The Wall Street Journal headline that caught my eye was "Prospect of political gridlock ignites rally."
While the "borrow-and-spend" Republicans may have been checkmated by the "tax-and-spend" Democrats, I think the gridlock started awhile ago, when the government effectively ran out of money.
Take the 700-mile border fence, for example. Although Congress voted for it with much fanfare recently, it is clear that no money has been allocated for it and probably never will.
No Child Left Behind is yet another example of an idea set in motion for political gains a few years ago that has received only a fraction of the money needed to implement it. Instead, schools have been saddled with onerous testing requirements and teachers are left having to buy basic supplies with their own money.
If the government stops spending money -- money it doesn't have in the first place -- it makes sense that stock market values will rise.
Markets respond well to the promise of less government spending and borrowing. What markets are signaling with such signs as 10-year bond interest rates of 4.5 percent is that the backdrop of the current strong business and stock market climate is a government that is bankrupt on paper. Any sign of improvement is worth celebrating in the form of momentary higher stock prices.
The government's own accounting office put the current gap at $60 trillion. To close this gap with higher taxes, we would have to increase the tax rates by 80 percent, according to a report in the New York Times by Austan Goolsbee of the University of Chicago.
While top marginal tax rates prior to the Reagan administration were as high as 70 percent (plus California state taxes for us), it is depressing to think that they will be that high again. There probably is some perversion of the Laffer Curve that illustrates the point at which higher taxes cripple the economy and prompt people to earn less and thereby reduce total tax revenues.
I remember a time back in the 1970s when business owners were allowed to pay themselves only "reasonable compensation" at a max of about $300,000 a year and everything after that had to be paid as a dividend.
After the corporation had paid its taxes and passed the dividend on to the owner, who was already in a 70 percent marginal bracket, the double taxation put him or her in an effective 90 percent marginal tax bracket. The only option was to cheat, buy real estate for tax shelter or sell the business.
Our best option might be to start taxing the deceased more heavily. A great deal of effort, plus about $200 million in lobbying fees and political contributions, have been spent by a small group of extremely wealthy families that want to do away with what their public relations campaign now calls the "death tax."
It used to be called the "estate tax," but they wanted something that sounded more onerous. Talk about the law of unintended consequences -- the term death tax offers a far better description of an ideal tool for the "work-out" team that will usher us out of bankruptcy.
Frankly, I don't know of a single deceased person who has objected to paying his or her death tax. It's a tax that in no way reduced their sense of security or pleasure while he or she was alive. So it left their progeny with a little less, but hey, any estate large enough to trigger a death tax leaves plenty of after-tax windfall to enjoy.
The tax is essentially voluntary, because any deceased person can avoid paying it entirely by giving the assets to charity. It can even be insured today at an annual cost of just a few thousand dollars per million of coverage if you think you might become the first family in America to ever lose a farm because of the "death tax."
Read my lips: Higher taxes are just around the corner.