Prioritization in Fiscal Policy

For reasons that are not quite clear to me, I often seem to have trouble making myself understood in online discussions. My post yesterday on the consequences of the fiscal deal is a good example. Based on the comments thread, I seem to have come across as an austerity-monger who hates poor people. So I’m a little leery about going back to the well on this one, but YOLO, as the kids say.

I can’t claim to be the most progressivy progressive in the history of the world, but I’ve become pretty committed to some notions about the society I want to live in that, I think, would strike many as progressive. I think everyone should have access to quality, affordable health care. Same with education. I think everyone should be able to retire with a certain degree of material comfort. I believe that economic prosperity is built on well-developed and maintained infrastructure. As a consequence, I have a pretty robust view of the role of government.

But you can only have a robust government if that government is appropriately funded. In order to meet the goals I’ve outlines, the federal government will need to spend at a rate of roughly 24-25% of GDP in the future. Maybe if you get a lot of efficiencies and are willing to live with a relatively minimal defense establishment, you can bring that down to 22-23% of GDP.

Here is my problem in a nutshell: Obama’s adoption of anti-tax rhetoric in terms of keeping the vast majority of the Bush tax cuts and the recent fiscal cliff deal that resulted from this commitment caps (for now) federal revenue at roughly 18-19% of GDP. That suggests a “structural deficit” under conditions of full employment of roughly 3-7% of GDP. 3% is actually a perfectly sustainable level. But you can’t just plan for the best case, of course. And furthermore, given current debt levels and the likelihood that debt service will eat up 20% of the federal budget the actually gap between revenue and desired spending is going to be much larger, in the neighborhood of 6% of GDP, and as a result likely not sustainable. Debt/GDP would increase and in time, debt service obligations would choke the federal government.

Yes, all of this is uncertain. You can’t fully predict the futures. And I get that the idea of accepting certain short-term pain (in the form of higher taxes) to stave off uncertain long-term pain (in the form of potential cuts in major programs) strikes many as unattractive. But this kind of argument is problematic. Consider its application to climate change. Most of us would argue for more vigorous action on that front, but the counter-argument is precisely the one I laid out above. Climate change is likely but uncertain (particularly in terms of predicting the long-term effectiveness of mitigation efforts), while the costs of capping or pricing carbon are short-term and certain.

Anyway, all of this leads me to the core of my argument. The biggest threat to the society I want to live in is lack of sufficient funding for government programs. Obama had a historic opportunity to reset federal revenue to a higher level. Instead he locked in revenue at an insufficient level.

But maybe you agree with this argument and just believe that now is not a good time. Yes, I agree. Right now is a terrible time to raise taxes, especially on the poor and middle class. Purely in terms of policy, my preference would have been a two year extension of all the tax cuts followed by a full expiration of all of them.

But then consider the politics. Would it better to have taxes rise in time for midterm elections? How would it affect 2016? Ultimately, it is never going to be a good time to raise taxes. Between politics and policy, there will always been a compelling case for not doing it. As a practical matter and considering political consequences, I think now may have the least bad time for doing it. I could be convinced otherwise, but the case needs to be something more than just noting that it would hit people hard in hard times.

In my last thread a lot of people argued that I was overly pessimistic about the possibility of raising taxes in the future. Most of them said, essentially, “we did in 1993, it can happen again in the future.”

Okay, but what happened after 1993? The GOP got a wave election in 1994. Clinton’s health care initiatives crashed and burned. 1993 is not necessarily a happy story, and I think Democratic strategists are likely to be leery to relying on this analogy. But also, the context has changed. The Democratic Party is now generally much more hostile to taxes. Obama’s two campaigns have been an example of that, embracing anti-tax rhetoric aggressively. I would argue that you just can’t cite 1993 are an example of the possible without walking through the logic of that argument, and how context has changed since.

Finally, while I’d like to raise all the needed additional revenue from the wealthy, who have become richer than ever, I am not sure the math works out there. I suggested above a delta of roughly 3-4% of GDP between where we are and where we need to be in terms of federal revenue. While I agree with all the proposals people suggested in my previous thread — closing the “carried interest” loophole, ending subsidies to oil and gas, cutting defense, reducing the Estate Tax deduction, etc. — I know of no credible study that suggests this will raise anything like the required revenue. Consider this a bleg if you want, but show me the math to prove me wrong on that.

In short, this is an issue of priorities for me. Would I like to see taxes stay low (and go lower) on the poor and middle class? Indeed. Would I like to provide universal health care and a robust retirement safety net? Yes, of course. Would I like to see us reduce income inequality? Sure. More infrastructure investment? Better access to education? Yes to all.

But I’m skeptical that we can get it all. And so, my priority is pushing for a higher federal government revenue base that will allow major programs to remain intact. Others may have different priorities, but I think we all need to acknowledge the consequences and tradeoffs of those priorities.

Share On Facebook
Share On Twitter
Share On Google Plus
Share On Pinterest
Share On Reddit






188 replies
  1. 1
    imonlylurking says:

    Nobody says it has to be a one-step process. Why not start with those proposals, give the economy a few years to shake itself out, and then take another look? Instant utopia is fun to imagine but that’s not how the real economy works.

    Also, I think there is a great deal of underestimating the impact of better health care access on economic growth. My best friend’s brother works for an insurance company, and he says that at least half of the employees in his department are good enough at their self-employment gigs to make a living at it-except they have pre-existing health conditions, hence the job at the insurance company.

  2. 2
    Keith G says:

    Your observations are very much in line with what a lot of other knowledgeable people are saying. It is quite likely that some of the folks that give you a negative comments are the folks who usually get riled up when someone says Obama could have made a better decision. That is a especially the case if those people are not supporting their view with some type of usable data.

  3. 3

    In your abstract scenario how much does the economy grow? The economy is not static it will change, we don’t know how it will change. Long term economic forecasting is fraught with errors also in the long run we are all dead. What we need to focus on us is the short term and medium term instead, which is what the fiscal cliff does.

    This speculation of what will happen to the social programs 20 years from now because of the fiscal deal is as useful as reading tea leaves. YMMV.

  4. 4
    brantl says:

    Climate change is likely but uncertain (particularly in terms of predicting the long-term effectiveness of mitigation efforts), while the costs of capping or pricing carbon are short-term and certain.

    No, it’s likely and certain, the relative degree is somewhat uncertain, but there is a guaranteed range, all of which is problematic to an untenable degree. Your statement here is 100 proof horseshit.

  5. 5
    Mnemosyne says:

    But maybe you agree with this argument and just believe that now is not a good time. Yes, I agree. Right now is a terrible time to raise taxes, especially on the poor and middle class.

    And yet you’re saying we should do it anyway?

    Personally, I think you’re attacking it from the wrong angle. If your main concern is Social Security and Medicare/Medicaid, shouldn’t we be talking about raising the salary cap on those contributions? It’s stuck at about $105,000 right now, but if we’ve now decided that $400,000 is the new middle class, then the cap should rise to that level at a minimum (if not be removed entirely).

  6. 6
    Bernard Finel says:

    @schrodinger’s cat: Would you accept the application of precisely the same line of argumentation to climate change? I’m just curious. Should we always prioritize the certain short-term over the uncertain long-term.

  7. 7
    Lex says:

    Forget it, Bernie. It’s Chinatown.

  8. 8
    danimal says:

    I will never understand why the Obama administration didn’t push for a full phaseout of the Bush rates over a 3-4 year period, perhaps only implemented once economic benchmarks are acheived so the recovery isn’t imperiled by hasty austerity.

    We all benefit from government; we all need to contribute to pay for these benefits. There is nothing sacrosanct about the middle class, or the poor. Increase progressivity to the tax code, yes, but let’s be real and acknowledge increased revenues need to be levied across the board. First, we are all Americans.

    This was a missed opportunity for Obama.

  9. 9
    Bernard Finel says:

    @brantl: You are dead wrong and don’t know the literature on this at all. There is absolutely no consensus on the likely effectiveness of mitigation measures. There is broad acceptance that if we do nothing, global warming will result. There is no consensus on what happens even if we adopt the most aggressive proposals currently being discussed. Sorry, but you’re just wrong.

  10. 10
    Mark S. says:

    What’s frustrating is that all of our long term deficit problems are completely due to our lack of a comprehensive national health care system. If we spent per capita on health care what Canada does we would have budget surpluses. But as far as I can tell, this concept is completely unknown to Very Serious People, who have orgasms over Bowles-Simpson.

  11. 11
    Tonal Crow says:

    Climate change is likely but uncertain (particularly in terms of predicting the long-term effectiveness of mitigation efforts), while the costs of capping or pricing carbon are short-term and certain.

    Remember that uncertainty in climate change plays in both directions. It could be less bad than some predictions, but it could also be far worse. By “far worse”, I mean (among other things), devastating drought (see, e.g., http://www.cgd.ucar.edu/cas/ad.....ES2010.pdf ), which can mean mass starvation. And not just in the usual places, but everywhere. Yeah, here too.

  12. 12
    Scott de B. says:

    I will never understand why the Obama administration didn’t push for a full phaseout of the Bush rates over a 3-4 year period, perhaps only implemented once economic benchmarks are acheived so the recovery isn’t imperiled by hasty austerity.

    Because one of the central planks in his 2008 and 2012 election campaigns was that he wouldn’t do that?

  13. 13
    Belafon (formerly anonevent) says:

    Okay, but what happened after 1993? The GOP got a wave election in 1994.

    And, right now, if Obama had let everything expire, we would lose the Senate in 2014 because he would have no political capital to do anything else.

    Your argument boils down to getting most of the American people to think hard about what you want (which is almost everything I want) and vote for the right people to do it. The problem is, most people vote for what they want, which for some people is making sure the guy under the next bridge does not have a hanger to cook his pigeon on.

    If you can figure out a good way to get people to vote for 1940s-1960s policies without us going into a depression first, I’m all ears. My theory is that we really needed two more years of GWB to really start getting people to understand how fucked we were. Obama and the Democrats saved the country, and so most people think it must not have been that bad.

  14. 14
    ThatLeftTurnInABQ says:

    For reasons that are not quite clear to me, I often seem to have trouble making myself understood in online discussions.

    An observation: you have a bad habit in your writing of grasping only one part of a large and complex reality in order to make a focused point about one aspect of policy and refusing to acknowledge the other parts which might muddle your argument.

    In this case, what your critics in the previous thread had to say boiled down to: Keynesian economics trumps tax policy in this case. We need stimulus more than revenue right now, and if tax cuts are the only politically feasible form of stimulus we can get thru the current Congress, then better tax cuts than nothing. This might be a bad argument if there were evidence from the political history of the previous decades that tax policy is written in stone and can never be changed by future Congresses. Such evidence is not compelling, to put it mildly.

  15. 15
    Jeremy says:

    @danimal: Because there was no chance of that passing Congress and he didn’t campaign on that proposal.

  16. 16

    Wait, can’t Obama use the bully pulpit to get all of these things? He can’t?

    Snark aside, I, for one, welcome each Nard Dog post. Keep on truckin’. The act of uncorking a not so good or agreeable post makes your writing stronger in the future.

  17. 17
    Tonal Crow says:

    @Bernard Finel:

    There is absolutely no consensus on the likely effectiveness of mitigation measures. There is broad acceptance that if we do nothing, global warming will result. There is no consensus on what happens even if we adopt the most aggressive proposals currently being discussed.

    Please substantiate this assertion. The IPCC SRES scenarios are scientific consensus projections based upon various emissions scenarios, and thus include mitigations that reduce CO2 emissions.

  18. 18
    Scott de B. says:

    It strikes me as a bit strange that Bernard would take Obama to task for not being sufficiently concerned with structural deficits and their impact on social programs, when I would say that concern for structural deficits and their impact on social programs is one of the cornerstones of Obama’s political philosophy. He’s articulated it in public many times, and his commitment to the principle has been, I would argue, second to none among national Democrats (to the ire of many in the progressive community, I would add).

  19. 19

    @Bernard Finel: I was paraphrasing what Keynes said about the long term. Also economic forecasting is not as accurate as forecasting using hard sciences. Which the forecasting of Climate Change is based on. Economics may have physics envy but is nowhere as accurate as the hard sciences are. Uncertainty that one deals with in economics is non-ergodic. Also, I was just laying out the practical problems in long term economic forecasting not saying that we should not care about the future.

  20. 20
    FormerSwingVoter says:

    But maybe you agree with this argument and just believe that now is not a good time.

    This. It’s not simply an abstract “pplz will be hurt” kind of thing – it’s that we’d go back into recession if the entire fiscal cliff hit us. The lower-middle tax cut extension provides an entire percentage point higher GDP growth, and with the unemployment extension it goes significantly higher. As a result, instead of negative GDP growth, we’re going to see 1.0-1.5% growth (assuming no other changes).

    See the CBO’s Fiscal Cliff Deal FAQ:
    http://www.cbo.gov/publication/43835

  21. 21

    @Mnemosyne: 105K for individuals and whatever corresponds for couples must be about the upper limit for the Old Middle Class, aka the New Genteel Poverty. That’s where new marginal rates could start, very gently; could be a lot of revenue. Of course the salary cap on payroll tax is insane where it is.

  22. 22
    Brachiator says:

    @Bernard:

    But maybe you agree with this argument and just believe that now is not a good time. Yes, I agree. Right now is a terrible time to raise taxes, especially on the poor and middle class. Purely in terms of policy, my preference would have been a two year extension of all the tax cuts followed by a full expiration of all of them.

    My reservations about your earlier post can be summed up in your policy proposal here. This is both uninformed and insufficient. Like many posters, you focus on tax rates, but don’t have much to say about actual programs. Nor do you make any distinction between individual, business or estate and gift taxes. Or the stimulus programs enacted since Clinton and broadened or added under Obama.

    You talk about federal spending as a proportion of GDP, but this is not particularly meaningful. You seem to assume that the economy will recover, that employment and wages will rise. Your GDP figures are largely fanciful, but even here you could have GDP growth and still have an economy in which millions are unemployed or underemployed. This would still be worrisome despite any issue with respect to federal revenues.

    But I’m skeptical that we can get it all. And so, my priority is pushing for a higher federal government revenue base that will allow major programs to remain intact

    As you challenged, show me the math. And show me the actual programs that you would fund.

    And I don’t know you and have nothing against you, but I keep getting a sense from your writing that poor people are actually an obstacle to your progressive vision; and the middle class are supposed to take a bullet and sacrifice so that federal coffers can fill up so that you can do … something … it’s never quite clear what, to bring about a progressive nirvana.

  23. 23
    Higgs Boson's Mate says:

    I suggest that we sell the U.S. Air Force and most of the Navy to the Chinese. Then we can make some popcorn and watch them go broke trying to remain the world’s last super power.

  24. 24
    danimal says:

    @Scott de B.: Yeah, of course once Obama committed to the “no taxes over 250K” pledge, he had to stick with it, but IMHO he just unnecessarily constrained his policy options with that pledge. Dems are too afraid to be viewed as tax-raisers even though the electorate is much more open to responsible tax hikes than in 1988.

  25. 25
    Jennifer says:

    I wasn’t in on the previous thread, but I’d start more from the position that our current debt is the result of drastically lower taxes on the wealthiest – which has to its advantage that it is true – for the past 30 years, so even if we went back to the max marginal rate of 70% like we had in the 1970s, folks who have been making out like bandits for the past generation would have no reason to complain. Of course they would complain, but the fact is they’ve gotten close to a free ride for a very long time now, which is why we have the debt we have coupled with degraded services.

    If we’re ever to get the fiscal house in order, it would seem the place to start would be to look at how we had things set up before we started accumulating debt and how the conditions of that time compare (and differ) from now, and then pick up from there. There’s a kind of fascinating chart of information here, showing income tax brackets in both the dollar amounts of the time and adjusted for inflation. I think the Tax Foundation is probably a wingnut org, but the info in the chart is good. I say “fascinating” because among other things, I found myself noting how much higher the rates were for people on very low incomes as much as how high they were for people making the equivalent of $400,000 today.

    The biggest thing it points out to me is the need for more brackets. It’s ridiculous for the rate to top out at $400K and ridiculous for there to be only 5 or 6 brackets to cover incomes from $8,500 to infinity.

    Of course the income tax is only one part of the equation – the special rates for investment income, loopholes, etc are where a lot of the problem lies, and in fact increase the inequality of the system even more – but we could start by just going back to having lots of brackets and a much higher top marginal rate. Split the difference with the greedy fucks, let them off with a top rate of only 55% compared to the 70% they were paying a generation ago – and tell them to stop crying or we’ll GIVE them something to cry about. But most important – always, always make clear that the source of the debt goes back to all the tax giveaways they’ve enjoyed for the past 30 years.

  26. 26
    Bernard Finel says:

    @Tonal Crow: You are confusing outcomes with policy. Yes, if the policies result in predicted emissions reductions, you can get compelling results. But dig into the assumptions. No one is sure what any particular policy initiative will result in. There is just too much uncertainty in the mix — policy choices by other key actors, substitution effects (particularly given the current energy revolution)” etc.

    Yes, if you can reduce emissions enough, the models are promising. But there is zero consensus on the likely effectiveness of current policy options.

  27. 27
    mainmati says:

    Carbon tax. Start it out fairly low and raise it a bit every year until it starts to bite. It will rake in hundreds of billions and also go a long way towards reducing carbon emissions. Set aside a portion – say 10% – to fund a public/private infrastructure bank.

  28. 28
    srv says:

    Most of you will die still living in a country defined by Reaganism. He is the zombie icon that the right still whoreships and the democrats use to define their leftward flank, given that Nixon and Reagan come off as centrists in today’s political nuthouse. Obama is just going to be able to trend back to the norm of pre-9/11.

    Since we can’t have death panels, we need those on SS to start working for their benefits. Think of it as the WPA for boomers. They can learn to dig ditches and build dams. We can get an economic multiple out of that labor and they can die with their boots on. Surely what the generation that gave us Reagan would want.

  29. 29
    nastybrutishntall says:

    @FormerSwingVoter: Eggzactly. One way to think about revenues is tax rates, the other is overall economic growth. Both can lead to increased revenues, but only at appropriate times in the economic cycle. Saying that tax rates need to be higher now, where they will depress the economy with near certitude and thus lower the actual incomes the higher tax rates are hitting, makes no sense. It’s like saying we will all need coffins when we die, so let’s forgo food and shelter and spend all our money on that pine box…therefore hastening our occupancy of that final efficiency in the worst neighborhood of all.

  30. 30
    Culture of Truth says:

    I just read the entirety of this long post and I am still not sure what the point was. Is the author is calling for higher taxes? On a certain group? Why so cryptic?

  31. 31
    Jeremy says:

    The problem with the “nothing is ever good enough” crowd is that they fail to understand how our government works, and don’t understand history. They think Obama controls everything and holds him to some standard that no one can meet including the best presidents in history.

    The president was able to increase taxes on the wealthy and with the ACA taxes, Personal exemption phaseout on those making 250,000 + along with pease, and tax increases on those making 400,000 + is considered a sell out to some and I don’t get it.

  32. 32
    Tonal Crow says:

    @Bernard Finel:

    @Tonal Crow: You are confusing outcomes with policy. Yes, if the policies result in predicted emissions reductions, you can get compelling results.

    “Are very likely to get compelling results” would be much closer to a consensus statement. Please try to be accurate on this topic.

    But dig into the assumptions. No one is sure what any particular policy initiative will result in. There is just too much uncertainty in the mix — policy choices by other key actors, substitution effects (particularly given the current energy revolution)” etc.

    That’s economics, not climate science. Don’t confuse the two. We must quickly reduce carbon emissions to avoid very serious climate effects. To do that, we must quickly implement economic policies (e.g., an escalating carbon tax) that are most likely to result in those emissions reductions. I hope you’re not saying to refrain from action because there is some uncertainty in those policies’ effectiveness?

  33. 33
    Linnaeus says:

    A start, though certainly not the exclusive solution, would be to spend a lot less on our military empire.

  34. 34
    Bernard Finel says:

    @Culture of Truth: Good grief, I’m saying we need higher taxes, and that I doubt we can get all of it from the rich. We’re all gonna need to throw more into the kitty. Yes, nail the rich first, but understand that exempting everyone under $250k from an increased burden implies accepting very large cuts in existing (and inadequate) programs.

  35. 35
    Roger Moore says:

    @Mnemosyne:

    And yet you’re saying we should do it anyway?

    I think he’s saying that we shouldn’t have made the tax cuts for lower brackets permanent. As it is, it will take an affirmative act by Congress to raise those lower brackets back to Clinton-era levels. The ideal solution would have been to make the cuts temporary, so that they’d expire about when we expect the economy to be back to full employment, e.g. in about 2-3 years.

  36. 36
    Tonal Crow says:

    @Linnaeus: Not to mention zeroing out the War on Drugs, regulating and taxing currently-illegal drugs, and releasing everyone currently imprisoned for non-violent drug crimes.

  37. 37
    Bernard Finel says:

    @Tonal Crow: No, you completely missed my point. My point is that just as we ought to proceed with efforts to cut emissions despite uncertainties, we should also proceed with efforts to raise revenue despite uncertainties.

  38. 38
    Bernard Finel says:

    @Tonal Crow: No, you completely missed my point. My point is that just as we ought to proceed with efforts to cut emissions despite uncertainties, we should also proceed with efforts to raise revenue despite uncertainties.

  39. 39
    Paul in KY says:

    @Mnemosyne: The cap needs to be raised, pronto!

  40. 40
    gene108 says:

    Climate change is a bad metaphor. Changes in regulatory regimes do not lead higher unemployment. Dodd-Frank, catalytic converters in cars, etc. are not engines of short term macro economic problems.

    Higher taxes now will result in higher unemployment and worse overall economy. Get employment and wage growth up and then we can look at taxes.

    I do not believe raising taxes is impossible in the future. For the first time in a generation you have liberals pushing back against conservative economic group think. At some point, whether occupy movement or economists, the push to address the structural economic problems of the past thirty years will filter up to Democratic politicians.

    The rightward shift did not happen overnight. I believe we will see a leftward shift in a few years.

  41. 41
    Paul in KY says:

    @Mark S.: It is actually due to the Repubs spending all the money on wars & their buddies, while cutting taxes on the rich.

  42. 42
    Amir Khalid says:

    @Higgs Boson’s Mate:
    There’s no way the Chinese would fall for that trick. Just twenty years ago, they saw the same thing happen to the superpower right on their doorstep, the Soviet Union.

  43. 43
    FormerSwingVoter says:

    @nastybrutishntall:
    The funny thing is, I basically agree with most everything Bernie’s said over these two posts. We’re going to need – relatively soonish – more revenues and/or less spending (likely from entitlements). This was our last best chance to get major revenues for a little while, given how infrequently Congress has raised taxes over the last few decades and the political consequences of doing so.

    So I agree with Bernard that we had a choice here: a new recession in order to preserve entitlements and other social programs, or to keep cleaning up the old recession. I just place much more value on the latter than the former, as I think he’s underestimating the political costs of a new recession.

  44. 44
    Machine-Gun Preacher (formerly Ben Franklin) says:

    OT…Jack Lew nominated for TS. He worked for Citigroup. I hope he was an operative, rather than a convert.

    http://www.theatlantic.com/pol.....ry/266982/

    3. He’s no moderate. Unlike Geithner, a disciple of Robert Rubin and product of Clinton-era economics, Lew is more closely aligned with class-warrior image that Obama adopted during the election campaign. A staunch liberal, he started his political career canvassing for anti-war hero Eugene McCarthy in 1968 (he was 12); his adviser at Carleton College was Paul Wellstone, later an iconic liberal senator; and one of his first jobs in Washington was working for Democratic lion and former Speaker of the House Tip O’Neill.

  45. 45
    Mnemosyne says:

    @ThatLeftTurnInABQ:

    Keynesian economics trumps tax policy in this case. We need stimulus more than revenue right now, and if tax cuts are the only politically feasible form of stimulus we can get thru the current Congress, then better tax cuts than nothing.

    This. Right now, the last frickin’ thing we should be worrying about is the debt and the deficit. The economy needs more stimulus, not less.

    As far as I can tell, Bernard is proposing one of the main planks of austerity. Tell me, how is that working out for Europe right now?

    @Yastreblyansky:

    Somebody else here (I’m blanking on who) was pointing out that it’s absolutely ridiculous that someone who makes $388,000 a year and someone who makes $3,888,000 a year pay the exact same marginal tax rate on their income. IMO, it’s ridiculous to pretend that those two people are in the same position and should pay the same marginal rate. There needs to be at least one additional marginal rate, if not a couple more, above the current one.

  46. 46
    Jeremy says:

    @srv: I don’t see Democrats using Reagan to describe the leftward flank. I think some on the left are just as obsessed/ paranoid about the Reagan effect when people on the right realize that Obama is trying to take America back to an era before Reagan.

    If you look at DW nominate scores Obama is in the mainstream of the Democratic party between the most conservative and most liberal democrat. Also the DW nominate scores show that Obama and many Democrats are to the left of democrats from the 90’s. Nate Silver even said that Obama is more liberal than an 80’s moderate republican.

  47. 47
    Bernard Finel says:

    @Brachiator: Oh, come on. This is a blog post, not a full think tank report on taxation. If you really want, I could expound in depth on the various potential revenue streams available, but only you, me, a tax attorneys would care. My main point is that it is hard to devise a scheme that hits only those above $250k and produces needed revenue. My other point is that embracing anti-tax rhetoric for everyone under $250 also makes it harder to pass revenue measures generally.

  48. 48
    Mnemosyne says:

    @Bernard Finel:

    Yes, nail the rich first, but understand that exempting everyone under $250k from an increased burden implies accepting very large cuts in existing (and inadequate) programs.

    Because of the low threshold of the salary cap, those people are ALREADY carrying the majority of the burden for Social Security and Medicare. Like everyone else, Warren Buffett only has to pay Social Security taxes on the first $105,000 he makes every year.

    Why are you comfortable exempting people who make more than $105,000 a year from paying their fair share into Social Security and Medicare and insisting that people who make less than that need to pay even more?

  49. 49
    taylormattd says:

    @Bernard Finel: If it’s any consolation Bernard (and I’m sure it’s not, lol), I can’t imagine how *anyone* would read your last post and come away thinking you were pro-austerity. Frankly, there is no explanation other than those folks have a difficult time with reading comprehension. I mean for god’s sake, you went on about (and I totally think you are wrong on this, btw) how Obama has allegedly adopted a large part of Bush’s tax plan.

  50. 50
    Higgs Boson's Mate says:

    @Amir Khalid:

    True, that. Maybe if we threw in this Congress and the DEA?

  51. 51

    BTW I just read Friedman’s column, can someone please explain to me how one can make a linear turn? How does this man have a column in NYT? Freshmen in college write better than he does.

  52. 52
    Jeremy says:

    @srv: And by the way Nixon was a centrist when it came to domestic policy. He even ran as a centrist in 1960 and 1968. So he didn’t look like a centrist because of a right ward shift it’s because he governed like one. He just looks extremely liberal now because the republican party has moved far to the right since then.

  53. 53
    LGRooney says:

    There simply needs to be some education on the issue. Too many Americans live at or near paycheck-to-paycheck level and higher taxes on them will push them over the edge. Yes, the taxes need to go up to do all the things we want and ensure an equal-opportunity society, health care, and retirement for all, along with the defense we demand and the infrastructure rebuild needed on a massive scale.

    My pipe dream needs to be done in phases:

    1) Jack up rates on the wealthy and pocket the difference for 2-3 years while reducing military spending 20-30%.
    2) Use those funds to pay for a massive infrastructure rebuild which will put plenty to work, who have no job now or have need of another income.
    3) Now that you have an improved employment picture, raise tax rates across the board while forcing the banks whose asses we pulled from the fire to slash interest rates on current debt owned for 12-24 months, i.e., not new debt issued in that same period.
    4) People have had the chance to pay down debts, prices will have had a chance to adjust to the new pay structure with the new tax regime and the populace’s new net income, and we will have a new foundation on which to continue building towards the future.
    5) Close loopholes on businesses and the wealthy in the tax code and introduce a lower flat-tax rate on the former.

    Make no mistake that the reason that raising taxes is such a difficult prospect is that prices on goods are set to the current take-home levels and many of the costs have already been absorbed and profits taken (that’s the way of the world these days – surprise! – money is extracted at the top on profits yet to be realized, i.e., those merely forecast b/c the math geniuses like myself can’t be that wrong in our predictions, right?).

    In any event, as long as easy credit is available, there is little incentive for businesses to lower profits. Once people realize the freedom of being debt free, they will be more reluctant to use it. Once banks realize that they may have to take a hit on credit extended, they will be more reluctant to extend it.

    That’s why loopholes are closed after the “loss-making” period has passed for businesses – for what it’s worth, businesses only pay taxes on the amount left after their “living expenses” are accounted for. Probably something else that needs to be fixed.

  54. 54
    Paul in KY says:

    @Bernard Finel: Hopefully we can raise them some more on the rich in a couple of years. Don’t think they can’t be raised some more.

  55. 55
    Kristin says:

    @Roger Moore: Thanks for the clarity. That point actually makes sense, but it was lost somewhere (for me, anyway).

  56. 56
    Aaron Morrow says:

    “But you can only have a robust government if that government is appropriately funded.”

    How many years of deficits funded the New Deal through Clinton? Your terms need redefining.

    I fail to see how extended long-term unemployment will result in more revenues collected by the federal government. Remember, tax rates are multiplied by the tax base, which will continue to shrink under your anti-stimulus plan.

    Long term budget problems should be solved under the long term. We don’t need to solve them in the short term. In fact, your solution of raising taxes in a year or two would make the long term budget problems worse.

    Even the IMF and Jon Chait have backed off of austerity over stimulus this week. (Kind of.)

  57. 57
    Elizabelle says:

    @Machine-Gun Preacher (formerly Ben Franklin):

    Thank you for the link on Lew. Much appreciated.

  58. 58

    @Aaron Morrow: But Friedman is still pimping it, apparently markets are a force of nature and deficits make markets have a sad.

  59. 59
    Paul in KY says:

    @Mnemosyne: Totally right on there needing to be some more marginal tax rates for the uber-rich.

  60. 60
    kindness says:

    Bernard….know your audience. Balloon Juice is shall we say a herding cats affair.

  61. 61
    Mnemosyne says:

    @taylormattd:

    I mean for god’s sake, you went on about (and I totally think you are wrong on this, btw) how Obama has allegedly adopted a large part of Bush’s tax plan.

    Bush’s tax plan was pretty much the opposite of austerity. Lowering taxes + increasing spending on non-stimulative projects (ie the wars in Afghanistan and Iraq) were pretty much guaranteed to give us the results we got.

    People love to throw around “austerity” without understanding what economists meant by it, but as it was used in the past few years in Europe, austerity meant simultaneously raising taxes and cutting social programs.

    So if Bernard wants to raise taxes he is, in fact, proposing that the US implement one of the major austerity measures used in Europe. The fact that he seems not to realize this is more than a little startling.

  62. 62
    gene108 says:

    @Bernard Finel:

    I really wish people, who advocated for returning to the Clinton era taxes and/or sequestration had some “skin in the game”, i.e. you could be one of the few 100,000’s of people to lose their job in another recession.

    I’m sorry, but the job market in our “growing” economy sucks balls.

    The employment situation needs to be fixed first. I don’t just mean more people employed, but efforts to improve wages for most working stiffs, so a tax increase wouldn’t severely effect the consumption part of GDP.

    Probably a few things would have to move at once, but the current “new normal” of our high unemployment rates doesn’t look to come down significantly in the near or longer terms. Zapping consumption with higher taxes isn’t going to help matters, either in the short or long term.

    Best thing would be to follow the WW2 formula of massive deficits, huge government spending in the economy to boost demand and then, when things are better start easing back on government spending and then look to incrementally raise taxes.

  63. 63
    Machine-Gun Preacher (formerly Ben Franklin) says:

    @Elizabelle:

    you are welcome….

  64. 64
    Punchy says:

    I seem to have come across as an austerity-monger who hates poor people

    You talked badly about Obama. Therefore you got The Troll Treatment(TM)

    We’ve all been there at some point. Welcome to the group.

  65. 65
    Paul in KY says:

    @LGRooney: The only problem with this would be that most Americans would need a raise & the fuckers who give out raises aren’t giving them.

  66. 66
    Alex says:

    Bernard, there is a critical minority of commenters here who justifiably qualify as “Obama drones” in the Greenwaldian sense of the term. You often find them heh-indeed’ing almost anything ABL or Zandar posts as the latter two progress in transforming a blog that has commendably maintained critical distance from the present Demonstratic administration in years past into a cavernous echo chamber of eternal Obama adulation. They particularly do not curry to any comment that implies that the President is anything less than immaculate in his policy choices and negotiating maneuvers. And they absolutely refuse to acknowledge the worst kept secret in Washington — that Mr. Obama is the most incompetent negotiator to hold the office in modern presidential history.

    I hope these facts clarify the matter for you.

  67. 67
    Mnemosyne says:

    @Alex:

    Please explain how Bernard’s plan to raise taxes on people who make less than $250,000 a year is different than when the UK raised taxes as part of their austerity program. Statistics will be helpful.

    I’m still waiting for Bernard to explain why people who make less than $250,000 need to pay higher income taxes but the salary cap on Social Security and Medicare should stay at $105,000.

  68. 68
    MattR says:

    @Mnemosyne:

    People love to throw around “austerity” without understanding what economists meant by it, but as it was used in the past few years in Europe, austerity meant simultaneously raising taxes and cutting social programs.

    So if Bernard wants to raise taxes he is, in fact, proposing that the US implement one of the major austerity measures used in Europe. The fact that he seems not to realize this is more than a little startling.

    You don’t see a difference between raising taxes while cutting social programs and raising taxes to pay for those social programs? It seems to me that Bernard is trying to do the latter which is most definitely not austerity.

  69. 69
    Eamms says:

    @Mnemosyne: To paraphrase Alex, there’s a critical minority of commenters here who justifiably qualify as Obama haters and will try to force any criticism of a political/economic post by any front pager to be measured through the lens of how much Obama is bashed or praised, even though you haven’t mentioned Obama and are asking legitimate fiscal policy questions.

  70. 70
    Aaron Morrow says:

    @taylormattd: I can’t imagine how *anyone* would read your last post and come away thinking you were pro-austerity.

    A. Raising taxes on most Americans (less so wealthy/rich/upper class/etc.) is an anti-stimulus and pro-austerity measure. For example, the raise in the payroll tax is anti-stimulus and pro-austerity measure.

    B. Bernard Finel proposed to raise taxes on all Americans, including those mentioned in A, in his last post.

    C. Therefore, Bernard Finel proposed an anti-stimulus and pro-austerity measure in his last post.

    While I like what he and others have proposed today, waiting to enact these measures, I think raises in broad-based taxes should be tied to the unemployment rate. Without additional stimulus measures, I doubt the economy is going to recover in a year or two. (Either more spending or lower payroll taxes would be my choice.)

  71. 71
    liberal says:

    @Mnemosyne:

    Because of the low threshold of the salary cap, those people are ALREADY carrying the majority of the burden for Social Security and Medicare.

    I thought there wasn’t any cap for Medicare.

    Like everyone else, Warren Buffett only has to pay Social Security taxes on the first $105,000 he makes every year.
    Why are you comfortable exempting people who make more than $105,000 a year from paying their fair share into Social Security and Medicare and insisting that people who make less than that need to pay even more?

    I don’t entirely disagree, but two points:
    (1) There’s a disadvantage to raising the cap—it would make SS less like social insurance and more like social welfare. Not that I care as far as fairness is concerned, but rather because the less it’s like insurance, the greater the political risk to the program. (Not saying that means we shouldn’t raise the cap.)
    (2) I don’t see the rationale for raising the cap but leaving non-wage income untaxed.

  72. 72
    Kristin says:

    Two things:

    1) It’s ad hominem to discount anything anyone says if that person supports Obama. There have been plenty of thoughtful comments here, and the nasty, “Bernard, the only reason they disagree with you is because you criticized Obama” comments are unfair in addition to being reasoning fallacies. I know this sounds crazy, but it is possible to reasonably disagree with Mr. Finel. (The opposite is true, too, of course: someone who does not support Obama is not automatically wrong when they criticize him.)

    2) Yesterday, Mr. Finel commented that “… we Dems have become almost as enamored of tax cuts as the Republicans.” I don’t think anyone here has made any statement that could be construed as even almost being as enamored of tax cuts as Republicans. I’m sure someone will correct me if I am wrong about that, but the approach seems to me to be quite a bit more nuanced.

    Reasonable people can disagree about whether so called “middle class tax cuts” are a good idea, but to paint “we Dems” as being almost in line with Republicans on taxes really does nothing to further the discussion. (I do believe that many of the Dems in Congress are enamored of tax cuts at an almost Republican level, but that’s a different discussion.)

  73. 73
    Roger Moore says:

    @Bernard Finel:

    My point is that just as we ought to proceed with efforts to cut emissions despite uncertainties, we should also proceed with efforts to raise revenue despite uncertainties.

    But you’re missing a critical point. With climate change, immediate action is important because any delay will make matters worse, possibly irretrievably worse. With the economy, immediate action is a mistake because we’re still in a precarious economic situation. Raising taxes on lower income people is likely to throw us back into recession, which could cut revenues more than the tax increase boosts them. It’s counter intuitive, but the best thing for the long-term debt outlook is a massive stimulus, which would bring us out of recession, boostin revenues and allowing us to cut spending on safety net programs like unemployment insurance.

  74. 74
    LGRooney says:

    @Paul in KY: That’s why I throw in the point about banks being forced to slash rates for a period, i.e., to ease the impact on people struggling (because most struggle is coming via debt) and to allow time for prices to factor in the lower net income and lesser availability of credit.

  75. 75
    Belafon (formerly anonevent) says:

    @Alex: Strangely, the only people referring to Obama in this thread are the people using his name to bash “supporters”. The rest of us disagreeing with Bernard are disagreeing with the idea that the economy could handle a tax hike on everyone right now, or that taxes cannot be raised in the future, or some other policy short-sightedness we think Bernard has. You are contributing nothing to the conversation this way. If you agree with Bernard defend his post.

  76. 76
    liberal says:

    @MattR:
    It’s certainly austerity in the sense of macroeconomics (decreasing demand).

  77. 77
    Jeremy says:

    @Alex: Okay so Obama is the worst president in American history. Well I guess the far left and far right have more things in common. They both hate Obama, and think he is the worse president ever.

  78. 78

    @Belafon (formerly anonevent):
    This.

    I’d also add that (even after 30 years of methodical teardown) we had more of a social safety net in 2008 than in 1929. Enough people were insulated from the brunt of it, that we didn’t get the leftward wave of the 1930s.

  79. 79
    Emma says:

    @Eamms: This is me. And that weird posting was absolutely not my fault, dang it.

  80. 80
    Alex says:

    @Jeremy: Please go back and read again carefully. No claim was made about being the worst president of all time. However, it is widely known in D.C., especially among otherwise favorable Democratic insiders, that he is a horrible negotiator. People here can play counter-factuals all day long, but the man quite obviously is out of his depth in this arena.

  81. 81
    Cassidy says:

    @Alex: Wow. I think we just watched you jerk off. Kinda gross.

  82. 82
    MattR says:

    Bernard @ Top

    But maybe you agree with this argument and just believe that now is not a good time. Yes, I agree. Right now is a terrible time to raise taxes, especially on the poor and middle class. Purely in terms of policy, my preference would have been a two year extension of all the tax cuts followed by a full expiration of all of them.

    But then consider the politics. Would it better to have taxes rise in time for midterm elections? How would it affect 2016? Ultimately, it is never going to be a good time to raise taxes. Between politics and policy, there will always been a compelling case for not doing it. As a practical matter and considering political consequences, I think now may have the least bad time for doing it. I could be convinced otherwise, but the case needs to be something more than just noting that it would hit people hard in hard times.

    While I agree with most of what you say about how there is always a political reason not do something that causes short term pain even if the long term benefits are greater, the objection (which others have stated) is that increasing taxes on the lower classes right now will not just “hit people hard in hard times” but will make those hard times last longer. Beyond the moral issue, it also leads to an increased demand for social programs which further strains the government and economy that we are supposed to be trying to get back on track.

    Having said that if you gave me the choice between raising taxes on the poor and middle class now or never being able to do it all, I would probably begrudgingly end up on the side of raising taxes now. I just don’t believe that to be the case, though I do understand the arguments about it becoming more difficult to do down the line.

  83. 83
    Aaron Morrow says:

    schrodinger’s cat: Mythical Bond Vigilantes! *sigh* Most of the time http://thomasfriedmanopedgenerator.com makes more sense.

  84. 84
    Cassidy says:

    @Alex: Shorter Alex: Some people say…

  85. 85
    FormerSwingVoter says:

    @liberal:

    I thought there wasn’t any cap for Medicare.

    There isn’t. In fact, with Health Care Reform, it actually is progressive, increasing as you go over $250k in income.

    This falls through the cracks a lot when talking about payroll taxes, though, since the Medicare tax is less than 3% on most people, while the (capped) Social Security tax actually exceeds income tax for the majority of workers.

  86. 86
    Emma says:

    @Alex: Really? Jeeesus. Maybe we should clean out the nest of stupid those insiders have become.

  87. 87
    Jeremy says:

    @Alex: And who are these democratic insiders ?

    All I know is that Obama has got more done legislative wise then the last two Democratic presidents Clinton and Carter combined and Clinton went along with welfare reform, De-regulation, and couldn’t even get a vote on a health care bill.

    Has Obama been perfect ? No, but he always get’s a better deal than his critics let on.

  88. 88
    Gin & Tonic says:

    @Alex:

    However, it is widely known

    Beautiful phrase. I loved it so much better in Russian, though.

  89. 89
    MattR says:

    @liberal: I have never seen austerity defined strictly as something that reduces demand. Austerity is about cutting back to close defictis. Those measures may have the effect of reducing demand but that does not mean that all measures that reduce demand are austere in nature.

  90. 90
    Jeremy says:

    @Jeremy: Correction :worst president ever.

  91. 91
    El Caganer says:

    Before worrying a whole lot about raising or lowering taxes, the US of A needs an enormous deficit-fueled stimulus package to get people working. Of course, the odds of that finding its way through Congress are about the same as my going home tonight and finding a unicorn in my apartment.

  92. 92
    👽 Martin says:

    @Mnemosyne:

    I’m still waiting for Bernard to explain why people who make less than $250,000 need to pay higher income taxes but the salary cap on Social Security and Medicare should stay at $105,000.

    He isn’t saying the latter at all. But payroll taxes don’t address the deficit, so it’s a non-sequitur.

    Bottom line is that if we want 22% of GDP in services, then we need to collectively pay 22% in taxation. It’s unrealistic to keep 95% of the public below that line and hope to still hit that number. Toss in mortgage interest deductions and child tax credits and so on, and most of us are paying effective rates in the single digits. Last year I paid 0.4% in federal taxes on $100K in income. Don’t fucking tell me that most people under $250K can’t absorb a tax increase if it’s done properly. For me, I was given every deduction and credit under the sun, and I didn’t actively chase any of them. But at this point in the game, my household paid $400 in taxes to support everything from defense to welfare programs to social security – since we didn’t pay payroll taxes either. It’s insane.

    Given my druthers, I’d set a standard deduction per household as a % of the poverty lines for the prior year – say 150% – and then tier the rates above that. Get rid of the mortgage interest deduction and the child tax credit and all the rest. For my family of 4 that’d be $23K + 50% or $34,500. You get your income for free up to that line, and you start hitting the tiered rates from that number upward. Not a flat tax, but certainly a much more straightfoward one and assumes that the poverty rate incorporates most of the things we would normally give deductions for. And I’d tax cap gains as income, adjusted for inflation. So, if you earned $100,000 off of a $50,000 investment from 10 years ago, you’d deduct 28% for inflation (from 1/02 to 1/12) and add the remaining $36K of unearned income to your regular income. That’d also apply toward payroll taxes.

    Overall, rates for me would go way the fuck up (as they should), but most low income families would see no change or even a decline. At the very least, they’d see way, way easier taxes to calculate and file, and no disincentive for owning/renting, and no differentiation between caring for a elder parent or a child.

  93. 93
    MikeJ says:

    @Roger Moore:

    Raising taxes on lower income people is likely to throw us back into recession, which could cut revenues more than the tax increase boosts them.

    Exactly. Bush drove the economy into a ditch and Republicans say we can’t afford a tow truck to get it out. All of our further economic travels will be much, much easier once the economy is back on the road.

  94. 94

    Right now with 8% unemployment worrying about the debt and deficits for whatever reason, either because markets has a sad, or oh noes soshul programs, is counter-productive we need to focus on lowering the unemployment. Period. We can worry about the debt and deficit when the unemployment is lower than at least 6% say.

  95. 95
    Aaron Morrow says:

    @MattR: Austerity is about closing deficits by lowering spending or increasing revenues. In that sense, all fiscal measures that reduce demand are austere in nature.

  96. 96
    Mnemosyne says:

    @liberal:

    (1) There’s a disadvantage to raising the cap—it would make SS less like social insurance and more like social welfare. Not that I care as far as fairness is concerned, but rather because the less it’s like insurance, the greater the political risk to the program. (Not saying that means we shouldn’t raise the cap.)

    I really don’t understand how making sure only people who make less than $105,000 a year pay the maximum into Social Security magically makes it insurance and not social welfare. Right now, keeping the cap that low is basically an admission that only people who make less than $105,000 a year will need Social Security and people who make more than that will take care of their own retirement. At a minimum, if we have now reached a societal agreement that people who make $400,000 a year are “middle class,” then the salary cap should be raised to that level.

    Though I do appreciate the correction on Medicare — I was under the impression it was also capped.

    (2) I don’t see the rationale for raising the cap but leaving non-wage income untaxed.

    IIRC, people who only have non-wage income are not eligible for Social Security payments. Your Social Security payment is based on your wage income only. So, yes, if those people expect Social Security payments, they should have to pay into the Social Security system.

    ETA: I’m only talking about Social Security and Medicare because those are the programs that Bernard is purportedly concerned about, and yet he makes no proposals to actually increase funding for those programs.

  97. 97
    Chris says:

    @Amir Khalid:

    There’s no way the Chinese would fall for that trick. Just twenty years ago, they saw the same thing happen to the superpower right on their doorstep, the Soviet Union.

    You’d think America would’ve fucking learned from that too.

    Heck, I’ll even concede the “Reagan won the Cold War by forcing the Soviets to spend on defense until it broke their economy” if they in turn concede that if that’s true, then maybe reckless and no-holds-barred defense spending ISN’T necessarily a good thing (especially the part of it that involves slowly bleeding to death in Afghanistan).

  98. 98
    cat says:

    @Bernard Finel:
    People who made over 500k in 2006, the last data easily available, reported a total of ~370B in income from 714k returns. These people can easily absorb a 25% increase in their nominal tax rates which is roughly $120B extra a year.

    in 2006 Corps whose returns totaled over $10M numbered 162k and have reported income $1.7T and generated $337B in taxes. Again they can easily absorb 25% increase in their nominal rates for another easy 120B.

    There is plenty of money in just reported income for the taxing/taking. If you start actually cleaning up the subsidies and loopholes for the rich and corporations the tax rates for the rest of us can remain untouched until the elite decide to start sharing their prosperity with everyone who helped make it possible.

  99. 99
    MattR says:

    @Aaron Morrow:

    Austerity is about closing deficits by lowering spending or increasing revenues.

    I have to disagree with your definition a bit. IMO, austerity is about closing deficits by lowering spending. This may be paired with increasing revenues (and have been during the recent crisis in Europe), but this is not a necessary component of austerity.

    In that sense, all fiscal measures that reduce demand are austere in nature.

    What if you are running a surplus? By either of our definitions you cannot take austerity measures while running a surplus. But you can definitely take measures that reduce demand.

  100. 100
    Mnemosyne says:

    @👽 Martin:

    Toss in mortgage interest deductions and child tax credits and so on, and most of us are paying effective rates in the single digits. Last year I paid 0.4% in federal taxes on $100K in income. Don’t fucking tell me that most people under $250K can’t absorb a tax increase if it’s done properly

    I have no house and no children, so I did pay the 15% rate on the same amount of income. G and I both took the standard deduction because we didn’t have anything deductable that was close to making a difference. In fact, I ended up having to pay money over and above what was withheld from my paycheck because of an unexpected settlement I received.

    I mean, it’s lovely that you were able to get those deductions, but I think you are VASTLY overestimating how many people who make $100K or even $250K are eligible for them. And now I’m supposed to pay a higher rate so you can keep getting your deductions? Sorry, but eff that.

  101. 101
    👽 Martin says:

    @liberal: SS isn’t just retirement, but also disability, and disability is what’s killing SS, not retirement. Retirement is fine if we can fix disability.

    There’s no way to fix disability without treating it as a welfare program – because it is. People do get some fraction of what they pay in, but the consequence of high unemployment is that every marginal disability case files for SSD because it’s income, so we’re carrying WAY more SSD people than were ever envisioned.

    My preference would be for a disability insurance mandate, not unlike the health insurance one. Every worker must carry 12 months of disability insurance. Employers of a certain size must provide it for employees. SSD would take over when that runs out. Saves SSD having to evaluate cases, as they’d take the insurers recommendations at first, and save SSD from paying out on the most immediate cohort of cases. Preserves SSR as is.

    And the cap is indexed to inflation, so it does go up each year. Further, the cap is tied to wage inflation, so it’s going up 3.3% to $113,700, while benefits are tied to price inflation, so they’re only going up 1.7%. That’s good news. If more jobs can slow the SSD enrollment and payment growth, we might actually buy ourselves an extra year of solvency here.

  102. 102
    Tonal Crow says:

    @Bernard Finel:

    @Tonal Crow: No, you completely missed my point. My point is that just as we ought to proceed with efforts to cut emissions despite uncertainties, we should also proceed with efforts to raise revenue despite uncertainties.

    The analogy is inapt. The time scales are different, the drivers are different, and the potential losses from different policies are different.

    The penalty for climate inaction (that is, permitting emissions to grow without bound) is very bad, and likely catastrophic (= mass starvation). We are already (at 0.8 degrees warming) incurring very significant bad effects (e.g., drought, Sandy-like storms, strong heat waves).

    The penalty for short-term inaction on debt reduction — or even increasing the deficit — is likely to be small. Krugman and others even argue that more short-term stimulus will raise out-year tax revenues by increasing economic activity. The penalty for long-term inaction on debt reduction is less certain. Sure, you can’t keep increasing debt/GDP forever: eventually the debt becomes insupportable. But we have other fish (e.g. unemployment) to fry right now.

    BTW, why not kill two birds with one stone, and institute a carbon tax that takes effect in 2014, starts out small, and regularly increases?

  103. 103
    MattR says:

    @Mnemosyne:

    And now I’m supposed to pay a higher rate so you can keep getting your deductions? Sorry, but eff that.

    Given that the next parapgraph was Martin proposing a plan where he would lose all his deductions, I am not sure how you reached this conclusion.

  104. 104
    Maude says:

    @gene108:
    Wages have been dropping all along since 1980’s or even late 70’s. Unemployment we know about. underemployed as well. Companies cutting wages in various manners.
    The federal spending under Obama is low.
    Infrastructure can be done as it is badly needed. There are all sorts of ways that the Feds can boost employment by funding projects and training programs.
    I must have said this hundreds of times.
    We are on the same page.

  105. 105
    Mnemosyne says:

    @MattR:

    I may not have been clear — Bernard is talking about raising my rates but says nothing at all about deductions, etc. So, basically, Bernard’s plan is for me to pay a higher rate so people like Martin can keep their deductions. Again, eff that.

    I don’t necessarily have a problem with Martin’s plan but, again, Martin’s plan is not to raise rates, but to close deductions and raise revenue that way, unlike Bernard’s plan to raise rates but (as far as I can tell) leave deductions alone except for easy targets like the estate tax.

    ETA: Ironically, Martin’s plan is much closer to the recent deal than Bernard’s is since people who make more than $250K will lose deductions that they are currently getting and therefore will pay more in taxes next year.

  106. 106
    Maude says:

    @👽 Martin:
    You are dead wrong on SSDI and SSI.

  107. 107
    artem1s says:

    hitting the 99% with more taxes is only going to exacerbate the accumulation of wealth at the top 1%. If you really want the 99% to contribute more taxes then a better strategy would be to increase their income. Then, not only do they, but also their employers end up contributing more into the pot.

    The problem with your growth projections, IMO, is they assume improvement in individual salaries won’t happen. We have been rewarding growth in corporation and investment areas with tax incentives with the idea that it trickles down but it NEVER does.

    If you don’t address the issue of salary inequality you will only be looking at a diminishing base to tax anyway. You need to create tax policies that encourages paying workers more or at least not rewarding companies that look to screwing over their pension holders or their current employees as a quick fix to raise their stock value.

    The Ponzi schemes and Bain Capital methods are never going to stop if we don’t address finance reform adequately and do something about the risk vs return of investments and how investment income is handled in the tax code.

    Austerity isn’t going to stop the next stock market and banking collapse.

  108. 108
    liberal says:

    @Mnemosyne:

    I really don’t understand how making sure only people who make less than $105,000 a year pay the maximum into Social Security magically makes it insurance and not social welfare.

    Social Security, as currented constituted, is a blend of something that’s purely insurance and something that’s purely welfare. So we can view this kind of thing as a spectrum, with two poles.

    By trying to solve solvency problems by increasing the cap, you’re moving it closer to the “purely welfare” pole.

    Not saying that it’s not worth doing, but…

  109. 109
    Mnemosyne says:

    @liberal:

    By trying to solve solvency problems by increasing the cap, you’re moving it closer to the “purely welfare” pole.

    I still do not understand your argument here. Can you please be clearer? Are you admitting my point that people who make less than $113,700 (per Martin) are more likely to depend on Social Security for retirement while people who make more than that are less likely to need it?

  110. 110
    Omnes Omnibus says:

    Bernard, I would say that, in the grand scheme of things, stimulus is the most important thing that we could be doing right now. Giant infrastructure projects – high speed rail, fiber optics everywhere, wind power generation, etc. If we do that, we put people to work in good jobs, the recovery becomes solidified, and the we can start working on deficit issues. In the short term, I think any focus on deficits by the GOP or Obama is wrong headed

  111. 111
    liberal says:

    @Mnemosyne:

    IIRC, people who only have non-wage income are not eligible for Social Security payments. Your Social Security payment is based on your wage income only. So, yes, if those people expect Social Security payments, they should have to pay into the Social Security system.

    My point is the following: there are two goals, somewhat in conflict. One goal is to make the program more solvent. Another goal is to not make it “too welfare-like” (not owing to fairness, but owing to keeping the political support firm). Yet another goal is fairness in some abstract sense.

    In the fairness sense, I don’t see why my SS taxes should increase considerably (when I won’t see much if any increased payout) when some rent-collecting asshole doesn’t pay anything. Sure, I don’t live paycheck-to-paycheck, but then again I’m not filthy rich either.

    The bit about payout being based on wage income only is a red herring; we could just start paying out based on income taxed, not just wage income.

  112. 112
    Aaron Morrow says:

    @MattR: @MattR: I’m not saying that increased taxes are a necessary component of austerity, I’m just saying that decreased spending is also not a necessary component of austerity.

    For example, independent of any other change, the raise in the payroll tax would be anti-stimulative and considered austerity.

    If you are running a surplus, by my definition you can still raise taxes and lower spending, resulting in a yet larger surplus that should reduce demand. (This is exactly why austerity measures should be saved for times of lower unemployment and higher inflation.)

  113. 113
    👽 Martin says:

    @Mnemosyne:

    I mean, it’s lovely that you were able to get those deductions, but I think you are VASTLY overestimating how many people who make $100K or even $250K are eligible for them.

    I think you are vastly underestimating how many do. Interest on mortgages is paid up front, so all new home buyers and refis are paying nearly 100% interest, all of which they can deduct. For me, that’s a $20K deduction right off the top that you don’t get. And that’s true for almost every other household in my city (I’m way on the low end, actually – the folks on the corner who have less equity are probably getting a $40K deduction). My kids give me $2,000 in tax credits. If my mortgage gets my effective rate down to 10%, then they’re an effective $20K deduction again. You can see how I’m just gulping down my AGI incredibly quickly – and so far all I’ve done is own a house and have 2 kids. That’s pretty damn common.

    And now I’m supposed to pay a higher rate so you can keep getting your deductions? Sorry, but eff that.

    Actually, if you read what I wrote, you’d see that my proposal really only raises taxes on the folks getting all of those deductions. In fact, it eliminates the tax penalty on renters, which is profoundly unfair and regressive. My kids would give me an extra $8K total in deductions over you, but that’s half or less than what I’m getting now off of them (yet it’d not hurt most working class households, but it’d be a welfare program eliminated for the very poor – I’d expand TANF/Medicaid with that money), and I’d get no benefit from the mortgage interest. And my unearned income from last year, instead of paying no taxes on it, I’d have paid at least 15%. Ballpark, I’d have had an AGI of $50K and have paid $7K in taxes. That’s still only an effective rate of 7%, which is still pretty fucking low, but a hell of a lot higher than 0.4%.

  114. 114
    liberal says:

    @Mnemosyne:
    My argument is that, last I checked, for people in “the middle,” SS is perhaps actuarially fair. For people who make a lower wage, it’s an actuarial benefit (net). For people who make more, it’s an actuarial penalty (net).

    This is slightly confused by the fact that due to the entire “ratio of workers to retirees falling” problem (whence all the chicken littles about SS not being there, etc), I would assume that for anyone (ie of any wage) there’s a secular trend over time where the net benefit is eroding. In which case my terms above should be replaced by “less actuarial penalty,” “some actuarial penalty,” “more actuarial penalty”.

  115. 115
    liberal says:

    @👽 Martin:

    I think you are vastly underestimating how many do.

    My household perhaps makes around $250K (gross, not AGI). Agreeing with you, our tax bill would go up substantially if they got rid of the interest deduction.

    I’m not against it, because I like to put my policy preferences ahead of my wallet, but IMHO it’s total BS to get rid of this deduction (which would largely hit the upper middle and “lower upper” classes) and not get rid of the preferential treatment of capital gains (allow perhaps an inflation correction of course).

  116. 116
    Aaron Morrow says:

    @liberal: For what it’s worth, if you raise or eliminate the payroll tax cap, individuals who pay more taxes will get more benefits, just not at a 1:1 ratio.

  117. 117
    Mnemosyne says:

    @liberal:

    In the fairness sense, I don’t see why my SS taxes should increase considerably (when I won’t see much if any increased payout) when some rent-collecting asshole doesn’t pay anything.

    Because the rent-collecting asshole isn’t going to get any benefit at all from Social Security except for the social benefit of it existing for other people. S/he is never going to see a dime of money from Social Security.

    Unless you’re proposing that we restructure Social Security so it applies to all income (not just wage income) and that all income earners (not just wage income earners) can collect it after they retire, I’m not seeing any value added by taxing non-wage earners for Social Security.

    And I admit that I am not good with math, but I am still not understanding the argument that the cap needs to remain low for it to not become a welfare program. Sorry.

    ETA: Also, what Aaron said — my presumption with raising the cap would be that it would also proportionally raise the SS payment due after retirement.

  118. 118
    liberal says:

    @👽 Martin:
    W/o looking at details—gotta work—sounds reasonable. Just adding that having more rates and brackets adds essentially nothing to complexity, since all you need is a lookup table.

  119. 119
    MattR says:

    @Aaron Morrow:

    I’m just saying that decreased spending is also not a necessary component of austerity.

    For example, independent of any other change, the raise in the payroll tax would be anti-stimulative and considered austerity.

    OK. I understand where you are coming from but I disagree. Decreased spending is the key component that defines austerity. Austerity is not just anything that might contract the economy. It is specifically cutting spending to close a deficit.

  120. 120
    Chris says:

    @srv:

    Most of you will die still living in a country defined by Reaganism.

    I have no doubt.

    Realigning the political spectrum takes years and years. Nixon broke the New Deal coalition in the late sixties, and the conservative think tanks and foundations dominating our political thought were founded in the early seventies. Gingrich taking over Congress and cementing movement conservatism as the ruler in Washington, that was the mid-nineties. You’ve got a whole quarter century between the one and the other.

    … so, even if you assume that the Obama era is when we start bringing down the Reagan coalition, it’ll take about that much more time before it’s well and truly brought down.

  121. 121
    MattR says:

    @liberal:

    I’m not against it, because I like to put my policy preferences ahead of my wallet, but IMHO it’s total BS to get rid of this deduction (which would largely hit the upper middle and “lower upper” classes) and not get rid of the preferential treatment of capital gains (allow perhaps an inflation correction of course).

    I am not against getting rid of the mortgage interest deduction per se, but I am opposed to doing it now due to the combination of the housing market still being fragile and the large number of people who are dependent on that deduction to afford their house (I don’t even mean people who knowingly made that decision. I am referring more to the people who have been affected by the economy over the past 5 years and have seen their income decrease or had other expenses increase). It is actually pretty analgous to the way many feel about Bernard’s proposal to raise taxes on those making under $250K. Not a bad idea in theory. But a very bad time in practice.

  122. 122
    liberal says:

    @Mnemosyne:

    Because the rent-collecting asshole isn’t going to get any benefit at all from Social Security except for the social benefit of it existing for other people. S/he is never going to see a dime of money from Social Security.

    So? If you increase the cap and want to raise revenues net of benefits, I’m not going to see a dime of the increase in SS tax on my wages over the cap, either.

  123. 123
    liberal says:

    @MattR:
    This is just arguing over definitions, hence not really useful, but I don’t see why looking at the spending side only is really very meaningful, especially given how much implicit spending is done through tax expenditures.

  124. 124
    👽 Martin says:

    @liberal:

    For people who make a lower wage, it’s an actuarial benefit (net). For people who make more, it’s an actuarial penalty (net).

    To reinforce your point:

    The people at the top do get more out of the program because they put more in. That’s why it’s not considered a welfare program. At worst, you look at it as the people at the bottom get a very good rate of return on their investment and the people at the top get a poor rate of return on their investment – but all groups, taken in aggregate, come out no worse than they went in. Effectively the program is designed to take most of the interest earned on the contributions at the top and distribute those to the people at the bottom, but leave the principle alone (including inflation adjustments) – the folks at the top will get that back in payments. If you raise the cap above the rate of inflation, then that will stop being true. As it happens, that’s sorta already happening because the cap and payments are on two different inflation indexes.

    What the wage cap reflects is a mechanism whereby only potential future growth is redistributed, but not the actual contributions themselves. At least in theory. I’d note that this is the very same argument behind the CPI to C-CPI change – that only potential future benefit growth is reduced (which is why it’s really not a cut – as all future growth rates you’re cutting from are arbitrary), and similarly redistributed – mainly to SSD, which is way the fuck broke.

    It would be illustrative in this to separate retirement from disability. Retirement in isolation really is in decent shape. The issue is disability, and while people that draw disability understandably don’t want this attention on them, that’s really where the problem lies. We underestimated how to fund disability, and underestimated the difficulty of fairly assessing who should qualify (making it too hard for them) and who shouldn’t (making it not hard enough). Relative to discussions of how to change funding the program, we really should be thinking about what is most appropriate toward increasing disability funding and how to get that specific program stabilized.

  125. 125
    liberal says:

    @MattR:
    I don’t disagree with the timing argument you’re making.

    NB: AFAICT getting rid of the deduction is actually a double whammy. One’s taxes would go up, and the value of one’s house would go down (if you view land value in particular as the net present value of land rent minus taxes).

  126. 126
    👽 Martin says:

    @liberal:

    it’s total BS to get rid of this deduction (which would largely hit the upper middle and “lower upper” classes) and not get rid of the preferential treatment of capital gains (allow perhaps an inflation correction of course).

    I agree. I always consider them together.

    The inflation correction is the only substantive obstacle to doing it. Everyone thinks it would be hard, but it’s really damn easy to work out, and it’s a fair thing to add. For some people (really long term cap gains), it’d result in lower rates than they’re paying now. It’d just massacre the short-term cap gain folks. But that’s sorta the goal – encourage investing, not trading.

  127. 127
    MattR says:

    @liberal: You are probably right, but it does go to the heart of Mnemosyne’s comment which I initially quoted and which I feel is not an accurate way to frame things.

    So if Bernard wants to raise taxes he is, in fact, proposing that the US implement one of the major austerity measures used in Europe. The fact that he seems not to realize this is more than a little startling.

  128. 128
    Aaron Morrow says:

    @MattR: From now on, I shall try to use the term “anti-stimulative” to eliminate confusion.

    Re #121: How do you feel about triggers for taxes tied to inflation? Higher taxes when the economy can bear it, lower taxes when it can’t.

  129. 129
    liberal says:

    @👽 Martin:

    The people at the top do get more out of the program because they put more in. That’s why it’s not considered a welfare program.

    That’s hardly sufficient for it not to be considered welfare. It depends on notional rates of return.

    At worst, you look at it as the people at the bottom get a very good rate of return on their investment and the people at the top get a poor rate of return on their investment – but all groups, taken in aggregate, come out no worse than they went in.

    That’s an empirical question—I don’t have time to look up the numbers.

    What’s simply a fact, though, is that increasing the cap is going to make someone worse off. Otherwise, no net funds are being added to the system, and there’s no point in raising the cap to begin with.

    What I’m saying is that making people who at least nominally work for a living worse off, while leaving people who sit on their asses and collect economic rents, is fundamentally unfair.

    It’s not unreasonable to try to make an argument that extending the system to non-wage income would cause more political damage to the system than would be worth the current unfairness I’m describing. But that’s not the argument I see being put forth.

  130. 130
    liberal says:

    @👽 Martin:
    I guess I’ve heard the claim that “it would be hard,” but IMHO that’s just nonsense.

    Agree with your other points, too.

  131. 131
    👽 Martin says:

    @liberal: And I think you’d need to phase out the mortgage interest deduction over a few years. So many people have that factored into their finances and it’s a HUGE number for some of us. For people that might need to get out of a home that they really can’t afford (a lot of vacation homes and rentals will go up for sale) there needs to be something of a glide path to do that.

    Of course, now is the time to do it with interest rates so low.

  132. 132
    MomSense says:

    Hey if Climate Change brings major drought and there is resulting mass starvation we probably won’t have to spend as much for Medicare and Social Security. Wooo Hoooo- low tax rates for the survivors!

    This whole thread is ridiculous.

  133. 133
    liberal says:

    FWIW, here’s a document with some notional rates of return:
    “INTERNAL REAL RATES OF RETURN UNDER THE OASDI PROGRAM
    FOR HYPOTHETICAL WORKERS”
    . Gotta run to earn my non-non-wage income… :-)

  134. 134
    MattR says:

    @Aaron Morrow:

    Re #121: How do you feel about triggers for taxes tied to inflation? Higher taxes when the economy can bear it, lower taxes when it can’t.

    The concept seems reasonable enough though I haven’t given it all too much thought so I am not sure if there are any nasty side effects that I’m not considering. Maybe an economic score based on more than just inflation. OTOH the more complicated you make it, the more my doubts intensify that our political leaders could do it right.

  135. 135
    👽 Martin says:

    @liberal:

    That’s an empirical question—I don’t have time to look up the numbers.

    That’s how it was originally set up. Not sure how true that remains after all of the adjustments.

  136. 136
    xian says:

    @MattR: i don’t think that word means what you think that means

  137. 137
    Chris T. says:

    @imonlylurking:

    Also, I think there is a great deal of underestimating the impact of better health care access on economic growth. My best friend’s brother works for an insurance company, and he says that at least half of the employees in his department are good enough at their self-employment gigs to make a living at it-except they have pre-existing health conditions, hence the job at the insurance company.

    This is so, so important. People (Republicans especially) just don’t get it: they want an “entrepreneurial society” but they haven’t thought about what it takes to start your own business. Even if you have built up a decent nest egg, you can’t leave your full time job (more people do have one than don’t, despite the high unemployment and underemployment levels) as you’d also lose your all-important coverage.

  138. 138
    Aaron Morrow says:

    @MattR: Agreed. Now pretend that what I wrote was “How do you feel about triggers for taxes tied to UNEMPLOYMENT? Higher taxes when the economy can bear it, lower taxes when it can’t.” That’s more appropriate to the argument that I was trying to make, and what I would prefer to do. Simple policy to enact and simple policy to explain.

  139. 139
    EriktheRed says:

    No negative comments from here. What you say makes perfect sense to me, especially the part about raising taxes. It will have to be done on more than just the wealthy some time and it might as well be now.

  140. 140
    Roger Moore says:

    @Mnemosyne:
    I think the point is that the current system caps both taxes and benfits, which makes it behave a lot like a social insurance system. Some people get out more than they pay in and some people get less, but that has more to do with how long they live rather than with their income. If you remove the cap on taxes, it behaves more like a welfare system, with some people guaranteed to pay a lot more into the system than they’ll ever get back. I think the argument is that social insurance systems with their “you get out what you pay in” aspect are more likely to maintain popular support than social welfare systems, which can be demonized as helping freeloaders.

  141. 141
    Ted & Hellen says:

    @Paul in KY:

    It is actually due to the Repubs spending all the money on wars & their buddies, while cutting taxes on the rich.

    BINGO. And the dems, including Obama, are too wimpy to say this out loud.

  142. 142
    Omnes Omnibus says:

    @EriktheRed: Why now? Interest rates are at historic lows, unemployment/underemployment is high, our infrastructure is crumbling. Why deal with the deficit now? Why not go all out with stimulus?

  143. 143
    Pococurante says:

    @schrodinger’s cat:

    Right now with 8% unemployment worrying about the debt and deficits for whatever reason, either because markets has a sad, or oh noes soshul programs, is counter-productive we need to focus on lowering the unemployment. Period. We can worry about the debt and deficit when the unemployment is lower than at least 6% say.

    Bernard I’m of the same position as cat, mnemo, and others.

    Tea Partiers are not necessarily wrong that there is wasteful spending we can cut – their madness lies in their priorities.

    The explosive growth in police power and foreign adventurism programs is strangling economically as well as morally and socially. I suggest that targeting these homeland security issues, re-purposing these funds to education / safety net / infrastructure, would be a far more effective short term offset than tax increases.

    That would be stimulative action, not contractionary.

    What you’re suggesting has more in common with the Irish debacle than Southern/Eastern Europe. Americans enjoy nothing like the free lunch countries like Greece were gorging.

  144. 144
    Pococurante says:

    @Mnemosyne:

    I really don’t understand how making sure only people who make less than $105,000 a year pay the maximum into Social Security magically makes it insurance and not social welfare.

    I don’t think it does either, considering the same people who insist on the salary cap also refuse means testing for eligibility. Remove the cap, or means test. (I’d prefer doing both – it’s more honest to the intent of SS).

  145. 145
    Keith G says:

    @Bernard Finel:

    …it is hard to devise a scheme that hits only those above $250k and produces needed revenue. My other point is that embracing anti-tax rhetoric for everyone under $250 also makes it harder to pass revenue measures generally.

    This is the bottom line, or as Gramps used to say, “Truer words were n’ere spoken.”

    This society is critically under taxed given what the citizenry expect the government to do. Maybe Obama (in a near-perfect world) will be able to put together and get passed a package of tax reform that will provide more revenue without rate increase, but we need a lot more revenue than the last bargain allows for (and more than future tax code reform can ever provide). I am afraid, baring some calamity that this President will not be able to go back to the well and get higher tax rates.

  146. 146
    Omnes Omnibus says:

    @Keith G: Why is this necessary right now?

  147. 147
    Mnemosyne says:

    @👽 Martin:

    The issue is disability, and while people that draw disability understandably don’t want this attention on them, that’s really where the problem lies. We underestimated how to fund disability, and underestimated the difficulty of fairly assessing who should qualify (making it too hard for them) and who shouldn’t (making it not hard enough).

    Not to get too far away from taxes, but I think another issue with disability is that social expectations about people with disabilities have changed. My cousin is moderately disabled (she’s probably at about a 12-year-old’s intellectual level). When Social Security was first set up, the expectation would be that she would be committed to a state institution at government expense, so there would be no need for her to have disability payments. Now, she is able to live independently and has a part-time job, but she does need some SSDI payments (and Medicaid) to fill in the gap.

    I think SSDI was originally pictured to operate more as a Worker’s Comp system to take care of people who had been paying in but were injured on the job and could no longer work, but it’s been expanded out quite a bit without the funding mechanism being changed.

    @liberal:

    I don’t disagree that we need to raise taxes on people who are just rent-collecting, but I don’t think adding them to the Social Security system (and paying them benefits from it) is the way to go.

    I was thinking about it on my way back from lunch and one of the big problems with our current tax system is that we’re giving incentives for people to preserve their capital in one big chunk as much as they can. I would have no problem if, say, investment income was taxed at normal income rates UNLESS the investment was in an actual capital project (i.e. a municipal or state fund to retrofit bridges, rebuild schools, etc.) If the money was invested in something like that, then you could get a lower rate, but if your money was just sitting in the stock market, you would pay the normal income rate.

    As it is, we’re rewarding people for churning their money in the stock market, and that is not what capital gains taxes were meant to reward.

    ETA: Shorter me: tax shelters and government boondoggles are underrated.

  148. 148
    Ted & Hellen says:

    @Cassidy:

    Wow. I think we just watched you jerk off. Kinda gross.

    Wow. I mean seriously…what kind of mind comes up with a reply like that?

  149. 149
    Mnemosyne says:

    @Roger Moore:

    I realized after I posted that I had forgotten an important point (and Aaron reminded me) — if the salary cap was raised, then benefits would have to be raised a bit as well. I think it could be done in a way that was reasonably fair and yet still provide the extra funding needed but, again, I am not good with math so I can’t get into percentages and ratios.

  150. 150
    Mnemosyne says:

    @Keith G:
    @Omnes Omnibus:

    Also, why is it better to do it through raising tax rates on everyone rather than, say, closing or reducing certain deductions for people in higher brackets? I know that “closing loopholes” is the Republican mantra, but I do think it can be useful if done carefully since those loopholes are generally more useful to higher-income people. See Martin’s explanation of the tax credits and other loopholes that allow him to pay a minuscule tax rate while my husband and I, who combined make less than half than his family does, have to pay the full 15%.

  151. 151
    Pococurante says:

    @Chris:

    Nixon broke the New Deal coalition in the late sixties…

    It can be argued that between he and LBJ they finally broke Reconstruction…

  152. 152
    Keith G says:

    @Omnes Omnibus:

    Why is this necessary right now?

    We seem to be at a place where there are few good choices. Not being a political mastermind, I wonder is there could have been a way to leverage the stronger position (Prez v GOP) to work out a schedule of locked in tax expanded increases over time.

    Without more revenue the drumbeat for cuts that will mash the weakest among us will grow to near irresistible levels. Obama will not be able to increase rates anymore.

  153. 153
    jayackroyd says:

    WTF? This is entirely the wrong way to frame the question. A government doesn’t need to “budget” a fraction of GDP. The amount of GDP is considerably endogenous–the government can make it bigger by doing shit like fixing bridges and building science labs. Or FTM pissing money away on even more expensive jet fighters.

    At this moment in time, the obviously good policy position is a government jobs program–10 bucks an hour minimum, for infrastructure development. That this is not not on the table, but not even discusses is deeply troubling.

  154. 154
    Yutsano says:

    @jayackroyd: But then blahs and browns and poors might get those jerbs, and the Republicans just can’t allow that to happen now can they? If they culd tailor the jobs so only straight white men could benefit they might go for it, but it would risk allows poors above their station, and they have to keep the middle class scared of falling into poverty. So no way Johnnie Boy lets anything like that through the House.

    Oh and the President is blah. Also. Too. No victories for that boy in the White House until the natural order is restored with impeachment!

  155. 155
    Ted & Hellen says:

    @Yutsano:

    Yutsano, in your opinion, and seriously please, how much of Republican intransigence do you believe to be due to Obama’s biracial status, as a percentage?

    Also, how much more of a truly progressive/liberal agenda could have been/be legislated if Obama were white?

    In other words, if we had a white Democrat in the WH instead of a biracial Democrat?

  156. 156
    FlipYrWhig says:

    Bernard is still offering what amounts to a progressive case for deficit reduction. Most of the people cheering him on would blanch and/or shit if Obama said anything like this. It would be taken as proof that he didn’t understand economic reality and cared more about the government’s ledger than about everyday people’s well-being.

  157. 157
    Brachiator says:

    @Bernard Finel:

    Oh, come on. This is a blog post, not a full think tank report on taxation. If you really want, I could expound in depth on the various potential revenue streams available, but only you, me, a tax attorneys would care.

    Your premise, which focuses on tax rates and extending or repealing the Bush tax cuts, is flawed.

    Your argument, based on revenues as a proportion of GDP, is not nearly as useful a starting or ending point, as you want to declare.

    We don’t have to do a deep discussion about taxation to see the weaknesses in your approach.

    My main point is that it is hard to devise a scheme that hits only those above $250k and produces needed revenue. My other point is that embracing anti-tax rhetoric for everyone under $250 also makes it harder to pass revenue measures generally.

    Focusing on the @250K threshold as a revenue generator is not nearly as important as either you or other posters keep insisting.

    And tax policy has to take into account the weakness of the economy and potential impact on the majority of taxpayers. You seem to want to insist that all income groups must accept an increase in taxes so that federal revenues are increased, but not to worry, since there will be some new social programs to either help them or to patch the safety net.

    Sorry, I’m not buying it, and you have not produced anything that is persuasive, or more than a restatement of your progressive principles.

    And again, you do not seem to be either particularly knowledgeable about or sympathetic to the current tax credits and deductions that are targeted toward middle and lower income Americans. Worse, you don’t seem to be able to articulate what you would replace these programs with, or how they would help these groups, especially after you have raised their taxes.

    At one point, you challenged other posters to show you some numbers that would refute your points. This is a dodge, since you do not produce any meaningful numbers yourself. Is there an economics blog that deals with your suggestions in more speficity? Otherwise, you don’t really offer much to actually analyze. And we don’t have to get detailed.

    Lastly, what you articulate here is not particularly useful in dealing with the larger question of stimulating the economy, easing unemployment, and increasing jobs.

    @Mnemosyne:

    Also, why is it better to do it through raising tax rates on everyone rather than, say, closing or reducing certain deductions for people in higher brackets?

    Some of this is actually in the tax compromise. For example, personal exemptions and itemized deductions will be phased out at certain levels for higher income individuals.

    Lower capital gains rates for high income people who are not in the new 39.6 percent bracket is more of a giveaway than necessary, and could be fixed with a willing Democratic majority.

    What is really needed is something that goes beyond the reactive battle to keep or repeal the Bush tax cuts and to look at more substantial tax reform.

    If people really wanted to put some accountability on Obama and the Democrats, they would stop making a fetish about what tax rates should be used to slap the wealthy, and ask why the Democrats have never even outlined a more comprehensive tax reform policy.

    It would be a shame and a wasted opportunity if the Democrats got a House majority in the mid term elections and then ended up scrambling to try to come up with some coherent economic and tax policy.

    And yeah, he had a GOP majority in the House, and his tax plan was stupid, but Dubya’s tax plan had clearly been crafted well in advance, was introduced in the House in May 2001 and enacted by June 2001.

    The Republicans had their ducks all lined up ready to go. The Democrats, still, not so much.

  158. 158
    different-church-lady says:

    For reasons that are not quite clear to me, I often seem to have trouble making myself understood in online discussions.

    What part of “trolls” don’t you get?

  159. 159
    feebog says:

    Bernard, I’m coming late to the dance, but I have a quibble with this:

    But you can only have a robust government if that government is appropriately funded. In order to meet the goals I’ve outlines, the federal government will need to spend at a rate of roughly 24-25% of GDP in the future. Maybe if you get a lot of efficiencies and are willing to live with a relatively minimal defense establishment, you can bring that down to 22-23% of GDP.

    What do you mean by “robust” exactly? Maintaining current programs at current levels? Expanding current entitlement programs, and if so to what levels? I would remind you that we were running surpluses from 1997 to 2000 with taxes at 20% of GDP. And as was pointed out upthread, if we just went to a single payer universal health care system we would gain 2 to 3% in GDP right there. Social Security does not need a drastic fix. A gradual raise in the cap over the next twenty years would get us through the Baby Boomer spike, Social Security would be bringing in plenty after that. Medicare? Convert it to Medicare for all, beginning with a lowering of the age to 55, but with significantly higher premiums for the first 10 years. Medicaid? Bring down the cost of health care and we can control the future costs of Medicaid.

    What you don’t examine is what further cuts in spending we can make over the next few years. We should be reducing defense spending by 5% a year for the next 5 years. Hell, getting out of Afghanistan saves us 90 billion a year alone. Those two things combined net us almost 800 billion in 5 years and 235 billion every year thereafter.

    An expanding economy will take care of a big chunk of the rest of the defict. Not all of it, but a big chunk. People who are calling for infrastucture stimulus are spot on. We can borrow the money for next to nothing and create millions of jobs. Millions of jobs equals added demand, which will accelerate recovery. In the end we may need to raise taxes, but first we should be trying to close every corprate and individual loophole and see what we gain in additional revenue.

  160. 160
    Mnemosyne says:

    @Keith G:

    We seem to be at a place where there are few good choices. Not being a political mastermind, I wonder is there could have been a way to leverage the stronger position (Prez v GOP) to work out a schedule of locked in tax expanded increases over time.

    Why is it better to raise rates instead of adjusting deductions? Maybe it’s just my perspective, but it kind of bothers me that (to use him as an example), Martin makes more than twice as much as my family does but we pay 15% of our income in taxes and he pays 0.4% thanks to the deductions he’s able to take. How would raising my tax rate to 18% fix anything if the deductions he can take and I can’t are left in place?

  161. 161
    e.a.f. says:

    To provide more revenue, tax pot. Then outlaw ear marks. Everytime a bill passes there is some expensive item attached. If they were done away with the government would save a bomb. Next get rid of military contractors. They are in business to make a profit. Way to much money wasted there. Reduce the “write offs” businesses get. It won’t raise their tax rate but they will have to pay their fair share of taxes. There is no need for the American government to be in the debt situation they currently are. there appears to be a lot of “freebies” for business but if a person needs some sort of social assistance its called “an entitlement”. I just love the language. The real ones with their “entitlements” are the large corporations. Like how many ear marks were there on that money bill passed last week and at what cost to the taxpayers?

    Increase the min. wage. How many workers at Wal-Mart collect food stamps because they aren’t paid enough? Over 50%.

    Stop military spending in other countries. They will eventually use it against the U.S.A. anyhow. Stop foreign aid to hostile countries. Cut the number of “advisors” in half.

  162. 162
    Mnemosyne says:

    @Brachiator:

    And yeah, he had a GOP majority in the House, and his tax plan was stupid, but Dubya’s tax plan had clearly been crafted well in advance, was introduced in the House in May 2001 and enacted by June 2001.

    I can’t Google it now, but I sense the fine hand of ALEC behind that since they’ve been behind so much of the “ready-made” legislation that Republicans have been passing.

    I don’t know why Democratic/liberal think tanks can’t get their shit together and have similar pre-packaged legislation ready to go. It’s definitely a serious problem.

  163. 163
    TS says:

    @Brachiator:

    And yeah, he had a GOP majority in the House, and his tax plan was stupid, but Dubya’s tax plan had clearly been crafted well in advance, was introduced in the House in May 2001 and enacted by June 2001.

    The Republicans had their ducks all lined up ready to go. The Democrats, still, not so much.

    From the point of winning elections – and thus being able to implement a plan – it is very much easier if that plan is to reduce taxes rather than raise them (on anyone). It would be nigh impossible to win a midterm with the type of tax reform that needs to be introduced. The media would just love to see that plan – now.

  164. 164
    Jack Hughes says:

    Inflation.

    Inflation is a tax on cash that will also grant a subsidy to every mortgage holder.

    Controlled inflation — 5-9% — is the only we will ever pay off the national debt without killing our social programs. It will have the added benefit of making our exports cheaper and making our foreign debt easier to pay off.

  165. 165
    Brachiator says:

    @TS:

    From the point of winning elections – and thus being able to implement a plan – it is very much easier if that plan is to reduce taxes rather than raise them (on anyone). It would be nigh impossible to win a midterm with the type of tax reform that needs to be introduced. The media would just love to see that plan – now.

    But this wasn’t about winning elections. It was about what you did after you won. And I am not sure that what the media might want to see is all that important.

    The GOP had a plan and they put it into action fairly quickly. They also demanded that the Democrats sign on.

    The Democrats and Obama have in fact won a partial victory in making the Republicans blink when it comes to raising taxes. And Reagan and Bush I raised taxes as well, so it’s not impossible. Clinton got a tax plan passed in 1993.

    The Democrats need to stop sitting on their hands or waiting for permission. Obama seems to have nudged them a bit. It’s a start.

  166. 166
    zoot says:

    if you’re ‘splainin’, you’re losin’

    get a job!

  167. 167
    Humble Lurker says:

    @Ted & Hellen:
    Because he didn’t say that in almost every speech he made in 2010 and 2012….oh wait.

    And even if he didn’t, you know, it wasn’t like he actually DID anything. Like raise taxes on the rich or whatever…oh wait.

  168. 168
    Mnemosyne says:

    @TS:

    From the point of winning elections – and thus being able to implement a plan – it is very much easier if that plan is to reduce taxes rather than raise them (on anyone).

    When did the Republicans run on a platform of outlawing unions, making fetuses “persons,” letting you kill anyone you want as long as you can claim you were standing your ground, and administering vaginal probes to any woman who wants an abortion?

    That’s the point. ALEC has their legislation written and ready to go so it can be implemented as soon as Republicans have control. Why are Democratic and/or liberal think tanks not doing to the same thing?

  169. 169
    TS says:

    @Mnemosyne:

    When did the Republicans run on a platform of outlawing unions, making fetuses “persons,” letting you kill anyone you want as long as you can claim you were standing your ground, and administering vaginal probes to any woman who wants an abortion?

    I cannot answer for the dumber than a post GOP supporters – I can assume that women, minorities and anyone other than white males didn’t vote in sufficient quantities to stop this – also too – the media conveniently doesn’t harp on it night and day – they only do that for democrat programs.

    I am entirely sick of reading about what the democrats and the President don’t do. I believe (foolishly no doubt some think) that the legislators should write their own legislation after they are elected. Groups such as ALEC are part of the reason the US is sinking under the weight of the demented reasoning of a group that would destroy it without a second thought.

  170. 170
    mclaren says:

    The other problem is that what Finel really means by “robust” government is insane self-destructive waste, like $21,500 “canine tactical suits” for SEAL dogs.

    The U.S. government spends 418 billion dollars a year on medicare, but 1.2 trillion dollars a year on “national security.” We get actual value for the medicare dollars. We get pretty much nothing for that 1.2 trillion dollars a year wasted on horseshit like the endless unwinnable Afghanistan quagmire and TSA goons groping grannies.

    Right now, looks like Bernard is part of the problem. Along with Obama and the obots.

    Wake the fuck up people, and do the math. 418 billion last year on medicare. 1.2 trillion on “national security” like body scanners for the TSA that don’t work. One is useful, the other isn’t. This ain’t rocket science. If you want to cut expenditures to balance the budget, where do you start?

  171. 171
    Tim I says:

    You may know something about economics, but you clearly don’t know shit about politics.

  172. 172
    mclaren says:

    @Mnemosyne:

    Also, why is it better to do it through raising tax rates on everyone rather than, say, closing or reducing certain deductions for people in higher brackets?

    Because (as people like you are always whimpering and whining), this makes it politically palatable. The key is how much you raise taxes on each bracket. By raising taxes by, say, 0.1% on the middle class while raising taxes by, say, 70% on people making more than $250,000 a year, you can truthfully say “We’re being fair by raising everyone’s taxes” so the Repubs can’t demonize a tax increase as “stealing rich people’s hard-earned money” or “targeting only the wealthy.”

    Seriously. This is basic politics. You’d think you’d have grasped these kinds of optics by now.

  173. 173
    mclaren says:

    @TS:

    From the point of winning elections – and thus being able to implement a plan – it is very much easier if that plan is to reduce taxes rather than raise them (on anyone).

    How does someone who lived through the last 9 months of the 2012 presidential election make a statement like this?

    We had two presidential candidates. One of them promised to cut taxes (Romney), while the other one promised to raise taxes (Obama). Obama won.

    Obama won because the American people recognize that we can’t keep cutting taxes without turning into a third world country.

    Are you drunk? Brain-damaged? On hard drugs?

    When you make a sweeping claim, in future make sure to check that it’s not clearly and obviously contradicted by the observable facts on the ground visible to everyone around you.

  174. 174
    weaselone says:

    @mclaren: That Obama was able to sell a tax increase does not invalidate the concept that tax cuts are easier to sell than increases.

  175. 175
    mclaren says:

    @Eamms:

    To paraphrase Alex, there’s a critical minority of commenters here who justifiably qualify as Obama haters and will try to force any criticism of a political/economic post by any front pager to be measured through the lens of how much Obama is bashed or praised, even though you haven’t mentioned Obama and are asking legitimate fiscal policy questions.

    Commenters only talk about “Obama haters” to distract from the multiple war crimes and incompetences and outright betrayals of Barack Obama of both his campaign promises and the ideals of the Democratic party. In short, if Barack Obama says something, you know he’s going to do the exact opposite.

    Using smears like “Obama haters” is the equivalent of the McCarthy era smear “anti-American.” It’s designed to delegitimize dissent and shut down any criticism of crazy policies, no matter how foolish they might be.

    Next, the obots will move on to the tried-and-true “insanity” smear. Anyone who persists in criticizing Obama is mentally ill, off his meds, and so forth. Once again, standard operating procedure for authoritarian toadies, used to good effect in the former Soviet Union against dissidents sentenced to psychiatric hospitals.

  176. 176
    mclaren says:

    @weaselone:

    That Obama was able to sell a tax increase does not invalidate the concept that tax cuts are easier to sell than increases.

    Shorter weaselone: “Tax cuts as election-winning policies can never fail, they can only be failed.”

    Thank you for illustrating how completely the obots have internalized the failed and insanely foolish and self-destructive Republican policies.

    We need some actual goddamn progressives in this country, people who don’t look at the crazy Republican policies that are sending this nation straight into the toilet and nod their heads and say, `Yeah, that’s good, that’s what Democrats need to do to win elections!’

  177. 177
    mclaren says:

    @e.a.f.:

    Your laundry list of stuff to do sounds laudable, but it’s typical of the woolly-headed thinking endemic in the Democratic party. SS + medicare spending = 1.1 trillion dollars. Current U.S. national security spending = 1.2 trillion dollars.

    That’s your annual budget right there. The rest of yearly U.S. government spending (on everything from NIH grants to highway funding to the Bureau of Weights and Measures) is accounted for by the annual deficit, which we want to eliminate.

    All your cuts and efficiencies are irrelevant, because the two giant elephants in the room are SS + medicare, and U.S. national security spending. That’s our entire budget. That’s it. That’s everything. If we want to have other services that endless unwinnable foreign wars, or SS payments + medicare, we need to cut one or the other of two sets of programs.

    Right now, every fucking person in Washington and all the goddamn obots are yapping about cutting medicare and adjusting SS with various tweaks.

    I want to know why.

    Why the FUCK are we talking about cutting only one of the two programs that account for essentially 100% of our current budgetary spending, ex deficits?

    There are two programs we could cut — medicare/SS, and “national security.”

    And here’s the really interesting statistic…polls show an overwhelming support among the public for large cuts to national security spending — but no support at all for cutting SS/medicare.

    So explain to me once again: why are Democrats even talking about cutting SS/medicare?

    Why?

    Why?

    Why?

    This is Democratic self-destructiveness at its absolute zenith.

  178. 178
    brantl says:

    @Bernard Finel: No, dumbass, you are saying that the results of global warming are indefinite, that’s what you said. It may easily not have been what you meant, having watched how lazy you are with your sentences. Learm to say what you mean, bozo. You’re use of the English language is extremely fuzzy, bonehead.

  179. 179
    Bernard Finel says:

    @brantl: I did not say that. Learn to read.

  180. 180
    Ted & Hellen says:

    @Bernard Finel:

    Bernard, thanks for your continued posting here, despite…well, you know.

  181. 181
    mclaren says:

    @Bernard Finel:

    I did not say that. Learn to read.

    Dr. Finel, this is Balloon Juice. Dyslexia is a point of pride to most of the commenters here. This is the online forum of politically interested 14-year-olds with Tourette’s Syndrome.

  182. 182
    Irony Abounds says:

    Yeah, let’s raise taxes on the middle class. Brilliant idea. I hope people realize this isn’t 1993. The median wage has barely budged since then yet the middle class is shouldering an ever increasing share of ever increasing health care costs, dealing with an astounding loss if equity in their homes, and huge increases in costs of higher education. So let’s dump more taxes on them. Reverting to the Clinton era tax rates for most people with incomes under $250,000 would cause real pain. Are parents making, say $130,000 a year with two kids in college really supposed to go deeply into debt rather than pay for college from their incomes just to bolster the safety net?

    I have an idea, how about trying to cut the cost of government and take your 24-25% of GDP down a few notches. Reduce the defense budget (don’t just reduce the growth), cut out subsidies to corporate farms, oil companies and other corporate giants, make genuine efforts to weed out waste, and most importantly do what is needed to cut health care costs, because unless health care costs are reduced, this whole exercise is just a gigantic waste of time. Force people on Medicare to use health systems like the Mayo Clinic whenever possible. Stop being afraid of the elderly’s voting clout. The transfer of wealth in this country from young to old is frightening, and it’s going to get worse under any circumstances. Don’t exacerbate the problem by taking more and more money out of the hands of ordinary Americans who work hard, play by the rules and are just trying to have nice though not extravagant lives. I’m not that far from retirement age, and the safety net should be there, but I don’t want to see middle class Americans have to pay more and more into the system just so large blocs of middle class elderly Americans don’t have to sacrifice. Screw that. The elderly in this country have gone from the most endangered to the most well off. Let them share in the sacrifice.

    I find it particularly ironic that those calling for higher taxes on the middle class are also the same people who cry the loudest about how underpaid the middle class is. Yeah, they do deserve more income because it is rough getting by with any kind of life if you have a couple of kids, you act responsibly and have robust insurance plans to take care of your family in cases of emergency, and you provide you kids with a good education (and I’m talking about a public education, including a public university). So they deserve more income, while at the same time they need to have that extra income taxed away? No thanks.

  183. 183
    brantl says:

    @Bernard Finel: You said and I copy/quote:

    Consider its application to climate change. Most of us would argue for more vigorous action on that front, but the counter-argument is precisely the one I laid out above. Climate change is likely but uncertain (particularly in terms of predicting the long-term effectiveness of mitigation efforts), while the costs of capping or pricing carbon are short-term and certain.

    “Climate change is likely but uncertain” and then you say particularly in terms of mitigation. Climate change is not uncertain in its effects, nor is it uncertain that it is happening, nor is it uncertain that it is deleterious….. ; I can continue a list of ways it isn’t uncertain, and you need to say what you want to say without being flowery and innaccurate. It seems to me that it makes you feel that it makes you look intelligent, when it only makes you look innaccurate. Particularly is the wrong word as it leaves you in error about climate change in general, if you had said that mitigation was specifically uncertain, you would have been correct. As it is, you’re just sloppy, and largely wrong. The language is a tool, and a deft one, in careful hands. Learn to proof-read carefully.

  184. 184
    Paul in KY says:

    @LGRooney: I wonder how much more they can slash them & if you don’t have that kind of debt (but are still struggling), that doesn’t help you.

  185. 185
    Paul in KY says:

    @Ted & Hellen: Pres. Obama has certainly stated this when campaigning. He just isn’t quite so ‘direct’ when saying it.

  186. 186

    […] But perhaps I should do the calculation anyway.  Using the rounded numbers, it seems that federal spending in fiscal 2011 amounted to ~ 24% of GDP.  Or, for those of you keeping score, right in the range  Bernard discussed yesterday. […]

  187. 187
    Paul in KY says:

    @Mnemosyne: Democrats don’t seem to work that way. Dubya was just a sock puppet for Cheney & PNAC guys, so it was cool that they had already done all the thinking for him.

    A generic Democratic president usually has their own ideas.

  188. 188
    Paul in KY says:

    @mclaren: Probably because the Repubs have set it up so almost every congressional district has some business/base that gets good money from the National Security apparatus & when the cutting come up, those voters in that district assume they would be axed & whine, whine, whine about it. Thus, congresman is not inclined to want to vote on that.

Trackbacks & Pingbacks

  1. […] But perhaps I should do the calculation anyway.  Using the rounded numbers, it seems that federal spending in fiscal 2011 amounted to ~ 24% of GDP.  Or, for those of you keeping score, right in the range  Bernard discussed yesterday. […]

Comments are closed.