I know the Republican plan is vague at best, and disastrous at worst. But at least they say they will cut things. Whereas Obama seems to be planning tax cuts for the 95% and tons of expensive programs aimed at securing the Public Employee, Socialist Leaning and Low Income vote. Many of his ideas seem rational at the surface, however no where did he explain where all this cash is coming from. Or how he is going to make Government more effective and efficient while the Public Employee Unions are still holding the reins?
These were some of his talking points. Everyone should:
- Have a fair shot
- Pay their fair share
- Play by the same rules
It reminded me very much so of the Bar Stool Economics post. Fair is apparently a very relative term.
Your thoughts?
57 comments:
Mitt Romney has promised to spend more too. And Mitt Romney wants to restore Obama's cuts particularly in the area of health care. And the cuts he does want to make, particularly in Social Security, aren't politically viable.
I think it's important to get away from this notion that the Republican Party is the party of fiscal responsibility. They want to spend more in the military. Their position toward health care and Social Security aren't realistic or responsive to the problems we face. In the face of huge deficits caused by tax cuts in the past that were never paid for, they want to cut taxes more, not on those best able to afford to pay taxes, but on those who have already borne the burdens created by these difficult economic times.
--Hirsm
As always, lets focus on what government actually spends money on. The federal government spends money on three things that matter; Social Security, health care, and the military. Mitt Romney wants to raise spending substantially on the military. So in order to cut spending, he must cut Social Security and health care. And he has also told us that he doesn't want to cut health care, indeed that he wants to restore cuts made by the president and supported by his own vice presidential candidate. So that leaves Social Security, and that means the tax cuts he wants to give himself and his wealthy friends will be paid for by America's elderly, who in Mitt's Ayn Rand influenced world, we don't seem to need anymore.
--Hiram
I realize that all of "their lips are moving".... I was just hoping for a bit more reality from the sitting and "experienced" President. (also, it was late and I was crabby)
The bar stool thing always kind of stumps me. It just seems to me a very complicated way of explaining that rich people benefit more from tax breaks than poor people, something we all pretty much knew. It's something of a leveraged system in that respect. So what of it? Is this a reason why taxes should never change? If we raise taxes slightly, across the board, will rich people decide to give up being rich? Leave the bar, in the bar stool analogy? Withdraw their services in an Atlas Shrugged analogy? Unlikely. Rich people got rich because of their avarice, because they really, really like the beer, and they refuse to give it up.
--Hiram
I can tell you were crabby; if not, your bias is showing.
With a wave of your hand, you describe the Republican platform as being vague, but mitigate that concern with "at least they want to make cuts." Then you lambaste Obama for lacking details and promising everything but the kitchen sink. When you throw in the term "socialist," I can't help but dismiss your analysis altogether. You might as well talk about Social Security and Medicare as being "entitlement programs," and the 1% as being "job creators."
As for the barstool analogy, I've yet to see an effective analogy to how government works. People have talked about the federal budget in terms of the household budget you create at your kitchen table, which is such a flawed analysis to render it a non-starter. To begin with, the bar metaphor fails to take in all of the nuances of citizenship, the tax code's bias toward the wealthy and corporations, and the other taxes paid by those whom you describe as not paying taxes.
There are serious, substantial, and specific differences between the two platforms and two candidates that bear more careful analysis. I read too many comments from people whom aren't seeing the forest for the trees, supporting a platform and candidate that will have substantial effects on them, their children, and their grandchildren, yet they focus on the idealogy because of its simplicity and how it is spoon-fed to them rather than taking the time and making the effort to think hard about the long-term effects. One example is Social Security. Given what happened in the markets four years ago, that anyone thinks that its privatization is a good thing is beyond me. Yet people seem not be giving it a second thought.
Well, thinking about Social Security, privatization would be a very good thing. It would stabilize the markets and cause our economy to expand greatly. It would provide more retirement security than the current system because it would NOT be going broke as the current system already is. Adding Obama's silly Social Security tax cut simply accelerated the decline of the SS system )and increased the deficit), by cutting the ONLY money coming in to pay benefits that must still, of course, be paid.
Yes, careful analysis is desirable, but in the end there are still only two choices for President. Once you have resolved, in your own mind, the proper choice for 3 or 4 reasons, you can stop looking. What complicates things is that we invest so much energy and importance to the Presidential race that we forget about the House and Senate, and State House and Senate, and all the other races that may have a more direct impact on our lives and more power to control events than the President has.
J. Ewing
I've yet to see an effective analogy to how government works.
Actually, if you change the terms, the bar stool analogy works for government as well. Social Security, for example, benefits poor people more than rich people. What the bar stool analogy says is that cuts in taxes benefit rich people more than poor people. Obversely, the bar stool analogy also shows that cuts in Social Security hurt poor people more than rich people. It's the same principle.
Properly understood, I think household economics can serve as a metaphor for government finance just fine. But in order to do that, what you have to understand is that household economics is far more complicated than just paying the bills at the end of the month. You have to factor in things like long term debt, the mortgage, various deferred forms of savings, and assumptions about long term insurance programs, like medicare and social security.
Basically, as a country, we haven't saved enough for our retirement. So the costs of that retirement are going to be higher. That's a given, and that's not something we can go back in time and change. What we can do is start addressing those problems now, and that's what Democrats are trying to do. What Republicans are trying to do is push those problems further down the road, proposing jury rigged changes for future retirees, and factoring in assumptions of unrealistic growth, made more unrealistic by the way, by the failure to deal with the problems now.
--Hiram
Anon,
Please answer 2 questions for me.
Are "Payroll Taxes" a Tax or a Mandatory Saving & Insurance account in your opinion?
If the President says: "WE" will pay for your Healthcare, College, etc if you can not afford it. And jokes about "getting loans from your parents" as if this shouldn't be the primary path. What better term should I use than "Socialistic Leaning"?
I wonder who that we is....
As for privatizing Social Security. I don't think it will ever work. There are too many people out there with little to no self discipline.
As for the "Stock Market Disaster"... I didn't lose a thing because I never sold and I am about even again. In some ways I am ahead because I kept buying right through the down turn...
If folks freaked and sold low, and then did not get back in for the increase. Then I thank them for my profits and think they should stay out of volatile investments. Maybe a nice Gov't Bond would match their level of acceptable risk.
"Are "Payroll Taxes" a Tax or a Mandatory Saving & Insurance account in your opinion?"
They are taxes on payroll, a form of income tax.
Privatizing Social Security was an idea that reached it's peak during the stock market bubble. It was in fact evidence of bubble thinking, assuming as it did that markets were far safer than they actually were. For a lot of reasons, it's a bad idea. One of them is that it would reduce the effective diversification of retirement savings, by aligning Social Security with stock investments when it's best that they should be independent of each other.
I think the stock market is pretty much dead now and for the foreseeable future. What we now know really happens is that the real money made from stocks goes to private investors, the recent public offering of Facebook being a case in point.
--Hiram
Anon,
If they are taxes, then Social Security, Medicare, Unemployment Insurance, etc are all entitlements similar to TANF and other welfare programs. Thus they are all open to being renegotiated at any time. (ie reduced, increased, eliminated, etc)
Where as if they are mandatory savings and insurance plans, then they should be off limits. (ie just like a savings account) However I would not then count them as a tax on the low income. since they expect to get their money back. (ie it's just an investment)
Thoughts?
Hiram,
I hope not, I am all in on the market...
Related Posts:
G2A FICA: Income vs Benefit
G2A Buffett Rule
Now when to buy and when to sell? Because it sure has been active and a lot of money is trading hands.
Stock Index
If they are taxes, then Social Security, Medicare, Unemployment Insurance, etc are all entitlements similar to TANF and other welfare programs.
How we pay for our commitments can be flexible and subject to change. That doesn't mean our commitments are. Your bank doesn't care how you pay for your mortgage, just that you make your payments.
--Hiram
"What we can do is start addressing those problems now, and that's what Democrats are trying to do. What Republicans are trying to do is push those problems further down the road, proposing jury rigged changes for future retirees, and factoring in assumptions of unrealistic growth, made more unrealistic by the way, by the failure to deal with the problems now. " -- hiram
hiram, I don't know how you continue to get these things exactly backwards, but you do. I don't know what Democrats intend to do, but they have SAID that SS is OK until 2040 or something because the "trust fund" will pay benefits. Surely you know that is a complete lie, and that there is no money-- i.e. liquid asset-- in that fund? What Democrats have DONE is to cut social security taxes, thereby hastening the day when the "trust fund" runs out. Neither words nor actions have done anything to "save" the program and in fact it's pretty much unsustainable. It's a Ponzi scheme. Not only that, it should not be sustained, because it's a lousy "investment" for almost everybody. Putting your money in a bank CD would give a better return, and putting your money in the DJIA 10, 20 or 30 years ago would have made you rich.
Republicans, on the other hand, have seen what can be accomplished by privatization. Looking at Chile, or Houston, we see people retiring earlier, with vastly greater wealth, and an economy growing by 9% per year, in the case of Chile. Some Republicans, notably my own Senator, have proposed a gradual cutover (over 30 years) to a private system, and the math works. It's the only reasonable alternative to a system that is already failing.
J. Ewing
And if you are worried about irresponsible folks (I notice no one ever puts themselves in that category) then you simply do as Chile did, and as we do now, and make the FICA tax mandatory but reserved for a personal retirement account. Done. If you want to go further, as Chile did, and limit the types of investments that can be chosen, you can add even more security (and sacrifice potentially higher returns that come with risk), you can do that, too. In simple terms, using personal irresponsibility OR the stock market wobbles as a bugbear against privatization just marks you as another delusional socialist.
Anons,
Please humor us and add a name at the end of your comments. Any name is fine, it just helps us keep the comments and views straight.
Hiram,
If you put money in with the expectation that you will get that money plus interest back, it is an investment. Or if you expect to get insurance benefits back, that is a premium.
If this is what they are, then Liberals should stop saying that the poor are so "highly taxed"...
By the way, "commitments" sounds a lot like "entitlements" to me.
There really isn't anything unsustainable about Social Security. The way Ronald Reagan set up the program backing in 1983 is working just fine. Lowering payroll taxes means some accounting adjustments, but no overall changes to the program.
--Hiram
O come now... According to that logic, then it would be okay for corporations to not fully fund their pension trust funds...
The reality is that if you make lower contributions today, your nest egg will not last as long.
Remember, that is why many citizens are not ready for retirement. They underfunded their savings account when they were younger.
Whereas I was taught at a young age to save hard early, invest wisely and then you can lower your savings rate later. That meant I drove a 77 chev pickup when I could have paid cash for a much nicer car. Now things are pretty cool. Thanks Dad and Mom !!!!
By lowering the FICA, Obama is just underfunding an at risk Pention Trust Fund...
it would be okay for corporations to not fully fund their pension trust funds
The government doesn't have the equivalent of a separate pension fund. Social Security is a general obligation of the federal government. Pensions are a general obligation of corporations as well, but they are required to maintain separate pension funds because of the risks involved in corporations generally, in particular bankruptcy. Ronald Reagan never required that of the government because it never occurred to him that the government would dishonor it's obligations. That possibility has been brought to the table only recently by Republicans.
--Hiram
"By lowering the FICA, Obama is just underfunding an at risk Pention Trust Fund..."
There is no such fund. Social Security is paid out of the general obligation funds of the federal government, the same place the Pentagon gets it's money. Slowing or stopping altogether, FICA withholding would have no effect at all on Social Security payments. Or on Pentagon funding for that matter.
--Hiram
I watched the speech and didn't hear the parts about the "tons of expensive programs." Obamacare includes the taxes necessary to pay for it and won't increase the deficit. If concern about the reducing the deficit was my #1 issue I would vote for Obama. Romney's tax cuts for the wealthy will in no way be paid for by sufficient spending cuts. History shows that dems are the more fiscally responsible party.
Laurie, you have to start learning to take Obama's statements as the good intentions that they are, and not statements with any basis in fact or something that can be achieved in the real world where the rest of us have to live. Start with Obamacare's cutting of $725Billion from Medicare, spending it on Obamacare, and then claiming it as deficit reduction. It's double-counting and doubletalk.
And everybody from Kennedy on down, including Obama, has either said and/or proven that cutting taxes, ESPECIALLY on the wealthy, grows the economy and federal revenues to more than pay for the cuts. This idea that the rich aren't paying their "fair share" when the top 1% pay 37% of the taxes is an outrageous fiction. Tell you what: let's just do away with all of the Bush tax cuts. Several million people will see their taxes increase by 100% and several million more will see increases of 50% or more. Only a few will see increases lower than 10%, but those will be the top 1%! The biggest increases will be for the lowest incomes!
I think the problem of defining the "fiscally responsible party" is that we tend to look at the president's party rather than the party controlling Congress. And spending decisions carry over for many years or, as Reagan said, "the closest thing on this earth to eternal life is a government program." At least Republicans have proposed a balanced budget amendment to the Constitution, which Democrats have vehemently opposed.
J. Ewing
Laurie,
Here is a list of expensive promises in his own words.
FOX News Obama Transcript
"It'll require common effort, shared responsibility, and the kind of bold, persistent experimentation that Franklin Roosevelt pursued during the only crisis worse than this one."
"We can choose a future where we export more products and outsource fewer jobs."
"We can gut education, or we can decide that in the United States of America, no child should have her dreams deferred because of a crowded classroom or a crumbling school."
"No family should have to set aside a college acceptance letter because they don't have the money."
"Help me recruit 100,000 math and science teachers within ten years, and improve early childhood education."
"Help us work with colleges and universities to cut in half the growth of tuition costs over the next ten years."
"You're the reason there's a little girl with a heart disorder in Phoenix who'll get the surgery she needs because an insurance company can't limit her coverage."
"You're the reason a young man in Colorado who never thought he'd be able to afford his dream of earning a medical degree is about to get that chance."
"We leave no one behind. "
From what I see, he wants to expand FDR's govt sppt concept, raise costs (ie carrots & sticks) to force jobs back into America, maintain Medicare roughly as is, provide unlimited health insurance, increase education funding without resolving Union issues (ie throw money at it & hire more Teachers), pay for or subsidize higher education, cut tuition increases?, pay for medical degrees?, and Save Everyone?
If you think these can be done while reducing Gov't spending, the Yearly Deficit and National Debt, I have a bridge I would like to sell you.
J-
about "Obamacare's cutting of $725Billion from Medicare, spending it on Obamacare" - it is quite confusing but to my understaning the medicare cuts were a part of Obamacare that extends the solvency of medicare by 8 years (these $ were not used to fund healthcare for undeserving poor people.)
Medicare’s Piggy Bank
about " And everybody from Kennedy on down, including Obama, has either said and/or proven that cutting taxes, ESPECIALLY on the wealthy, grows the economy and federal revenues to more than pay for the cuts"- I believe this is completely false. Maybe you should try researching to find a credible source to back up this claim. I would find a source to disprove your claim, but as I am certain you would find it unpersuasive I am not going to waste my time.
Hiram,
Some light reading.Hoover 5 SS and Medicare Myths Written by one of the trustees of both programs.
Some of my favorite quotes.
"The argument that Social Security "can’t add to the deficit" is founded on the idea that the program is self-financing, so it can’t spend on benefits beyond what it previously generated in revenues. The money and spending authority now in Social Security’s Trust Funds, it is asserted, simply represent the amount by which the program has thus far reduced federal deficits. In 2036, therefore, when the Trust Funds are depleted, the program’s net effect on the debt to date would theoretically be zero. It can never become a net negative, so the story goes, because the program lacks borrowing authority."
Insolvency is defined as when the Trust Fund is exhausted. (and yes the trust fund is all invested in those special US Bonds)
"Much of this might well hold water were it not for certain unavoidable realities. First, not all of the money in Social Security’s Trust Funds represents past surplus taxes paid by anyone. Some of the debt was simply issued without any incoming taxes behind it. This year, for example, the Social Security payroll tax was cut while—to make up for the lost revenue—the same law issued $105 billion in further Treasury bonds to its Trust Funds."
Of course the good news is it looks like the Federal Gov't paid $105 BILLION to the SS Trust fund. (ie additional bonds) Even though they did not collect the money in Payroll Taxes.
It seems it really might be a tax, since they added to the TRUST FUND with out collecting the cash.
Laurie,
My simple summary of the FactChecker article.
Both Obama and Romney are planning to forcefully slow Medicare payment rate of increase. Many think these won't hold because the Healthcare system will refuse to treat the patients for that "lower than market fee". So Congress will need to increase the costs again.
Obama is apparently issuing the IOU's to the Medicare Trust fund and using the cash to fund Obamacare in the short term. However the bonds will be redeemed later and we will have to pay up.
Kind of like the $105 Billion in IOU's he sent to SS to cover the lower payroll tax. The bill will come due sooner or later.
J,
I agree with Laurie here. Show us the source of this outlandish claim.
"And everybody from Kennedy on down, including Obama, has either said and/or proven that cutting taxes, ESPECIALLY on the wealthy, grows the economy and federal revenues to more than pay for the cuts."
I am somewhat of a Republican and I can't even believe it.
J,
By your rule we should set all tax rates to ZERO in order to maximize revenues...
Now that is simply not good arithmetic.
It may do wonders for the GDP, but the Tax Revenues will still be ZERO.
As online is research is just so darn easy I can't help myself.
"A review of data from the White House Office of Management and Budget shows that tax revenues did not consistently increase after the Bush tax cuts went into effect." (CBS money watch)
and
"Thus, there is little evidence to support that the Bush tax cuts had a significant effect on growth. In addition, contrary to the argument that the tax cuts would pay for themselves being made at the time the tax cuts were enacted, the deficit ballooned as a result of the tax cuts." (CBS money watch)
John,
Thanks for your list of examples and what you infer from these Obama quotes.
I infer differently. I believe Obama wants to try innovative programs and investments to bolster our under performing economy and make us more competitive. He would like to maintain funding for college financial aid, slightly increase funding for preK-12 education, encourage job growth through trade agreements and the tax code. He would also reduce insurance co. profits slightly with his medical loss ratio (requirement that 80-85% of premium payments be used to provide care)
It is my understanding that Obama and the dems think the recovery is too fragile for large spending cuts now, but would find small spending cuts to pay for new programs or spending increases in some areas. When unemployment is lower than 6% it will be the right time to make serious reductions in the deficit, using a balanced approach which includes tax increases (in addition to the one on the wealthy which he is proposing now.)
"Insolvency is defined as when the Trust Fund is exhausted. (and yes the trust fund is all invested in those special US Bonds)"
Is that your definition or someone else's? Insolvency, actually, is defined as the inability of a debtor to pay his debts. We are actually cutting, not raising taxes, so it seems to me the argument that we can't pay our debts is untenable.
Social Security can have an impact on the deficit. All those surplus payments made over the years were used to buy bonds and added to the deficit, and are part of the accumulated debt today. When we reduce taxes, without reducing spending, we add to the deficit. But with respect to the deficit and the debt, it doesn't matter what taxes we reduce, or what cuts we choose not to make. There isn't a Social Security trust fund, just as there isn't a Pentagon trust fund. Each entity has financial obligations that are met out of the same general fund. The Q and A uses a lot of words, and employes several straw men, but doesn't really say anything different once you boil it down.
The overall problem remains the same. We want more than we are willing to pay for. And we have made binding commitments in the past, that are now coming due, something a lot of people don't or at least pretend not to understand. We spent that Social Security money in 1983, just as you spend money at Target when you present your credit card. In neither case, can we change that spending now that we are getting the bills in the mail.
--Hiram
Laurie,
If he wins, we will find out which interpretation of his words is correct. Referencing FDR, unlimited healthcare payouts, saving everyone, etc seems very disturbing.
Hiram,
"There isn't a Social Security trust fund,"
Now you are just being stubborn. I gave you a link to an article about the TRUST FUND written by one of it's TRUSTEEs.
There is Trust Fund that is paying the bills for the COMMITMENT / ENTITLEMENT for now. When payouts exceed incoming revenues and the bonds are all spent, it by itself will not be able to honor its obligations.
Then a more direct infusion of cash will need to come from somewhere in the general fund.
There is Trust Fund that is paying the bills for the COMMITMENT / ENTITLEMENT for now.
No, for the most part, as the guy says, current recipients are being paid by current workers. For most years, more money has been coming into the system than going out. Since that money was used to buy bonds, that resulted in spending which added to the public debt. In theory, now that outflows exceed inflows, if we were paying for the shortfall by cashing in those bonds, we would be reducing, not increasing the public debt. We are not, of course, we are simply paying those obligations by refinancing the overall debt.
"There is Trust Fund that is paying the bills for the COMMITMENT / ENTITLEMENT for now. When payouts exceed incoming revenues and the bonds are all spent, it by itself will not be able to honor its obligations."
Think of it like a corporation. A corporation may have chosen to establish a fund to pay certain debt obligations it might have. It may have even been required by law to do that as is the case with pensions. If, for some reason, that fund runs out of money, is the corporation relieved of it's obligation to pay it's debts? It is not. It would simply be required to make those payments out of the general funds of the corporation. It's the same with government except government doesn't maintain a separate fund out of which Social Security payments are made. And the article, with all it's verbosity, doesn't say anything different.
==Hiram
Blahous in this article is correcting misunderstandings that people really shouldn't have:
"The reason that the Trust Fund is projected to last until 2036 is not because Baby Boomers have pre-funded a quarter-century’s worth of benefit payments. To the contrary, the Trust Funds are never projected to hold enough assets to fund more than about three and a half years’ worth of payments. From now through 2036, well more than four-fifths of the funds to finance benefit payments will be derived from taxes coming in from younger workers."
If Social Security isn't pre-funded, and it isn't, where is the trust fund, and why would one even be needed? What Blauhaos is calling the trust fund is the accumulated surpluses, which exist not in some sort of special account where actual money resides, but in a collection of bonds. The cost of those bonds constituted general government spending over the decades they were accumulated, and to the extent government spending was not matched by revenue, added to the debt.
--Hiram
By the way, the guy doesn't understand what insolvency is. Or at least he is thinking of it in some sort of economic sense when it is in fact more of a legal or financial term. As I noted earlier, insolvency is an inability to pay debts. We live in the richest country in the world. We buy ourselves car elevators and iPads. We lower our taxes, and increase spending. Each of these things absolutely contradicts the notion that as a nation, we are unable to pay our debts. Rather, we just don't like our debts, we wish they were lower, or that we didn't have to pay them. Some among us have the notion that if we hire Mitt Romney as president, he will negotiate those debts away, as he did when he was in the private sector when his own business was collapsing into bankruptcy. It should be impossible for the federal government to do that. For one thing it would violate the constitution. But Mitt speaks for a lot people who despite their reverence the constitution, never seem to have actually read it. And who when you come down to it, are so many self indulgent baby boomers who after having received the benefits of living in this country, don't want to pay the bills for it as they come due.
--Hiram
Well said, hiram. What I would add is that Social Security, while it does not HAVE to be paid (courts have ruled that Congress may reduce or cancel benefits at any time), it nonetheless is an "obligation" of the government and will be paid by money from the general fund "redeeming" those bonds, depleting the trust funds and, unless the general fund is running a surplus, add to the deficit still further.
J. Ewing
paid by money from the general fund "redeeming" those bonds, depleting the trust funds and, unless the general fund is running a surplus, add to the deficit still further.
When the bonds are "redeemed" by money from the general fund, the deficit goes down. When the budget is in deficit, more bonds are issued. As the article suggests, there are some interest consequences to think about, but basically it's a wash.
In balance sheet terms, the debt generated by the Social Security system is no different from any other federal debt.
==Hiram
"J,
By your rule we should set all tax rates to ZERO in order to maximize revenues..." -- John
Please refer to the Laffer Curve. What you think about taxing the rich really revolves around where you think the Laffer Curve "bends"
but also recognizing that, if maximizing government revenue is NOT what should drive tax rates [funding the essential functions of government should be] then the number for maximizing economic growth is substantially lower.
Also recognize that many other factors are involved. Reagan's tax cuts grew the economy (and revenues), but deficits increased because Congress increased spending even more. That to me is the greatest reason for not increasing taxes: that until spending is brought under control-- consistently balanced budgets or surpluses with no gimmicks-- every nickel of new revenue is going down a rathole. And here's something else to think about: Increasing taxes to 100% on the top 1% would bring in less than HALF what would be needed to cover this year's deficit. What Obama is talking about doing, letting the Bush tax cuts expire for ALL of "the rich," would barely make a dent. Seems to me we have a spending problem, not a revenue problem.
http://voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.html
J. Ewing
The problem with taxing the rich is that they have so many perfectly legal strategies available to them to avoid taxation.
Reagan during his term mostly raised taxes, and the economy did struggle. Reviewing the history of the last few decades, the economy has often performed when higher taxes prevailed and less well when tax rates were lower. In the Bush year, the economy struggled and much of what little strength it had was financed by the real estate bubble. During the years of the really punitive tax rates, Ronald Reagan rebelled against the economy performed exceedingly well. It does indeed baffle me how the economy could do as well as it did with 90% marginal tax rates.
I really doubt that the increases in tax rates for upper income earners Democrats are proposing would have much impact at all on the economy. Closing various loopholes such as the carried interest deduction Mitt Romney benefits from would have a huge effect on his income but would probably help eliminate the distortion of the tax code it creates.
--Hiram
--Hiram
One more try from the experts:
SS Trust Fund Explained
SS Trust Fund and Gen Revenue Subsidies
SS Trust Fund Income and Disbursements
And to keep this straight:
-When the General Fund takes surplus cash out of the SS Trust Fund and gives them bonds. It increases the national debt, and reduces that years deficit or increases the surplus..
- When the General fund buys back the Bonds from the SS Trust Fund. It reduces the national debt, and increase that years deficit or lessens the surplus.
- All Incomes and Disbursements flow through the Social Security Trust fund. The Incomes either come from the FICA tax, redeemed bond revenues or transfers from the General fund. The disbursements go to Benefits, Admin Expenses and to buy bonds from the General fund.
You must be seeing the old lady..
Different topic: Laffer Curve... That name always makes me smile.
WP Laffer
Angry Bear on Laffer
Time Tax Cuts Do Not Boost Revenues
Okay, having read some of these links it's time to exercise my "paradigm" by rubbing two facts together to see if I can get a spark of understanding. There is no arguing with the fundamental logic of the Laffer curve, but no one really knows where the apex of it lies, nor does "marginal tax rate" really describe our crazily complex tax system, with its regressive and progressive elements. What everybody agrees on, however, is that whether you believe we need to raise taxes or lower taxes to get to that perfect place on the curve, all you will accomplish is to maximize GOVERNMENT REVENUE, and that is not the proper goal for a tax system. Sorry if I repeat myself.
The other fact I throw in is the fact that a tax rate of 100% is certainly far past the apex of the curve, and that a tax of roughly 300% (on the top 1% of earners) would be required to curb the deficit for this one year. That's not likely to work very well. I frankly don't know how anyone with two brain cells to rub together can keep suggesting that raising taxes in a down economy to pay for profligate government spending is a good idea. If it was you or I we wouldn't be spending money we don't have on things we don't need, and we wouldn't have to take that third job-- if we could find it.
J. Ewing
I think we found something we can agree on.
If I ran the USA, I would let the "Bush" Tax cuts all lapse and then pass the balanced budget amendment. With an additional requirement that we pay down the National debt to 30% of the avg of the last 5 yrs GDP within 10 yrs. Wiki Nat'l Debt
If that means we have to stop socialized medicine, keep our troops home, reduce social security payments, cut the public employee rolls, cut welfare payments, stop corporate welfare, stop the Mars rovers, etc. Let's within our revenues !!!! Alleluia!!!!
If the tax rates were good enough for the Bush I and Clinton era, they should be good enough for the Democrats and Republicans. The Rich and Poor both pay more until we get this problem fixed.
The tax code is complex because America is complex. And much of the complexity of taxes has very little to do with the complexity of the code itself. Mitt Romney's carried interest tax loophole doesn't have so much to do with the tax code itself as strategies crafted to avoid it, which either accepted by courts, or go unchallenged by the IRS.
It is certainly true that we can be prosperous at higher marginal rates than we have now. History shows that. And it's also the case that we can struggle economically at relatively low rates. History proves that too.
We have much less socialized medicine than other countries and our health care costs are much higher. Health care costs in areas where government plays a greater role, Medicare and veterans' care are lower than in the health care industry generally. So why do we assume a more privatized system would be cheaper rather than more expensive?
--Hiram
All a complex tax code does is beget more complexity. Every single "loophole" exists because Congress tried to make policy using incentives and disincentives of the tax code. When too many people do what Congress wanted them to do, or quit doing what Congress wanted them not to do, they add another layer of complexity to fix it, rather than removing the offending provision and letting people run their own economic affairs. I used to have an uncle in the luxury boat business, and you know that story.
No, the only fair tax is a simple tax-- a flat tax or national sales tax, eliminating every other. Everybody pays the same percentage of their wages (and even that is a concession, because it SHOULD be that everyone pays the same dollars). I'll make one more concession, too, and that is that I would collect the tax only on "disposable" (above poverty line) income, thus making the tax perfectly progressive. The economy would blossom because decisions would be made based on what was the best economic decision rather than on how best to game the tax code.
J. Ewing
J- Thanks for the interesting link on the laffer curve. Of course the number that will stick in my mind as the best top tax rate for maximizing revenue is 70%. I don't see how you can claim a tax cut will always increase revenue, as it clearly depends on what the current rates are.
John-
about - "If he (Obama) wins, we will find out which interpretation of his words is correct"
I know my interpretation will be correct, because with GOP obstruction in congress Obama will be able to do very little.
This election is really a referendum on the Romney / GOP agenda, which would be enacted to a significant degree. I think Romney is likely to sign tea party bills cutting both taxes and spending drastically. Maybe a GOP Senate will hold back or be prevented from fully embracing the radical GOP agenda.
I don't think most voters realize that the real choice is between continued gridlock and major cuts to the safety net and other govt programs and a ballooning the deficit with large tax cuts for the wealthy.
You never know. If the views that Obama and yourself share have a popular mandate, maybe Democrats will take the Legislature and Executive branches back.
I am not sure our society is ready to go that far Left though.
John,
Sometimes your comments are surprisingly ignorant. If the dems win the election with an enormous mandate, retaking the house and retaining the senate with a big increase to 59 seats, the GOP still could and would obstruct the Obama agenda.
In reality the senate is a tossup. Neither party will have anything near a filibuster proof majority.
If Romney were to win and the GOP retains the house, the question is would a GOP senate majority change the filibuster rules. Given this scenario I think they should, as those rules are very undemocratic.
I was just trying to give you a positive thought to cheer you up. And you call my comment ignorant. I am so hurt...
Now go back to worrying that the election will be a Republican sweep and the Left's agenda will be undone.
I try hard to not worry about things that I can in no way control. My friend is the Serenity Prayer.
Sleep well...
John,
At this time I don't feel like a worried person in need of cheering up, but I will keep your kind words in mind if Obama's reelection chances go south (my favorite election prediction blog currently gives him an 80% chance of winning, though I don't think the models are good at including the GOP big $ advantage going into these last 2 months.)
Here is a link to an article showing how the bar room economics metaphor, that the more you pay in taxes, the more you benefit from tax breaks plays out in the real world:
http://www.nytimes.com/2012/09/10/us/politics/romneys-tax-plan-leaves-key-variables-blank.html?hp
Basically, the point is that under the laws of arithmetic, there is no way Mitt Romney can structure his tax cut plan, no loopholes he can find and eliminate, that wouldn't result in the rich paying less in taxes while others pay more.
--Hiram
NY Times Romney Tax Plan Blanks
"...The GOP still could and would obstruct the Obama agenda." -- laurie
Dang! I would sure hope so! The last time the Dems had total control of the government we got that d@#$% Obamacare rammed down our throats, and that's not good for our health! (nationally or individually) Of course, if Obama gets four more years none of us will need to worry, we will have already contracted terminal stupidity.
J. Ewing
"I don't think most voters realize that the real choice is between continued gridlock and major cuts to the safety net and other govt programs and a ballooning the deficit with large tax cuts for the wealthy." -- Laurie
Laurie, you need to do the math. Large tax cuts for the wealthy (Even of the size "feared" by Democrats), are not going to balloon the deficit. Huge tax increases on the wealthy aren't going to resolve the deficit, either, even taken to confiscatory (i.e. counterproductive) levels. Gridlock is a GOOD thing when it prevents the nation from going in the wrong direction, and "cutting the safety net" is a good thing when it has become a hammock. Unless you are willing to tell me that every dollar government spends is spent as efficiently as it would be left in the hands of the people who originally earned it, then cuts are not only sensible but absolutely necessary.
J. Ewing
OK, since I'm always being challenged, I went to the IRS website and found the following actual numbers for 2009:
Total income taxes paid: $866 billion
Total paid by top 1%: $318 billion
Average tax rate of 1%: 24%
Share paid by 1%: 36.73%
Share of income of the 1%: 16.9%
Conclusion: The 1% are paying TWICE what is "fair" and then some!
Now, let's say Obama succeeds in raising taxes on the rich (as he seems to be building his campaign around that idea) by 10% (his actual proposal). Let us further assume that the people smart enough to make these incomes (>384K/yr) are too dumb to figure out ways around this tax. They will then pay $350B, and total revenues increase to $897B. Total deficit reduction (unless Congress spends it) is... $31B against a deficit of 1200 B, or 2.5%!! Whoopee!! Practically a balanced budget, right?
Now, can we please talk about the REAL problem-- government spending that makes a drunken sailor look miserly?
J. Ewing
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