European Stars and Stripes (Newspaper) - January 22, 1990, Darmstadt, Hesse                                Pago 10 a the stars and Stripe columns Tom Wicker Moynihan tax plan has gop squirming Quot hoi on awhile a this capital Sains thins is really important Quot a the republicans Quot Ronald Reagan once declared a Are the party of july fourth and the democrats Are the party of april 15.&Quot knowing a profitable political message when he saw it George Bush has continued to press the theme that the democrats would raise taxes but he won t a read my  it is with some poetic Justice therefore. That president Bush now must twist and turn to Deal with the one response he neither expected nor can Stonewall a an attractive democratic plan to Cut taxes. The proposal by sen. Daniel p. Moynihan d-n.y., to repeal the most recent increase in the social Security payroll tax appears to have been the senator s own brainchild. It has deficiencies that ultimately May condemn it. But the idea is so nearly diabolical in the numerous political problems it poses for Bush and the republicans that the White House rightly tears a Quot Stampede Quot in its favor. Moynihan has proposed not just any old tax Cut but one that would be of most immediate Benefit to Low and Middle in come workers a those who have just been hit with an increase to 7.65 percent. In payroll taxes deducted from their earnings. This would be a tax Cut moreover in what can plausibly be termed the most regressive . Tax. All workers pay the same rate whether they make $20,000 a year or $250,000 the earnings on which the tax can be imposed now $51,300 arc also the same. Someone making that much pays the same Dollar amount As a person making $250,000. And All income other than wages is exempt. Repealing the most recent Rise in this onerous tax would Benefit greatly those who have suffered most in the Economy of the Reagan Bush years High school graduates and dropouts most of whom William Safire Are payroll workers. Peter Passell reported in the new York times on wednesday that from 1979 to 1987 their real earnings fell by 9 percent and 15 percent respectively in the same years the real earnings of College graduates Rose by 9 percent. Nor is it Only to workers that a payroll tax Cut would Appeal because social Security deductions from a worker s wages have to be matched by his employer. That s a heavy Cost of doing business from which Many an employer would like to be relieved a particularly Small business people who hire Only a few workers. Thus a proposal appealing on its own terms to workers and employers alike also stands in Stark contrast to one of George Bush s top priorities a capital gains tax Cut. No matter How he defends this scheme it would be of no immediate Relief to most Low income americans and would yield its primary benefits to wealthy investors. Its trickle Down effect on employment and Job creation would be speculative at Best. Its possible in fact that a sizable reduction in the social Security payroll tax would produce at least As Many new jobs and pay increases As would Bush s capital gains tax and perhaps More. The benefits of a payroll tax Cut after All would be spread across All Levels of the Economy immediately. Not Only might employers be enabled to hire More and pay better millions of americans would receive higher take Home pay to pour into the Economy. Besides As Moynihan complains the rising social Security Trust fund surplus a intended to pay benefits 30 and 40 years from now a is being used deceitfully to make the Federal deficit look smaller and illicitly to finance other government expenditures that ought to be paid for a if at All a out of general revenues. Thus the payroll tax Cut the senator proposes if achieved would bring additional pressures on Bush for the general tax increase he is sworn to oppose. Depending on its substance and purpose such a tax increase might or might not be a Good thing. Cutting the payroll lax now would raise the question whether future social Security benefits would be sufficiently guaranteed. Other questions remain to be answered but for now Moynihan has neatly turned the political tables on Bush Ana the republicans a in an election year at that. C new York time it a time Bankers Learned principles of banking banking is the business of risk. A Good banker lends depositors Money when he sees Little risk of the borrowers inability to repay he acts both As an informed source of credit and a restraining hand. A bad banker pays Little attention to the risk of helping a Borrower bite off More than he can Chew. He will lend As much As he can and then some with Little concern for the Burden that his High interest profit then places on the business. This is the heyday of bad Bankers bad savings and loan Bankers bad commercial Bankers bad investment Bankers. In the a amp a scandal the taxpayer is forced to assume the risk that the Carefree Bankers ignored in the nationwide department store bankruptcy the bondholders will pay the plungers Piper. Consider what happened in the collapse of the Campeau corp. House of cards. Supposedly sensible investment advisers and prudent Bankers loaned billions of dollars to a Canadian real estate Developer to buy a profitable Well managed retail business for much More Money than the business was Worth. Campeau As is common practice in such highly leveraged takeovers hoped to be Able to sell off the individual pieces of the huge retail Empire he had acquired for More than he paid for the total. But Campeau could t find buyers for the pieces at the hyper inflated prices he had to ask to cover his own takeover Cost and the Burden of the buyout loan became too heavy for the individual store components to Bear. The House of cards collapsed because the Bankers judgment of risk was bad such Blue Chip store chains As Bloomingdale s and Bonwit Teller Are now in chapter 11 reorganization. Who benefited most the Selling stockholders who reaped a Bonanza and gladly paid whopping fees to their own investment Bankers and Legal advisers they received far More than the company was Worth. Who was Hurt in this staggering misjudgment of risk a the bondholders Quot we Are told. That includes Many of the big names of investment banking a first Boston Dillon read Paine Webber. But they were in on the Mega fee takeovers so no tears need be shed for them. Of More concern Are the pension funds and individuals for whom Many Bankers acted As custodians. Then there Are the employees of the stores who will be Laid Oft in a retrenchment that should not have been necessary. And done to forget the customers Many of whom came to like and Trust the stores and May not like what the stripped Down institutions May be forced to become. Something is out of whack in ajl this. A Good Many conservative free enterprises think it must be More than a glitch in the software of capitalism. The first item out of whack is the idea of the Worth of a company. Bad Bankers operate on the notion that a company is Worth whatever it can sell for a that its Quot value Quot is whatever the highest bidder will pay. Then other Bankers seek out a bidder to lend More Money to bid higher. That is cockeyed valuation. A company s Worth is determined primarily by what it can earn and if debt service drags earnings Down into the red the company is Worth next to nothing the bad Bankers will have destroyed the value of a going concern. We in the press have occasionally been suckered by the go go Bankers. When a leveraged buyout bid is based on a Stock Price higher than the Market Price but is then topped by a rival bid observers automatically Hoot at inc original offer As a Quot Low Ball bid Quot i the an attempt to Quot steal inc  we take a higher bid As proof of Worth when it sometimes is proof Only of an imprudent banker. What s to be done to discourage business dooming takeovers first the Nice Man serving As Treasury Secretary until Dick Darman takes Over should include a proposal to end the debilitating deductibility of debt in his Friend the presidents state of the Union message. Next the financial press should focus on the names and numbers of All the Bankers whose poor judgment has ripped Fidelity out of fiduciary. We celebrated their Boom time Success we lionized their lifestyles and lapped up their philanthropy now lets recount the extent of their professional failure. Where is Bruce Wasserstein s Chagrin on the covers of Forbes Fortune and institutional investor what geniuses at Sumitomo Bank put $1 billion of their customers deposits into the sinking of Bloomingdale a what hotshots at Citibank fuelled these vanity bonfires the destination of an ego trip is bad publicity. Bankers whose poor judgment harmed a lot of people should be taught that being a banker involves risk. C nit York Elmo