Wednesday, July 13, 2011

The Real Agenda of the Deficit Hawks

One thing is for sure. The deficit hawks have been very successful at making the deficit a top priority in Washington. There wasn't too much complaining about it by the neocons when it was being created by Reagan, Bush I, and Bush II. In the wake of the worst economic downturn since the Great Depression we finally have a Democratic President that's acting like a Republican and running up the deficit. So finally it's time to talk about blocking efforts to raise the debt ceiling, despite the fact that this could lead to economic catastrophe. It's time to think about failing to deliver Social Security checks. It's time to consider the austerity measures that have worked so well in Africa, Latin America, and Haiti. In fact these austerity measures are now imposed on the East Asian tigers. And their formerly rapid economic growth has slowed, particularly in South Korea and Taiwan. They've been forced to accept austerity in wake of the 1997 East Asian banking crisis.

But OK, let's say they are right and we need to get this deficit under control. There's three obvious ways to do it.

1-Raise taxes on the wealthy. Trickle down economic theories have failed. The theory involved a two part process. First you see to it that the rich have more money in their pockets. You then look for them to invest which leads to jobs and wealth for everyone else. As Rush Limbaugh points out, he's never been offered a job by a poor person. So we got the first part. Plenty of money in the pockets of the rich. The second part never materialized. Corporations are sitting on tons of cash. They aren't investing it. That's their choice and what we might expect them to do. But what this means is taxing some of that won't affect job creation much. So the left supports this policy change.

2-Reform our health care system to where it is more like what exists in the rest of the industrialized world. If history is a guide we should expect about half the cost and much improved outcomes. Medicare is the largest single cause of our deficit problems. Cut our health care costs in half and the deficit is gone. The left supports this policy change (though Obama blocked it).

3-End our various pointless wars. Greenwald has some excellent points in this regard. I can hardly keep track of how many wars are going on right now. I see no point in Afghanistan or Libya. This is some really expensive stuff. Right now ending the wars wouldn't entirely wipe out the deficit, but it would go a long way. The left supports this policy change (though obviously Obama does not).

Your typical Republican opposes all three of these. And yet he pretends to care about the deficit. And that concern is only expressed when a Democratic President is in charge. So I think we can dismiss Republican concern with contempt as purely faux outrage and concern.

But of course it's not just Republicans. Obama wants to let the Bush tax cuts expire, so he supports point 1 above. But as far as spending cuts, it's not the obvious (2 and 3). He wants to cut Social Security expenditures. Maybe Krugman is right. They don't really care about deficits. What they want to do is dismantle the welfare state.


Chad said...

Taxing the rich per the proposal will cover a grand total of 1o days of spending while costing jobs - terrible idea.

Health care as the foundation to handle the deficit is again a terrible plan.

Wars - hate them and we should not be involved in any wars.

Your missing the bouncing ball once again - the Progressive moment has slowly and continously destroyed this country no matter who the sitting President was or is. A deficit issue was coming no matter who was Pres because of the Social Programs created by government which has put us right here standing on the X. Whether they fail this year, 10 years from now or in 30 years they will fail and fail miserably. What we need to do is cut the cord now before we lose everything.

The only chance we have to avoid a total meltdown in this country is to find the top 50 business minds in the world - bring them in to a room and let them review every regulation and tax on the books today. Any one found to be a barrier to job creation should be killed immediately.

The only goal that should be on the minds of gov't today is how to get the hell out of the way - create 35 million jobs and there is a start to ending the deficit, social and entilement programs that should have never existed in the first place.

Hey - ball is over here Jon so why you looking at the clouds?

Jon said...

Where do you get 10 days? Laura Ingraham wanted to pretend it wasn't much as well since she's a right wing zealot and she said Obama's plan would raise $938 billion. She then tried to pretend that wasn't much. But right winger Ben Stein said no. That's a lot of money. The budget is $4 trillion. So nearly $1 trillion is not 10 days but more like 4 months. Where do you get 10 days?

Health care change is a terrible idea you say. Assertions are not arguments, Chad. If they were I could just say that the health care changes I support would be a great idea and that would mean I win.

But I think you are exposing yourself here. You are revealing the true agenda of the deficit hawks. You don't really care about the deficit. You divert from the real solutions and say you want to instead dismantle the welfare state. Fine. You of course think that's a great idea. I think the welfare state needs some changes, but I wouldn't eliminate it as you would.

Can you fathom that sometimes the goals of the business community might not align with the goals of the public at large? You want to let people that have a singular goal (profits) decide which regulations should apply and which shouldn't? Do you have zero concern for environmental destruction? Zero concern for the fact that short term profit maximization can lead to long term economic stagnation and regression?

Businessmen aren't necessarily interested in creating jobs. Why should they be? Are they here to make society better? That's really not part of their incentives as businessmen. The public may like it, but the business community might not. They are here to make profits, even if that means harming society, reducing the total number of jobs, increasing unemployment, and wrecking the environment (for future generations possibly, or possibly for poor people that can't move away from wrecked territory). They naturally serve the needs of themselves first, not the public. That's why they shouldn't be running the government.

Unfortunately they pretty much run it now.

Jon said...

I mean 3 months.

Jon said...

By the way, Republicans always claim that tax hikes will cost jobs. The screamed when Reagan raised taxes in 1982. They screamed when Clinton did the same in 1993, predicting dire consequences. Surging unemployment. Drops in GDP. Well, those predictions were exactly wrong. Watch Art Laffer, who you link to in the other thread, get it wrong again and again:

Then there was the Bush tax cuts. These were going to send the economy soaring. The results were precisely the opposite. The worst economic performance of any administration since the Great Depression.

Is it religious dogma? Why so much resistance to facing the facts?

Chad said...

Rubio references that the data came from the Joint Economic Committee.

First if you think that the Republicans or the rich are going to agree to taxes totalling nearly a Trillion dollars you are absoltuely off your $#@%^ rocker pal. Take a Trillion dollars divided that up among the top 1% earners and you want to steal $300,000 per person? Your a bloody thief and if you don't think that will cost jobs well I can't help you to understand why that is. Maybe you want the top 10% to pay then so you want $30,000 per person in that group to gladly hand over their cash to pay for 24 days of wasteful gov't spending with no end in sight? My family is quote/unquote a top 10% family and I would quit work before giving you/gov't $30,000 of my cash or if you took $300,000 or $30,000 from me I would get that back - raise my prices on the goods I sell, eliminate the jobs required to get that back, eliminate my charitable contributions I give - your cause WILL affect the economy and people negatively.

Next - total deficit we are talking about is more like 15 Trillion dollars Jon. So that money you want to steal covers barely 24 days of deficit spending and according to Rubio only 10 days so somewhere in between is the truth and that is if you get it all per your plan. Then what Jon - you took the money and it didn't even make a frickin dent beacuse we are DEFICIT SPENDING! Wake up sir.

Quote "President Barack Obama proposed his 2011 budget during February 2010. He has indicated that jobs, health care, clean energy, education, and infrastructure will be priorities. Total requested spending is $3.83 trillion and the federal deficit is forecast to be $1.56 trillion in 2010 and $1.27 trillion in 2011. Total debt is budgeted to increase from $11.9 trillion in FY2009, to $13.8 trillion in FY2010, and $15.1 trillion in FY2011"

Every American Citizen Owes $45,454 dollars to the National Deficit - we got there by RECKLESS SPENDING and ENTILEMENTS FAILING.

Here is the biggest problem the Left has no clue how to create Jobs so we are screwed - your column here proves it, you can't even come close to balancing a yearly budget with your ideas and you created zero jobs.

JOBS JOBS JOBS - Rubio is 100% correct, what every idea is on the table that costs jobs should be thrown away.

Chad said...

Also Jon - I think you need to know something. I sat in a Tea Party meeting last week - 85 people strong. A room full of concerned American's about the US debt and our future. The room was filled with business owners, job creators, people who understand business and what it takes - you know what the talk was about for 90 minutes. What can we do to help our community and how concerned people were that they would have to layoff more folks because of the gov't. Talked about how some people in that room make less than their employees because they want to keep their business alive, but you wouldn't know a thing about that - people want to hire and they want to help build their individual communities so your so dead wrong when you said business people don't care and that is part of your problem - we care. We care about those who care about America and those who care about helping themselves. We are far less intersted in those who simply want to take from us because they feel that is their right, but will be the first to help someone who wants to help themselves so your attitude is way off base. Besides Jon how does a rich person become rich without good people to make, sell and ship the widgets made? Your thinking is so backwards it is scary, very scary.

There are bad people who have self interest above the interest of others everywhere, but in my experiences in life those people can be found more often on the Left in the Progressive party. People want to physically steal earning and property that does not belong to them - what could be more selfish than that.

Chad said...

Jon said...

I'm just amazed that the right wing is even capable, as you are, of repeating the same old errors that they have been guilty of for so many years. You did not respond to my point about how all the right wing fear mongers said precisely the same thing about the Clinton era tax hikes and the Reagan tax hikes. What do you have to say about that? Does that bother you? Does that factor into your thinking at all? Seriously, how do you address this point in your mind? You're so bold in your predictions about the dire consequences of raising taxes. Even using CAPS. These tax hikes WILL cause massive economic destruction. What about the fact that these predictions have always been wrong? Does that at least put a little damper in your confidence level? Don't you think saying something like, these tax hikes MAY cause dire economic consequences would make more sense?

With regards to the amount of tax revenue Obama proposes we collect from the rich, let's look at it another way, Chad. You say taking $300K/person from the top 1% is outrageous. But it's outrageous only if that represents a substantial portion of their income. Don't you think? If right now they make $1 million and take home $700,000 and I'm saying yeah, let's take another $300,000 then you might say that's taking too much. I would say that.

But if they are making $100 million and taking home $70 million, and I'm saying let's take another $300K, well that's not really that big a deal. They are paying 30% now. If you bump them to 30.3%, is that a big deal? I don't think so. $300K is not a lot of money for some people. For others it is.

So I did some back of the envelope calculations. Let's suppose we only go after the top 1% for the money. In fact that's not true. Obama's plan is to raise taxes on those making more than $250K, which will include more than the top 1%. But let's just stick with these fewer people to see how tough this is for them.

Jon said...

I'm using 2006 because that's the latest data I have. Total federal tax revenue in the US in 2006 was $4.7 trillion. The effective rate in 2006 for the top 1% was 32%. So their total income was $4.7/0.32 = $14.7 trillion.

There are 113 million households in the US. 1% is 1.13 million households. Those households earned on average $14.7 trillion/1.13 million = $13 million dollars/household. That's the average household income for a top 1%-er.

Suppose we ask those households, and only those households, to come up with an additional $1 trillion. That's $885K/household.

Right now the avg top 1% household pays $4.1 million, or 32% of their income to federal taxes. On this scenario they'd go to $5 million, or 39%. That's nothing to sneeze at, but it's not obscene in my view. They were taking home $8.9 million. Now it's $8 million. It's not like I enjoy taking money from people to fund a government. It would be great if everything was free. But in the real world these things must be funded. Asking the average top 1% type to suffer with a mere $8 million annually, and this sacrifice is so that we can do some things as a society, things that have lead to the present wealth that this person enjoys, seems pretty sensible to me. Especially in light of the fact that our government's policies over the last 30 years following Friedman style economics has really disproportionately benefited these rich people at the expense of the poor.

You are confusing the debt with the deficit when you talk about $15 trillion.

You say we got to this present state of high debt with reckless entitlement spending. What you don't mention is two other factors that are kind of big, and kind of more a Republican thing. Tax cuts and wars. We're going to reduce revenue by cutting taxes and we're going to increase expenditures by starting wars. And we're going to deregulate banking and cause economic catastrophe. And then when we can't pay the bills we'll blame old people and poor social security recipients.

Never said business people don't care. Are you interested in understanding my view or offering caricatures?

You may have noticed I did see the Wall St Journal editorial and replied here.

Jon said...

One other point, Chad. Economists believe that business aren't hiring because of weak demand, not concern over pending government policy changes.

Paul said...

Jon -

Your math in the following is wrong

I'm using 2006 because that's the latest data I have. Total federal tax revenue in the US in 2006 was $4.7 trillion. The effective rate in 2006 for the top 1% was 32%. So their total income was $4.7/0.32 = $14.7 trillion.

As I understand it when referring to effective rate what it means is - roughly speaking - that a person is paying approximately XX% of their income in taxes.

Maybe by example I can better illustrate where you went wrong.

Say a population of 100 people and that the top 1% (1 person) makes 1,000,000 and pays an effective rate of 33. That person is paying $330,000 in taxes. Now say that the other 99 make $100,000 and pay an effective rate of 20%. Each of those 99 pays 20,000. For a combined total of $1,980,000. All together the inlay would be $2,310,000. You cannot take this total amount and divide it by an effective rate.

Although if the top 1% really made as much as $14 trillion a year, while I personally would be very envious of them, from a tax receipt perspective, at current rates, that would be awesome. Combined with taxes paid by the remaining 99% the national debt would actually be a huge surplus.

Paul said...

FYI - I am not sure since posts need to be approved first and I cannot yet see it - but I think I may have used "debt" at the end of last post when I should have used "deficit".

Jon said...

You're right Paul. I had all these numbers floating in my head and I confused them. Let me step back and think this through.

Jon said...

Check my math here Paul.

My NY Times article linked above says the effective rate of the top 1% is 32%. It also says that they paid 28.3% of all the taxes.

So if the total tax receipts were $4.7 trillion and they paid 28.3% that means the top 1% paid $481 billion.

So if that is what they paid and their effective rate is 32% that means their total income is much less than I said. It's $481 billion/.32 = $1.5 trillion.

So per household that avg income for the top 1% is $1.5 trillion/1.13 million households = $1.3 million/household.

If their rate is 32% they are already paying $426K. To ask them to pay another $300K? Yeah, that's too much.

I don't think Obama is even considering anything like this. This would mean that the top marginal rate would have to go up to like 80%.

I wonder if what is happening here is when they say he wants $1 trillion in tax increases, do they mean over a multiple year period? I spent some time searching for that and it was never clear.

Jon said...

Wait a minute once again. They don't pay another $300K. They pay $885K because I'm calculating for households, not persons as Chad was referring to above. So they were paying $426K and on this scheme they pay $1.3 million. And they only make $1.3 million. Obviously something isn't right. Probably the $938 billion claim was over multiple years. Stein replied to it in relation to the annual budget, so this threw me off.

Paul said...

Jon -

When people start talking about averages be careful and try to put it in proper context.

Possible disclaimer -
Where I get a little hazy is that I don't know if people use effective tax rate in a standardized way (maybe they do). What I mean is, when calculating it do they include FICA taxes (taxes for social security,etc). For sake of this discussion let me assume this doesn't matter much.

When Chad states something like
Take a Trillion dollars divided that up among the top 1% earners and you want to steal $300,000 per person?

I don't know where the $300,000 comes from. If you are requiring 1 trillion dollars and you want that additional revenue to come solely from the top 1% - The number is actually is actually about $ 1 million per person/family. This guesstimates that there are about 1 million people in the top 1%. Maybe Chad mistakenly used 1% of the total population in his calculations.

But even corrected - I don't think he knows the error of his ways. Errors are aplenty here. Yes the average is about $1 million per person/family but because it is an average it doesn't actually apply for each individual. For each "real" individual his or hers additional contribution will vary greatly depending on actual income.

The thing about using averages and statistics is that people can often, and IMO, easily manipulate it to satisfy whatever they wish. As a side note I do think that per capita type of statistics are meaningful.

As for me I prefer to use raw numbers as much as possible if available and work things out from there. What I mean is, (made up example) if one claims that the top 50% of income earners pay 98% of the taxes my initial response is - "so?". As far as I am concerned throwing out statistic like this without a proper view of the overall picture doesn't a whole lot of qualitative information.

Within the top 1% of income earners you can have crazy (for lack of a better word) differences in income. Going off the top of my head (so number may not be right) I think the top 0.1% are making in the $80+ million/year. Whereas someone who just makes into the top 1.0% may be making (again off top of my head, may be wrong by a lot) $500,000.

Let me assume though that my numbers are accurate "enough". Let me also make the assumption that an averaged effective rate of 33% applies to both someone who makes 500,000 and 80 million (this is probably not the case - but maybe it is good enough - HP?)

The person making 500,000 will pay
$165,000/yr in taxes for a net of $335,000. The person making $80 million will pay $26,400,000 for a net of $53,600,000

Assume that we increase the top income bracket by another 4% - from 35% to 39%. This actually does *not* translate to a 4% increase in effective tax rate. Not even close for those closer to the lower limit. Closer for those at the upper limits. But for sake of discussion let us assume it does cause an increase in 4% in effective tax rate.

The person making 500,000 will (now) pay
$185,000/yr in taxes for a net of $315,000. The person making $80 million will pay $29,600,000 for a net of $50,400,000

Paul said...

IMO - the imporatnt part; the first person now pays an additional $20,000 per year and the other pays an additional 3.2 million. For a comparison the average is

Now as to my personal view -
I'd love to hear someone with a straight face tell me about the plight of the person (or family) w/ a net 50,400,000 - I am more receptive; although not too receptive, about the plight of the other person. FWIW - I would be OK w/ adding additional tax brackets.

btw- if someone is going to make a moral case, they first need to establish where does their morality come from and why I should care about it. Since Jesus was very pro poor people and; generally speaking, antagonist towards the rich (e,g. it is easier for a camel to pass through the eye of a needle than for the rich to get to heave - paraphrased). I wish them luck if that is the route one chooses.

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