Political Bloviators and Bad Economics
As the republicans' political fortunes gradually decline, they are naturally going on the warpath to try to discredit any voices speaking against their policies. In particular, there's been a lot of hysteria from some conservative gasbags terrified that the tax cuts handed to the wealthiest Americans might not be made permanent.
Any honest analysis of economic data during Bushes time in office is extremely clear: the republicans have dramatically decreased revenues (by 297 billion in 2004, the most recent year for which I could find complete figures), while dramatically increasing spending (31.5% increase between 2001 and 2004).
Of course, the incredibly simple arithmetic of a balanced budget is apparently beyond political bloviators.
Here's how a balanced budget is supposed to work:
Revenue - Spending = 0
Now, what happens if we increase spending and decrease revenue?
Revenue - Spending < 0
But that doesn't stop our conservative geniuses, like John McIntyre of "Real Clear Politics":
Yeah, you see, you can quote all the studies and economic analyses you want - the fact that "Revenue - Spending < 0" isn't a problem in McIntyre's world. In McIntyre's world, cutting revenue increases revenue.
Sorry Johnny-boy, that's not how things work. Spending more money than you have is going to be a problem, sooner or later. You can't borrow money forever. And borrowing money so that you can hand it over to the wealthiest people in your society, well, that's not particularly what I calla brilliant idea. (And in the interests of full disclosure, my wife and I are quite definitely in the range where we are benefiting from those tax cuts. If they expire, it will cost us rather a lot of money.)
You see, dogma overcomes math. The simple and undeniable fact that the Bush tax cuts have decreased revenue - a fact that not even the Bush administration denies - that's just the babblins of a bunch of egg-head intellectuals. "Reality" is that lowering taxes increases revenues.
Any honest analysis of economic data during Bushes time in office is extremely clear: the republicans have dramatically decreased revenues (by 297 billion in 2004, the most recent year for which I could find complete figures), while dramatically increasing spending (31.5% increase between 2001 and 2004).
Of course, the incredibly simple arithmetic of a balanced budget is apparently beyond political bloviators.
Here's how a balanced budget is supposed to work:
Revenue - Spending = 0
Now, what happens if we increase spending and decrease revenue?
Revenue - Spending < 0
But that doesn't stop our conservative geniuses, like John McIntyre of "Real Clear Politics":
The Washington Post's Sebastian Mallaby is on a crusade to discredit pro-growth or supply-side economic policies. Today's column titled "The Return of Voodoo Economics" makes one wonder about what he doesn't like about 4% growth, under 5% unemployment, housing and the stock market higher, wealth being created and tax revenues at all time highs. I guess he pines for the pre-Voodoo Economics days of the 1970's when the highest marginal tax rate was 70% and the country had anemic growth, high unemployment and a Dow languishing below 1,000.
What gives Mallaby the right to think that he is a "serious" person when it comes to economic policy, but President Bush, Vice President Cheney, Majority Leader Frist and Finance Chairmen Grassley are not? Is Mallaby really that arrogant? Did it ever occur to Sebastian that maybe he is letting his ideological views get in the way of an honest appraisal of the facts?
Why is it so hard to explain the concept to many "intellectuals" that the idea is to grow the pie as big as possible, and that taking a smaller percentage of a bigger pie can yield more than a higher percentage of a smaller pie? Mallaby can quote all the economists and studies he wants to justify his attack on the economic wisdom of lower tax rates.
I'll just look at what happens in the real world.
Yeah, you see, you can quote all the studies and economic analyses you want - the fact that "Revenue - Spending < 0" isn't a problem in McIntyre's world. In McIntyre's world, cutting revenue increases revenue.
Sorry Johnny-boy, that's not how things work. Spending more money than you have is going to be a problem, sooner or later. You can't borrow money forever. And borrowing money so that you can hand it over to the wealthiest people in your society, well, that's not particularly what I calla brilliant idea. (And in the interests of full disclosure, my wife and I are quite definitely in the range where we are benefiting from those tax cuts. If they expire, it will cost us rather a lot of money.)
Growth produces wealth, which leads to higher tax revenues and a more prosperous nation. Less growth produces less wealth and in turn lowers tax revenues. High tax rates retard economic growth; low tax rates encourage more growth. It really isn't that complicated.
You see, dogma overcomes math. The simple and undeniable fact that the Bush tax cuts have decreased revenue - a fact that not even the Bush administration denies - that's just the babblins of a bunch of egg-head intellectuals. "Reality" is that lowering taxes increases revenues.
posted by MarkCC at
2:18 PM
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33 Comments:
To echo a theme you have sounded here before, McIntyre's argument only works as long as it is not quantitative:
"Why is it so hard to explain the concept to many "intellectuals" that the idea is to grow the pie as big as possible, and that taking a smaller percentage of a bigger pie can yield more than a higher percentage of a smaller pie?"
Answer: When you "explain the concept," it is not hard on them, it is hard on you -- because "intellectuals" tend to ask questions in return, questions such as "If we cut tax rates from (e.g.) 20% to 18%, will the economy grow by 11% in response? 'Cuz that is what it would take to make it pay for itself." and "Did the economy grow enough to make tax cuts revenue-neutral in 1982? How about in 2001?"
Damn intellectuals -- they never have appreciated the beauty of a good hand-waving argument.
By
Anonymous, at 3:04 PM
Well, actually, its not so much bad economic modeling and bad economic empirics. There are models that would support his position. It all depends on how responsive GDP is to taxes. If GDP is highly elastic with respect to taxes, its possible that lowering the % rate of taxes could increase overall growth enough to lead to a net increase in revenue. Conversely if GDP is relatively inelastic to the tax rate, then the growth from cutting taxes wouldn't offset the lower marginal rate, leading to a lower net revenue.
MarkCC's data suggests that in real life the parameters of the model are such that (these) tax cuts haven't had a big enough effect on GDP for the growth-effect to offset marginal-rate-effect. But there may be other states of the economy and/or other kinds of tax cuts that would be self financing.
Steve
By
Anonymous, at 3:17 PM
"bad economic modeling and bad economic empirics"
make that as bad economic empirics
Steve
By
Anonymous, at 3:17 PM
Your political biases seem to be driving you to some bad math of your own. Some cursory research would have illustrated that the laffer curve (the idea in theory that cutting taxes can increase tax revenue) is widely accepted among economists of all stripes. It was the basis of JFK cutting taxes in the early 1960's. Now it is obviously not a linear function. At a 100% tax rate, there will be no taxes collected, as no one will work. Taking the tax rate from 90% in the early 60's or 50% in the early 80's has a much greater effect than taking the marginal rate from 39.6% to 35%, especially since most wealthy people fall into Alternative minimum tax and were unaffected by the tax reform.
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Anonymous, at 3:36 PM
steve, henry:
I don't dispute that there are conditions under which lowering taxes can raise revenues. Notice that in my post, I do *not* say that *lowering taxes* and raising spending is the problem. The problem is that the current tax cuts have *decreased* revenue.
What I am criticizing is the fact that people like McIntyre insist that lowering taxes will raise revenues *even when the data specifically shows that it is not true*.
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MarkCC, at 3:54 PM
The other point about the Laffer curve is that it can reduce government expenditures in theory. If the 10% tax cut spurs investment and employment growth then outlays for welfare, unemployment programs etc. can be reduced.
Futhermore the empirical evidence on the Kennedy and Reagan tax cuts is pretty conclusive:
http://www.heritage.org/Research/Taxes/bg1765.cfm
"President Kennedy proposed massive tax-rate reductions, which were passed by Congress and became law after he was assassinated. The 1964 tax cut reduced the top marginal personal income tax rate from 91 percent to 70 percent by 1965. The cut reduced lower-bracket rates as well. In the four years prior to the 1965 tax-rate cuts, federal government income tax revenue--adjusted for inflation--increased at an average annual rate of 2.1 percent, while total government income tax revenue (federal plus state and local) increased by 2.6 percent per year (See Table 4). In the four years following the tax cut, federal government income tax revenue increased by 8.6 percent annually and total government income tax revenue increased by 9.0 percent annually. Government income tax revenue not only increased in the years following the tax cut, it increased at a much faster rate.
,,,
These across-the-board marginal tax-rate cuts resulted in higher incentives to work, produce, and invest, and the economy responded (See Table 7). Between 1978 and 1982, the economy grew at a 0.9 percent annual rate in real terms, but from 1983 to 1986 this annual growth rate increased to 4.8 percent.
Prior to the tax cut, the economy was choking on high inflation, high interest rates, and high unemployment. All three of these economic bellwethers dropped sharply after the tax cuts. The unemployment rate, which peaked at 9.7 percent in 1982, began a steady decline, reaching 7.0 percent by 1986 and 5.3 percent when Reagan left office in January 1989.
Inflation-adjusted revenue growth dramatically improved. Over the four years prior to 1983, federal income tax revenue declined at an average rate of 2.8 percent per year, and total government income tax revenue declined at an annual rate of 2.6 percent. Between 1983 and 1986, federal income tax revenue increased by 2.7 percent annually, and total government income tax revenue increased by 3.5 percent annually."
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Anonymous, at 4:01 PM
Mark CC said
"The problem is that the current tax cuts have *decreased* revenue."
Actually, tax revenues have increased since the 2003 tax cuts were passed (the issue is that thanks to Iraq, Katrina and other projects the increases have not kept pace with spending)
According to the CBO, tax revenues have been:
2002 $1.9T
2003 $1.8T
2004 $1.8T
2005 $2.2T
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Anonymous, at 4:19 PM
I refer you all to Kevin Phillips' book "The Politics of Rich and Poor", Random House, 1990 which demonstrates with government numbers how, after the Reagan tax cuts, in the 1980's the rich got richer and the poor got poorer. It destroys the Republican concept of trickle-down, or as they re-named it, supply-side, economics.
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Anonymous, at 4:43 PM
Mark is right. Steve is wrong.
The budget numbers are at http://www.whitehouse.gov/omb/budget/fy2007/
Download spec.pdf and hist.pdf for all the data your heart desires.
Taking a longer series, we have for federal receipts:
1990 1.032T
1991 1.055T
1992 1.091T
1993 1.154T
1994 1.259T
1995 1.352T
1996 1.453T
1997 1.579T
1998 1.722T
1999 1.828T
2000 2.025T
2001 1.991T
2002 1.853T
2003 1.782T
2004 1.880T
2005 2.154T
That trend looks to me like it took a sharp dip after the 2001 tax cuts, and has only recently started to recover. And -- lest we lose sight of the main point, McIntyre is clearly arguing not just that tax cuts are stimulative (they are, though these particular cuts are probably very inefficient in that respect), but that the economy would grow enough to make up for the revenue lost to tax rate cuts. It clearly has not done that, no matter how you cut it.
As an exercise for the reader, I recommend you go to that table on pp. 25-27 of hist.pdf and plot the "Outlays" and "Deficit" columns, then mark where the major tax changes of the past 25 years have occurred. That alone ought to be enough to convince a fair-minded assessor that tax cuts do not pay for themselves. Give it up.
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Anonymous, at 4:50 PM
1990 1.032T
1991 1.055T
1992 1.091T
1993 1.154T
1994 1.259T
1995 1.352T
1996 1.453T
1997 1.579T
1998 1.722T
1999 1.828T
2000 2.025T
2001 1.991T
2002 1.853T
2003 1.782T
2004 1.880T
2005 2.154T
- Tax Receipts are higher in 2005 than any prior period, so the tax revenue has recovered - which was the issue at hand.
- 2001 was a recession year and the 2001-2002 receipts reflect a huge decline in capital gains taxes due to the 45% decline in the stock market over the period (by the same token receipts in 2000 are an abberation on the positive side from capital gains taxes and between 1991 and 2000 capital gains revenue increased by nearly 6X)
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Anonymous, at 5:14 PM
Mark,
Sorry Johnny-boy, that's not how things work. Spending more money than you have is going to be a problem, sooner or later.
Right. Deficit spending now often means higher taxes in the future.
You can't borrow money forever.
Well...maybe. So long as GDP is growing at a decent rate and your borrowing is less than the growth rate of GDP I'd say it is probably sustainable for a pretty long time. Eventaully you'd have to pay people back, but the actual debt level to GDP could remain constant or even decline.
And borrowing money so that you can hand it over to the wealthiest people in your society, well, that's not particularly what I calla brilliant idea.
Errr...uhhhh...what?
Oh I get it, a person's money actually belongs to the government and they are lucky to keep whatever the government lets them. Is that how you see it?
Just curious because that last part pretty much derails a decent post on Conservative Bad Math.
jre,
"Did the economy grow enough to make tax cuts revenue-neutral in 1982? How about in 2001?"
Well, you'd also have to factor in the increases in defense spending...or more accurately take those into account. As Mark implicitly noted, increasing spending by itself can result in a deficit.
Mark is right. Steve is wrong.
The budget numbers are at http://www.whitehouse.gov/omb/budget/fy2007/
Download spec.pdf and hist.pdf for all the data your heart desires.
Taking a longer series, we have for federal receipts:
1990 1.032T
1991 1.055T
1992 1.091T
1993 1.154T
1994 1.259T
1995 1.352T
1996 1.453T
1997 1.579T
1998 1.722T
1999 1.828T
2000 2.025T
2001 1.991T
2002 1.853T
2003 1.782T
2004 1.880T
2005 2.154T
Uhhhmmm, not quite. jre you are forgetting to factor in the recession which was a foregone conclusion by the time Bush got into the White House (note I'm not blaming Clinton or Bush here, simply noting that by the time Bush got into the WH, with the benefit of hind sight, the recession was pretty much unavoidable). Recessions also lower revenues. For example, looking at your data we can see that as a percentage of GDP in 1990/1991 revenues declined (although they increased in absolute terms). And if we look at the data for 1983 we see another decline which is right in line with the 1981/1982 recession. Also, 2000 was a pretty damn good year in terms of tax revenues. The last time that reciepts had a similar share of GDP (20.9%) was back in 1944. So, the short answer is that things aren't so simple as merely looking at the tax rates as the sole drivers of tax revenues.
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Steve, at 6:18 PM
The "rich->richer, poor->poorer" argument is specious as well, as most economists I've ever known have pointed out. The question is intertemporal status for the same individual. How has a single person done over time, rather than an income class?
Another thing is that income is somewhat of a misleading indicator of well being. A person who makes quite a bit of money, but only spends $20,000 for consumption is living a life very much like a person who earns only $20,000 (after taxes) and spends it all. This is why economists tend to prefer data on consumption expenditures vs. income data.
Another problem with income data is that it doesn't incorporate some types of "income"/consumption such as health care/medical consumption and insurance. Most people don't consider their employer paid benefits income, but most economists would.
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Steve, at 6:22 PM
steve:
How about we turn off the reactionary bullshit, eh?
I never even suggested that "a person's money actually belongs to the government and they are lucky to keep whatever the government lets them. Is that how you see it?"
The government provides services to its citizens: from military, to law enforcement, to business regulation, etc. Those services cost money. The government needs money to pay for those services - that's what taxes are for.
The question becomes, what is the appropriate way to distribute the cost of those services onto the population? And that's something that people can disagree about in a civil way.
I happen to believe in a progressive tax code. But that's not what I'm arguing here.
The tax cuts passed by the Bush administration, and which they are attempting to make permanent, are causing a *huge* deficit, because revenues aren't matching expenditures. When you're *increasing* spending, to decrease revenues by cutting the taxes paid by the wealthiest segment of society is not reasonable.
As I said in the post: my wife and I have benefited significantly from Bush's tax cuts. The catch is, we don't *need* that money. The tax rate that we were paying was fair and reasonable for the services that the government provides. On the other hand, we have plenty of family and friends who don't make as much as we do, and some of them could *really* use some relief from taxes, because they're income isn't much beyond what they need to get by - and the governments slice, for people in their situation, can make the difference between getting by, and going into debt just to survive.
Cutting taxes for *us* in a time of deficit spending and war - while leaving taxes pretty much unchanged for the vast majority of people who are struggling - that's just stupid.
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MarkCC, at 6:34 PM
Mark,
The government provides services to its citizens: from military, to law enforcement, to business regulation, etc. Those services cost money. The government needs money to pay for those services - that's what taxes are for.
National defense is a pure public good. We all consume it equally. Hence this is "giving the money" to the rich, poor and everybody in between.
The idea that money is being borrowed to be handed over to the rich is hyperbole of pretty much the same kind you are decrying.
The question becomes, what is the appropriate way to distribute the cost of those services onto the population? And that's something that people can disagree about in a civil way.
Sure, fine. And the people who pay the bulk of that cost are in the upper end of the income distribution link. There are a couple of things to note there. First that for the bottom two quintiles the share of taxes is actually negative (most likely due to the EITC). Those in the fourth and fifth quintile pay over 96% of the income taxes and about 85% of total federal taxes.
As for those who are at the lower end of the income distribution and taxes, on a federal level there isn't much there to cut. These people end up paying lots in taxes due to things like state and local taxes, sales taxes and the payroll taxes. While the latter are indeed federal taxes cutting them with the impending shortfalls in both Medicare and Social Security is not a good idea. However, taxes at the lower end of the income distribution were cut at the federal level. So while you have a good point about the total tax burden, in reality it is besides the point of your initial post. Neither President Bush nor any other President can, could have, or will be able to do much about it.
Oh, and a brief bit of history. During one war this century the U.S. ran up a public debt that was well in excess of GDP. During WWII I believe that public debt as a share of GDP was around 104% or so by the end. So running deficits during a war isn't all that unusual, in fact, it is probably to be expected. As for the wisdom of cutting taxes at the same time, that is a bit more debatable.
And upon finishing your comment I see you are completely incapable of defending your initial claim that money is borrowed by the federal government and given to the wealthy. Is that an example of bad math where no math is actually present? Looks that way to me.
By
Steve, at 7:40 PM
I messed up the html on the link. Here it is again, but corrected:
link
By
Steve, at 7:42 PM
Steve said:
"The "rich->richer, poor->poorer" argument is specious"
Would you explain that to me please.
I refer you again to Kevin Phillips book.
It seems to me that the given reason for cutting taxes is to stimulate the economy. I fail to see how giving comparatively large amounts of money back to the comparatively few people who already are making more money than they can spend stimulates the economy more than giving a smaller amount of money back to the vast majority of people who make less than they need to live decently.
It seems to me that a sensible way to cut taxes is to take the total amount of the cut and give every tax-reporting entity an equal share of it.
By
Anonymous, at 8:41 PM
steve:
I'm starting to get *very* pissed off at having words put in my mouth.
I said that we're deliberately cutting revenues and increasing spending, which puts us into deficit (which means borrowing money), and that a sizeable portion of that revenue cut is in the form of a tax cut to the wealthiest people. Tell me - how does it wrong to say that the government is borrowing money in order to lower taxes on the wealthiest people when the country is in deficit largely because of the tax cuts for the wealthiest people?
And the war is no excuse. Yes, it's common to run deficits during a war. It is *not* common to lower income taxes on the wealthiest citizens, give subsidies to corporations raking in records profits, and then say that you need to borrow money "because we're at war".
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MarkCC, at 8:45 PM
karl:
I'm with you on that. The idea that somehow this governments tax cuts are an "economic stimulus" is horseshit.
I also have to comment that it's amusing to see people like steve insist that "rich get richer, poor get poorer" is nonsense because income distribution statistics aren't really meaningful; but then when they want to show that rich people pay more taxes, suddenly figures calculated in exactly the same way become worthy of quotation.
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MarkCC, at 8:48 PM
(btw I am a different Steve than the one with the blog)
The Bush tax cuts did benefit working families - the child tax credit was doubled, the bottom rates lowered, etc. On the other hand, most wealthy individuals are in the Alt Min bracket which was not changed from 28% so they saw little benefit from the program other than the reduction in capital gains rates.
Fundementally when you set the top rates too high, the wealthy spend their efforts on tax shelters to preserve their wealth rather than constructive investment that spur economic growth. At top brackets, an individual in NY or CA has a marginal tax rate (including state and local taxes) of nearly 50%
By
Anonymous, at 8:50 PM
"How about we turn off the reactionary bullshit, eh?
I never even suggested that "a person's money actually belongs to the government and they are lucky to keep whatever the government lets them. Is that how you see it?""
Yes, it's a straw man argument, designed to parody your position and make it easier to refute.
By
Orac, at 11:28 PM
I said that we're deliberately cutting revenues and increasing spending, which puts us into deficit (which means borrowing money), and that a sizeable portion of that revenue cut is in the form of a tax cut to the wealthiest people. Tell me - how does it wrong to say that the government is borrowing money in order to lower taxes on the wealthiest people when the country is in deficit largely because of the tax cuts for the wealthiest people?
It isn't wrong. But that also isn't what you wrote. What you wrote is that the government is borrowing money to give it to the rich. This is false. A more accurate statement is that the government is borrowing money so that the rich (and the poor) can keep a larger protion of their income. It isn't my problem that this pisses you off as you are the one who is inaccurate here.
And the war is no excuse. Yes, it's common to run deficits during a war. It is *not* common to lower income taxes on the wealthiest citizens, give subsidies to corporations raking in records profits, and then say that you need to borrow money "because we're at war".
I'm pretty sure that taxes across the board were cut. Look at the data I linked too, in 2002 the lowest income quintile's share of taxes went from -2.6 tp -2.9. Also, the effective tax rates declined for all income quintiles as well. It isn't that taxes were just cut for the rich, they were cut across the board. Since the rich pay a larger portion of taxes, they got a larger share of the cut.
As for all the corporate pork, that is true. There is a goodly amount of that. But there are other spending programs that are rotten fiscal policy too. The Medicare Drug program for the Elderly. There is quite a bit of idiocy on which to blame the Republicans and Bush, no need to go about using the hyperbole.
Orac,
Yes, it was a strawman, but I like to call is sarcasm, unfortunately it wasn't as obvious as I thought.
Now this is a better example of a strawman,
I also have to comment that it's amusing to see people like steve insist that "rich get richer, poor get poorer" is nonsense because income distribution statistics aren't really meaningful; but then when they want to show that rich people pay more taxes, suddenly figures calculated in exactly the same way become worthy of quotation.
I didn't say it was nonsense, but that in terms of measuring welfare economists prefer to use consumption expenditures. Since income taxes are levied, under current law, on income and not consumption looking at taxes as a function of income seems reasonable.
Next time I'll be more like Mark and just say, "its just wrong."
By
Steve, at 11:54 PM
amazing. on a blog dedicated to the analysis of good and bad math, a political issue gets 25 lengthy comments and counting; the previous lambda calculus post just one.
By
Anonymous, at 12:20 PM
In 1905:
[I had] a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules -
(1) Use mathematics as a shorthand language, rather than an engine of inquiry.
(2) Keep to them till you have done.
(3) Translate into English.
(4) Then illustrate by examples that are important in real life.
(5) Burn the mathematics.
(6) If you can't succeed in (4), burn (3). This last I did often.
By
Anonymous, at 1:10 PM
One of the interesting fallacies I see all the time in discussions of economics (which all of us are equipped to understand are fantastically multi-variate systems with behaviours that are probably impossible to predict in detail) is this line of thinking:
Alice: action X resulted in change Y therefore change Y caused action X.
Bob: No, change Y did not occur -- look at this data.
Alice: Oh well change Y would have occurred if not for this other variable Z.
Repeat ad nauseum.
By
Anonymous, at 1:48 PM
Steve wrote: "Next time I'll be more like Mark and just say, 'its just wrong'."
Now, that's not fair. Mark rarely says "its just wrong". More often he says something like "That's bulls***, you s***head."
By
Anonymous, at 2:55 PM
Nat:
Care to take a moment and back that up? Can you cite a single instance in the entire history of my blog where I've said anything remotely like "that's bullshit you shithead" to a commenter?
By
MarkCC, at 3:22 PM
Hi,
There is an elephant in the room, and that is the fact that the US is not paying its way in the wider world. At the moment, US consumption is fed by imports which are financed by investment from overseas; chiefly from Japan and now China. One day this will end: there will be nothing worthwhile left to buy and the investors will want their money back. World-wide economic chaos ensues.
There is no evidence that politicians or government economists are doing anything about the problem.
I am a Brit, and the situation here is the same except on a smaller scale. I take no pleasure in it.
Regards,
John Green
By
Anonymous, at 4:08 PM
There's an additional factor in this whole economic scene that isn't being addressed.
Even assuming that reducing taxes will accelerate economic growth and might even result in greater tax revenue given sufficient growth, the economy can only grow so fast before inflationary pressures start slowing it down again anyway. If the economy can't grow enough to offset the tax rate reduction, revenues can't increase.
And that's the situation we're already seeing. The Fed is steadily raising interest rates to try to slow the economy before inflation gets out of hand. If tax rate reductions are still stimulating high economic growth, then allowing the reductions to phase out would presumably have the same effect as interest rate increases, making them desirable to slow economic growth to a sustainable pace.
By
Lord Runolfr, at 5:06 PM
Mark,
I think you missed one interesting factor - the fallacy that our tax system is progressive.
Given the tax cuts on capital gains and dividends, I'm not sure that's the case.
Consider two individuals.
Harry is a successful tradesman, and has a salary of $100,000 per year. He has $20,000 of deductions, so his taxable income is $80,000. He pays:
$16,906 in payroll taxes
$ 5,580 in social security
$ 1,305 in medicare taxes
$23,791 in total
George is the son of an investment banker. He doesn't draw a salary - his income comes from capital gains and dividends. For sake of argument, assume $50K of each, and that his capital gains are long-term.
He pays:
$ 7,500 capital gains tax
$ 7,500 dividend tax
$15,000 in total
That's really the worst case - these taxes vary from 5% to 15% - so the actual tax is probably less.
So, to summarize, the guy who makes his money in wages pays 23% of his income in tax, and the guy who gets his money from investments pays 15% (it's actually probably closer to 10%).
That is a huge inequity. And if the numbers get bigger, it gets worse, since the income tax brackets are progressive but there is no progressiveness in dividends or capital gains.
Like Mark, I'm in a position where I stand to personally benefit from such policies, but have family who are on the other end of it.
By
Anonymous, at 5:11 PM
Well, let's see. On this thread, we have you saying "How about we turn off the reactionary bulls***, eh?" and "The idea that somehow this governments tax cuts are an 'economic stimulus' is horses***." On a post on Monday, you enlighten us about some "miserable walking s***bag" who is also, apparently, a "s***head". The Duke lacrosse rape case brought to our attention a practitioner of bad math who was identified the first four times as an "a**hole" but by the fifth mention had been downgraded to a "jackass". And you thought that the proper response to Richard Swinburne's questionable probabilizing was to meditate on the odds of flying monkeys zeroing in on his house and "pelt[ing] it with their feces." There appears to be a trend here.
By
Anonymous, at 7:20 PM
Nat:
In other words, you can't come up with a single instance where I've said anything like "that's horseshit you shithead" to a commenter.
I make no apologies for calling people like Vox Day a shithead - they've earned it. But I do *not* resort to crude insults of people who comment on this blog.
If you find my writing so objectionable, feel free to not read it. No one is forcing you. But if you're going to keep reading and commenting, I'd really appreciate it if you could stick to talking about the actual subject of the post rather than personal attacks.
By
MarkCC, at 8:15 PM
So running deficits during a war isn't all that unusual, in fact, it is probably to be expected.
In the past this made perfect sense; WWI, WWII, Vietnam, Korean war, etc. However, Iraq was a war that was supposed to cost under 4 billion including rebuilding, according to the administration's first estimates. This year, if I remember correctly, they have spent somewhere in the neighborhood of 250 billion, numbers which outstrip the original estimate for the total war by a factor of over 60.
By
Anonymous, at 1:17 AM
Well, yes $250B so far (though costofwar.com says $280B).
But the long-term cost is likely to be $2T.
Which would make it a factor of 500
By
Anonymous, at 4:46 PM
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