Deficit Reduction

[awm]

The bottom line on deficit reduction is that someone needs to pay for it. Every dollar of tax increases costs someone (or some company) money. But federal spending dollars also benefit someone, and cutting federal spending thus costs someone money too. The underlying question is "who should pay" for deficit reduction, given that the long term prognosis is bleak if we keep running up the debt.

 

My view (and most Democrats) is that those who have benefitted disproportionately from the policies that got us into this mess should pay. That's the wealthiest Americans, who've seen their incomes grow dramatically in the last decade (while middle-class incomes have declined). It's companies receiving substantial federal subsidies (like the big oil and gas companies, or large agricultural companies) especially when those same companies are making billions in profits. And it's the investor class, who've seen the stock market rise dramatically during Obama's time in office, while simultaneously enjoying much lower tax rates than people who work for the same income.

 

The Republican view seems to be that the poor and middle class should pay. They want to retain low tax rates for the wealthy, and cut (or eliminate) the estate tax which effects only a very small number of fabulously wealthy families. They make proposals about banning earmarks and a federal hiring freeze... neither of which will seriously help with deficit reduction (small potatoes relative to the federal budget) and both of which potentially hurt the middle class (most federal workers are middle class, as are the people who end up getting paid to work on earmarks, most of which are construction and renovation projects). They refuse to cut military spending (we spend roughly as much as the rest of the world combined), so it seems that their big targets are the "social safety net" programs of medicare and social security, which both Paul Ryan's budget proposal and the "deficit commission" have proposed substantially cutting. These are programs for everyone, but they disproportionately help the poor and middle class, many of whom have little savings at retirement and depend on these programs almost exclusively for their income and medical care. Republicans oppose even short-term policies like extending unemployment insurance which would help the struggling middle class through the recession. Yes, I know they say they support it but "it just has to be paid for" -- but there are plenty of other expensive programs (like tax cuts, or military spending) which apparently don't "have to be paid for" according to the Republican philosophy. For the most part "it has to be paid for" is just a way of saying one doesn't support it (but that one might accept it in a compromise in exchange for something else) without having to openly come out against it.

[luke warm]

The Republican view ~~

what would you, personally, like to see america look like?

[hrothgar]

what would you, personally, like to see america look like?

 

Norway

[kenberg]

Norway

 

 

As long as lutefisk is not required, I'm in favor of this.

[awm]

what would you, personally, like to see america look like?

 

In my opinion there are three great things about America (as opposed, at least historically, to most other countries):

 

(1) Respect and integration for people from varying ethnicities, religions, political views, and the ability to express our opinions freely.

(2) The ability of people from modest backgrounds, through hard work and good ideas, to attain success.

(3) The enduring faith that each generation will have a better life than the last.

 

Obviously none of these are totally without problems throughout our nation's history. But in all, I think America has become great mostly because of these three things.

 

These days, I feel that all three are threatened. The news media is more and more controlled by a small number of super-wealthy individuals and groups. We are seeing demonization of minority groups (particularly muslims and latinos), stated very blatantly by supposedly "respectable" political leaders. Progress on gay rights has seemingly stalled, even when our military desperately needs more trained soldiers abroad we are kicking gay troops with exemplary records and critically needed skills out of the service.

 

The middle class (which most people belong to) is suffering more and more. Kids can't go to college because it's unaffordable. Huge numbers of people are unemployed. The willingness to work hard is no guarantee of success -- in many cases it doesn't even offer a chance of success when all one can find is a minimum wage job (if that). A plurality of parents believe that their kids will be worse off than they are, and with new factory workers being paid half as much as they were even a few years ago, things aren't getting better.

 

We need to break up the huge media and banking conglomerates. We need to have a higher estate tax, so those who inherit billions without working a day in their lives give back a portion to society. And we need a stronger social safety net, so people who want to work can get a job, so people who want to be educated can get an education, so people who need medical care can get it.

 

I'd like to see a real attempt at attaining full employment. My recommendation for how to do this involves offering businesses a huge tax exemption for each US employee, roughly the cost of that employee's labour at minimum wage (i.e. making hiring an additional minimum wage employee virtually free, vastly changing the tradeoffs involved in hiring new labor). This would be paid for by eliminating "corporate welfare" for big businesses that are making a profit (i.e. the oil companies), by raising the capital gains tax gradually towards the income tax rate, and by raising the corporate tax rate if necessary to make up the difference. The idea is that companies which employ people in the United States would see huge savings, whereas companies which make huge profits but have relatively few employees, or mostly overseas employees would pay more taxes. Note that other countries effectively do some of this through federalized healthcare systems (i.e. when a US company hires someone, they have to foot the bill for health care; there's a tax deduction but not an exemption as I understand it, whereas a European company doesn't have those costs).

[luke warm]

In my opinion there are three great things about America (as opposed, at least historically, to most other countries):

 

(1) Respect and integration for people from varying ethnicities, religions, political views, and the ability to express our opinions freely.

(2) The ability of people from modest backgrounds, through hard work and good ideas, to attain success.

(3) The enduring faith that each generation will have a better life than the last.

those are three good ones, and i think all 3 are only possible in a country with a (relatively) weak central gov't... take #1 for example... the u.s. has historically been a country people have wanted to live in; the same can't be said for countries that aren't as receptive to other religions, ethnicities, or where free speech is frowned on (or flat out not tolerated), etc... i think the same can be said for the other 2 in your list

 

but after a person has worked hard and attained success, it seems that nowadays those same folks are being villanized (assuming that's a word)... by that i mean there seems to be a lot of people who want to "share in" the success such people might have... i've even heard some refer to those who have attained (as opposed to those who have not attained) success as being lucky, even when this 'luck' is the result of superior mental ability or just plain hard work... work hard, attain success, pay more doesn't seem like an incentive

 

i like and agree with some of what you say... i'd also give tax breaks to those who keep their businesses here and hire american workers... i'm also against what is termed corporate welfare... but we need to understand that this sort of thing is not the fault of one political party, as much as we might want to make it so... all politicians are equally guilty, they all have a piece of the action, and they don't want to see it changed... they can't see any further ahead than the next election cycle... sure, there are some honest conservatives and honest liberals - a few... but they either convert or leave office

 

i have to admit that my thinking would be different if i had absolute power... personal liberty would work much better in a republic than in my dictatorship :)

[PassedOut]

In my opinion there are three great things about America (as opposed, at least historically, to most other countries):

 

(1) Respect and integration for people from varying ethnicities, religions, political views, and the ability to express our opinions freely.

(2) The ability of people from modest backgrounds, through hard work and good ideas, to attain success.

(3) The enduring faith that each generation will have a better life than the last.

those are three good ones, and i think all 3 are only possible in a country with a (relatively) weak central gov't... take #1 for example... the u.s. has historically been a country people have wanted to live in; the same can't be said for countries that aren't as receptive to other religions, ethnicities, or where free speech is frowned on (or flat out not tolerated), etc...

I'm interested in why you think that a weak central government provides a better haven for religious and ethnic minorities. Isn't a strong central government, established to protect the rights of minorities, much superior in that regard?

 

We've seen what the collapse of central governments has meant for populations in Africa. In Europe the collapse of the communist government in Yugoslavia led to the slaughter of religious and ethnic populations. And it was the federal government in the US that acted to correct massive racial injustices, not the states. A weak central government would not have had the capacity to do so.

 

Similarly for points two and three.

[luke warm]

you seem to have missed the word 'relatively'... also, there's a big difference between a (relatively) weak central gov't and one that has collapsed... but i think you can answer your own question if you look at just how many tried to immigrate to, for example, china or the ussr or north korea vs. the west (whose governance, you'll admit, wass quite a bit less centralized)... here's a clue - if the gov't has to forcefully prevent you from leaving, you're in the wrong place

[PassedOut]

It is certainly true that strong central governments can be oppressors as well as protectors. But a weak central government inherently lacks the protective strength of a strong one. Note that many people have chosen to move to the US, to Canada, and to several European countries, all with good, strong central governments. To Mexico and other countries with relatively weak central governments, not so many.

[awm]

I'm not sure that "weak" versus "strong" central government is the right way to put it.

 

What's needed is a government that effectively works to build a better nation. One can easily name strong central regimes (such as in communist countries) which have come down against freedom or against equality. One can also easily give situations where a strong central government (usually in the US or Europe) has stepped in to enforce freedoms or enforce equality which was otherwise threatened. And one can name instances where a weak central government was unable to prevent corporations or religious groups from trampling the rights of citizens.

 

The reason that the United States has mostly succeeded in the past, I think, is because of our system of checks and balances. The government is designed to prevent a slim majority from stomping on the rights of minorities (by, for example, establishing a strong judiciary, establishing constitutional protections which are hard to overrule, and even by allocating senators by states rather than pure population). But at the same time, the central government is strong enough that it can step in when civil rights are being violated by a big corporation, or by a local government. The government has also acted to establish a system of public education, which is really necessary to make sure that poor kids have a shot at success in the modern world.

 

My reasoning about taxation isn't due to a dislike of wealthy people. Certainly I might have some distaste for people who inherited a big fortune (seemingly didn't work for it) or people who obtained a fortune by basically "ripping people off." But there are plenty of wealthy people who are wealthy because they worked hard and/or had great ideas that caught on. Plenty of wealthy people give back to society through charities (look at Gates and Buffett for example).

 

Yet there seems to be this view (very popular with Republicans) that the wealthy don't owe anything to society as a whole... that they earned their money and they should get to keep "what's theirs." The reality is that wealthy people benefitted a lot from living in a society which allows freedoms and entrepreneurship, that maintains an educated population and a decent infrastructure. Do we think these people would be rich if they'd been born in North Korea? Sure, they worked hard for their wealth... but they also owe something to the system that made that wealth possible.

[mike777]

"allows freedoms and entrepreneurship, that maintains an educated population and a decent infrastructure. Do we think these people would be rich if they'd been born in North Korea? Sure, they worked hard for their wealth... but they also owe something to the system that made that wealth possible."

 

 

 

 

 

I agree that those that make it rich in the usa owe something back.

 

I think this is a strong moral argument but not a good legal one.

 

In any case how much more do they owe and how they pay it back is a good discussion. Should we force them to pay it in taxes or trust them to choose other ways such as charity or creating jobs.

 

The good news is they pay taxes when they earn it and they pay taxes when they spend it. If they invest in building america that is good. Now perhaps we should tax it if they gift it to anyone in anyway also.

[kenberg]

When you go camping, you are expected to leave the campsite in at least as good a condition as it was when you arrived. Apply the same logic to living in a country that has provided very well for a great many of us, and we are well on the way to accepting that we have some obligations.

[luke warm]

Yet there seems to be this view (very popular with Republicans) that the wealthy don't owe anything to society as a whole... that they earned their money and they should get to keep "what's theirs." The reality is that wealthy people benefitted a lot from living in a society which allows freedoms and entrepreneurship, that maintains an educated population and a decent infrastructure. Do we think these people would be rich if they'd been born in North Korea? Sure, they worked hard for their wealth... but they also owe something to the system that made that wealth possible.

i don't think this is true (the part about republicans believing what you say they believe)... i do believe that most conservatives think a flat tax would be fairer and would result in more revenue... imagine that you make $100G and pay a flat 20%, no deductions... your tax burden is $20G... now if i make $400G, my tax totals $80G at the same 20%, no deductions... what in the world is wrong with that? haven't i "paid back" my fair share? why must i pay a higher rate simply because i made more money (usually but not always because of higher education/more hours worked)?

 

as for the rest, the reality isn't that just the wealthy benefited from being born americans, so did those not as well off... many americans have not come from wealthy beginnings yet have attained the "american dream"... as long as there is equality of opportunity, i don't think punishing those who achieve is the right way to go (and this is quite apart from someone subjectively determining just who is 'wealthy')...

 

"Do we think these people would be rich if they'd been born in North Korea?" maybe not, but would the poor be any richer in n. korea? iow, both rich and poor supposedly have the same opportunity in america... i know there are arguments as to why this isn't always true, just as there are examples that prove its truth

[hrothgar]

i don't think this is true (the part about republicans believing what you say they believe)... i do believe that most conservatives think a flat tax would be fairer and would result in more revenue... imagine that you make $100G and pay a flat 20%, no deductions... your tax burden is $20G... now if i make $400G, my tax totals $80G at the same 20%, no deductions... what in the world is wrong with that? haven't i "paid back" my fair share? why must i pay a higher rate simply because i made more money (usually but not always because of higher education/more hours worked)?

 

 

Most conservatives (probably) do believe that a flat tax would raise more revenue.

Most of them also believe that the great sky fairy is going to wave his magic wand whisk all of them away to Never Never Land.

 

With this said and done, I doubt that you'll find any reputable economist who believes that a flat tax will generate more revenue than a progressive tax structure. (I'm sure that bizarre examples can be constructed, but by and large, progressive tax structures generate much more revenue under any realistic conditions)

 

This is why modern day conservativism is (essentially) a religion, near completely isolated from "The Reality Based Community"

 

That raving liberal David Frum had a very interesting series of articles about the alienation between the educated and the Republican Party.

 

http://www.frumforum.com/smart-youth-voters-shunned-gop-in-midterms

 

Pew did a very interesting study showing that only 8% of scientists self identify as Republicans (let alone conservatives)

[hrothgar]

 

as for the rest, the reality isn't that just the wealthy benefited from being born americans, so did those not as well off... many americans have not come from wealthy beginnings yet have attained the "american dream"... as long as there is equality of opportunity, i don't think punishing those who achieve is the right way to go (and this is quite apart from someone subjectively determining just who is 'wealthy')...

 

 

Interesting statistic: Social mobility in America is near the bottom of developed nations

 

(Scaling back inheritance taxes had a lot to do with that)

[nigel_k]

Most conservatives (probably) do believe that a flat tax would raise more revenue.

Most of them also believe that the great sky fairy is going to wave his magic wand whisk all of them away to Never Never Land.

 

With this said and done, I doubt that you'll find any reputable economist who believes that a flat tax will generate more revenue than a progressive tax structure. (I'm sure that bizarre examples can be constructed, but by and large, progressive tax structures generate much more revenue under any realistic conditions)

 

I doubt you'll find any reputable economist who thinks that maximising government revenue should be the primary measure of a successful tax system. And surely we can do better than arguments of the form:

 

Most of my opponents believe X

X is false

Therefore I am right about some issue only partly related to X

 

I don't really buy the 'fairness' arguments about the tax rate (for either side) but I can understand why people make them. If I was going to try to state my position reasonably precisely, it would be complicated enough to state, let alone justify, that undecided voters would turn off long before I was finished. The problem is that there aren't that many arguments for either side that are both simple and correct. But it's worse for small government advocates because the losses from government failing to act are generally visible, and the losses from government doing too much are the reduced jobs and wealth that cannot be seen because they were never created in the first place.

[hrothgar]

I doubt you'll find any reputable economist who thinks that maximising government revenue should be the primary measure of a successful tax system.

 

Please show me where I made any such claim...

 

Jimmy posted something that is factually incorrect (and obviously so)

I pointed this out.

 

(Kinda pathetic to make this kind of logical mistake when you're correcting other people's line of argument)

[awm]

The simplest argument against a flat tax is that taxation should be based on disposable income. If someone makes $20,000 a year and legitimately needs $18,000 a year in order to have food and housing for themselves and their dependents... should we really be charging them $4,000 in "flat tax"? Having this person starve and/or living on the streets is a good way to lose them the job that makes that $20K a year anyway.

 

Of course, one could institute a deduction which roughly matches the cost of living (perhaps location dependent) and then charge a flat tax on income above that mark. But the reality is that "cost of living" is a very fuzzy term that's hard to define precisely. In any case, the idea is that the more "excess" money a person makes beyond what they really need, the higher tax we should ask them to pay.

 

Another way to look at things is that the nation as a whole is "investing" in the success of its citizens (by providing things which cost money, like education, infrastructure, national security). When a citizen succeeds, he therefore owes the nation a percentage return on his profits. That's a percentage return on his profits, not his income.... with profits being the usual income minus costs. Of course, if I decide to buy myself a Ferrari, calling that part of my "costs" and allowing me to avoid taxes on that basis is somewhat ridiculous... so costs should really capture only legitimate necessary expenses.

[mike777]

As I pointed out in other posts, taxes are on "earned income" What the definition of earned income is could fill thousands of pages and changes every year.

 

Flat tax, progressive, whatever the more complicated question is what is earned income.

 

 

btw GM can make somewhere between 45 billion and 160 billion in profits and pay zero in taxes for those that want to use the word profits.

[awm]

http://www.frumforum.com/smart-youth-voters-shunned-gop-in-midterms

 

Pew did a very interesting study showing that only 8% of scientists self identify as Republicans (let alone conservatives)

 

The situation really is disturbing. Our country faces a number of very real problems, including how best to educate our kids, how to solve our energy problems and address climate change, how to regulate drug companies and hi-tech industries, how to prevent teen pregnancies, how to balance the budget. I think there's a great deal of room for difference of opinion about how to address these problems. We need to have an informed discussion about these things, preferably with the two parties championing distinct positions and presenting serious, fact-based arguments. Apparently this used to happen with some regularity. It doesn't seem to happen any more. In fact the Republicans routinely filibuster motions to start debate in the Senate... they don't even want to discuss the issues!

 

The Republicans seem to base their positions on appeals to emotion, denial of facts that every reputable expert knows to be true, and using religion to trump everything else. They rewrite textbooks to cast doubt on evolution and the historical separation of church and state in the US. They deny that climate change even exists, and claim that more oil drilling will solve our energy problems. They regulate stem cell research by claiming it's "against God's will." They insist that abstinence-only sex education prevents teen pregnancy (and for that matter, that homosexuals can be "cured") contrary to the facts. And they seem to think they can balance the budget by cutting taxes, and that revenues will somehow magically go up. How can an educated person take a party like this seriously?

 

Fiscal conservatism has an important role to play in our country, and there are strong arguments to be made for market-based solutions to some of our country's problems. But before these arguments can be made, one has to acknowledge the problems and respect the facts.

[hrothgar]

The simplest argument against a flat tax is that taxation should be based on disposable income. If someone makes $20,000 a year and legitimately needs $18,000 a year in order to have food and housing for themselves and their dependents... should we really be charging them $4,000 in "flat tax"? Having this person starve and/or living on the streets is a good way to lose them the job that makes that $20K a year anyway.

 

Here's an alternative argument / extension:

 

Diminishing marginal utility is one of the central assumptions that underlies economics.

 

Simply put, each dollar that I spend increases my utility.

However, the amount of additional utility that I derive from each additional dollar spent decreases.

 

If you accept this line of argument - which is essentially a given in microeconomics - then it follows that redistribution of wealth increases societal welfare.

[nigel_k]

Here's an alternative argument / extension:

 

Diminishing marginal utility is one of the central assumptions that underlies economics.

 

Simply put, each dollar that I spend increases my utility.

However, the amount of additional utility that I derive from each additional dollar spent decreases.

 

If you accept this line of argument - which is essentially a given in microeconomics - then it follows that redistribution of wealth increases societal welfare.

I agree with a utility maximising strategy and this seems like the only place to really start a serious discussion. However:

 

1. A tax which is a flat percentage of income does result in redistribution. Diminishing marginal utility at most implies it would be sub-optimal to charge each citizen a fixed dollar amount in tax. Hardly anybody is opposed to redistribution, we're just arguing about method and quantity.

 

2. Redistribution of income, redistribution of wealth, and redistribution of consumption do not follow each other automatically. It's quite easy to come up with a plan that will redistribute a nominal dollar amount but inflation will eat away at the entire amount so the receipients' real income doesn't change.

 

3. There isn't a fixed amount of income or wealth just sitting around waiting to be distributed by fair and wise politicians. A rule that leads to redistribution often tends to diminish total wealth, by creating a disincentive to work for both the payer and the recipient.

[Elianna]

Most conservatives (probably) do believe that a flat tax would raise more revenue.

Most of them also believe that the great sky fairy is going to wave his magic wand whisk all of them away to Never Never Land.

 

With this said and done, I doubt that you'll find any reputable economist who believes that a flat tax will generate more revenue than a progressive tax structure. (I'm sure that bizarre examples can be constructed, but by and large, progressive tax structures generate much more revenue under any realistic conditions)

 

This is why modern day conservativism is (essentially) a religion, near completely isolated from "The Reality Based Community"

 

That raving liberal David Frum had a very interesting series of articles about the alienation between the educated and the Republican Party.

 

http://www.frumforum.com/smart-youth-voters-shunned-gop-in-midterms

 

Pew did a very interesting study showing that only 8% of scientists self identify as Republicans (let alone conservatives)

 

I agree

[mike777]

Fwiw

 

I find this whole discussion about taxing the rich really creepy.

 

It seems to be based on the assumption the truly rich dont give back to society in the USA in a fair way.

 

So we should force them and take away their money with the power of the government/

[Rodney26]

The Republican view seems to be that the poor and middle class should pay. They want to retain low tax rates for the wealthy, and cut (or eliminate) the estate tax which effects only a very small number of fabulously wealthy families. They make proposals about banning earmarks and a federal hiring freeze... neither of which will seriously help with deficit reduction (small potatoes relative to the federal budget) and both of which potentially hurt the middle class (most federal workers are middle class, as are the people who end up getting paid to work on earmarks, most of which are construction and renovation projects).

 

I pretty much disagree with everything you say admittedly, but this here is a little much. US federal employees are probably the most well compensated class of workers in the entire world when taken as a group. If they're middle class, there is no upper class. It's like how there is no longer such thing as a small coffee except in reverse.

 

Their average total compensation (including bennies) is twice as high as your average US private sector worker (120k/60k). Reading this blog, you'd think it was at least the other way around.