The Republicans claim we have a spending problem, not a revenue problem. That is a lie. We have a revenue problem. Sessions makes the misstatement, the LIE, about the revenue side of the problem, some 7 minutes + several seconds into the video clip.
Don't take my word for it; the CBO, the Congressional Budget Office says so, by way of Bruce Bartlett; (bold face, my emphasis added - DG).
GOP's Fuzzy Math Misstates CBO Revenue Projections
By BRUCE BARTLETT, The Fiscal Times June 3, 2011We can't afford to live in a Right Wing fantasy world - a scary place, dominated by conspiracy theories, out of touch with reality. It is not only a very ugly place, a bad place, it is dishonest. We need to balance our budgets realistically, including increasing revenues and decreasing tax expenditures such as the bad subsidies, like those to big oil, and ethanol and other Big Ag, and to big finance such as billionaire hedge fund managers.
Debt Ceiling: Complete Coverage
With the House voting 318 to 97 earlier this week against raising the Treasury’s borrowing authority, every Republican and some Democrats were digging in their heels on the idea that trillions of dollars of spending cuts must accompany any rise in the debt limit. Although they repeatedly say that “everything is one the table,” Republicans quickly add that this does not include higher taxes.
Simple arithmetic, however, tells us that a budget deficit and the concomitant increase in debt can result from either higher spending or lower revenues. And indeed, lower revenues are responsible for about half the increase in debt since 2001, according to the Congressional Budget Office.
Since 2001, the national debt has increased $11.8 trillion. This resulted from a $6.2 trillion decline in revenues and a $5.7 trillion increase in spending. Of the revenue decline, $2.8 trillion resulted from legislated tax cuts and $3.4 trillion from economic and technical factors. On the spending side, almost all of the increase was legislated, with $2.4 trillion of it coming between 2001 and 2008.
Despite the significant contribution of tax cuts to the national debt, Republicans argue that higher revenues are off the table in the debt limit negotiations. In a May 16 floor speech, Sen. Jon Kyl (R-AZ), the assistant Senate minority leader, made this fact clear in no uncertain terms. Said Kyl, “When we are talking about how to get the budget better balanced, how to reduce our deficits, we should not be looking at the revenue side or the taxing side; we should be looking at the spending side.”
A key argument Kyl made is that it is unnecessary to raise revenues because they are already projected to rise substantially in coming years to their historical level of between 18 percent and 20 percent of the gross domestic product. As he explained:
“CBO figures demonstrate that under any of the budgets offered…we will be back to historic average levels of tax collections in just the next few years – something on the order of 20 percent of our gross domestic product. Revenues are not the problem. They are going to be back where they have always been.”Indeed, if one looks at the latest CBO projections, Kyl is right. They show revenues rising from 14.8 percent of GDP this year – the lowest level since 1950 – to 16.3 percent next year, 18.8 percent in 2013 and about 20 percent of GDP thereafter.
What Kyl neglected to mention is that the CBO is required to assume that all laws presently on the books will be followed to the letter. Therefore, it assumes in its projections that all of the tax cuts set to expire at the end of 2011 and 2012 will lapse permanently and on schedule – no matter how obvious it is that they will be extended. For example, the research and experimentation tax credit will expire at the end of this year. But it has expired many times in the past and always been renewed. Although there is no doubt that it will be renewed again because it has strong bipartisan support, CBO’s baseline projections presume that the research tax credit will cease to exist for good after Dec. 31.
More importantly, the CBO assumes that all of the Bush tax cuts will expire at the end of next year. By 2014, the end of all expiring tax provisions will raise revenues by 3.8 percent of GDP. Therefore, virtually all of the revenue increase Sen. Kyl says will take place is the result of allowing current tax cuts to expire.
This would be okay if Kyl and the rest of his party were committed to allowing the Bush tax cuts to expire at the end of 2012 and not press for their extension or for additional tax cuts. But everyone knows that this will never happen. It is a 100 percent certainty that Republicans will demand that the Bush tax cuts be extended, just as they did when they were previously scheduled to expire at the end of 2010.
We have a revenue problem, and it is the result, in large part, of the Bush era tax cuts and the subsequent tax cuts forced on the country by the right, the ones which primarily benefit the wealthiest over the interests of the majority. The decline in revenue occurred BEFORE the financial crisis that began in 2007, which only exacerbated the problem. The right as always, pushes their Republican Math, which doesn't add up, pursuing the Grover Norquist ideology and right wing 'Ickonomics". The facts be damned, if you're one of these Republicans, the greedy, corrupt kind.
I have to admit that the Bush tax cuts, especially those regarding inheritance would be personally advantageous to me, but...
ReplyDeleteThere have actually been at least a couple of defectors from the Reganomics camp with Bartlett providing a list of Conservative critics of those policies. Amusingly enough George H. W. Bush had derided Reaganomics as "voodoo economics" during the 1980 presidential campaign!
The British Consevrvative party and ruling coalition are not only implementing budget cuts, but are aslo seeking to increase revenue. David Cameron told voters in the last election to expect significant budget cuts and new taxes to balance the UK’s budget.
Of course, taxes are the third rail in US politics. Although, I have heard rumours that the US may find itself facing a federal VAT in future.
Whatever the case, expect more posturing and finger pointing. One thing Betty Ford also pointed out was that there was not the partisanship in the past which now exists in US politics.
If you look at this link to OMB,
ReplyDeletehttp://www.whitehouse.gov/omb/budget/Historicals
(table 1.3),
you will see that federal government outlays increased about 50% between 2000 & 2010 while receipts decreased by about 25% (constant 2005 dollars).
Furthermore, while receipts varied quite a bit, down during the early years of the millennium, increasing to near parity with pre-tax cut level in 2008, then dropping dramatically after the crash of 2008-2009, outlays were increasing at an accelerating pace 2000-2010. The OMB projects this pace will continue through 2016, with outlays that year of over 3.5 trillion dollars, an increase of 75% over FY 2000.
Looks like a spending problem to me.
Terry, always good to see you here, and most particularly, I appreciate the challenges you make to our posts, and the way you accompany them with links and factual arguments.
ReplyDeletePlease know that agree or disagree, how you comment is very welcome.
I looked at the information you provided, and would argue that while spending increased, a large amount of that was related directly to the unpaid for two wars, and also other legislation.
The largely Republican government did not match their spending to revenue, and were therefore the ones guilty of overspending. Had they not passed the Bush tax cuts, or at the very least ended them when our spending increased, we would not have had the existing debt problem. Had they supported sufficient regulation, we also would not have had the financial crisis either.
George W. Bush was a Republican President with a Republican majority in Congress, January 2003 to January 2007.
'W' presided over economic decisions - see above, largely Republican driven - that resulted in only an increase of 1.1 millin jobs - and those and more were lost in the economic crisis.
In contrast, with higher taxes, Clinton in his 8 years saw greater economic growth, AND an increase in revenue, AND the creation of 22.2 million jobs. Even allowing for the tech bubble, that resulted in genuine growth and progress, compared to purely Republican policies.
Obama's stimulus spending was a necessary for our economic recovery and to position us for economic growth; it is supported by the economic experiences of every economy that has experienced a crisis and recovery. Look at Japan, look at Sweden, for examples.
That cannot be said of Republican spending policies, or the results of Republican tax policies.
Terry,
ReplyDeleteI'm sorry, but your facts are far too general to be compelling.
Looked at in detail they paint another picture entirely.
First, you only tacitly acknowledge that for the first 3 years following the 2001 tax cut, revenues fell, they did not increase at all. If they "stimulate" the economy, especially in some way related to "tone" as is often claimed by the right when decrying the Health Care Reform Act, then it should have had an immediate effect. It didn't, neither did Reagan's cuts in the 80's.
Instead what occured, similar to the 1980s is that the excess money the wealthy now found themselves holding sought out good investment, but there simply wasn't much to be had on shore, so they invested offshore and in bad investments in real estate. In the 2000's case, they invested in CDS's. Consequently, as the equity of the middle class was transitioned from their own hands to the hands of banks and investment firms, on paper our economy grew. In 2007, Financial Services accounted for 40 PERCENT of all profits in the US, FORTY!. Considering it employs less than 10%, that's one helluva shift. We also offshored 32% of our manufacturing during the decade. So, NO, Terry, revenues did not in fact increase in any way related to the 2001 tax cuts.
Further, spending and new programs. Please tell me which NEW programs Bush engaged in during his Presidency (new social programs) which accounted for the dramatic growth in spending? Care to name any? Other than the wars on our treasury (err I mean war in Iraq and Afghanistan) Bush didn't engage in new social services or other meaningful new spending, yet spending increased pretty dramatically? Gosh, I wonder why? The answer is that Bush, like Cheney, didn't think deficits mattered and so they spent on the military - as Paul O'Niel said, they raided the treasury.
Since taking office, and of course in the waning days of the Bush administration, yes, both Presidents spent, and spent lavishly to try to stave off another Great Depression. It was a lessoned learned from the Great Depression that creating jobs, even temporarily, as well as and equally importantly, staving off a severe lack of confidence in the stock market, actually DID work, and worked very very well. Hoover's failure to act, and Roosevelt's turning off the spigot in 1935 and 1936, made the problems MUCH worse, not the spending.
Obama is spending more on a few programs as part of the stimulus, but when you factor out the stimulus and TARP (and other bailouts), Obama isn't spending ANYWHERE near what Bush did on discretionary programs.
We don't have a spending problem, we have a factual dishonesty problem. Folks on the right appear unable or unwilling to grasp that their favorite economic theory, that of giving the rich all the money so they build factories in China, has been an abject and absolute failure. We had a hollow economy in the 2000's, perhaps you remember me telling Mitch EXACTLY that in 2004 and 2005? The tax cuts didn't work, never have, never will, and all we did was strip home equity from the middle class, THAT was the engine of the 2000's.
Blah, on vacation, typing too quickly.
ReplyDeleteSorry Terry, to clarify, the "bad" investments of the 2000's were the explosive growth of mortgage backed derivatives including Credit Default Swaps. These kinds of instruments grew in the 1990's but grew explosively after the repeal of Glass-Steagal (sic). They were bad investments because ultimately they exploded on the investors themselves. But worse and more meaningful, our economy was NOT growing in the 2000's other than on mortgage/equity backed growth. Such activity was purposeful (read "The Big Short") in that Wall Street PURPOSEFULLY set out in the 1990's to get at the last, vast untapped source of funds in the US (other than privatizing Social Security - which they also tried), specifically the Trillions of dollars held in equity by the middle class. The promotion of cheap credit cards and using your home equity to consolidate debt was NOT done philanthropically, it was done to take that equity and put it into the market and ultimately into the hands of the banks and their ownership. If you factor out Financial Services profits and the consequential tax revenue from it, our economy shrank DRAMATICALLY, and much of that activity was due to mortgage activity - and that doesn't begin to include things like mortgage servicing activity or home improvement activity, ALL of which was funded by ever increasing home values translated into ever increasing mortgages. The home prices of the 1990's and 2000's weree hollow, self-perpetuating fictions fueled by speculation. Such a scenario was/is starkly similar to what happened in the 1920's where speculation in the stock market not based on any tangible asset, created the appearance of success, but it was only appearance. In this case, it wasn't the stock market, but instead a purposefully unregulated bond market - a market unregulated at the behest of Wall Street/corporatists. The very same people who say higher taxes are bad for the economy without proof, and who equally say lower taxes create jobs without proof.
Dog Gone & Penigma, I am not defending the out of control spending of Bush & the GOP congress 2001-2008. I am a conservative. On some issues my politics align with the GOP, and on some issues they do not.
ReplyDeleteHowever, during the Bush years deficits ranged from ~$250 billion to ~$500 billion. If the Bush tax cuts "cost" the treasury $150 billion/yr, and the various wars cost $100 billion/yr, well, you do the math. We still would not have achieved the near-balanced budgets of the Clinton years (I say near balanced because Clinton's budgets spent social security surpluses that we no longer receive). What would you have cut, other than the tax cuts & wars, to balance Bush's budgets?
The OMB budget data that shows the deficit decreasing to ~500 billion/year around 2016 do not include only the restoration of the Clinton tax rates, it also includes Medicare surcharges enacted by the last Democrat congress on incomes above $380k/yr (and on investment income as well as wages). The projection also includes the expiration of the AMT "fix" that will hit middle class families.
You might note that the outlays in 2016 are projected to be over 22% of GDP versus a little over 18% of GDP in Clinton's last budget (enacted by a GOP congress). It still looks like a spending problem to me.
"The very same people who say higher taxes are bad for the economy without proof, and who equally say lower taxes create jobs without proof."
ReplyDeletePenigma, how much do you know about economics?
You understand, don't you, that less money paid to the government means more money is free for individuals and corporations to invest in the future? That is to grow wealth?
While it is possible for the government to "invest" in something and grow the wealth of the economy, government spends money for political reasons. Our constitution requires that all spending bills originate in the house of representatives. The requirements for membership in the house are several, but the most important requirement is receiving more votes than the other candidates. Furthermore, representatives must face re-election every two years. There is no requirement that house members know anything about economics and investing.
By and large, businesses that do not invest well, and return less than the money they have invested, fail and disappear.
If the government's investments fail, they can raise taxes or print money to cover up the failure.
And yet, trickle down economics, Terry, or supply side, or any other name you choose to use - I personally prefer the earliest name, horse and sparrow economic theory - has NEVER, EVER shown a growth in jobs, becaues it emphasizes the wrong side.
ReplyDeleteOur economic growth is consumer driven. Our problem is not insufficient wealth to invest among the already weatlthy, or among corporations.
What is stifling growth is lack of DEMAND, lack of consumption. By concentrating the money in the hands of the broadest possible group of consumers, you grow the economy. What grows the economy is to stimulate growth of demand, and the supply side will follow, because it doesn't like to miss out on opportunity.
If what you suggest worked so well, you'd be able to produce reams of data proving it worked.
You can't produce those stats.
Because supply side, give the money to the wealthiest doesn't produce jobs and doesn't produce economic growth.
That is why what Obama did - with a combination of tax cut expenditure for the less wealthy, along with stimulus spending for infrastructure and other expenditures that were selected to produce the most growth has resulted in the only growth we've had to date. That puts it in an entirely different category than the Bush REPUBLICAN spending and the debt that resulted from the Bush REPUBLICAN tax cuts combined with that REPUBLICAN spending.
Remember that, the next time you hear the cliches about Democratic tax and spend. The Democrats select the correct kind of spending, and they have a better record of paying for it with appropriate revenues.
I don't have a degree in Economics, but Laci the Chinese Crested does. A degree in both politics and economics, actually.
I'll boot this to Laci to address further.
Terry the assumptions on the right about tax cuts being good are a lot like the intuitive arguments that because there can be a lot of fraudulent voter registration, there is automatically a lot of voter fraud.
ReplyDeleteIn supply side economics, it is the assumption that if you give people who are wealthy more money they will spend it, in this country, creating more wealth, and by inference, grow the economy with new businesses and new jobs.
Except that voter registration problems (the greatest is simple duplication of registry) does NOT result in anything but the rarest case of voter fraud - and then it is more often an honest mistake. There hasn't been attempts to alter the outcome of an election as part of grand scheme orchestrated by the left.
Similarly giving money to people through tax cuts hasn't done diddly to reduce the debt, or make a healthier economy. It has only resulted in an even more uneven playing field unfairly favoring the wealthy.
We have had a growing chasm in wealth in this country with the poor getting poorer, and the middle class majority stagnant or losing wealth, while the wealthiest few keep getting richer and richer and richer, faster and faster - and buying politicians, mostly on the right, directly and indirectly to maintain that advantage.
In supply side economics, it is the assumption that if you give people who are wealthy more money they will spend it, in this country, creating more wealth, and by inference, grow the economy with new businesses and new jobs.
ReplyDeleteThat is the strangest definition of "supply side economics" that I've ever heard. Where did you find it?
Traditional, keynesian economics is "demand side" economics. You grow the economy by adjusting the money supply to increase or decrease demand. Too much and you get inflation, too little and you get high unemployment. "Supply side" economics works by lowering or raising the barriers restrict the production of goods and services.
You can look it up.
market economies produce more wealth than command economies because market economies produce goods and services at the lowest possible cost. This is standard, textbook stuff, it's not "conservative" economics. Politics comes in because producing the most efficient economy is not always what we want to achieve. Old, retired people and young children consume far more goods than they produce, but we don't let them starve.
"We have had a growing chasm in wealth in this country with the poor getting poorer, and the middle class majority stagnant or losing wealth, while the wealthiest few keep getting richer and richer and richer, faster and faster - and buying politicians, mostly on the right, directly and indirectly to maintain that advantage."
ReplyDeleteThe one thing that the government could do to remedy this instantly, writing no new laws, would be to enforce immigration laws as written. No valid SS number, no can work.
The left is against this because they really don't give a damn about the plight of American workers. Their position is identical to that of the US Chamber of Commerce: "There are no "American" jobs".
At least the USCC is honest about supporting open immigration in order to keep wages down.
http://useconomy.about.com/od/fiscalpolicy/p/supply_side.htm
ReplyDeleteWhat Is Supply-side Economics?:
Supply-side economics, also known as trickle-down economics, is an economic theory that states that a reduction in taxes will stimulate the economy through increased consumer spending. Over time, the increased economic growth will generate a larger tax base, which will recoup the revenue lost from the tax cut.
_______________
There, I've looked it up, and provided you a link.
If you listen to the Republicans, like Boehner, they insist that we cannot tax the rich at the pre-Bush tax rates, because they are the job creators.
I'm quite familiar with your definition as well - it amounts to this, a theory that tax cuts produce jobs.
My education listening to economists speaking started somewhere around age 10. I was consistently the only child in rooms full of adults. I heard what amounted to dinner lectures on the economy and economics pretty much nightly at the family dinner table as well from my financial industry executive parent - an ultra conservative, btw.
The specific tax cuts which are promoted by the right currently only really benefit the wealthy.
There is nothing inherent in tax cuts which produce investment in new business or hiring. That is a weakeness in the assumption of the theory, that such tax cuts will go into production rather than savings, or overseas investments, or other uses.
There is in fact nothing which indicates that tax policy is particularly useful in regard to job creation, compared to other factors, principally interest rate reductions.
From the same source link above:
"FromStudies That Support Supply-Side Economics:
The Treasury Department developed a model which showed that the Bush tax cuts would ultimately increase annual GDP by .7%. However, it is important to note that the model assumes that the revenue lost by the cuts were offset by reduced spending. In fact, the study showed that if the tax cuts were offset by future tax increases, they would have a negative impact on the economy in the long run.(Source: U.S. Treasury Department, A Dynamic Analysis of Permanent Extension of President's Tax Relief, July 25, 2006)
I've researched and written about this before:
http://penigma.blogspot.com/2010/09/tax-cuts-for-rich-wont-do-what-right.html
http://www.kypolicy.us/sites/kcep/files/Extending%20Federal%20Tax%20Cuts.pdf
But the big one, the best graphic of all was this:
http://www.washingtonpost.com/wp-dyn/content/graphic/2010/08/11/GR2010081106717.html
Terry, of all the things I've read on this - and I've read quite a few - this study by Moody's (I assume I don't have to explain who they are) was the most compelling and thorough analysis, particularly taken in conjunction with the WaPo graph cited in my previous comment.
ReplyDeletehttp://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html?source=patrick.net
"Give the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it.
Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody’s Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.
The findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.
“I would tend to wonder how much the tax cut actually influences spending behavior,” said Chris Cornell, an economist who mined government reports back to 1989 for West Chester, Pennsylvania-based Moody’s Analytics. “Spending by the top 5 percent of households seems much more closely tied to business- cycle issues than it does to tax-cut issues.”
The Moody’s research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates.
Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.
...Economist Harm Bandholz said discouraging the wealthy from spending could weaken the economy, something Republicans argue will happen if the Bush-era tax cuts expire.
“Most of the consumption growth is coming from the higher- income groups,” said Bandholz, chief U.S. economist at UniCredit Global Research in New York. “The lower income groups, they are barely living hand-to-mouth.”
I believe that should adequately explain the definition I used for trickle down / supply side/ horse >horeshit> sparrow economics, and why it doesn't work, particularly NOW.
Simple question for you, Terry, where are the jobs?
ReplyDeleteThe term “supply-side economics” is used in two different but related ways. Some use the term to refer to the fact that production (supply) underlies consumption and living standards. In the long run, our income levels reflect our ability to produce goods and services that people value. Higher income levels and living standards cannot be achieved without expansion in output.
“Supply-side economics” is also used to describe how changes in marginal tax rates influence economic activity. Supply-side economists believe that high marginal tax rates strongly discourage income, output, and the efficiency of resource use. In recent years, this latter use of the term has become the more common of the two.
The argument is that low rates of taxation will increase investment.
Bollocks.
Let's take Rupert Murdoch's News Corp as an example. News Corp.’s financial disclosures, Johnston reports that based on the company’s $10.4 billion profits, the company would have been expected to pay $3.6 billion at the 35 percent corporate tax rate. But instead the company managed to collect $4.8 billion in income tax refunds, “all or nearly all from the U.S. government.” Source.
Terry, business is under no obligation to create jobs in return for lower taxes. Yet, we see examples such as News Corp where businesses with high amounts of earnings not only pay no income tax, they receive refunds. What are these refunds subsidising?
Personally, I find the argument that lower taxes will "increase investment to be exceedingly facile.
The problem is that one needs to cut through all the smoke and mirrors to get to some very simple concepts.
You don't need a first in PPE from Oxford to understand the basic concept of economics is profit maximisation, that is the process by which a firm determines the price and output level that returns the greatest profit. We need to add in the following definitions of costs incurred by a firm. These are classed into two groups: fixed costs and variable costs.
Fixed costs are incurred by the business at any level of output, including zero output. These may include equipment maintenance, rent, wages, and general upkeep. Variable costs change with the level of output, increasing as more product is generated. Materials consumed during production often have the largest impact on this category. Fixed cost and variable cost, combined, equal total cost.
Note that wages are part of the definition of fixed costs. A firm will work to keep the cost of wages as low as it can to help maximise profits.
If one looks at the economic trends of the past 30 years we have seen the tax rates for the rich go down. Regressive taxation systems instituted. Add in the consolidation of industries into a few large companies (e.g., US Media holdings and Pharmaceuticals).
http://media.tumblr.com/tumblr_lieojvacIz1qgolc4.png. See also http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
A market economy falls if there is no market (that is buyers for the products). If the wealth is in the hands of a few, it makes it harder for the many to be able to afford to buy the products.
Terry, see this http://www.counterpunch.org/nader07122011.html
ReplyDeleteThe ultra-accurate Citizens for Tax Justice (CTJ) publishes precise reports on the effective taxes paid by corporations that make an utter mockery of the 35 percent statutory tax rate for corporations.
On June 1, 2011, CTJ released a preview of its forthcoming study of Fortune 500 companies and "the taxes they paid--or failed to pay--over the 2008-2010 period." Judging by the preview, this report should silence those who say that the U.S. taxes corporations more than other industrialized nations.
What do you think the following profitable corporations paid in actual total federal income taxes in that period: American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell, International, IBM, United Technologies, Verizon Communications, Wells Fargo, and Yahoo? Nothing!
CTJ reports that "from 2008 through 2010, these 12 companies reported $171 billion in pretax U.S. profits. But as a group, their federal income taxes were negative: $2.5 billion."
CTJ documents that "not a single one of the companies paid anything close to the 35 percent statutory tax rate. In fact, the 'highest tax' company on our list, ExxonMobil, paid an effective three-year tax rate of only 14.2 percent…and over the past two years, Exxon Mobil's net tax on its $9.9 billion in U.S. pretax profits was a minuscule $39 million, an effective tax rate of 0.4 percent."
We seem to be talking past one another, Mr. Chinese Crested. I haven't mentioned jobs at all in my comments, other than in the context of the availability of illegal workers lowering the wages of legal workers.
ReplyDeleteI've been talking about wealth creation, which is not the same thing as "job creation" at all.
The government has a lot of tools to promote GDP growth, not many to promote job growth. While federal and local government can do direct hiring, this impacts taxes and/or public debt, and that tends to discourage private sector investment.
I am not sure why you are obsessed with the idea of the corporate income tax, Mr. Chinese Crested.
As you note in your last comment, if you confiscated all of the profits of "American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell, International, IBM, United Technologies, Verizon Communications, Wells Fargo, and Yahoo" you would gain $171 billion. That is a bit over 10% of this year's federal budget deficit.
As I said at the start of this thread, we have a spending problem, not a revenue problem.
You're quite correct about wealth creation, the tax cuts have created a new class of super rich.
ReplyDeleteBut for the rest of the population, they are seeing their standard of living drop.
This is why I mention Jobs. Wealth in the hands of a few is not a very good economic situation, especially if it leads to the rest of the population seeing their incomes drop and standard of living decline.
That is not a desirable outcome--Is it?
If the invcestments only result in the righ getting richer, then it make no sense to see regressive taxation being imposed on the rest of the population, which is that the current system is turning out to be.
It's jobs, not investments, which are important.
Wasn't the republican promise that they were going to create more jobs: not make the rich richer?
Or should we go with what Dubious Bush said in that his people "were the haves and the have mores"?
The ultimate point of investments should be that they create jobs. And if we are "alking past one another" it's because you are missing the fundamental points of the argument that you are trying to make.
That is that cuts in taxes are beneficial to the economy.
The cuts in taxes are only beneficial to the super rich, not to the population at large.
Republicans ran on the promise of jobs, not wealth creation for the wealthy.
ReplyDeleteThey promised to improve the economy, and they haven't. They cannot with the economic polices they propose; all facts supporting their claims are against them.
They were not elected by the majority to put in place the extreme right ideology, not in their economic policy, including taxation, and not their culture wars.
If you have any doubt about that Terry, that they do not represent the will of the people elected them, I suggest you look at the polls including those which indicated that people would vote for democrats, now they've seen republicans in action (or, should I say inaction) if they could have a do over.
Republicans don't look to be faring well in the recall elections either. That suggests to me the Republicans failed to understand what they were actually elected to do.
In any case they aren't doing what they promised, they aren't addressing jobs, or the revenue of more people working, especially the middle class.
Or do you need me to provide the links that show they promised JOBS, not the crap they are doing instead?
The downturn in the economy, including the rise in reported unemployment lies squarely at the feet of the Republicans. With the democrats there was much greater improvement in the stats. That's going to bite the right in the rear in 2011 and 2012.
Every
"Since 2001, the national debt has increased $11.8 trillion. This resulted from a $6.2 trillion decline in revenues and a $5.7 trillion increase in spending."
ReplyDeleteWe have revenue AND spending issues as the causes of our debt Terry. I don't know how to be more clear than this.
That was quoting information from the CBO.
The ultimate point of investments should be that they create jobs. And if we are "alking past one another" it's because you are missing the fundamental points of the argument that you are trying to make.
ReplyDeleteThis is a bizarre response. What argument do you think that I am trying to make? I've made several arguments, none of which tried to make the case that tax cuts created jobs.
As for your claim that "The ultimate point of investments should be that they create jobs."
This isn't just wrong, it's silly. Trade policy can have "creating jobs" as its objective. So can industrial policy. Private investors, of all olitical persuasions, seek return on investment measured in asset appreciation, not "jobs created".
Maybe you are talking about public investment? The federal reserve is already mandated to seek full employment: http://www.federalreserve.gov/pf/pdf/pf_2.pdf
"Republicans ran on the promise of jobs, not wealth creation for the wealthy."
ReplyDeleteAs the Democrats did in 2008. Surely you are not suggesting that the Democrats be allowed more than two years to deliver on their promises when they control the Presidency, the House, and the Senate, while the Republicans be allowed less than one year to deliver on their promises when they control only the House?
That's a valid partisan position, it is not a valid partisanship-free position.
Fer cryin' out loud, Dog Gone, it's like you aren't even trying anymore.
"Since 2001, the national debt has increased $11.8 trillion. This resulted from a $6.2 trillion decline in revenues and a $5.7 trillion increase in spending."
ReplyDeleteCan you give me the link? I'd like to see the context, that is, how much of the increased debt/declining revenues took place before & after 2008.
You need information like that to make an informed, rational judgment.
My apologies Terry - the quote was from the article, which included the link to the Bartlett piece as well as the link to the CBO section that was referenced. The links were present in the piece all the time, but for some reason the color contrast showing the links was showing up when it was posted in the same black as the surrounding type. I've reset the color contrast which should provide the links you request.
ReplyDeleteFYI, I did check a variety of different stats, from the CBO and other sources, some going back as far as 1900 for comparison, and forward through 2010.
I DO multisource, and do try to fact check fairly and extensively Terry before writing, to be as fairly informed as I can be. Since I take a certain amount of teasing and fair criticism for writing 'long' - certainly longer than my friend Laci usually writes - I don't include every source in my posts. This should get you started.
Terry wrote:
As the Democrats did in 2008. Surely you are not suggesting that the Democrats be allowed more than two years to deliver on their promises when they control the Presidency, the House, and the Senate, while the Republicans be allowed less than one year to deliver on their promises when they control only the House?
That's a valid partisan position, it is not a valid partisanship-free position.
Fer cryin' out loud, Dog Gone, it's like you aren't even trying anymore."
The democrats have, during the time they were in the majority in conjunction with the administration, made progress from where the worst job results were after the economic crisis - resulting from Republican decisions related directly to too lax regulation. The Democrats have been delivering on their promises, making steady progress.
The stock market has recovered, manufacturing is at new highs, the contraction of the economy has been over for some time now, marking the technical end of the depression / recession. Jobs have been recovering steadily, until the GOP took power. The GOP claimed credit for progress to which they made no contribution, while they refuse to take credit for the later declines after they've been in majority.
Some changes DO take longer, but this link shows you how very quickly Obama began to turn the job situation around.
In support of the assertion that Obama began to make headway in first reducing the rate of job losses and then in reaching positive job gain territory, I offer this link:
http://stevensonblog.blogs.tuscaloosanews.com/13004/the-bikini-graph-redux/
It was the first one that turned up when I did a jobs bikini graph search. What I like about it is that it is updated through Mar. 2010. I couldn't find one (quickly) more currently updated than that. It shows that Obama and the Dems were effective in the time frame I'm looking for that from the Republicans, an apples to apples comparison.
Republican policies which focus on tax policy that benefits the wealthy are simply not good for jobs, or for economic growth, or for wealth and economic recovery for anyone except the wealthiest.
Republican econmic policy is nothing but regressive wealth redistribution to the already wealthy, who tend - like the Koch Bros. - to be larger donors to the right than to the left, often the extreme right.
Here are slightly more updated versions of the classic bikini graph:
ReplyDeletehttp://www.washingtonmonthly.com/archives/individual/2011_02/027840.php
http://www.washingtonmonthly.com/political-animal/2011_06/jobs_landscape_deteriorates_un029998.php
I'm still looking for the July 2011 version.... this site does one monthly, the first Friday of the month, using Labor Dept. statistics.
In case you were unaware of the kinds of sources I was tracking to write this. I do occasionally ask Laci to put on his economy studies hat and check my content for accuracy from a more scholarly economic perspective, so where appropriate, I'll defer some answers to him if I think he can address an issue more articulately than I can.
Hope this adequately responds to your request for links.
My point is quite simple, Terry.
ReplyDeleteWhat is the point of tax cuts creating investments if only a few people benefit from these investments?
You have prevaricated upon the topic of supply side economics which is supposed to increase income levels. But WHOSE income levels are rising?
Likewise, what is the point of encouraging investment if there isn't a benefit from that investment amongst larger segment of the population?
Your answer concedes that it isn't lower tax rates that accomplish this, but the government. Increased investment does not provide a benefit to society at large, but only a small segment of society.
I think you will find that the British Conservative government's Budget not only includes budget cuts, but also includes tax increases. It is ridiculous for the US right to insist that the tax burden falls on the less wealthy.
Like it or not, wealth is best spread in a more equitable fashion than the regressive policies which the US right is currently advocating.
You have come out in the open and admitted that these policies are not beneficial to the public at large.
As such, they should be abandoned immediately.
Regressive taxation is an incredibly poor economic policy.
Thanks Laci for getting to that response so quickly, given the time difference.
ReplyDeleteI would suggest Terry you might want to look at where a PPE degree is offered - places like Oxford, and the London School of Economics - and what it entails, to appreciate the background Laci brings to the subject.
Further, you accused me of being partisan, unfairly. I have never found credence in the economic idea of trickle down/ supply side economics, and I know the history of it fairly well, all the way back to the late 19th century, not just the 20th. That includes during my earlier days as a conservative, back when it didn't work under the rebranding of Reaganomics.
Given that my economic education - begun as a conservative - included economists who were presidential advisors, and given that YOU are unable to produce anything worthwhile, from any era, to support the asserted effectiveness of the tax cuts to the wealthy, or reduction in revenues on growing the economy (I'm still waiting), I don't think you are in a very good position to try to dismiss this as partisan rhetoric.
Tax cuts to the rich do not grow the economy, they don't result in growth of businesses or hiring.
They result in one thing and one thing only - redistributing wealth to the already wealthy few.
If you want to claim otherwise, please prove it, and back it up with supporting data, preferably from a nonpartisan source.
You can't.
Mr. Chinese Crested wrote:
ReplyDelete"You have prevaricated upon the topic of supply side economics which is supposed to increase income levels. But WHOSE income levels are rising?"
Prevaricated? I hope you did not intend to use that word. I was correcting a highly colored use of an economic term.
Also I did not say that say that it was supposed to increase income levels (whatever that means). I described it (accurately) as an economic policy that is supposed to grow the economy by addressing barriers to the supply of goods and services rather than the demand for goods and services.
Really, Dog Gone, I am at a loss. I can't find where I wrote that giving tax cuts to the rich will provide jobs.
ReplyDeleteI have no idea what expertise Laci brings to the topic, but making a statement like "The ultimate point of investments should be that they create jobs." is silly. It's like womething an 8th grader would write.
If laci has money I would hope that he would put his money where his pen is and give it to an investment service that would promise to create jobs with it instead of giving him a positive return while keeping his capital safe.
No one invests money to create jobs.
Apple inc. has created tens of thousands of manufacturing jobs -- in China. Is this what Laci had in mind?
How about a hundred thousand US minimum wage jobs with no future? Maybe that's what he thinks we should invest to create? Or maybe jobs for illegal aliens?
Sloppy thinking and/or sloppy writing.
And your definition of "supply-side economics came from about.com. It is a step or two below Wikipedia. The author of the article you cite to define "supply-side economics"http://useconomy.about.com/od/fiscalpolicy/p/supply_side.htm, is Kimberly Amadeo. Her about.com bio says of Ms. Amadeo Kimberly is President of WorldMoneyWatch.com. Kimberly is a professional public speaker whose humor and high energy help you focus on the three most important things the economy will do next. Most important, you will receive three practical steps to safeguard both your business and personal financial future.
Here is the Encyclopedia Britannica's definition of supply side economics.
supply-side economics, Theory that focuses on influencing the supply of labour and goods, using tax cuts and benefit cuts as incentives to work and produce goods. It was expounded by the U.S. economist Arthur Laffer (b. 1940) and implemented by Pres. Ronald Reagan in the 1980s. Supporters point to the economic growth of the 1980s as proof of its efficacy; detractors point to the massive federal deficits and speculation that accompanied that growth.
http://www.britannica.com/EBchecked/topic/574677/supply-side-economics
Dog Gone, please don't take this as insult, but I would appreciate it if you did not make appeals to authority based on your experience, education, and the "London School of Economics" until you can tell the difference between an authoritative source and a non-authoritive source. I think you try and make too many points in a single post or comment to make them well.
Terry,
ReplyDeleteFirst, sorry for not replying sooner, but I’m currently on vacation with my family in Montana.
Second, while I understand that you are trying to ask whether I grasp basic economic theory, let me suggest to you the following. I believe we are able to have a respectful dialogue including acknowledging each person has a wealth of experience and reading on various subjects such that our CV isn’t really the issue. Both of us, as well as DG and Laci, are capable, intelligent people, fully able to understand the macro and micro effects of trends we see in the wider world.
Further, you are, as I understand, someone educated and engaged in astronomical observation, not economics. I am someone trained in Information Technology Management, including the management and economies of off-shore production. In that, I authored a 25 page or so paper on off-shoring, as part of one of my senior level courses. I currently work in a banking services firm, directing a network of banks and discussing daily (or nearly daily) the conduct of the Fed, the driving forces behind bank lending policies, the capital markets, etc.. As such, if you would allow me to say so, I feel I’m reasonably conversant in the state of affairs in the US capital markets, including the driving elements of the economies involved. If someone were to look at our two backgrounds, I suspect they’d conclude I was more likely than less to be aware of the economic landscape in the United States, and perhaps even conclude that I was more likely to be aware than you.
to be continued..
continued..
ReplyDeleteHowever, I don’t seek to personalize such a discussion. Whatever my (or your) relative expertise, it does not mean the other is incapable of formulating good opinion, of witnessing the impacts of certain activities over the courses of our respective lives. Consequently, while some people might say I could easily be dismissive of your opinion as simplistic, my reaction is that such conduct is petulant at best. I’m quite certain I can learn from you, as I hope you would accept my opinion is one which may offer a perspective you’ve not yet considered. So, I’m happy to engage in a healthy discussion setting aside any personal reference or slight (or perceived slight), and not requiring a commenter to submit their bona fides before considering the relevance or worth of their opinion. To do otherwise is nothing less than intellectual elitism, and unjustified elitism at that.
So, as to the question and point at hand; my point in stating that those who claim that higher taxes are bad are wrong was not to advocate for unending increases in taxation. I was making the point that those who advocate always and in every situation that taxes are a. always too high and b. always should be cut, are those who have said such cuts work to stimulate investment in productive capacity, and through it, jobs and a stronger, more vibrant economy. That assertion has been proved wholly and utterly flawed and wrong over the past 30 years. With scant little exception, cuts in taxes have had zero correlation to increased investment in sustainable productivity, which is the key to sustainable wealth, at least at the macro-economic level. Furthermore, and probably more importantly, they have probably had the exact opposite effect, stimulating activity by corporate leaders to move jobs to locales where the cost of manufacturing was lower so that stock holders would have a higher return. In a vacuum such activity can be seen as positive, after all, having stocks increase in value is by itself a net positive, but if that valuation is based on the assumption that the service or product offered by that public entity has increased in value solely because there are higher profits, then the stock has exceeded it’s probabilistic fundamental valuation as the goods and services underpinning the stock have not in fact increased in value. Unless those profits ultimately turn into a higher market share or other increased productive capacity (in the same line or a new line) then the profits are merely turned in to higher total worth for the owners, but only at sale, and presumably such sale would depress the value. Regardless, all it’s done is put money in the hands of a small number of people. Worse, at a macro level, net employment (payroll) dollars fall. Consequently, on a par basis, in fact such activity is at best parasitic, not incremental improvement, when compared to the prior environment.
continued..
ReplyDeleteSo, in a short answer to your question, Yes, taking money out of the hands of consumers is bad for an economy, but there are two replies to this. First, such conduct, i.e. taxing an extraordinarily small number of people, pales to insignificance when contrasted against taking money out of the hands of the middle class by changing jobs which paid on average $65,000 into those which pay $40,000 as you switch from professional to service class jobs. We (in the US and Europe) have lost more than 10 Million such jobs just in Information Technology alone. On an annual basis, that results in a loss of 250,000,000 in payroll A YEAR, and that’s just in IT alone and it assumes that all of those IT folks found jobs, which is not the case. If 10% of those number are unemployed, that becomes 285,000,000.00. Worse still, that results in a loss of about 40 Billion in tax receipts (assuming US tax rates). Moving 10 Million jobs from one place to another is not increasing employment, it is cannibalizing it, taking massive amounts of money OUT of the system. The $450 Billion/year tax cuts in the Bush tax cuts would obviously exceed simply this amount, but you must keep in mind that such taxes would be paid by a very small number of people, and much of that through inheritance tax on an even smaller number of people. As such, the lost consumption, the impact to the US consumer economy which makes up 66% of our economy, is far, FAR less.
Further, and also important, taking 250,000,000 (just in IT remember) out of our economy does far more impact than taking 450,000,000 and spending it to EMPLOY government workers, paying Social Security benefits and so on, for that 450,000,000 didn’t (as you assert) disappear from our economy, but rather was spread to far greater hands. Even if it just retired debt, which is a fine idea, using $450,000,000 a year to retire debt still does FAR more good than taking (and now I’ll assume the tax and income impact) 325,000,000 OUT of the economy and instead having it spent to employ people in China.
Consequently, Terry, on your point about economics, like Rodney Dangerfield said in “Back to School”, economics is ivory tower hogwash unless you consider the equally important, real world factors. When doing so, and considering in fact how taxes are used, and what occurs when you destroy jobs one place to create them more cheaply elsewhere, the fact is it is only the ultrawealthy who benefit. Yes, THEY have wealth “created”, but such creation is both hollow (as was seen in the housing and internet booms) and is short sighted for it leads to the parasitic destruction of the more mature economy. Most importantly though, it does great harm to a great number of people, rather than befitting the most possible. My ethic, and those of many people who write on ethics, is that we are bound by good conduct to do the least harm in order to define ourselves as “good.” Such conduct as you seem to desire to see occur would not do the least harm, but instead perhaps the most. It leads to decaying infrastructure, falling tax bases, loss of future, violent unrest and potentially even civil war when the “masses” finally tire of being screwed.
My belief, and the foundation of our country, suggests that promoting the GENERAL WELFARE is the goal of our government, not the utter concentration of influence and power into the hands of a very few. If you believe “creating wealth” for the ultrapowerful is the proper role of government (when done at the expense of the “working man”), then you are as always entitled to your opinion, but please accept that most Americans do not agree. This is part why right wing politicians TALK about job creation, even good job creation sometimes. They may agree with you in principle, but they recognize that trying to sell an economic policy which destroys middle America is a non-starter for it is highly unjust.
ReplyDeleteThat does not mean (so please do not assert) that everyone should be paid equally, clearly those with an ability to sell, manage, or create, are worth more to an employer. Clearly those who put their assets at risk deserve reward, the question has long been, since the time of monarchies, what is a fair dividing line. Most of us feel such a line must be where the largest section of people possilbe live well, while still allowing for a very good lifestyle for those who lead. Such is not the America of 2011.
Also, most of us believe people should work for their fortunes, not inherit them, to do less is to recreate monarchies, and those who are fortunate enough to both have a good idea and have it in the right place at the right time, should recognize that others helped them get there, others worked hard, and most importantly, it is only by creating and sustaining viable employment that their products are sustained and along with that, our communities are sustained. Creating a nation where 10,000 very lucky people have 3,000 people a piece working for them for table scraps is the economic model you are advocating whether you see the end game or not. It is unethical to its core and is why we had an age of enlightenment and a democratic revolution throughout Europe in the 1800’s. Suplant the word “king” with “CEO” and the dynamics are hardly different.
ReplyDeleteLastly, on your point about Bush’s spending and the figures you used. Bush’s war in Iraq cost roughly 2.5 TRILLION dollars, not 100 B per year. It and Afghanistan, which should have been over and done with in two years, have cost 3.5 Trillion to date, or an average of 350 Billion per year. They were also done “off book” meaning they weren’t included in each year’s debt figures. Consequently, in fact Bush’s debt numbers are pretty damned horrible for he was NOT in a middle of an economic crisis thus crashing his tax receipts and vastly increasing his outlays (the primary genesis of Obama’s debt numbers when you factor out stimulus spending). IF you factor our stimulus spending in fact Obama’s debt figure for this year is about 700 Billion (a startling figure to be sure), but if you consider lost tax receipts and increased outlays, his figure drops to roughly 200-300 Billion. Even more, he didn’t create his own tax receipt problem as Bush did. Had Bush NOT enacted his worthless and abjectly flawed and failed tax cuts, he would not have run a deficit in some years. Had he not engaged in the war in Iraq, our debt picture would look far brighter, but most importantly, had Bush not advocated for lax oversight of the bond market, we would have probably struggled through the 2000’s until we found a real source of wealth, such as manufacturing new forms of energy, but our long-term economic outlook would be far better. Please take it from me, the fundamental strength of many stocks is FAR overstated. No meaningful banking reform was passed due in main to HUGE opposition by Republicans.
Obama is no hero on passing new and better oversight, I don’t support or agree with what he’s done, but the roadblocks have been the party of privilege far more so than the Democrats. He also acted when failing to act would have brought about calamity (and by the way EVERY expert I know agrees with that statement, certainly 95% at least of anything I’ve ever heard does), so did Bush act (to his credit), but it is the far right who claims we should not have. That comment belies profound ignorance, and suggests an understanding of economics which fails to grasp the real world realities of how capital markets work. Obama’s new “spending” is a trifling next to Bush’s and mostly it’s for things which actually produce jobs, rather than for things like occupying another country so that your friend’s oil stocks do well. While I don’t love Obama as a President, his conduct at least seems to be for the good of the country, rather than the good of a few privileged few.