there’s a simple way to curb borrowing: Let the tax cuts expire for everyone
Lori Montgomery in the Washington Post Fearing a soaring deficit, many analysts favor letting Bush tax cuts expire makes a slip in thought or typing, but I wonder if a lot of people might also use this shorthand sort of thinking in the tax cuts raise revenue tradition:
…many economists and budget analysts say there’s a simple way to curb borrowing: Let the tax cuts expire for everyone.
I absolutely agree. If your number one goal is to reduce borrowing let the tax cuts expire, but it must be coupled with a serious cut in spending. Raising spending by ~25% in 18 months must be offset.
But do Dems want to become Tea Party members or worse validate their views? Dunno, just askin.
There was no mention of spending cuts in the lead. And the tea party candidates are not serious fiscal responsibility people as far as I can determine….a pity.
Dan, you obviously are not listening to the TPers. BTW, I have given this advice several times over the past weeks, why the comment re: the lede?
Tax cut expiration only gets us part way there. Why delay reaching a balanced budget? It’s the only way to stop the borrowing.
Steer me to some names in the running, otherwise all I have are the likes of Angle, McDonnel, Miller etc. These appear to be morality is mine people.
Tax cut expiration is a plus….how does that lead to fiscal responsibility? Deficit reduction probably.
For an economics blog, I am amazed at the lack of actual economic discusssion. Movie Guy asked a critical question re: a Plan B for the economy. From the Dems/liberals all he got in return was snark.
No one but me even took the opportunity to provide some ideas. I too received snark.
Are Dems so shell shocked that their oft proposed ideas have performed so badly? Or are Dems so bereft of ideas to feel most comfortable in silence?
Where are the Dem ideas? Anyone???? (Except KHarris, because all he will do is double down on the snark.)
I am serious about this question!
Dan
I didn’t see the “slip.” But I am all for expiring the tax cuts. I don’t see the lower taxes helping, and we can’t go on cutting taxes forever.
I am not at all sure I agree with CoRev about cutting spending… that would likely kill the economy as advertised… but very soon we ought to learn how to cut spending… say defense overspending… without killing half the economy. and, curmudgeon that i am… i’d be glad to see the spending “for the schools” made a little more responsible.
Let’s satart with Ryan, Gingrich, Palin, Armey, Lollar, O’Donnell, Rubio, Christy etc. all have ideas for fiscal responsibility.
CoRev
my understanding is that a “balanced budget” is not necessarily a good thing. i agree with you about a lot of the spending being wasteful, but the economy has grown up around that spending and you can’t cut it out any more than you can just take a knive and pare away all your excess body fat. moreover, private spending is mostly just as wasteful.
the problem we have today… i think… is that past deficit spending has put us at the point where further deficit spending may be impossible. so we are going to have to walk a tight line between “stimulus” and “deficit”… and i don’t see any reason not to raise taxes at this time.
I don’t understand. What is the slip?
CoRev–Have you ever heard Rubio’s ideas about how to run the government? While in the Florida legislature, he and his pals ran the state into the ground. “Overdevelopment” doesn’t touch what they did while they became incredibly rich, and the schools in the state went down the tubes. The insurance industry walked away from billions in claims after the storms in 2005, the state stepped in and paid out less than the premiums collected and thousands of citizens ended up broke and homeless.
Rubio belongs to Jeb Bush, the Knights, the Duponts all those folks we know and love for the last 150 years of continuous corruption in the state government. Yeah, native Floridian here. If you want to turn what’s left of the Sunshine state over to someone who looks and thinks like a dazed and confused teenager, I’d hate to think what you think good government is. NancyO.
i thinbk this needs to be consodered on multiple boards at once.
sure, tax increases may lower the deficit in the short run, but will they hamper grrowth in the intermediate term?
the other factor is that consumer debt is very high. higher taxes will make it more difficult for consumers to pay down what they owe. this will lengthen the period of economic doldrums created by paying down debt. is that desirtable and will it mean we are worse off 5 years from now?
the other question is at what point do you spur capital flight?
with the cap gains tax poised to go from 15% to 20% and then 24% as the HC tax gets tacked on, you are looking at a 60% tax hike on a lot of investment. between that and the inheritance tax, i know a lot of wealthy people who are either bying dual citizenship or creating highly tax resistant structures.
if any meaningful number of the top 1% of taxpayers head offshore, you’ll wind up with a 2% structural deficit. (5% of the 40% of income taxes they pay)
taxes are a helluva lot more difficult to avoid than they used to be. pre 9/11 you could still just get your money lost offshore if it was really bothering you, but no longer. now you have to move and take it all.
that would seem to be a reason to expect that this round of tax hikes would be more influential on emmigration behavior than those of the past.
all economics is at the margin.
CoRev
if you were serious you would have noticed that i made a serious suggestion.. not unlike that made by others: let the damn tax cuts expire. be careful about spending. stimulus is needed, but you don’t get stimulus by giving money to people who are already hoarding what they have.
good ol’ tyger.
the same “me” rationalizations that got us here offered as the cure for what ails us.
While we are at it, let’s just take a look at the standard political-operative language trickery CoRev has going. He is arguing on behalf of baggers, which is more or less a political insurgency on the right-wing fringe of the Republican party. His taunts are all directed either toward those who post at or read this blog, or at Democrats. Now, I’m not a Democrat and don’t pretend to speak for them. My impression is that even some of the less mainstream of the posters at this blog don’t count themselves as Democrats. So if the taunts (about which CoRev says he is serious – these are serious taunts) are aimed at local folk, I’m not sure what CoRev hopes to accomplish.
If the taunts are aimed in the abstract at Democrats, a reasonable response would be to insist that CoRev and his bagger buddies defend GOP policies in general. Democrats include Ben Nelson, Blue Dogs (who seem tinged with red, but maybe that’s just the quality of light at this time of year), Evan Bayh, Nancy Pelosi and Barney Frank. Last I checked, there was no single “Democratic” plan. That’s sort of why we all have representatives, instead of just letting the head of each party decide. CoRev isn’t asking for ideas that will work. He’s asking for ideas to blame in Democrats. I realize that the “us against them” impulse is strong among political operatives, but the rest of us may want to think in more useful terms.
The reality is that Democrats, while dealt a pretty crappy hand, could have played it better. As Mr. Clinton has been saying into every handy microphone of late, Democrats faced a $3 trillion hole and haven’t been clear about why a $800 bln stimulus plan didn’t fill it. Should have been more, but it wasn’t. The taunt about “why it didn’t work” tries very hard to distract us from the real reason that it didn’t work. Too small. It “worked” just fine, according to the OECD, IMF, CBO and others, given what was tried. We just didn’t go big enough to deal with a problem this large.
Good old Coberly.
Another snarky comment with zero substance.
Chris R
i don’t think you would recognize substance it it handed you your bottle.
Y’all–I wonder if Ty is a concern troll? What do y’all think? NO
The issue of how high taxes are seems impossible to discuss rationally. When the Euro sovereign debt issue arose, it was hard not to notice that the countries in trouble had low tax to GDP ratios. Debt to tax collection may be more pertinent, I suppose, but either would seem to point to the same conclusion: the countries with problems had lower tax revenues. Greece, if I remember correctly, collected something in the mid to high 20s as a percent of GDP. Germany, on the other hand, was about 46% of GDP. The US is in the Greek range, I believe.
So raise enough revenue to pay your bills, may be the simple concept at work here. Also, keep your bills under control. Which means you need some balance. And therein arises the twin towers of dispute: Tax the man behind the tree and; ‘don’t worry’ the government is full of waste and we can figure out how to save boucoup money there while still giving you tax breaks (ie, I know which tree the guy’s hiding behind.)
I think the ratio of tax revenue to debt should be termed the “Bust” ratio, or BS for short. The higher debt is to revenue, the higher BS ratio.
The issue of how high taxes are seems impossible to discuss rationally. When the Euro sovereign debt issue arose, it was hard not to notice that the countries in trouble had low tax to GDP ratios. Debt to tax collection may be more pertinent, I suppose, but either would seem to point to the same conclusion: the countries with problems had lower tax revenues. Greece, if I remember correctly, collected something in the mid to high 20s as a percent of GDP. Germany, on the other hand, was about 46% of GDP. The US is in the Greek range, I believe.
So raise enough revenue to pay your bills, may be the simple concept at work here. Also, keep your bills under control. Which means you need some balance. And therein arises the twin towers of dispute: Tax the man behind the tree and; ‘don’t worry’ the government is full of waste and we can figure out how to save boucoup money there while still giving you tax breaks (ie, I know which tree the guy’s hiding behind.)
I think the ratio of tax revenue to debt should be termed the “Bust” ratio, or BS for short. The higher debt is to revenue, the higher BS ratio.
I tried to start a discussion about ideas how to improve the economy, and challenged the “left of center” followers here. Why the challenge? Because at least 3 times in the past month I’ve tried to start a similar discussion and then MG tried again.
All attempts have been failures. All the ideas have been from the conservative side. I predicted the snarkiness, but hoped the challenges would at least stimulate some comment.
If I were a Dem/liberal I would be ashamed of the lack of ideas and failures to discuss this very important issue.
Sad, sad, sad.
Another thing I find extraordinary is someonc claiming credit for suggesting we let the Bush taxes expire, when the title of the thread was : “
there’s a simple way to curb borrowing: Let the tax cuts expire for everyone“
How’s that for hubris?
oh beezer
i think you discussed it rationally very well.
DOA: Angry Bear and the Federal Budget
There is apparently no serious interest by main posters and some others in laying out a sustainable course of actiion for the Federal Government.
In light of the national focus on operation of the Government, one would think that AB would step up and take on the entire issue front and center.
After all, spencer said that he can think of a number of plans.
I expect that kharris has a couple of good ideas, though we would have to wait for her/him to finish chewing on your butt for a while before any meaningful budget narrative would be provided.
Most of the econ blogs are weak whenever the subject is an analysis of the Federal Budget and recommended courses of action to insure sustainability. There is no substantial leadership being provided on this subject matter among most econ blogs that I have ever noticed.
Yet, this is a burning issue out in the real world.
tax cuts=curb borrowing This makes sense??? In the last decade?
You were referring to previous posts, so expiring tax cuts was proposed months ago in AB.
MG’s fiscal scare has an answer in MMT, which has been provided. And short term versus long term efforts.
Ryan’s plan has been dismantled here, which is the only plan I have seen.
Dan Said: “tax cuts=curb borrowing This makes sense???” The only thing that consistently curbs borrowing is reduced spending! Tax raises with curbed spending curbs borrowing, as long as the economy does not tank. Look at St Bill.
Tax cuts along with maintaining spending growth lower than revenue gains can reduce the rate of borrowing. look at Bush, until the economy tanked.
Cutting taxes and increasing spending during a recession will increase borrowing. Look at Obama.
What we are actually discussing is raising taxes with no associated reduction in spending. May or may not have any effect on borrowing.
The question still stands: Are there any ideas from the Bears re: how to get our economy moving at a faster pace?
Dan – “MG’s fiscal scare has an answer in MMT, which has been provided. And short term versus long term efforts.”
What are you talking about? What is MMT? Provided by whom and where?
As for the President’s Budget, there has been no main poster analysis of the Mid-Session Review to my knowledge. In truth, there has not been any comprehensive Government budget analysis performed at AB by main posters.
The game played here is ‘bits and pieces for a hundred’. In other words, the Federal Budget as a whole hasn’t been addressed in a serious manner. Instead, a few small pieces of it are discussed but the big picture analysis has not been performed on a department by department basis. Same problem that we have encountered with candidates during this election cycle.
There are three primary subject areas involved in a thorough Federal Budget analysis: (1) The needs of the U.S. economy (with justification), (2) the breakdown of the Federal Budget including the resulting deficit analysis per fiscal year, and (3) analysis of key policies which impact economic performance.
I actually question whether eliminating all of the Bush II era taxes cuts will result in a reduction in borrowing. One would think so, but it wouldn’t take the next Congress and the Congresses that follow very long to burn up an additional $4 trillion. Some of those elected officials might decide to the take the fiscal year offsets (elimination of ALL Bush II era tax cuts per fiscal year) and use such revenue as justification for an endless string of stimulus spending (regardless of name applied) to counter the anticipated decline in consumer and business demand. That wouldn’t surprise me.
Some people’s kids!
John Mauldin – opening remarks – “The question I get over and over as I travel and present my thoughts is “When is the US going to get real about its fiscal deficits?” There is little sympathy for the massive deficits we are running. We are making Europe, or at least the part of Europe I am visiting, very nervous.”
Clearly, the concerns go well beyond the U.S. borders.
Arnuad Mares’ follow on piece is pretty good. Nice overview.
Thanks.
MG
There is apparently no serious interest on your part to take seriously anything but your own views on what a serious sustainable course of action might be.
On the other hand I haven’t noticed your serious plan, not to say serious analysis.
Quite right, MG
no sense in setting that broken leg, he’ll just go out and break it again.
oh beezer
you are spoiling the surprise
but wait! wait… no danger. they won’t remember a word you said. and tomorrow we will have another “there are no ideas….on the left.”
and that’s not even counting crazy coberly’s big idea: “growth? we don’t need no steenking growth!”
(we don’t either. but there isn’t a hope in hell that anyone will agree with me until the last drop of oil is gone, the planet is intolerably hot, and we are fondly fondling the last of our plastic toys that we bought with our tax refunds.)
Yes, well the irony about Mauldin saying the places he is visiting are concerned is because the US is the place they put their money to keep it safe.
One of my problems with the debate regarding the expiration of Ws tax cuts is the way the history of that expiration is rarely acknowledged. My recollection of the story told at the time went like this:
We can’t afford to make these giveaways permanent – the huge additions to the deficit in the out years seriously undermined the GOPs efforts to maintain their deficit hawk branding. So we’ll make them automatically go away later after W is safely out of office (and therefore can’t be held responsible) and also after the amazing economy growing powers of lower taxation work their magic on restoring the national GDP, earnings, etc.
Now that the magic didn’t happen (and then some) we’re told “oh noes! You can’t raise taxes now that we wrecked the economy!”
So the medicine didn’t work – it actually made things a lot worse. But keep on spooning it up kids, you just have to believe!!!
Thank you, Beezer! See, the rest of you, just some thought gets us to a response and a discussion.
MG “What is MMT?”
If you have to ask, I can save you a lot of reading. Go back to my Mauldin post and scroll down to the bottom of the Morgan Stanley analyst paper. See the section that starts with:
Financial oppression as an alternative to outright default.
That in a nutshell is MMT. That is also why gold is $1275 right now. Who knows what else could happen.
I realized after I posted the comment I should have acknowledged the role of Blue Dog Dems in enabling this asinine “heads we win tails you lose” scheme. I’d throw them all out of the caucus.
It was a neat trick – either the prevailing supply side orthodoxy “works” and the magic grows the economy enough so the eventual required increases don’t matter or everything gets so wrecked the perps know they can’t be walked back. If the pretenders to fiscal conservatism didn’t realize what a trainwreck this was in terms of policy they are incompetent. If they did, they’re lying thieves.
Jimi, the deficit was not in decline under Bush, but the borrowing was declining. Given another year+ with the growing economy (Y’ano like St Bills’s) his numbers would have looked as good/better than St Bill’s with either a balanced budget. Or the budget wopuld have beenso close to balance it would have felt so, and this crazy Dem argument about his deficit spending would be gone.
All that was done while fighting the wars and under a lesser tax burden. Then the housing bubble burst and his borrowing progress ended. Just not as lucky as St. Bill.
We do have an economic complaint against Bush, and that is he did not reduce spending quite enough to speed us to that balanced budget. But, if that’s our major gripe then we are complaining that he was not prescient enough.
Difference in GDP growth from 1992-2000 to 2000-2008: $-852B (thanks for the data Jimi)
Yeah an 850B drop in GDP growth and it only cost us a couple Trillions! That’s some interesting magic babe.
I’d say it’s quite enough.
Sure, lets get us some more money by pouring crude oil in your daughter’s bedroom. No need for all that gummint regulation. MONEY’s the thing.
I think we need to start doing some worthwhile infrastructure spending one of these centuries, no matter how long it takes.
We always do Stim Plan #1 and we get the “pass around the pothole money” infrastructure plan.
Then we do Stim Plan #2 and we get the “pass around the pothole money” infrastructure plan.
Follow on stim plans need to hit different distribution channels each time. Otherwise Creative Destruction is never gonna work.
amateur,
Some of us have been on this “slightly left of center” blog since AB created it. I’m an Independent voter, and what I said about the lack of effort to provide a comprehensive analysis or presentation of the President’s Budget is correct. There is no effort by main posters to pull the pieces together and generate a meaningful, comprehensive discussion about the entire Federal Budget.
I could care less about RedState or Powerline. I don’t pay attention to those blogs.
coberly,
The readers of this blog will have been dead a long time if they are waiting on you to do a presentation of the President’s Budget. First, you would have to read it. And we know from your various comments on the threads that that hasn’t happened.
Cedric, I have already read that. What is MMT stand for?
Modern Monetary Theory.
Like we needed a new one.
That’s right. Thanks.
amateur,
Do you have any idea what the loss of GDP due to U.S. trade policy from 2000 forward has been?
AS,
“Difference in GDP growth from 1992-2000 to 2000-2008”
How is that relevant? There was no negative growth, there was growth every year in the United States during the Bush years. Just because growth was not as strong during the Clinton years, therefore the Bush years are a failure? Nobody is buying that!
Which 9-11 did Slick Willy get under his watch? and which Tech bubble did Bush II get to ride the wave of?
The unemployment numbers are no better than Clinotn than Bush.
Nobody is attacking Clinton’s economic performace you HACK!
MG
i have no intention of reading it. i am a specialist. i can tell you a great deal about one part… and that’s not even “on budget.”
but in your case its all bluff and bluster. you tell us we don’t know or blah blah, and you NEVER offer an “anlysis” or even a rational comment. just assertions like “My view is correct.” Well, hell, we already knew you thought that.
MG
thanks for clearing that up. i hate acronyms myself. when you get to be my age every ABC is some initial you carved in a tree when you were young.
Jimi, those are annual numbers. Until they go negative, as in 2001, the deficits are still going up annually by the amounts you show.
“I am a specialist.”
No….No….No….
“I am on a special list”….There……FIFY!
O.K. misunderstood what you were saying!
The currency markets decided the Fed statement today implies the Fed is more willing to do significant QE2. Here’s what happens then.
http://quotes.ino.com/chart/?s=NYBOT_DX
Note on the longer time frame chart the dollar index was 87 in June. June was when they first started worrying the fed may do QE2.
Also, the dollar index is more than 50% weighted with Euros. Yen is the next biggie. Yuan isn’t even in it. So that’s how the buck is doing against the heavies, euro and yen.
Note that we are not even safe with currency competition like that. Word is that chinese corporations are now flexing their muscles and looking for big price increases, in dollars, on the order of 10-30%, in new price negotiations with Wal-Mart, Target, etc… I heard it on Fast Money from a chinese exporter guest.
Corev
Long ago Jeff Davis introduce a bill in Senate for clearing a long jam on the Mississippi. Another Senator told him that he would support Jeff Davis’s bill if Jeff Davis supported his. Davis said no. Vote for my bill on it’s own merits and I’ll do the same on your bill. I’m sure Republicans trying to pass today’s defense bill wished that Democrates excercised the same reticence. Your probably one. Why not discuss rdans tax proposal on its own merits rather then linking it to spending cuts. Your not talking about really cutting spending? How about farm subsidies, or the cost of empire? You don’t want taxes to go up, so your here trying to muddy the waters. Jefferson Davis’s carrer shows that being a good a decent man isn’t always good enough. A terrible thing to have to learn, worse still to implement. Republicans are right that moral rectitude is essentail for a society, and when you toss it aside to aquire power, you’ll leave it aside to keep power. So tighten it up. Worry your own charactor house and don’t try to begrudge some poor schlub a government paid meal in these tough times.
MG
in what way are my standard personal attacks different from yours?
i had no trouble understanding CR’s post. I had trouble accepting the ignorant use of words and was trying to put it nicely. The way I usually start out with you.
CoRev has been the resident troll, going back to at least 2007. He has demonstrated repeatedly that he is immune to facts and data. His “Where does job growth originate” nonsense in the 10/19 open thread is a perfect example.
This is why is is a teabagger.
His typical ploy is to raise a series of irrelevant objections to whatever point is being made. then, when each one is addressed, go on to the next one. You can never outrun that kind of deceptive practice.
I’ve made the mistake of trying to engage him a few times, all to no avail.
Oh, well . . .
JzB
Mr. tyger sock puppet –
I guess I never learn.
sure, tax increases may lower the deficit in the short run, but will they hamper grrowth in the intermediate term?
Not only no, but hell no. There is zero evidence that raising taxes from current rates will be harmful.
higher taxes will make it more difficult for consumers to pay down what they owe.
Possibly true, but certainly irrelevant, since the higher taxes are only to affect the upper 2% of the economic spectrum.
the other question is at what point do you spur capital flight?
Check long bond rates and tell me what you see.
with the cap gains tax poised to go from 15% to 20% and then 24% as the HC tax gets tacked on, you are looking at a 60% tax hike on a lot of investment.
1) It’s not investment in the secondary market. It’s speculation. So, no that’s bullshit.
2) Wow – that relative percentage change sure looks large – because the base it’s coming from is so damned small.
between that and the inheritance tax, i know a lot of wealthy people who are either bying dual citizenship or creating highly tax resistant structures.
Well, then, we need better laws.
if any meaningful number of the top 1% of taxpayers head offshore, you’ll wind up with a 2% structural deficit. (5% of the 40% of income taxes they pay)
I’m sure they’ll have a wonderful time in either Ireland or Iceland.
http://moneycentral.msn.com/content/taxes/p148855.asp
taxes are a helluva lot more difficult to avoid than they used to be. pre 9/11 you could still just get your money lost offshore if it was really bothering you, but no longer. now you have to move and take it all.
See previous point
that would seem to be a reason to expect that this round of tax hikes would be more influential on emmigration behavior than those of the past.
I’m starting to snore.
Cheers, over and out,
JzB
Cursed, what’s to discuss? Dan doesn’t have a plan, nor does Obama. There is no written proposal at this time. All we see are trial balloons re: the Bush tax cuts.
As for cutting spending, that is what it will take to lower the deficit. As MG said, and to which I agree, the current class will unlikely stop spending and go through the whole revenue gained by any tax increase caused by the expiration of the Bush cuts.
coberly,
So, Calculated Risk (Bill) and the U.S. Government are guilty of “the ignorant use of words”.
I am sure that CR will find that to be laughable.
hey cedric
even if you raised the tax, say 3% on the other 98% of the population, if that would make it hard for them to pay their bills, they need to see a counselor.
actually i am not sure it was CR who used the words in the way i thought was ignorant. i asked some questions about the way they were used. unlike someone you know i am often unsure, even ignorant.
asking questions is how i get to learn stuff. sometimes i try to be tactful. i find it rarely works.
coberly: “the problem we have today… i think… is that past deficit spending has put us at the point where further deficit spending may be impossible.”
Politically, that is. But the fact that those who have been strongly opposing the deficits are in favor of extending the tax cuts reveals their hypocrisy. They are attackable on that score, which should make deficit spending easier. Besides, polls show that, although the public worry about the debt and deficit, they worry about unemployment more. Increasing the deficit to bring down unemployment is politically feasible. 🙂
so we are going to have to walk a tight line between “stimulus” and “deficit”… and i don’t see any reason not to raise taxes at this time.
That is the catch 22 of raising taxes. Also is why it’s soooo easy to lower ’em.
Sorry, I did not reply to that last part.
coberly: “so we are going to have to walk a tight line between “stimulus” and “deficit”… and i don’t see any reason not to raise taxes at this time.”
I think that “stimulus” has become a bad word, unfortunately, because the history of financial crises like we just had indicates the likely need for years of stimulus. Allowing the tax cuts on the rich to expire makes good political sense, but would probably have little anti-stimulus effect. But letting them expire for the rest of us would be very likely to reduce aggregate demand, at a time when it is still weak.
One problem with the stimulus so far is that it has not been aimed at lower income people, people who would be likely to spend their stimulus money. IMO, deficits should be targeted at putting people back to work and getting money to lower income people.
Bear in mind that the Chinese Government has been propping up the value of the Euro.
Co Rev: “Where are the Dem ideas? Anyone????”
“The Democrats are the party of no ideas. The Republicans are the party of really crappy ideas.” — Lewis Black
MG: “I actually question whether eliminating all of the Bush II era taxes cuts will result in a reduction in borrowing.”
I am in no position to predict anything, but one plausible scenario if the Bush tax cuts expire on time is that the economy will take a hit, increasing unemployment, which will increase spending while reducing revenue, thereby increasing the deficit, which will increase borrowing.
Min, I agree with the possibility of that scenario. Might happen just that way. Wonder how long it would take to bounce back from the taxation hit?
And these thoughts are coming from a person who wants to eliminate ALL Bush II era tax cuts. ALL of them.
In the article linked by Cedric Regula, Mares writes:
“So far during the Great Recession, sovereign (and bank) senior unsecured bond holders have been the only constituency fully protected from partaking in this loss.”
“This loss” refers, I think, to increasing gov’t debt. Mares does not make a coherent argument, and I am not sure that one is possible. But let that pass. It is true that, in the current financial crisis, the gov’t has fully protected only creditors, and creditors, as a group, are doing relatively well.
Mares:
“It is overly optimistic to assume that this can continue forever. The conflict that opposes bond holders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well aligned with those of influential political constituencies.”
What a relief! But I am not so sure that that is the case. The oligarchy seems fairly intact, doesn’t it?
Mares:
“There exists an alternative to outright default. ‘Financial oppression’ (imposing on creditors real rates of return that are either negative or artificially low) has been used repeatedly in history in similar circumstances.”
A healthy economy requires a reasonable balance between debtors and creditors. It seems clear that Mares takes the viewpoint of the creditors. Hence, the reference to “financial oppression”. Arguably, creditors have been favored too much in recent years, including receiving preferential treatment during the current crisis. Meanwhile, the burden of debt on the debtors is a major drag on the economy, holding back consumer demand, even for those who are not facing foreclosure or bankruptcy. Mares fears that creditors will have to share some of the pain that debtors are experiencing. Yet that may be necessary, or even desirable, to restore balance to the economy.
meta meta meta
I’m sorry I thought you were defending the W tax cuts as sound economic policy. I’ll try to type it slower for you: We’re short almost 900B in GDP growth. We gave over $2T in tax breaks mostly to rich people to achieve this.
Asshat.
Mr. Am. Soc., are you that clueless to fail to understand Jimi’s/Bush’s economic numbers? Are you so clueless to assign GDP loss to tax cuts? Even Mike Kimel does not make that claim. He shows a positive correlation to job growth for tax cuts on shorter terms.
I see you have failed to provide any constructive comment on the “Plan B” question. Engage the brain, please.
I’m not clueless wrt the way those tax cuts were sold to the public. I’m just trying to remind people of the architects stated priorities: Freeing up productive capital of wealthy folks by lightening their federal tax load so they could do the heavy lifting of creating jobs, markets, opportunites for export etc.
How do you remember that pitch going? Something more along the lines of “Let’s drop taxes so rich people can send more industries offshore?” I think that would have made the papers.
And just in case the question implied by my little review of history isn’t clear: Why can’t W’s tax cuts be evaluated and measured using the benefits they were supposed to bring? Why have I been subjected to decades of “Tax Cuts grow the economy!” rhetoric from both political parties when the evidence is clear that they just don’t work as advertised.
Mysterious.
Min
i would like to agree wtih you, but when you say “don’t tax me, tax the other guy” a little switch in my brain says we are not going to get anywhere with this.
not that you aren’t mostly right. the poor are more likely to spend any money they get. but when “the poor” includes people making 50 thouand a year (i’d have said 30 thousand, but i have lost track of what a “living wage” is these days… i smell the same sort of greed that motivates “the rich.” meanwhie the “poor” can afford to pay for their own retirement tax.
if this says what i think it says: debt relief for all… i’d say it’s more “tax the other guy” thinking.
could be good economics… i don’t think so, but i suppose it could be… but i think that in the long run borrow and never pay is bad for people, never mind the economy. i would be inclined to make an exception for those who borrowed under duress or conditions of near-fraud.
Voila.
Indeed!
Calculated Risk cites government data in many of his posts and uses the language employed by the U.S. Government. There is nothing unusual about that practice.
Calculated Risk wrote an excellent post.