Two more on macro policy
Two more contributors to the revenue/tax cut conversation are Angry Bear’s jazzbumpa and New Economic Perspective‘s L. Randall Wray:
Another look at Spending and Revenues
JazzBumpa | January 31, 2013 9:00 pm
This is more or less relevant to Beverly’s post from earlier today.
How many times have you heard Boehner, McConnell, Ryan or one of the legion of right-wing talking heads say, “We don’t have a revenue problem, we have a spending problem?” I refuted that lie repeatedly in this AB post and at the included links. But this is one of those zombie ideas that simply will not stay in the grave.
Therefore, some prominent voices have found it necessary to sing out again against the lie. I will add my humble quavery baritone to the chorus.
L. Randall Wray via Naked Capitalism
Memo to Obama: Don’t tie progressive spending policy to progressive tax policy. Each can stand on its own.
Reported today in the Washington Post:
Obama proposes $600 billion in new spending to boost economy
President Obama on Tuesday unveiled an ambitious budget that promised more than $600 billion in fresh spending to boost economic growth over the next decade while also pledging to solve the nation’s borrowing problem by raising taxes on the wealthy, passing an overhaul of immigration laws and cutting health costs without compromising the quality of care. Obama seeks to raise more than $1 trillion – largely by limiting tax breaks that benefit the wealthy — to spend on building roads and bridges, early childhood education and tax credits for the poor.
Here’s the conceit: Uncle Sam is broke. He’s got a borrowing problem. He’s gone hat-in-hand to those who’s got, trying to borrow a few dimes off them. But they are ready to foreclose on his White House.
Obama knows his economy is tanking. Five and a half years after Wall Street’s crisis, we still have tens of millions of workers without jobs. Even the best-case scenarios don’t see those jobs coming back for years.
My favorite is when the rwdws use the deficit to show the increased spending. As if there is only one side to a balance sheet.
Strangely enough, I have never heard one of them mention how Obama has collected less federal taxes as a percentage of GDP than any president since FDR(and yes I know the reason for it, but if they can ignore the Great Recession so can I).
It’s just a political anti-tax and anti-big government one-liner.
The tax and spenders got huge tax hikes, although with some spendiing cuts, last year.
And, defense spending as a percent of GDP is near the 70 year low of the late 1990s.
We need to shrink the rest of government too, because of the shrinking economy.
The U.S. had a massive tax increase in 2013 – almost $500 billion. The federal budget deficit shrunk from $1.089 trillion in fiscal year 2012 to $680 billion in fiscal year 2013 (ending Sep 30th), or around $400 billion.
• The expiration of the so-called “Bush tax cuts” enacted in 2001 and 2003 and extended to December 31, 2012 will draw $165 billion out of the economy.
• The renewal of the regular payroll tax, back to 6.2% from the temporary 4.2% extended to December, will draw another $125 billion out of the economy.
• The expiration of the Alternative Minimum Tax (AMT) “patch” designed to protect middle-class taxpayers from this “wealthy-only” tax will now apply to them as well and will extract another $119 billion.
• The expiration of numerous other tax cuts, tax cut extenders, the reimposition of the “death tax” and the elimination of 100% “expensing” for business investment will withdraw an additional $51 billion, and
• The imposition of five of the thirteen new taxes imposed by Obamacare effective January 1, 2013 will be responsible for the balance.
Grand total: $494 billion, or almost four percent of the country’s gross domestic product to be extracted and transferred to the federal government.
The U.S. not only has a spending problem, it has a squandering problem.
So, the national debt is roughly $18 trillion.
When interest rates rise, from these low rates, more of the federal budget will go into paying interest on the national debt, which means less money for other federal programs.
We need to follow Keyensian economics:
From Commanding Heights:
“Keynes intended government to play a much larger role in the economy. His vision was one of reformed capitalism, managed capitalism — capitalism saved both from socialism and from itself.
Fiscal policy would enable wise managers to stabilize the economy without resorting to actual controls. The bulk of decision making would remain with the decentralized market rather than with the central planner.
…fiscal policy — spending, deficits, and tax. These tools could be used to manage aggregate demand and thus ensure full employment.
As a corollary, the government would cut back its spending during times of recovery and expansion. This last precept, however, was all too often forgotten or overlooked.”
Keynesian economics has been hijacked by the NeoKeynesians.
And THAT’S why regulation is needed. NO wise managers in the good times or the bad times.
Federal taxes have become more progressive:
CBO:Top 40% Paid 106.2% of Income Taxes; Bottom 40% Paid -9.1%, Got Average of $18,950 in ‘Transfers’
December 9, 2013
“The top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010, according to a new study by the Congressional Budget Office.
At the same time, households in the bottom 40 percent took in an average of $18,950 in what the CBO called “government transfers” in 2010.
The households in the top 20 percent by income paid 92.9 percent of net income tax revenues taken in by the federal government in 2010, said CBO.”
http://cnsnews.com/news/article/terence-p-jeffrey/cbotop-40-paid-1062-income-taxes-bottom-40-paid-91-got-average-18950
PT:
Hmmmm. One answer is all you get.
The top 1% of household taxpayers paid 24.4% of All Federal Taxes (Income Tax, Payroll Tax, Estate, Corporate Income Tax). The balance was paid by the 99 percenters. Current-Law Distribution of Federal Taxes By Cash Income Class, 2011
When you look at who pays what in the “All Federal Taxes” even the lowest 10.7% of the tax units pay 4.5% of “All Federal Taxes.”
This is not really the argument though is it? You are attempting to create an argument that the 1 percenters are over taxed and quite honestly they can live quite well on what they have left. In the $500,000 to $1,000,000 bracket, the average income is $673,000 and they pay an average of $193,000 in Federal Income Tax leaving them with $480,000 in after tax income. Their average tax rate is 28.7% Terrible, I know.
Lets go to the other spectrum and look at those making $30,000 to $40,000. Their average income is $35,020 and they pay an average of $3,514 in Federal Income Tax leaving them with $31,506 in after tax income. Their average tax rate is 10%. This group is a part of the bottom 25% of household taxpayers.
In a 2008 EPI study http://www.epi.org/publication/bp224/ (What we need to get by; A basic standard of living costs $48,778, and nearly a third of families fall short), it was determined a family of 4 needed ~$48,000 to get by; but, this would vary by where you live. For example to qualify for CHPS in New Jersey you can have an income if the eighties. It is a lot less in the Dakotas.
http://s4.epi.org/page/-/old/briefingpapers/224/figurea.jpg
I suspect those in the 1 percent of the taxpayers bracket have no problem getting by, can sustain a level of upward mobility for themselves and their siblings while it Is quite a different scenario for those in the bottom 25%. Tom Hertz in Upward Mobility did a nice study on this.
Whenever I see “death tax” I know I am dealing with a hopeless case.
Course, linking to cns is beyond the pale also.
They closely follow the RWDW Elements of Style.
Pt is doing his thing some more.
Dan,
Yeah. You gotta love the “conclusion” that income taxes are becoming more progressive because the top group’s share of income taxes being paid have increased, that pays no attention to the fact that only the top group’s share of income has increased, or the bottom group’s share of income has decreased.
Almost as fun is a measurement that takes a $1000 child credit and tries to make a point that for the parent with $20,000 of income is getting a 5% transfer, while the parent with $100,000 of income is only getting a 1% transfer. The numbers are accurate, but mean absolutely nothing.
Add in the usual:
“When interest rates rise, from these low rates, more of the federal budget will go into paying interest on the national debt, which means less money for other federal programs.”
Man needs a bond calculator:
“The debt to GDP ratio is to some extent an arbitrary number. The point here is that the price of long-term debt (e.g. 10-year and 30-year bonds) fluctuates with the interest rate. Currently bond prices are very high because interest rates are very low. However if interest rates rise back to more normal levels, as the Congressional Budget Office and others project, then the price of bonds issued at today’s low rates will plummet.
This can be seen by playing with any standard bond calculator. This would mean that we could buy back the bonds we issue in today’s low interest environment at discount rates of 20 percent, 30 percent, possibly even 40 percent.”
http://www.cepr.net/index.php/blogs/beat-the-press/fun-with-debt-and-deficits
Oh, well. At least he hasn’t yet cried :”Greece! Greece, I tell you!”
BTW,
I always love it when people talk about taxes and income and never seem to mention the income that never hits a tax form because of tax law. Wildly regressive, but never mentioned.
Last year, my wife had over $35,000 of income that never hit our return. Totally legal.
Somehow that never enters the conversation with rwdws.
Dan, “doing my thing” is a free public service to help the unfortunate, who are abundant here.
EMichael, how will the federal government get trillions of dollars of budget surpluses to buy those bonds back at much lower prices?
The federal government should stop selling bonds before it starts to buy bonds, don’t you think?
And, I’m sure, you want to create more disincentives for the higher income groups to earn income (and move them down to the struggling “middle class”) and create more incentives for the lower income groups to stay poor (to receive more “free” government benefits).
The rich need to start paying their FAIR share. 91% looks good to me because THAT’S what IKE was charging and the country prospered. It ain’t commie or socialist like QE because IKE did it. IKE was a REAL American, born in the heartland, not Canada like some teabagger.
MIke, you’re ignoring the real economy. You, like some others, don’t understand what “paying a fair share” really means.
For example, if everyone worked equally hard, that’s fair. Everyone is paying their fair share.
Of course, computer engineers, for example, typically make more money than teachers. However, some of that unfairness can be corrected.
There are many other examples. However, when workers produce more (quantity and quality), they should also consume or save more.
PeakTrader
March 7, 2014 5:49 pm
EMichael, how will the federal government get trillions of dollars of budget surpluses to buy those bonds back at much lower prices?”
Seriously? This is a question?
I thought an options trader would know where the cash comes from:
The Stork brings it.
Right after he delivers high interest bonds to the buyers. Considering the declining birth rate in the world, The Stork had to find new markets.
I’m talking about infrastructure repair and advancement—PROGRESS and it ain’t cheap. Why this country can’t even get back to the moon or even the ISS because of lack of funding.
PROGRESS IN INFRASTRUCTURE helps everyone, increases employment, makes US ALL rich. THAT’S how IKE did it, he used those TAXES to build the freeways, missile defense systems, airports, etc. HE USED TAXES to make US the greatest nation in the world, the most advanced. Reagan cutting TAXES for his rich buddies IS what brought US to today. 91%, that’s how IKE did it. That’s good economy.
Next time YOU go for that case of beer, when YOU drive up that on ramp then THINK, every turn of the wheel, 91%, 91%, 91% and when driving that KIA to the end of the off ramp, look up out the windshield and THANK GOD FOR DWIGHT DAVID EISENHAUER and for once in YOUR life, be GRATEFUL for those hundred of thousands of WORKERS who came before and handed it all down to US on a golden plate.
Mike, in the 1950s, the U.S. became the dominant world power, with a huge share of world GDP, because Europe and Japan were rebuilding from the massive destruction of WWII.
The U.S. was much less efficient and more wasteful, because it had no major competitors, which eventually caught-up with the U.S. in the 1970s.
Opportunity costs matter.
Of course, when an economy is still developing, an interstate highway system and many other government projects are needed.
“Of course, when an economy is still developing, an interstate highway system and many other government projects are needed.”
Yeah. No reason for an economy to keep developing and moving forward. Highways, bridges and transportation systems last forever.
geez