, we spend more than a trillion dollars more than we take in. That’s a dire situation. But how we’re spending that borrowed money is the real crime. In short, old people are killing us. That’s right, I said it: if we don’t do something soon, grandma and grandpa are going to bleed us dry.
With the horrible events in Boston earlier this week, and in Texas last night, it seems like I should talk about something pleasant and diversionary today. So how about a post on, oh I don’t know … taxes?
On Sunday, the Times ran a couple of columns on the horrors of our tax code. One piece focused on the code’s unfairness, and how working people often wind up paying higher tax rates than hedge fund managers like me. Another documented how hopelessly complicated the code is, noting that Americans spend 9.14 billion hours filling out IRS forms every year. These twin critiques are not new. I’m old enough to remember when then-presidential candidate Jimmy Carter called the tax code “a disgrace to the human race.” And yet, Carter and every other would-be reformer after him have failed to make taxes fairer or simpler. If anything, the code has gotten both more complex and less equitable since Carter left office. Why is that?
Welcome to my new blog. I’ve been managing money successfully for three decades now and I’ll be posting regularly about investing and finance. I’ll probably spend a good amount of time complaining about my industry, too. What can I say? I’m kind of an odd bird–I’m an investment manager who despises just about everything about the investment business and Wall Street in general. With that in mind, I’ll start things off with a post on what you might call an “oldie but a goodie”—the infamous Wall Street bailouts of 2008, and something almost nobody understands about them.
David Stockman wrote something very true and yet very taboo recently. In a New York Times piece published last week, the former congressman and Reagan budget director argues persuasively that, despite what just about every pundit and politician has been saying for five solid years now, those bailouts did NOT “save us from the next Great Depression”: