So what do you think will happen here?
Who do you think is being rational and why?
Who do you think is being irrational and why?
Other thoughts?
Of course, I am for significant cuts and tax increases. I wish they were going for a lot more than the $1.2 Trillion. So I think both the Left and Right are being a bit irrational... The National Debt has apparently exceeded $15,000,000,000,000 !!! I think I got all those zeros right. Just servicing it at 4% is be $600,000,000,000/yr !!! Cut up those credit cards people !!!
CNN Deficit talks to Blame Game
FOX News $15 Trillion and Counting
FOX News Taxes,Benefits stall committee
Huffington Post Move to Somalia
PBS News Hour Stymied
MinnPost Found Middle?
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Talk about farce taken to the limit! If this "super" committee cut $1.2T from THIS YEARS budget, the debt would still be going up. If they succeed, it will theoretically and ONLY theoretically do that over ten years, a mere 6% or so of what is needed to actually get to a balanced budget. It's ridiculous!
The other thing that's ridiculous is trying to do this by raising taxes. History proves that raising taxes never generates the revenue predicted, and lowers economic growth. But of course we could simply confiscate 100% of what "the 1%" make and then we would only have to find another $1T to cut out of the budget THIS YEAR to get to balance. Of course, the 1% won't be paying anything next year, so....
This whole super-committee is a super-fraud, a grand kabuki theatre intended to give the appearance that our politicians are doing something about a problem that is vastly bigger than they want to admit. With the average family now owing something like $190,000 for the debt alone, somebody needs to take a meat-axe to the budget.
J. Ewing
It seems that history makes your statement suspect.Historical Top Marginal Rate
It seems the GDP was chugging along pretty good when the top marginal rate was much much higher.
GDP
Thoughts?
And a more modern viewpoint.Bloomberg Buffett
I don't know, it looks to me like the top marginal tax rate is more or less irrelevant, or at least indeterminate as far as GDP goes. For example, how fast would GDP have grown IF rates would have been lower, at some points in time? How much slower if they had been higher? It's all speculation. What we DO know is that higher taxes result in lower economic activity, simply because it must. Money taken from the private sector is not available for consumption, capital formation or capital expenditures. QED. We also know (Laffer curve) that higher rates lower government revenues, because people with lots of money can hire more accountants to avoid the taxes, especially with our loophole-riddled tax system.
As for Mr. Buffet, he has ZERO credibility on this. Anytime he wants, he can write a Billion-dollar check to the IRS, but what did he do? He gave $30-something Billion to the Bill Gates Foundation, a private charity. And no doubt took a whopping tax writeoff, as well as avoided estate taxes. He and his ilk are the top 1% of hypocrites in the country.
J. Ewing
"For example, how fast would GDP have grown IF rates would have been lower, at some points in time?"--J.Ewing.
This isn't hypothetical. Rates were gradually raised through the late 80s, and by the mid-90s the economy was roaring. Rate were lowered in the early Bush years. And the economy subsequently went to hell.
The facts are clear, and economists are just as clear on this. Periods of higher taxes yield economic health.
If you want to cut taxes because of some Nordquist religious zeal, fine. But historical data from 1920 disprove your hypothesis.
And I'm weary of the zero-sum argument of public vs. private sector. The two are interwoven--many of the biggest innovations of the modern age were launched in government laboratories (transistors, for instance) and then used and developed to great profit by the private industry. Healthy government produces healthy business and vice-versa.
As for John's original point, I'm squarely in the middle. We need to raise taxes, specifically on those who have enjoyed huge cuts in the past decade. We need to make cuts in the budget, specifically in the biggest budgets like military. We need to adjust entitlements like SS and Medicare to reflect our current demographics. And we need to simultaneously invest in those things that will make us again competitive--like research and education.
--Annie
It is an interesting contrast, let's assume an extremely wealthy investor named Bob earns $100,000,000 in divedends or interest in 2011. Then let's for simplicity sake assume he will pay 35% in taxes or $35,000,000. Pretty astounding to say the least.
As compared to if the top rate was 70%, and he would pay $70,000,000 in taxes. The difference is therefore $35,000,000.
Avoiding the "it's theft and wrong argument" for now, how would that $35,000,000 best help America?
Now if the rate stays low, Bob will very likely re-invest a large amount of $35,000,000 into the market or property. I mean, he is a saver and investor. This will provide capital so that companies can invest and grow. Also, it will help raise the value of our investments.
Now if the rate goes up, the government will most assuredly distribute the $35,000,000 as fast it can per the budget. Meaning it will land directly in the pockets of many people and companies very quickly. (ie salaries, benefits, grants, etc) And many of these people will then spend it quickly.
Now which is better for America and why?
There isn't much reason to think tax increase have a negative impact on growth. We have been prosperous during high tax eras and in recession during low tax eras. And the reality is, what taxes pay for has to be paid for, one way or another.
--Hiram
You ask a very good question, John. If the presumption is that the government spends every nickel it gets (and another besides), is the economy more helped by this consumption than by an equivalent consumption by the millionaire? Or by the re-investment of those dollars? I believe these are, in descending order: the private re-investment is the best thing to do with the money, because it will grow the economy. Second best is to have the millionaire spend his own money, on something he wants. It's consumption and doesn't grow the economy, but it does contribute to GDP. The worst possible thing to do with that money is to let government spend it. For example, they spend almost $1Trillion on a "stimulus" bill that created "jobs" at about $1million each and paid maybe $30K. WHERE did that money go, and can we ever get it back? I would say it was wasted.
J. Ewing
Hiram,
I think this statement is just plain old incorrect.... "And the reality is, what taxes pay for has to be paid for, one way or another." The reality is that a great deal of the spending by Government, Business and Individuals is discretionary.
J,
I personally have no faith in any statistics regarding "how many jobs were created" by any particular expenditure. It is simply too complicated to even consider measuring.
Is a job that was on track to be lost without the infusion a "created job"? Or is it only counted if the infusion pays someone?
If the well is failing intermittently and you add some water in the priming area. Then the well starts to perform better... Did the incremental flow prevent the well from failing or was it wasted? I suppose the judgements will vary depeding if the person voted for adding the water or not.
So did the $1 trillion just disappear or did it save our economy from a full fledge Depression? The world will never know for sure... Though I am quite sure the Left & Right will claim to be certain...G2A Woulda Shoulda Coulda
Huge portions of the federal budget aren't discretionary, those are the entitlements. And much of what remains might as well be considered entitlements, principally the military. But the reality is, America is getting older, and that's an expensive thing to do. Somebody has to get the bill for that. If not the government, who?
--Hiram
Since "entitlement" laws can be changed and Military bases can be closed, most of the spend can be adjusted if folks want to bad enough. The question is are we willing to live with the consequences? Or potential consequences?
"Since "entitlement" laws can be changed and Military bases can be closed, most of the spend can be adjusted if folks want to bad enough. The question is are we willing to live with the consequences? Or potential consequences?"
Laws can be changed, but not necessarily entitlements. There is a reason the Social Security trust fund takes the form of bonds. We aren't willing to live with the consequences of reducing the budget deficit which is why the budget deficit doesn't get reduced.
--Hiram
Suppose you are "entitled" to your rich uncle's huge country estate house upon his death. Unfortunately, a freak cyclone crushes it, and uncle, to the ground and the subsequent fire not only destroys the rest, but sets fire to neighboring fields and homes, leaving his estate with $3.5million in damage claims. Frugal uncle had no insurance. Now, how valuable was that entitlement?
It's the same as your Social Security or Medicare. If there is no money with which to pay those benefits, how do you expect to collect? Within ten years, we are told, the top three entitlements will consume every tax dollar coming into the Treasury. After that, they will consume MORE, but of course they cannot. I suppose fiscal sanity will eventually come to Washington, but it seems as if the only way it will happen is in the most painful way possible.
J. Ewing
"If there is no money with which to pay those benefits, how do you expect to collect?"
As with any debt, you foreclose on assets.
--Hiram
Ah, but Social Security and Medicare are not debts, they are entitlements, and there is a vast difference. Yes, government pays your claim so long as the money is there to pay it, but at any time they can simply refuse to pay, and your claim has zero value in court.
J. Ewing
"Ah, but Social Security and Medicare are not debts, they are entitlements, and there is a vast difference."
The Social Security bonds are debts, because they are bonds. And one way or another, the government is obligated to honor bonds.
--Hiram
CNN Failure
CNN Gone Nuts
By the way, still waiting for opinions regarding where is the better place for the $35 million and why?
I believe I have answered that question, whether it's $35 million or $10 billion.
"You ask a very good question, John. If the presumption is that the government spends every nickel it gets (and another besides), is the economy more helped by this consumption than by an equivalent consumption by the millionaire? Or by the re-investment of those dollars? I believe these are, in descending order: the private re-investment is the best thing to do with the money, because it will grow the economy. Second best is to have the millionaire spend his own money, on something he wants. It's consumption and doesn't grow the economy, but it does contribute to GDP. The worst possible thing to do with that money is to let government spend it." on something we don't need and don't want, in an incredibly wasteful way.
J.Ewing
J,
I guess I was looking for a bit more rationale. I see nothing other than opinion in your answer.
Liberals,
You keep saying you want government to take this hypothetical $35 million from this citizen. (ie tax the rich) How do you envision the government using this money to improve our economy and long term quality of life in the USA?
I can go either way on this one, so please sway me....
The public needs of the country are far greater than $35 million. One of my favorite proposals is $25 billion for fixing America's schools today. FAST
Not only can we upgrade our decrepit schools, we could put hundreds (or thousands) in the building trades back to work. The hedge fund manager paying a higher tax rate will have plenty of $ left for his luxury yacht and vacation homes.
My spouse was saying just yesterday that all of the Bush tax cuts should expire, including the middle class one that is to our benefit. I must say that I agree with him. The govt could put the $ to better use than us eating out frequently. I'd say more but I got to run. We are eating out before going to the movie (at the budget theater)
I am not sure there is an inherent benefit in fixing up the school buildings, however the revenues generated by the construction businesses and their employee's should be beneficial to our economy. Since paid workers and companies definitely buy more product and services than out of work folk and companies.
This is why I am on the fence. If everyone continually saved and invested, no one would be buying and spending. So it seems to me that some balance needs to be attained to have the optimal solution. Mr Buffett can own all the companies, but if no one is buying the company's product. They will be worthless sooner or later...
"I am not sure there is an inherent benefit in fixing up the school buildings"
I prefer my children (and all children) go to school in buildings that are safe, attractive and well maintained. Based on a news story I saw awhile ago, this is not the case for many students, but I could not find a good link. Someone should post a video on you tube of schools in dire need of repair, though not all needed renovation makes for good video. My school district did much work over the summer that kept the high school closed, though I couldn't say what they did.
Seems to me the fallacy here is in assuming that the federal government spends money more wisely than a local school district would given the same amount of money. And, in fact, it is known fact that Minnesota only gets back about 70 cents of every federal tax dollar we sent to Washington. If we wanted our schools repaired we would be money ahead to simply chip in and do it ourselves. In fact, every school district in Minnesota has that right, to call for a binding referendum for capital improvements to the schools. If the voters agree with the need, it gets done. What's wrong with that?
The second fallacy continues to be that, if you believe Washington spends your money more wisely than you can, then by all means send in every nickel you can spare. Nothing stops you. Nothing stopped Mr. Warren Buffett from giving $30 billion of his fortune to the IRS, but instead he gave it to a private charitable foundation. That ought to tell you something.
J. Ewing
Annie said "This isn't hypothetical. Rates were gradually raised through the late 80s, and by the mid-90s the economy was roaring. Rate were lowered in the early Bush years. And the economy subsequently went to hell."
Yes, it is hypothetical. You are hypothesizing that the high tax rates were what caused the economy to grow, but even if I could squeeze that interpretation out of your data, which I cannot, correlation does not prove causation. You should look at government REVENUE, which DOES have a direct causal link from tax rates, and you will find that government revenue went up after Jack Kennedy cut tax rates, and again after Reagan cut tax rates, and again when Bush cut tax rates. The problem has always been that spending, under Democrat-controlled Congresses, has increased faster than revenues, leading to deficits, debt and desolation of our economy.
Annie said "The facts are clear, and economists are just as clear on this. Periods of higher taxes yield economic health."
Really? Or is it the other way around?
Annie said "If you want to cut taxes because of some Nordquist religious zeal, fine. But historical data from 1920 disprove your hypothesis."
I want to cut rates because it is impossible for government to correctly make the trillions of individual decisions required to grow an economy. Put another way, you can spend your money more wisely than government can.
J. Ewing
Annie said, "And I'm weary of the zero-sum argument of public vs. private sector. The two are interwoven--many of the biggest innovations of the modern age were launched in government laboratories (transistors, for instance) and then used and developed to great profit by the private industry. Healthy government produces healthy business and vice-versa."
And I am weary of people who believe that federal money is not only the answer to all problems but blooms year-round on huge money-bush plantations in DC. The simple fact is that the federal government cannot spend one dime that it does not first extract from the private economy by way of taxes, borrowing (against future taxes), or by inflating the currency (the cruelest tax of all). We can go into each of them if you like, but the simple fact remains that if the private economy does not grow and thrive, there is nothing government can do for the overall economy.
Annie said, "As for John's original point, I'm squarely in the middle. We need to raise taxes, specifically on those who have enjoyed huge cuts in the past decade."
Okay, I will agree to that but I do not think it is what either of us really wants to do. The people who got the biggest tax rate cuts under Bush were those at the BOTTOM of the income scale, with the bottom tax rate going from 15% to 10%, for example, and when raising the brackets put MILLIONS of the lowest income people off the tax rolls entirely.
Annie said, "We need to make cuts in the budget, specifically in the biggest budgets like military. We need to adjust entitlements like SS and Medicare to reflect our current demographics. And we need to simultaneously invest in those things that will make us again competitive--like research and education."
Apparently you missed the part of my first post, where I tried to explain that there is not enough money among the wealthy, even at the highest marginal rates (and assuming the rich actually PAID them, which of course they don't) to make a serious dent in the deficit for THIS YEAR'S federal budget. There is NO amount of taxation of the rich that will prevent the federal debt from getting larger! The solution, as it has always been, is that the federal budget needs to be radically cut – by about 40%! That would be the 40%, by the way, that spending has increased under Obama. Please remember that the federal budget deficit under one year of Obama is 10 TIMES what it was under President Bush. And that was with those horrible "tax cuts for the rich" in place!
Now there is a place for government to fund BASIC research (it brings in a lot of money to universities) that most private corporations could not and would not support on their own (because most of it yields nothing useful). I think there's room to cut back on some of that, too, but taken as a whole it's a drop in the bucket. I'll give you all of that if you turn Medicaid back to the states, to do as they will with it. That by itself would save more than you would ever get by taxing the rich.
J. Ewing
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