Manufactured Crisis Averted

1 Aug

HT Marquil at EmpireWire.com.

Without analyzing a debt/deficit/spending/cuts deal that was cut just yesterday and I haven’t had an opportunity to review, I continually ask myself over these last several days why Washington is so willing to cut on the backs of the elderly, the poor, and the middle class, and why it so adamantly refuses to ask the very wealthy to pay, e.g., what they paid in income taxes back during the roaring 90s.

What will the tea party fad be replaced by, and when?

30 Responses to “Manufactured Crisis Averted”

  1. Ward August 1, 2011 at 9:09 am #

    Not surprised you haven’t dusted off the old canard – “balancing the budget on the backs of the poor blah blah blah”, because balancing the budget apparently isn’t on the menu. So to a large extent your spending proclivities have teiumphed.

    A converse of your query would be to ask if you think the 47% of Americans who pay zero income tax are paying more than their “fair share”; and how much less than zero would be their fair share.

    Just curious.

  2. John Roach August 1, 2011 at 9:25 am #

    I agree some with Ward. I don’t like paying taxes anymore than the next guy. But I also know they are needed to fund essential services. But way is it that when tax increases come up, Liberals still will not ask everyone with earned income to pay at least a minimal (or token) tax?

    If I can get you to give me a free ride and buy me stuff with someone else’s money, then you’re my friend. But don’t ask me to pay.

    Maybe tax rates have to go up, but we all need to have skin in the game.

  3. Jesse August 1, 2011 at 9:56 am #

    The trouble is that suddenly at the end of the aughts, spending jumped a couple hundred billion in one year, and the next, and the next.  Blah blah “recession” SPEND MORE says Krugman.

    If the Tea Party can pay attention to their reason for being – out of control spending – then I hope they never go away.

    Fact: Washington has PLENTY of fcking revenue.

  4. Mike In WNY August 1, 2011 at 10:06 am #

    I would title an article as follows: “Republicans and Democrats Kick the Can, Bigger Crisis Looming in the Future”.

  5. Leo Wilson August 1, 2011 at 10:10 am #

    Washington doesn’t just have plenty of revenues, it also has a huge slush fund on hand, nearly a trillion dollars of unspent “stimulus” cash and monies that were paid back from the TARP fund that weren’t repaid to out creditors, as well as the 14th amendment that requires our debt be paid. Alan got it right – this is an entirely manufactured crisis. We wouldn’t have defaulted, we’d simply have used that slush fund for a while instead of credit.

  6. MJC August 1, 2011 at 10:15 am #

    Obviously no one wants to pay any taxes. But the real problem in this country is income inequality – over the past 30 years the top percentage of wealthy people have gotten much wealthier at the expense of everyone else – most notably the former working class that has now been consigned to poverty.

    Before you scream about “class warfare”, or start arguing that the super wealthy deserve everything, ask yourself if this isn’t what is causing the tax dilemma to begin with. As the wealthy soak up more and more of the money, there are more people driven out of the working/middle class and into the poor class that pays no taxes. This results in a smaller tax base – fewer people being asked to pay for the same services that a larger number paid for before.

    On top of that, a greater number of poor people need more services, further straining the system and running up deficits.

    Wealthy people in this country complain about having to shoulder more of a tax burden at the same time they are taking a bigger cut of the pie. Why is the Tea Party supporting this?

    Oh yeah. They are funded (read: being manipulated by) the Dick Armey led Freedom Works and the Koch Brothers.

    Welcome back to the late 1800’s America. There will be two classes – the super wealthy and super poor.

  7. Greg August 1, 2011 at 10:27 am #

    I would title an article as follows: “Republicans and Democrats Kick the Can, Bigger Crisis Looming in the Future”.

    Completely agree. They’re all fucking cowards.

  8. Leo Wilson August 1, 2011 at 10:27 am #

    @MJC, I see this 30-years trend you’re complaining about as being more like 55+ years, and driven not by industrial magnates but by academic idealists that decide trade policy. How many of my out-of-work neighbors would be making 6 figures at the steel plant our one of the myriad of ancillary businesses (machine shops, tool and die shops, etc) without Johnson’s trade decision re: steel? How many in the rest of the country would be flush and successful without Clinton’s trade/human rights decision re: China? Who did the labor unions for those gone-missing industries support with their contributions and get-out-the-vote efforts when those politicians were running for office?

    Today’s budget/debt woes, and the income disparity you cite, are symptoms of the illness those politicians inflicted on us, plain and simple.

    And, you wish it was a return to the 1800’s. Then, there wasn’t the technology to track every freakin’ nickel you earn and spend, so you had a chance of doing something for yourself that the government couldn’t fuck up. What chance of being that lucky is there today?

  9. Mr.F.N. Magoo August 1, 2011 at 11:45 am #

    The CBO’s calculation of the Boner Plans savings includes….wait for it…the expiration of the Bush tax cuts. So much so, they won’t even be counted as the savings necessary to prevent the automatic cuts included in the law. That additional revenue is already calculated in the savings. The Boner just isn’t trumpeting that part. The House and Senate will have to craft a bill in order to extend tax breaks. And the GOP will have to try to include those for the top tier after the bulk of their constituents feel the effects of the cuts already made. That’s gonna make for interesting political theater.

    “The trouble is that suddenly at the end of the aughts, spending jumped a couple hundred billion in one year, and the next, and the next.” The deficit was enormous before that, an almost unprecedented increase in 8 years. Once the wars actually went on the books and the tax-protected upper echelon got finished prison fucking the economy, the piper needed to be paid. There’s no proven correlation between taxing the rich and the state of the overall economy, good nor bad. Its just not there. However, the state of the US budget almost always fares much better when the rich are paying more. Fair or not, that’s how it is.

  10. Leo Wilson August 1, 2011 at 12:11 pm #

    @Alan – if we admire the roaring 90’s so much, we should return to those times. Raise taxes to 90’s, abolish PPACA & Medicare Part D, abolish any new departments (HSA?), return funding levels to what remains to the same level as then, and enjoy that level of prosperity again.

    Taxation wasn’t the only thing that changed.

  11. Brian Castner August 1, 2011 at 1:00 pm #

    Just to correct a false assertion that is regularly made ’round these parts, the wars in Iraq and Afghanistan were never “off the books.” They were not included in the yearly DoD budget, but were paid for with supplementals. They always counted towards the total debt, which is what this whole fiasco (see: ceiling, debt) has been about. The implication that any ballooning of debt under Obama is due to the sudden acceptance of the wars “onto the books” is wrong.

  12. Ward August 1, 2011 at 1:03 pm #

    Alan — While the top two quintiles (that’s forty percent, to those educated by Phil Rumore’s membership) of American taxpayers earn three times as much as the bottom three quintiles, they pay seventy-five times as much in income tax. That means they pay twenty-five times as much tax per dollar earned.

    Would it be their “fair share” to pay thirty-five times as much, per dollar earned? Fifty times as much? Please tell us what constitutes their “fair share”, in your opinion.

  13. Mike In WNY August 1, 2011 at 1:30 pm #

    Harvard economist, Jeffrey Miron summed things up pretty well:

    The problem with the Democratic position is that it regards redistribution, rather than economic productivity, as the prime goal of government policy. The Democrats therefore want to address the deficit with higher taxes on “the rich,” not expenditure cuts.

    This approach, however, cannot remotely address the long-term debt outlook; the available revenue from the wealthy is far too small. And higher taxes discourage economic growth, making deficits worse. Thus whatever the morality of soaking the rich, it will not work.

    Likewise, Democrats refuse to accept that Medicare is the primary driver of the U.S. fiscal nightmare. This expenditure is growing much faster than the GDP has any chance of growing over the long haul. Unless a deal slows the growth of Medicare, nothing else matters.

    A good approach to scaling back Medicare would be a substantially higher deductible. Imagine, for example, that every beneficiary paid an extra $2,000 out of pocket each year. This is affordable for most families, especially those a few years from retirement.

    This one change in policy would save at least $100 billion a year. Better yet, Medicare beneficiaries would face the full price for more of their health care, while still having insurance against extraordinary expenditures. So they would pay more attention to prices and demand less health care, slowing the growth of health care costs.

    And proposing real cuts in Medicare is the perfect opportunity for Democrats to steal Republican thunder. Many Americans believe that Democrats will do anything to forestall entitlement cuts, even if that means an exploding debt. By instead accepting the undeniable — that Medicare as we know it is broken, so we have no choice but to end it — Democrats can give themselves a credibility they do not possess.

    For Republicans, the crucial mistake is their refusal to distinguish between the tax revenue that comes from higher rates and that which comes from fixing tax loopholes that inappropriately privilege certain consumption or production.

    The Republicans are correct that raising tax rates is a terrible idea. By discouraging savings, work and investment, higher rates dampen economic productivity in the long run. By reducing disposable income and corporate profits, they reduce consumption and investment in the short run. And higher rates will not raise as much revenue as initial forecasts.

    Jeffrey Miron is a senior lecturer and director of undergraduate studies in the Economics Department at Harvard University and a senior fellow at the Cato Institute. He is also the author of Libertarianism, from A to Z.
    More by Jeffrey A. Miron

    But closing tax loopholes — lowering tax expenditure — is a terrific idea. Many tax expenditures distort economic decision-making and therefore slow economic growth. Crucial examples include the home-mortgage interest deduction and the preferential treatment of employer-provided health insurance. Thus Republican skepticism about explicit expenditure should apply equally to tax expenditure, regardless of the revenue implications.

  14. Greg August 1, 2011 at 2:11 pm #

    Please tell us what constitutes their “fair share”

    Whatever amount it takes to keep the middle class around.

  15. STEEL August 1, 2011 at 2:23 pm #

    There is no proof that high taxes hinders economic growth. As a matter of fact one of the highest taxed nations (Germany) is now and has been for a long time one of the most prosperous and innovative in the world. Just saying that kind of crap does not make it so. Republicans know this in their hearts because up until now they have never made tax cuts without an accompanying huge increase in spending. Most recently the precipitous decline in the size of government across the country has been the main damper on job growth. Where are the jobs we were promised by the extension of the Bush tax cuts? Since those tax cuts job growth has stalled? The wealthy are currently hoarding money and would like nothing better than to get more of it to stash away.

    That being said I think a higher deductible is a good idea to cut insurance costs. Insurance really should be looked at as a safety net against catastrophic loss not for every cost.

  16. Saltecks August 1, 2011 at 3:38 pm #

    Jeffrey Miron so heavily quoted above is a fellow at the right wing Cato institue. the Cato building at 10th and Mass in DC is currently being doubled in size thanks to the generosity of the David and Charles aka the Koch brothers.

  17. Mr.F.N. Magoo August 1, 2011 at 3:57 pm #

    The wars were counted towards the deficit but weren’t part of proposed budgets. They went onto the books and thus became part of the budget in Obama’s first year when they hadn’t been counted that way before. Its easy to understand that the Bush wars weren’t counted in his final budget, so when they were finally officially counted as part of the budget as the money was allocated, it inflated the difference in ‘spending’.

  18. Leo Wilson August 1, 2011 at 4:15 pm #

    What will last longer, “Bush’s” wars, or new entitlements? Which will, in the long run, cost more? This argument about wars (which are ongoing long after the left gained control of congress and the white house, too) is getting thin…. espeically in light of Lybia. Good points, but you continue the wars willfully. That’s the same old gray mare with mud stockings and nobody believes it when you say you’re riding a white horse. Nobody believes the promise that you’ll buy one, either.

  19. Ward August 1, 2011 at 5:04 pm #

    Greg — actually I was hoping for a number, just to know what the left’s concept of fair share is.

  20. Greg August 1, 2011 at 6:18 pm #

    I’m not an economist. Whatever amount it takes to keep the middle class around. Without wealth redistribution, the rich get richer, the poor get poorer, and the middle class dies off. Wasn’t it 90% plus for the highest bracket just 50 years ago? That sounds good to me.

    It’s misleading to frame it in terms of dollars earned. It’s way different to tax someone who can barely afford to live than it is to tax someone coming off their eighth European vacation of the year.

  21. Carl August 1, 2011 at 6:21 pm #

    Let’s end one of Ward’s canards right now: Granted, the poorest pay little federal tax, if any. But I can guarantee you this: They’re STILL paying taxes….state, sales, the Soc Sec tax, payroll taxes….do you want me to continue? Even better, it hits them worse that it would a more affluent taxpayer because it’s taking a bitter hit out of their paychecks.

  22. Mr.F.N. Magoo August 1, 2011 at 6:42 pm #

    Marriner S. Eccles, FDR’s Fed chairman:
    “As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”

    And there’s this thread of ‘logic’ that the rich got that way because they work harder, smarter or just better than the rest of us. Bullshit. A lot of it has to do with plain luck.

    “Harvey Two-Face (Batman Forever):
    “One man is born a hero, his brother a coward. Babies starve, politicians grow fat. Holy men are martyred, anchovies grow legion. Why? Why why why why why? Luck! Blind stupid simple doo-dah clueless luck!””
    http://www.physorg.com/news/2011-07-chance-favors-wealth.html

    We tax Lotto winners at a high rate because they’re lucky. Raise the genetic Lottery tax (inheritance), raise capital gains tax, and let’s see what happens.

  23. Greg August 1, 2011 at 7:03 pm #

    This country pays people millions of dollars for catching a ball or timing a stupid market, yet pays those who risk their lives for us lower-middle class wages. Working-harder-for-it-my-ass.

  24. John Roach August 1, 2011 at 7:35 pm #

    Greg, in the 1950’s even the lowest income earners paid up to 20.4% of their income in federal income taxes while the top rate was 91%. Sounds fair?

  25. Greg August 1, 2011 at 7:43 pm #

    I never said the lowest bracket shouldn’t pay taxes. They indeed should pay some.

  26. Bbill August 1, 2011 at 7:58 pm #

    Hmmm

    http://bobcesca.com/blog-archives/2011/08/upon-further-examination.html

    …whistling past the graveyard or does this post provide food for optimism?

  27. Mr.F.N. Magoo August 1, 2011 at 8:05 pm #

    @Bbill: “The only way for the Bush Cuts to be extended is if the “super congress” committee offsets it with tax hikes or tax reform in other areas. Going after the Bush Tax Cuts in the committee would not count as reducing the deficit, because the baseline already assumes they will expire” Somebody already said that earlier in the thread.

  28. Eric Saldanha August 2, 2011 at 12:26 am #

    I am absolutely gobsmacked that none of our leaders in D.C. (save for the Progressive Caucus of the Democratic Party) are talking, let alone doing anything, about the current 9.2% unemployment rate. That’s millions of people (particularly the 99’ers who have exhausted their UI benefits) in the most desperate, dire times of their lives. Doing nothing about UI benefit extensions or investing in job programs is a dereliction of duty for all of our elected representatives.

    There is optimism in the post Bbill cited, but when will this Congress (and the Tea Party jihadists that nearly drove the nation into default) take up jobs in any form of meaningful legislation?

  29. Leo Wilson August 2, 2011 at 9:16 am #

    @Eric – the optimistic presentation of the U3 numbers is deceiving. U6 reflects reality more closely. And, how can you mention it at all and not review that it hits minorities and the young so disproportionately? This recession and the lame, failed attempts to fix it reverses progress in that respect that took generations to achieve in the first place.

  30. Eric Saldanha August 2, 2011 at 9:53 am #

    @ Leo – add to that the discrimination facing the long-term unemployed (see here and here).

    While folks are wrecking their credit just to stay afloat, businesses are penalizing them for something they didn’t do. “Job-creators,” my ass.

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