The Tea Party of Matt Taibbi

[awm]

The reality is that a lot of people don't have the slightest clue what the government spends its money on. Politicians tend to criticize particular "earmark" projects, which comprise a truly tiny percentage of the overall budget (and many of which are actually legitimate projects, despite the negative portrayal in the media).

 

In fact many of the tea partiers seem not to realize that medicare and social security are government programs, or that they make up a very large percentage of federal spending. There seems to be an impression that "welfare" is a big cost (for poor people, that is, not for the elderly) and also that we give a lot of money to other countries in foreign aid. It is amusing to hear them railing against "government-run obamacare" when in fact Obama's health care bill is mostly a big giveaway to private insurance companies without even offering the option of government-run insurance, while simultaneously complaining about anyone suggesting cuts to medicare (which is in fact government-run healthcare, albeit only for the elderly or disabled).

[hrothgar]

It was not. In fact, I still don't get it.

One of the meanings of the word "dig" is "A sarcastic, taunting remark; a gibe"

 

Thanks for the digging could be intrepeted as either

 

1. Thanks for the research

2. Thanks for the taunting

 

(The word "Needle" is sometimes used in a similar manner)

[Rodney26]

Of course some fools actually believe that cutting taxes causes increased receipts, kind of like the businessman who decides to sell at a loss, counting on increased volume for success. You can't reason with folks that stupid.

It's not a good comparison. There is some rate of taxation that will result in maximum revenues for the government. We know it is not 0% (where the government would net nothing), and we know it isn't 100% (where no one would work). It is somewhere in between those numbers. Suggesting that people who argue a lower number might be optimal are "fools" and "stupid" seems somewhat base to me.

 

Taibbi misses the point on this one. This is the main problem when the government runs Ponzi schemes; why shouldn't someone who has contributed to Medicare for 40 odd years not then receive the benefit? What people don't realize is that the Ponzi style funding means later generations will perforce receive the short end of the stick; current generations are used to thinking they can get more out of it than they put in. They are like Madoff's investors before he was exposed. It's not like you have a choice to contribute or not.

[Lobowolf]

If you look at the current pledge to America from the republicans, you will see a strong endorsement of tax cuts, but not the matching spending cuts. It is therefore a completely dishonest document, and it makes sense only to the crooks who produced it and the fools who actually fall for it. (Those are the only two possibilities I can think of, so it must be one or the other.)

No more dishonest than the increased spending proposals (from both sides) that can't be afforded. Even during a budget surplus, budget items that are annual experiences (e.g. hiring a chauffeur as opposed to buying a car) are just as irresponsible; in the inevitable eventual cyclic down turn, those expenditures remain on the budget just as if the surplus still existed.

[PassedOut]

If you look at the current pledge to America from the republicans, you will see a strong endorsement of tax cuts, but not the matching spending cuts. It is therefore a completely dishonest document, and it makes sense only to the crooks who produced it and the fools who actually fall for it. (Those are the only two possibilities I can think of, so it must be one or the other.)

No more dishonest than the increased spending proposals (from both sides) that can't be afforded. Even during a budget surplus, budget items that are annual experiences (e.g. hiring a chauffeur as opposed to buying a car) are just as irresponsible; in the inevitable eventual cyclic down turn, those expenditures remain on the budget just as if the surplus still existed.

I agree that anyone who proposes additional spending without identifying the source of the funds to pay for it -- and also claims to be financially responsible -- is being dishonest. The party affilation does not matter.

 

The new republican "pledge" is only the most egregious current example. I would like all of the GW Bush tax cuts to expire, not just those for the highest 2% of earners. Obama and the democrats are also playing a dishonest political game in that respect.

 

I certainly would like taxes cut, but only after the matching spending cuts have already been approved. The free lunch crowd (regardless of party) always offers tax cuts, but then never gets around to cutting the spending.

[PassedOut]

There is some rate of taxation that will result in maximum revenues for the government. We know it is not 0% (where the government would net nothing), and we know it isn't 100% (where no one would work). It is somewhere in between those numbers. Suggesting that people who argue a lower number might be optimal are "fools" and "stupid" seems somewhat base to me.

It is true that tax cuts do stimulate the economy so that the government does not lose 100% of the revenue that you'd calculate by straight arithmetic. And those effects have been looked at pretty carefully by both conservative and liberal economists.

 

Given tax rates under 50%, the government will actually get back from 15 cents to 25 cents of each tax cut dollar, so the actual loss is only 75 cents to 85 cents. The liberals tend to argue that the government gets back only 15 cents on the dollar, and conservatives argue for the full 25 cents. Fools argue that the government gets back $1.10.

[Lobowolf]

There is some rate of taxation that will result in maximum revenues for the government. We know it is not 0% (where the government would net nothing), and we know it isn't 100% (where no one would work).  It is somewhere in between those numbers. Suggesting that people who argue a lower number might be optimal are "fools" and "stupid" seems somewhat base to me.

It is true that tax cuts do stimulate the economy so that the government does not lose 100% of the revenue that you'd calculate by straight arithmetic. And those effects have been looked at pretty carefully by both conservative and liberal economists.

 

Given tax rates under 50%, the government will actually get back from 15 cents to 25 cents of each tax cut dollar, so the actual loss is only 75 cents to 85 cents. The liberals tend to argue that the government gets back only 15 cents on the dollar, and conservatives argue for the full 25 cents. Fools argue that the government gets back $1.10.

I'm not sure whether you're saying 1) "from a practical and historical position, tax revenues don't rise when you cut rates," or 2) "from a logical position, tax revenues can't rise when you cut tax rates".

 

It sounds as if you're saying 2), which Rodney was responding to, and which this follow-up doesn't really address. There's no theoretical reason tax revenues couldn't increase as a result of cuts to tax rates. That's like saying that a person who thinks you can increase revenue by dropping the price on a product is foolish. If the increased productivity results on that lower rate being applied on a larger base, than receipts can increase, just like if you sell more units of product X with a lower price, then revenue can go up.

 

Rodney's example illustrates this from a theoretical standpoint - lowering the tax rate from 100% to 75% would increase revenues, because there wouldn't be economic activity if the tax rate was 100%.

 

If your point all along was #1, above, then please ignore this post. Certainly, from a practical standpoint, that may not be relevant in the context of our current tax rates, i.e. it may only happen at rates that far exceed even the maximum tax rate today; my only point is that it's not inherently logically ridiculous to think that a decrease in rate may result in an increase in revenues (analogous to the pricing example; it's all about elasticity).

[hrothgar]

my only point is that it's not inherently logically ridiculous to think that a decrease in rate may result in an increase in revenues (analogous to the pricing example; it's all about elasticity).

I certainly agree that one can create hypothetical examples in which cutting tax rates will increase government revenue.

 

However, it is ridiculous to use these examples as a guide to practical decision making about fiscal policy.

[P_Marlowe]

Laffer Curve

 

http://en.wikipedia.org/wiki/Laffer_curve

 

With regards to our discussion, one of the more the interesting sentences is

 

The Laffer Curve assumes that the Government will collect no tax at a 100% tax rate

because there would be no incentive to earn income.

However some question whether this assumption is correct.

They argue, for example, that in the Soviet Union there was an effective 100% tax rate

and yet, while the Soviets were not known for their efficiency, the government still

managed to fund a very large and highly dispersed military while at the same time

creating a highly advanced space program.

 

and also

 

Laffer said (2007) that the curve should not be the sole basis for raising or lowering

taxes, but that is actually what peoble do, if they use the curve as ansupporting

argument.

 

With kind regards

Marlowe

 

PS: I am not very schooled in economics, I have a mathematics background.

Even if one assume the assumption to be correct, there is no justification to assume

that the curve is continuos, in fact even if the curve does exists, she will have jumps,

from one level to another.

[cherdanno]

my only point is that it's not inherently logically ridiculous to think that a decrease in rate may result in an increase in revenues (analogous to the pricing example; it's all about elasticity).

A thought can be ridiculous without being logically ridiculous.

[jdonn]

my only point is that it's not inherently logically ridiculous to think that a decrease in rate may result in an increase in revenues (analogous to the pricing example; it's all about elasticity).

A thought can be ridiculous without being logically ridiculous.

And a thought can be logically ridiculous (in a particular discussion such as this one) without being inherently logically ridiculous.

[kenberg]

I think that a priori it is not completely certain that lowering some taxes somewhat would necessarily reduce revenue. But probably it would do that, and suitably raising taxes would probably increase revenue and not necessarily dry up incentive. As always, I look to personal experience.

 

 

I am retired, but I work some. I don't actually know what percentage of my pay is taken by taxes so it seems unlikely that a modest increase in the tax would dissuade me from continuing. I am not a rich millionaire or even a poor millionaire but I am able to say that I will work at something if I find it interesting and I get paid something. So yes, a 100% tax would indeed stop me. Notching it up five percentage points would not. Boring would stop me. But otherwise, I don't much think about it. Suppose that the truly rich are told they must pay a bit more in taxes. Perhaps there might be someone out there somewhere who would say "Oh, there is this really interesting project out there that I was thinking of investing in but now that the tax rate has gone up, well, screw it". Some maybe, but many? I think not. What else do they have to do with their time? Play bridge?

 

 

Exactly how people decide to do what they do is probably not as straight line simple as some economists/politicians/social analysts like to make out.

[Winstonm]

MINNEAPOLIS – Former House Speaker Newt Gingrich is advising Republican candidates on November's ballots to frame the choice for voters between Democrats as "the party of food stamps"....

 

As opposed to Newt's own "Let them eat cake!" I suspect.

[PassedOut]

I'm not sure whether you're saying 1) "from a practical and historical position, tax revenues don't rise when you cut rates," or 2) "from a logical position, tax revenues can't rise when you cut tax rates".

I am, of course, talking about the reality of this much-studied problem.

 

I had thought of pointing out, as another poster has done, that it is not a given that no work would be done under a 100% income tax rate. Nor did I use the other extreme, the 0% income tax rate rate to illustrate the effect of taking tax cuts to the extreme.

 

(I do remember Lou Dobbs interviewing Dick Armey, a crooked Texas drooler who was once a republican leader. Armey was spouting the nonsense about lowering taxes as a means of increasing tax revenue. Dobbs asked, "How much would you need to lower taxes to eliminate the deficit entirely?"

 

I don't like Lou Dobbs at all, but that was one of the best questions I ever saw a politician try to answer.)

 

In any case there is no need to propose far-fetched theoretical answers to practical problems with well-known answers.

[Rodney26]

In any case there is no need to propose far-fetched theoretical answers to practical problems with well-known answers.

 

 

Tax Center outlay & revenue data

 

The data (Urban Institute and Brooking Center) doesn't support the idea that the lower marginal income tax rate on income hampered revenues when it was enacted in 2003. Obviously there are a lot of factors that impact these numbers year to year; Clinton was helped by the dot.com bubble, Bush had a nice stock market run during his second term before the financial meltdown, and I expect this fiscal year will eventually have abnormally high tax revenues because there will be lots of Roth conversions.

 

To me, that data shows a severe spending problem for the last two administrations, and especially the current one. We're in for a rough ride fiscally as a country I'm afraid.

[kenberg]

A rough ride is certainly likely. However understandable anger might be, it doesn't much help.

 

The morning paper brings the latest news in the foreclosure mess. Earlier reports about shortcuts in the process were explained away, unconvincingly, as merely technical issues. Now it appears that the banks doing the foreclosing may very well not have clear title to the mortgaged property, due to all of the inventive securitization tricks. This will be good for no one.

 

I don't know what to do about this, and I am suspicious of anyone who says that the answer is obvious. I am more than suspicious of anyone who thinks the answer can be found in the Constitution, the Bible, or the writings of Ayn Rand.

[P_Marlowe]

<nsip>

Clinton was helped by the dot.com bubble, Bush had a nice stock market run during his second term before the financial meltdown, <snip>

Just a comment

 

The one president got help from the "dot.com" bubble, the other was unfortunate,

he only got help by a nice "stock market run", you nicely left out the words "help

from a bubble in the housing market", which it basically was, the bubble in the

housing market started under Clinton, but really took during the beginning years

of the Bush administration.

 

Sry: This is just demagogic.

 

Regarding the current financial mess of the US

 

The Bush administration did cut taxes, since there was a forecast, that in a given

time window all debts would have been repaid, and due to this forecast, it was

decided, that the money generated was enough to justify the tax cuts, since the

rest would still be enough to pay of the debt.

You may or may not have accepted the forecast, forecast are ok, and as long

as you truly believe, the guys did a reasonable job, ok.

 

As the federal income went down, the tax cuts did not get reveresed, because

they were necessary to boost the economy.

 

So in effect, to summarize

 

If the economy runs well, and the goverment gets more money => lower taxes

If the economy runs bad, and the goverment gets less money => lower taxes

 

This was the financial policy of the Bush administration.

 

You need not to be a genius to see, that this is complete ...

 

The Bush taxes are a bigger amount of money than the money, that got paid to

help fighting the decline, and those tax cuts still cost money, the stimulus package

is terminated and basically the money is already spend.

 

With kind regards

Marlowe

[luke warm]

You need not to be a genius to see, that this is complete .

obviously... otherwise the administration would just recruit from BBF - there is no shortage of geniuses here

[Winstonm]

I am more than suspicious of anyone who thinks the answer can be found in the Constitution, the Bible, or the writings of Ayn Rand.

 

As well you should be, because it is a combination of all three (the key that leads to the riddle is in the Bible - then you find the multi-cololored spectacles made by Ben Franklin...which are wrapped in the Dead Sea Scrolls...)