Essential Reading on the Deficit/Debt Issue
Since we are to be treated to multiple staged crises by the GOP in order to dismantle entitlement programs so that there is more money to funnel to wealthy people, I thought it would be useful to collect some of the better pieces trying to assess where we (and the US Budget) really are. The coming months will be filled with more of the usual he say/she say fake objectivity from the media, who won’t do much to give you any context much less any real numbers. In other words, they’ll be participating in the fear factory that will be generated in order to create a better opportunity to cut back on entitlements. Several of these pieces will be longish and some will be fairly data-rich (we want that), so you might need a little time to read through them. But a good deal of the story is that we’ve gotten in a good deal of deficit cuts and we’re pretty close to the number needed for long term sustainability. This is good ammunition for talking to our Congressional delegation who seem hell bent on helping the GOP to cut Social Security and Medicare. Because what we should be focusing on is fixing these two — not in asking seniors to cut back.
I’m sure there will be other good work coming down the pike and I’ll add that to this list, but am not sure yet how to revive the thread. In the meantime, you can bookmark this as a place to find smarter journalism (or just plain wonkishness) on the budget issues.
The Senate Democrats’ internal budget memo: ‘Revenue Must Be Included’ This is from Ezra Klein and is probably the first of many from him — he is following the money, the policy and the politics. This is key, because he has included a link to the entire budget memo from Democrats, including a great recap of how we got here:
Take a good look at that chart — that chart says that Democrats have already agreed to implement $2.4 trillion in deficit reduction (over 10 years) and if you include the sequester, it becomes more than $3.6 trillion. So this means that there is alot of room to claim that Democrats have already been at the forefront of serious deficit reduction — certainly alot more than GWB and GOP run Congresses did. It also means that Democrats can stop cowering about deficit reduction, because (including the sequester) this amount of deficit reduction isn’t too far off what Simpson-Bowles asks for.
Go read the whole thing and know that the takeaway here is the the tax revenues Democrats will be going after are in cutting tax expenditures — loopholes and subsidies that are pointed at the wealthiest among us and at corporations.
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Assessment of Federal Expenditures Under Obama These charts originated with Kevin Drum, but it is pretty clear that the biggest increase in federal spending in recent history comes from George W. Bush.
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Exit Interview with Tim Geithner with TNR
This is an interesting interview, but I want to pull out two wonky points that you won’t get from the media:
LA: Now you’ve had a pretty full four years as Treasury Secretary. What’s been the hardest and most frustrating part of the job?
TG: I think absolutely the hardest thing was trying to design a response to the crisis that would be effective, that would work over time. That was the most important thing, because nothing was possible without that. I knew with a fair degree of confidence by the summer of ’09 that the cumulative actions we took, on top of what Paulson and Bernanke did, was going to work. I was very confident about that by that time. Even though we still had a long, rough road ahead of us.
The most frustrating part of this work, but in some ways it’s the most consequential, is how effective you can be in relaxing the political constraints that exist on policy. You can see that most compellingly now in the fiscal debate. Paulson before us and the President were very successful during the crisis in getting a very substantial amount of essential authority essential to resolving the crisis. But it has been very hard since then to get out of the American political system more room for maneuver both on near-term support for the economy, as well as reforms that would lock in a sustainable fiscal path. That is the most frustrating thing, to get the political system to embrace better policies for the country.
No matter what you think about Geithner, it is hard to argue with him that the political class has not done much to help support this slowly recovering economy.
LA: Over the last couple of years we’ve had pitched battles over the budget between the administration and the Republicans in Congress. There are really two interpretations of what’s driving the Republicans. One is, there is indeed in this county a fundamental philosophical divide about the role of government and that what we’re seeing is this divide being played out in the political arena. The other is that the Republicans have been willing to do almost anything to hand this President a defeat. Do you have a view?
TG: There’s something strange about the debate today. The magnitude of additional deficit reduction – revenue increases or spending cuts – that you need to lock in in order to achieve fiscal sustainability is pretty modest. By most accounting, because of what we’ve already done on the spending side and tax side, we have to find another ¾ of 1 percent of GDP of policy measures. And if we did that, that would achieve the economist test of sustainability, meaning it would get the deficit down to a modest primary surplus so the debt would start falling as a share of GDP.
Get that? We’re close to the needed deficit reduction that gets us to fiscal sustainability.
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Tim Geithner is Wrong This is Krugman weighing in on this interview — noting that Geithner is quite correct in the amount of deficit reduction needed, but that he is really wrong on the politics of bipartisanship to achieve that — noting that the GOP doesn’t really care about deficit reduction:
To say what should be obvious: Republicans don’t care about the deficit. They care about exploiting the deficit to pursue their goal of dismantling the social insurance system. They want a fiscal crisis; they need it; they’re enjoying it. I mean, how is “starve the beast” supposed to work? Precisely by creating a fiscal crisis, giving you an excuse to slash Social Security and Medicare.
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This is more of a think piece, but it also gets to the idea that the long term deficit reduction problem isn’t as big as it is being sold. How to Fix the Long Run Deficit in 6 Easy Steps.
I’d forgotten to include this one in the original list — a concise piece by James Kwak defining social insurance and its purpose. What Is Social Insurance?
In the inaugural address, I think the president got it basically right. They are risk-spreading programs. You don’t get back exactly what you put in: they have a certain degree of progressivity (although less for Social Security than is commonly imagined). Their main function is to protect people against extreme outcomes by pooling a limited share of our resources.
Democrats can STFU about more revenue – it’s only a ploy to win support with no intention of following through. We even gave back tax increases on the rich in CURRENT LAW when expiration handed them to us without a fight. You just know this stuff about closing loopholes will turn into a blue haze and will come out on the other side with more tax cuts for the rich. I’m tired of being lied to on revenue.
We are preparing to cut benefits to make up for the lost tax increases for the rich Joe Biden repealed at the beginning of the month, and now we have to look at Joe running around grinning like he did something good. I’ve had it with teasers about Democrats fighting for revenue just to string us along during negotiations, only to cave at the end like they wanted all along.
The Sunday Funnies
http://www.youtube.com/watch?v=S6ZsXrzF8Cc
Unfortunately, puck here isn’t much interested in numbers, just his own dead end narrative. Interestingly, there is a perfect Sell Out narrative to have on about in Harry Reid’s cave on the filibuster, but hey. The tax deal reached in January increased taxes on folks with incomes over 450K, increased estate taxes on folks with incomes over 450K, increased capital gains taxes, extended a few tax breaks targeted at low-income people (including the EITC) for 5 years, extended unemployment benefits for a year, fixed permanently the AMT and extended a bunch of business tax credits for another year. It raised something like $600B in revenue, which isn’t much to reduce the deficit, but it is better than nothing.
Seriously — it is worth every minute to read Patty Murray’s budget memo and not rely on either the media or puck here to give you the story:
Social Security doesn’t even appear in the memo. And nor should it. The potential SS shortfall doesn’t even happen until well after the 10 year budget window and SS does not add to the deficit unless Congress decides to make up the shortfall.
I hope that everyone else will take a good hard look at this information and use it to 1) go ask our Congressional delegation to support it and to come up with a real fix to SS that isn’t a burden to seniors and 2)let your Congressional delegation know that you are not on the Pete Peterson train and that you know that there isn’t much work left to get to a sustainable deficit level and that you want them to put as much energy into getting Americans back to work.
The tax deal reached in January increased taxes on folks with incomes over 450K, increased estate taxes on folks with incomes over 450K, increased capital gains taxes, extended a few tax breaks targeted at low-income people (including the EITC) for 5 years, extended unemployment benefits for a year, fixed permanently the AMT and extended a bunch of business tax credits for another year. It raised something like $600B in revenue, which isn’t much to reduce the deficit, but it is better than nothing.
Um, the deal was signed on Jan 3 or thereabouts. But on January 1 every one of the Clinton tax rates was in full effect via expiration. That is where you count cuts or increases from. Don’t buy the narrative from MSM or Cassandra that the rich had their taxes increased significantly.
– Capital gains tax was 20% and it is 20% today – no increase.
– Tax on dividends was 39.6% – Biden CUT it to 20% so Mitt Romney can add another story to his house with the car elevator.
– Top marginal rate of 39.6% was applied to wage income above $450K – a tax increase to be sure, but above $450K who the hell earns wages? The promise was to raise taxes on the bracket above $250K which actually DOES make wages.
– Estate tax? Sounds like a cut to me. From Forbes:
In every significant way, Biden left revenue worse off than it was between January 1-3. And worse, even where there were slight increases, Biden enshrined the general unbalanced shape of the Bush tax cuts.
Patty Murray’s plan was to let expiration happen, then fight for middle class tax cuts one by one. How dare the Administration now ask Murray to go out and trade benefit cuts for lost revenue THEY gave back willingly. Joe Biden should hang his head before Patty Murray.
$600 billion in new revenue is not worse off.
Clinton era capital gains was 20% and it is now. With 15% for people making less than $450K.
Estate taxes that have gone from a max of 35% to 40% is an increase.
There’s plenty of analysis of who pays the additional taxes and there are plenty of folks who will. Google is your friend here.
It isn’t a perfect deal, but there isn’t a perfect deal to be had out there.
And go read Murray’s memo. Benefit cuts are not on her table.
$600 billion in new revenue is not worse off.
And how much revenue would there be without a deal? That’s the yardstick. We are clearly worse off from the revenue standpoint with this deal than without it. I’d rather have all the expiration taxes in place and be fighting for middle-class cuts right now. That was the Murray plan.
The $450K line and the dividends tax cut were a straight-out gift from Joe Biden to the super-rich (or to the upper-upper middle class, in the case of the $450K line).
And go read Murray’s memo. Benefit cuts are not on her table.
Of course not. That’s Joe Biden’s job at the eleventh hour.
That was the Murray plan.
Link to that, please. Because at the end of last year she was a full-throated supporter of letting the tax cuts expire for those over 250K right then, not going back to get them.
And there would be more revenue without a deal. There would also be higher taxes on low income people, no fix to the AMT, no extension of unemployment benefits (yes, yes, I already know you couldn’t give a shit whether unemployed people get some help).
The 450K line also made some Dems happy, but also got a bunch of other fixes (mostly short term) for people who needed it. Amazing how much austerity you are willing to impose on people who can’t afford it just so that you could say the Bush tax cuts went away. Especially since there is no economic magic to be had — other than some deficit reduction — in those tax cuts. The magic to be had was a breakthrough in the revenue side. And Murray looks to extend on that.
Murray from November:
(yes, yes, I already know you couldn’t give a shit whether unemployed people get some help).
And we know you couldn’t give a shit whether the tax structure supports job creation or not so those unemployed people can get jobs. Keep arguing for some liberal temporary money drop instead of a progressive structural change. Which is not a pipe dream; it was law for three days.
On a meta level you could say that the Democratic party suffers from not having a critical mass of absolutists like Puck.
This blog doesn’t suffer from the same shortfall, however.
That was Murray providing an ultimatum, not her own plan or deal. Patty Murray on the floor of the Senate calling for passage of the Middle Class tax cut bill in late November.
And we know you couldn’t give a shit whether the tax structure supports job creation or not so those unemployed people can get jobs.
And I don’t give a shit about tax increases creating jobs because they don’t. It is as much of a lie as tax cuts creating jobs. In an economy that runs on consumer demand, tax increases do absolutely nothing to stimulate demand. And in spite of my asking for a detailed mechanism on how these magic tax increases will create jobs, all you do is just yell louder. Put up or STFU. Because you are still defending the reverse Laffer curve.
On a meta level you could say that the Democratic party suffers from not having a critical mass of absolutists like Puck.
I hear you on this. I think you are sorta right too. If you think about the anti-abortionists, they’ve been absolutists for 40 years. But they don’t mind getting the small wins as long as they are winning and moving to their long term goal. Democrats do not have the habit of long term fights any more.
If Roe v. Wade expired on Tuesday, how much do you think the pro-lifers would hand back by Thursday?
That’s a dumb question — RvW has no expiration. It was meant to be law. Not a negotiating pressure point.
“It is as much of a lie as tax cuts creating jobs. In an economy that runs on consumer demand, tax increases do absolutely nothing to stimulate demand”
Hear Hear!
Here come the tax deniers, thumbing their noses at fifty years of empirical evidence. Of course tax increases on the rich don’t increase demand directly; it is a second or third-level effect. They certainly change the way the wealthiest choose to spend and invest their money.
It’s not that the tax increase improves anything; it’s that increasing taxes can end the situation where certain taxes are too low. The Bush tax cuts took us over a tipping point where taxes, in particular investment taxes, were too low and began shrinking the middle class. The cliff deal didn’t change that situation.
“RvW has no expiration”
Thus the “if.” It takes a certain flexibility of mind to process a hypothetical situation.
And it takes someone to follow the actual thread of the argument to craft a hypothetical that applies to the topic at hand.
Back to the drawing board.
empirical evidence
So where is it? I keep asking for it and you keep ignoring this request. Just because you observe it, doesn’t make it true. Certainly there are economists or fiscal policy folks who have made the Exact Observation and who have written extensively on it. Because these folks are trained to actually record empirical data in a way that it is useful to other people. So where is it?
Edited this to add a piece from James Kwak from Baseline Scenario that defines Social Insurance.
Did I hear someone say they couldn’t find empirical evidence that higher taxes create jobs?
http://www.epi.org/publication/books_rethinking_growth/
http://www.thefiscaltimes.com/Columns/2011/06/24/Will-Higher-Taxes-Tank-the-Economy.aspx#page1
http://www.bloomberg.com/news/2011-06-02/raising-taxes-isn-t-a-kiss-of-death-for-employment-growth-history-shows.html
http://www.decisionsonevidence.com/2012/04/more-jobs-through-lower-tax-rates-a-look-at-the-evidence/
http://finance.yahoo.com/news/tax-cuts-rich-dont-spur-151649273.html
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2010/04/a-tax-on-jobs-experimental-evidence.html
Rutgers economic historian James Livingston has reasserted it in an excellent book: “Against Thrift”.
http://www.newrepublic.com/blog/plank/111016/rein-the-rich#
http://www.straightdope.com/columns/read/3043/does-cutting-taxes-create-jobs
http://www.columbia.edu/~ma820/taxes.and.jobs.html
http://www.ncjustice.org/sites/default/files/BTC%20Brief%20-%20Better%20Alternatives%20to%20Cutting%20Corp%20Tax.pdf
http://www.foxbusiness.com/personal-finance/2011/05/12/higher-taxes-encourage-tax-avoidance/
http://lanekenworthy.net/2011/05/09/taxes-and-work/
http://blog.oregonlive.com/myoregon/2010/01/facts_not_propaganda_should_gu.html
http://open.salon.com/blog/myles_spicer/2011/04/12/job_creation_by_the_wealthy_is_mostly_a_myth
http://www.fairtaxation.org/facts/jobs.php
http://jaredbernsteinblog.com/the-economic-impact-of-raising-taxes-on-high-income-households/
http://web.econ.uic.edu/espe2007/paper/F53new.pdf
http://blog.nj.com/njv_editorial_page/2011/07/on_high_income_taxes_and_job_c.html
http://washingtonindependent.com/108872/studies-debunk-myth-that-the-rich-flee-states-with-higher-tax-rates
http://www.policyalternatives.ca/publications/reports/corporate-income-taxes-profit-and-employment-performance-canadas-largest-compa
http://www.policyalternatives.ca/publications/reports/having-their-cake-and-eating-it-too
http://www.politicususa.com/higher-taxes-jobs.html
I hope you don’t mind the format. It is easier to pick and choose when one can see the actual links.
btw, comment with empirical evidence just got swept into moderation.
Saved ya! That’s a lot of links, Kavips.
Taxes were higher during our periods of greatest prosperity. But in particular, the Bush tax cuts marked a clear division between a decade of prosperity and a decade of slow decline in jobs and real wages (culminating in a much faster decline). The housing bubble postponed the job loss and wage decline until 2008.
The circumstantial evidence is that the Bush tax cuts triggered a change in investor behavior that resulted in what appears to be a permanent shift toward higher unemployment, lower real wages, and accelerated income inequality.
The cliff deal basically freezes the structure of the Bush tax cuts in place albeit at a trivially higher level. Meanwhile Obama is telling us “recovery will take time.” What this means is that we are expected to reduce our lifestyles and accept lower job growth and lower wages in order to finance the ongoing tax cuts on the rich, while the jobless recovery drags on. The middle class has been asked to capitulate to the Bush tax cuts favoring the rich.
Only the most accomplished or obtuse denialist can overlook the fact that American prosperity historically has a corresponding relationship to the tax rates on our wealthiest. Democrats handing more tax cuts to the rich (cliff deal) is a seismic event that signals the end of Democratic committment to a broad American prosperity. The vision of the Bush tax cuts has won. We will now attempt to rebuild our economy without the policies that kept the middle class strong, and without even the remnants of the tax infrastructure that has historically kept us prosperous.
That’s alot of links and those links don’t do what kavips thinks they do.
Let’s recap — puck’s claim is that higher taxes on the wealthy (not the wealthy’s businesses, just the *income* of the wealthy) will provide an incentive for those wealthy to get their money off of the sidelines and invested in creating jobs. His claim is that since this worked for Bill Clinton, it would work now.
Most of the links here actually support what I keep reminding people about Clinton era taxes — from the third link:
Tax hikes in Clinton’s term let the Government reduce its borrowing and the Government stopped being in the business of competing with the private sector for a limited pool of available funds. More capital available for firms who wanted that money meant that those firms could expand to meet the demand that they so obviously were trying to meet.
What is different about the current situation is that demand is still quite weak and employers are still squeezing more productivity out of the workers they have. There is plenty of money to lend, but banks are still feeling the effects of their own lending failures, and these banks are able to make money by taking cheap money from the government and lending it back to the government. There are businesses with plenty of cash on hand, anyway. Money is being parked with the US government from all over the world because it is still the safest place on the planet to do that. There is functionally no competition for business funds.
So the empirical evidence that is needed should show in detail how tax increases on wealthy people will motivate them to unpark their money and invest in hiring. In an environment where there is low demand almost across the board. The empirical evidence would provide some explanation of how this would work and provide some projections on its overall financial impact. None of these links do that.
None of these links qualify as empirical evidence, either. In the main, these are reported pieces (with the informative bits outsourced to various experts) and blog posts that provide no supporting data or background. Most of them talk about how tax cuts don’t provide economic growth, or how higher taxes don’t kill rich people — neither if which covers the claim that I have been asking for data to support.
Shame on you, kavips, for thinking that I wouldn’t notice.
Many, many words to say the Republicans are out to gut Medicare, Medicaid and Social security and that the Dems are mounting an all too weak defense. I’ll continue to call Carper, Coons and Carney and try not to scare their staffs, I have gained some self restraint with age. Note that in the whole debate there is no mention of cuts to the sacred “defense” budget, Afghanistan or not.
We actually did cut the defense budget, but just watch us give that back too. And then watch us cut Medicare benefits without one mention of drug price negotiation.
Face it, America loves the Bush tax cuts, even though they are bad for us. We’re going to be living with some version of them for the rest of our lives now, while making cuts in our standard of living to accommodate them and rationalizing that it’s not about taxes. Must be something else to blame.
Tax rates don’t kill jobs, demand does. Demand drives investment and growth. Where there is demand, investors will find a way to make money. Germany has high taxes and business’ still invest there.
What tax rates to do effect the economy is effect stability. If tax rates are constantly moving, or threatened with moving, it holds up investment because investors get skiddish when variables become volatile.
And the way to keep American business’ from moving overseas is to do what other countries do, place tarrifs on importing that product you are making in Thailand so it is price competitive with making it here. Oh, and the obvious, stop giving tax breaks to companies that move overseas.
If you want to sell in China, you have to build in China. Otherwise you pay hefty tarriffs. That is why car makers are opening factories there.
Many, many words to say the Republicans are out to gut Medicare, Medicaid and Social security and that the Dems are mounting an all too weak defense.
Absolutely. And I don’t mind admitting surprise that the “too weak defense” (especially since we are close to where we need to be) isn’t the cause for outrage — especially in the face of the deficit peacockery on display from our own delegation. And, as we know, Social Security has not one thing to do with a sustainable deficit (at least for now). In the meantime, plenty of Americans are out of work and with people throwing money at us, it would be damned cheap to start fixing up infrastructure.
I totally predicted Cass’s reaction to these links. Nailed it, I did.
The piece you took, …. Paring public debt, however, eventually reduces the government’s need to borrow, bringing down long-term interest rates and freeing capital for private investment, the study said.
That’s what happened in the 1990s, when the yield on 30- year Treasuries fell from a peak of 8.2 percent in November 1994 to 5.5 percent in January 2001 when Clinton left office
Plus your interpretation….? “Tax hikes in Clinton’s term let the Government reduce its borrowing and the Government stopped being in the business of competing with the private sector for a limited pool of available funds. More capital available for firms who wanted that money meant that those firms could expand to meet the demand that they so obviously were trying to meet.”
…
If that statement were true, that because of lowering yields on 30 year treasuries we had amazing growth under Clinton’s 8 year term, then that growth should have continued after Clinton left, through the years of Bush and Obama, as that rate continued to drop even lower. As we all experienced, that didn’t happen. (In fact the 30 year treasury dropped so low it was discontinued between 2001 and 2006.) If these premises were true, we should have had growth even more bountiful than those of Clinton. We didn’t.
Now, in the same article you quote, there is this line….
“We should be extremely wary of anyone making the argument that any tax increase at any time is going to kick the legs out from under the economy,In January 1994, five months after Clinton signed the Omnibus Budget Reconciliation Act of 1993, the Congressional Budget Office projected a 1999 deficit of $204 billion. Instead, stronger-than-expected growth flooded the Treasury with revenue. Rather than a deficit, the government ran a $126 billion surplus.
But In January 2002, following enactment of Bush’s first tax cut, CBO predicted a 2007 surplus of $166 billion. The actual outcome, …was a deficit of about $161 billion.”
Further proof that model does not work, in where you pull out this line… Tax hikes in Clinton’s term let the Government reduce its borrowing and the Government stopped being in the business of competing with the private sector for a limited pool of available fundsMore capital available for firms who wanted that money meant that those firms could expand to meet the demand that they so obviously were trying to meet.
Then directly below it, you state this. “There is plenty of money to lend,… There are businesses with plenty of cash on hand, anyway….Money is being parked with the US government ”
Obviously the borrowing from the government today is not taking money out of the system when all these business have it piling up interest…. They have the money…
Higher taxes increase what is known as tax avoidance. Avoiding taxes means putting ones money where it is not taxed. Municipal bonds could be one way. or before this new legislation, donating to a charity for a write off and a bounce back of good will would be another. Or even better, pay your people more. Or build an extension to your business. All these ways invest money into the economy, money that is just sitting on the side doing nothing constructive…
I think the proof you want, is not there. No matter what is offered you will say it is anecdotal. It doesn’t “prove” anything. That does not mean it is not true.
Plate tectonics were equally dismissed as baloney as early as when you were a little girl. Over many years, they were deemed it could not happen any other way.
The Periodic Chart of Elements was deemed a colossal mess of imagination. Later the modern world resulted from its guesses.
Darwin had no proof, just anecdotal skelatons. How dare he challenge the creation of man on the 6th day.
Global Warming, “there is NO proof it is manmade…” Yeah… right.
This is too new. It is being debated live… Many will contest it and over time as the evidence mounts, either agree, or disagree.
But if someone reads through all the links above, they will soon understand that there appears to be a viable correlation between high taxes and strong employment. The prevailing weight of evidence is pointing to just that conclusion.
And Puck. The Biden Compromise is not as damning as it appears to be. One thing I want to clear up. I’m afraid I may have come across through force of argument, as diminishing the role “demand” does play in the equation. I certainly ought to clarify that. Cass is right in her premise that “demand” is an important piece of the equation….
As you are well aware, as money becomes collected near the top, let us use the term one percenters for sake of argument, it stops being an economic driver. It gets bet on speculative ventures. Contrary, as money gets inserted into the bottom levels, it gets spent almost immediately. Currently there is tremendous pent-up demand. Most people have a long list of what they’ll buy when their tax refund comes in.
Simply put. Money is in the hands of the wrong people.
We can beg… Please, please, please spend money here so those on the bottom will spend it and we can finally have some demand……
Or we can tax. “Don’t like 40%? Good! we’ll make it 42%, then”. Ironically taxing to pay down the deficit, will not do anything for those people on the bottom who spend what they get as fast as they get it… but tax and build stuff, grow stuff, and spend, spend, spend,… will balloon the economy…
How? By putting money where it needs to be…
The Biden Compromise attacks the bulk of money that is now sitting off to the side. IF not quickly invested, big chunks of 1%’s wealth will get taken. The big players can’t sit on the sidelines anymore.
Those in the $250,000 to $400,000 range are still spenders. They don’t have enough money to build factories, but they can buy cars, houses, and raise their beach homes five more feet into the air… That drives demand.
The Bush tax cuts expiring fully, along with the sequestering, would have tackled the deficit problem far better than the deal we got, but, perhaps accepting the law of diminishing Republican clout, it might be better to now put that as a second priority, and this time, this time, get the economy roaring first.
This:
If that statement were true, that because of lowering yields on 30 year treasuries we had amazing growth under Clinton’s 8 year term, then that growth should have continued after Clinton left, through the years of Bush and Obama, as that rate continued to drop even lower. As we all experienced, that didn’t happen. (In fact the 30 year treasury dropped so low it was discontinued between 2001 and 2006.) If these premises were true, we should have had growth even more bountiful than those of Clinton. We didn’t.
This is why no one should trust your links. Every last one of them I read, BTW.
Treasury yields are a question of supply and demand. Lower yields tells you about the price of those bonds and (for Treasuries) tells you something about long-term interest rates. We didn’t experience uninterrupted growth because of the internet bubble bursting and accompanying recession. But there was a housing bubble which did create the illusion of some growth. BushCo brought back the 30 year bond because — wait for it — he needed a way to finance the increased federal debt. Debt that Bill Clinton was attempting to reduce, and in part was why he could get rid of the bond.
Last:
We should be extremely wary of anyone making the argument that any tax increase at any time is going to kick the legs out from under the economy,In January 1994, five months after Clinton signed the Omnibus Budget Reconciliation Act of 1993, the Congressional Budget Office projected a 1999 deficit of $204 billion. Instead, stronger-than-expected growth flooded the Treasury with revenue. Rather than a deficit, the government ran a $126 billion surplus.
So What? I am certainly not making an argument that increased taxes kills an economy. I AM making the argument that increased taxes to not jumpstart job growth in an atmosphere where demand is weak and businesses are not in competition with the government for borrowing. Is this really THIS hard? You guys are making a claim that going back to the Clinton era tax rates will cause business owners to put their money into hiring rather than paying taxes. I’m asking — again — for some empirical evidence of this. Because if there is any, I’m on my way to make the case to my management to let me hire a few more people since they will be paying more in taxes.
Your argument is with history, not with me.
I think the proof you want, is not there.
I am asking for empircal evidence. Both of you claim that it exists and neither of you can produce it. What you can produce asks me to forget your own claims here and to forget what the current economic landscape looks like. Unless you are a conservative flogging the Laffer curve, policy doesn’t get written because of claims you can’t support.
Even more — employers aren’t going to spend money on hiring until they have enough demand to justify the costs. Even a few of your links note that hiring is more dependent upon the state of the business cycle than it is on taxes (increased or decreased).
Actually, puck, your argument is with the realities of the business cycle. And with reality, period. Neither of which will change just so you can get higher taxes on everyone.
Cass is right in her premise that “demand” is an important piece of the equation….
Nobody denies that. Are you saying I said that? On the other hand, what fools are waiting around for demand to appear on its own like some kind of cargo cult? Our path toward more demand is stagnant, not accelerating.
Even Keynesian stimulus is wasted because it is immediately sent into the maw of some voracious corporation, where the next stop is the pocket of some 1-percenter. That’s the thinking that needs to be changed.
The Biden Compromise attacks the bulk of money that is now sitting off to the side.
Remember to measure cuts/increases from the rates in effect on Jan. 1, then tell me where the bulk of the deal falls.
“your argument is with the realities of the business cycle”
This is not a normal downturn caused by the business cycle, and it is not responding to the usual tools or to the passage of time.
This downturn is following the countours of a typical debt crisis downturn and it has responded as well as it could to the tools being used. Which aren’t especially many since the GOP in Congress block the most effective ones. And time is the signature of a debt crisis — it doesn’t repair itself in a few months. Plenty of people caught in this thing are still paying off debt AND adjusting to a life with less stuff.
And it is hard to know what you say, puck, since you change it pretty much every time you get challenged on this. The path towards more demand is very slow, because consumers are still deleveraging, consumers are accommodating themselves to living on less credit (and fewer wages) and consumers are under or unemployed. The only tax policy that could help consumers would put more money in THEIR pockets. Not in the pockets of employers or wealthy people. Keyensian stimulus does a key thing — it creates demand. If somehow the government handed over enough money to add another lane to the Blue Route, there will be an awful lot of hiring to get that work done. That means paychecks to people who will be buying groceries, clothes, entertainment and so on. Corporations will get their cut, but it will put money into the hands of the people who most need employment opportunities and that is construction workers.
So your prescription is for the (former) middle class to hunker down and eat cat food while the 1% runs wild with money that used to be yours? Demand will descend from the sky any day now, right? Until then, just
deleveragesell off your house and your 401(k) to yet other 1% ‘ers. If you still don’t have a job it’s because you haven’t deleveraged enough.Um, no. My prescription can be found in one of the items that I just talked about. An item that I have been talking about pretty consistently while you are trying to pretend that new taxes create jobs.
But now we know that you really aren’t paying attention.
In the 30’s you had a sea change in the agricultural industry. As farms failed, unemployed farm laborers were no longer needed. As farms got bought off the auction block, and became consolidated into huge corporate mega-farms, farm machinery took over most of the worker’s positions. We had an entire industry of people whose livelihood had collapsed from under them.
Today information technology has done that to middle management. Now, every middle manager is more in the way and has become a cost that can be eradicated without hurting function. Their years of experience and perception, are now with a click of a mouse, reported on the chief’s desk every morning.
In the 40’s we went to war, killed off our excess, and reached full employment. Living on top the Pacific Ocean didn’t pay much, but you got room and board for free. We would have returned to the same unemployment problem upon the war’s close, except for the fact that those industries we created for the war,… we kept in operation against the new threat, Soviet Russia. The military industrial complex never shut down. That new industry was hard wired by new technology, war science, and basically grew until the Soviet Union made its excessive draw on our resources, untenable.
Most of today’s military equipment is still drawn off ideas coming out of the fifties. We’ve done a few modernizational tweaks, but we still use B-52’s as our workhorses because we never dug down and built the thousands of B-1’s necessary to upgrade our fleet.
The recession of 89 had some help coming out of it,… from the tech bubble. As those familiar with software know, today we are not inventing software as much as we used to, but instead are tweaking the software already invented to make it better for special uses. The full employment that once gave us hope and promise is no more.
Obviously we need a new rush.
Green energy was touted 4 years ago. Now cheap natural gas from fracking have sucked that market dry, as well as the realization that the rare earths necessary for that industry to mushroom, were not limitless nor cheap.
Health care too was touted at the same time. Our population was aging, etc, but we found to pay professionals their high wages to sit around with old people, sucked up those old people’s retirement accounts rather too quickly, leaving no income left to drive the market forward. For all those who trained hard to get into that field, those jobs now are as cheap as they can possibly be, out of necessity.
It might be space,… the next frontier. But where ever, today’s accumulation of personal wealth now doing nothing, needs to quickly go into something productive and bold in order to get out of our country’s doldrums…. The idea of building a death star was funny, but it was strangely true in a vague way of the next big push we will need to aim for. Failure to do so, simply put… means we’ll die and wither on the vine.
Instead of being like “the Britain” of the 19th Century, we will turn ourselves into “the Spain” of that same era…