It is all about Taxes

The main issue, above all else, is taxes.

David Stockman, former head of the OMB under Ronald Reagan in an interview with TPM:

“I think the biggest problem is revenues. It is simply unrealistic to say that raising revenue isn’t part of the solution. It’s a measure of how far off the deep end Republicans have gone with this religious catechism about taxes.”

Senator McConnell from this Sunday’s MTP:

SEN. McCONNELL:  Yeah, look, you know, we just have a fundamental difference of opinion.  If there’s any issue which clearly divides Republicans and Democrats, it’s taxes.  We think we have this problem because we spend too much, not because we tax too little.  And you’ve heard us have this debate over the years, we’re going to have it again next year in the course of the election because the president wants the rates to go up again next year. We’ve got a two-year extension of current tax rates right now.  I think we can stipulate this is an issue upon which there is deep-seated difference of opinion.

Really, by the way, I think that this is at the heart of the Ryan Plan:  the goal is not to find a way to fix Medicare and Medicaid, but rather the goal is to simply find a way to reduce overall federal spending so that taxes can be further cut.

While I agree that the notion that this can all be fixed by taxing only high level income earners is problematic, I don’t know how one looks at the fiscal projections and states that revenue increases can’t be part of the discussion.  Indeed, I will reiterate a position I have held for some time now:  I can’t take any politician seriously who doesn’t acknowledge that both spending and revenues have to be addressed.

Back to Stockman, however, I think he has the right of it when he likens the current Republican line on taxes to “religious catechism.”

And look:  I don’t want to pay more taxes.  I don’t like paying taxes, but pretending like revenues can’t be part of the debate is to assume that current tax code is perfect.  How can anyone legitimately and honestly take that position?

FILED UNDER: Deficit and Debt, US Politics, , , , , , ,
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. john personna says:

    I think the secret is that no one in Washington is out to solve the problem this year. They are all counting time, and testing messages, until 2012

  2. mantis says:

    I don’t know how one looks at the fiscal projections and states that revenue increases can’t be part of the discussion.

    It’s easy. You just need to be completely uninterested in real solutions or, for that matter, reality.

  3. Andyman says:

    This is the fundamental dishonesty of the GOP position. Finding a productive, fair equilibrium is not and never has been the goal. The goal is to complete another cycle of the smaller-government ratchet.

    Identify a budget “crisis” or claim one exists when it doesn’t, and take the revenue side off the table. Cut spending until the crisis goes away. Use our relatively healthy finances to justify a tax cut. Watch revenue plummet until another “crisis” is provoked. Repeat.

    There’s a small minority in the GOP caucus that truly believes that Americans’ welfare will be improved at the end of the ratcheting. The rest of them are playing a cynical game of “I got mine”. This is really, truly, all there is to it.

  4. lunaticllama says:

    Umm, the Ryan Plan is a tax cut plan. Nothing more, nothing less. The Republican party is completely uninterested in deficit spending when it’s not in their political interests to be against it. Their main political objective is lowering tax cuts on the rich. Full stop.

  5. Patrick T. McGuire says:

    While I agree that the notion that this can all be fixed by taxing only high level income earners is problematic

    Problematic!!! Just ask New York about how problematic this can be. They are losing population in droves because of taxes. The same goes for California and Illinois isn’t too far behind. Hell, Illinois raised it’s tax rates to increase revenues and then had to give tax breaks to big corporations to keep them from leaving the state.

    So go ahead, raise them taxes and see just how “problematic” things will become.

  6. ej says:

    Steven,

    Don’t you think part of this right now is simply setting your intial offer? You don’t list your intial price on a used car at the level you think you will ultimitally get.

    If republicans started out the gate saying raise taxes, then that means the compromise is even higher levels of taxes. Similarly, the dems have basically said any cuts to the entitelments are off the table. If they say they are open to cutting social security, thent he ultimate compromise will be even greaty cuts.

    This was why the entension of the bush rates for two years was such a political struggle for both sides. Because where that ended up was the starting point of negotiations. Now the republicans get to offer the experation of the bush rates as a bargining chip. If they already reversed those, then they will have to offer up even greater levels of taxes and the dems need to give up less.

  7. john personna says:

    @Patrick, I don’t believe there are any good studies to show tax-driven migration.

    What people use, typically, are demographic/retirement numbers, and call them tax-based.

    You know, like the weather, Florida vs. New York, has nothing to do with it.

  8. john personna says:

    @ej, did you just offer a narrative without a 2012 presidential election?

    lol, oh yeah, they are really just bargaining for “solutions.”

  9. @ej:

    Don’t you think part of this right now is simply setting your intial offer?

    Actually, no, I don’t.

    I have been intimately watching this debate since the 1980s and the GOP has firmly moved into a space wherein tax cuts are orthodoxy. I don’t think that this is about negotiating tactics.

  10. anjin-san says:

    I have lived in California for 52 years. Never once have I known anyone to move out of state because taxes are too high.

    The overall high cost of living is probably the largest driver I have encountered. Probably half of the people I have known that left for that reason eventually come back, or want to come back but are unable to make it work financially. A lot of Californians move to Oregon (no sales tax), and end up regretting it because of the overall anemia of Oregon’s economy. If you are not an established white collar worker there are not a lot of jobs beyond low-paying drudgery.

  11. Wayne says:

    Show me you are serious about cutting spending and controlling it then we can talk about tax levels. Past history has shown us that Democrats will give a little in spending cuts. Mostly promises of future cuts and cuts in the size of increase spending in order to get higher taxes. Problem is they don’t follow through on their promises and will turn around in the next congress and spend more.

    Look at one of their excuses for the boom in spending in last couple years. They claim that Bush didn’t spend enough so they have to play catch-up. Of course this is the same time they are complaining that Bush spent too much.

    Government revenues have been increasing for a long time now. The problem is the Government increase in spending has outpaced it.

    I can’t believe anyone would honesty think it is just a matter of the Government not taxing the people enough.

  12. tom p says:

    While I agree that the notion that this can all be fixed by taxing only high level income earners is problematic,

    There you go Steve. I fixed it so that even Patrick can understand.

  13. hey norm says:

    ej…
    i don’t see where the democrats have said “…any cuts to the entitelments are off the table…”. the fact is that the ACA cuts $500B in Medicare over 10 years. yes it is used to subsidize the healthcare of non-seniors. that’s what budgets do – they direct funds. Ryan’s budget abolishes Medicare and directs the funds to tax cuts for the rich.

    as an extension of mitch mcconnells complete bunk about spending palin steps up on fox last night and tells another lie (she probably has not been diagnosed as a pathological liar – but that’s semantics) about Obama and spending – that Obama has increased spending more than all other presidents combined. Fact – when Obama took office the debt stood at about $10.5T. Given 2 wars the republicans were unable to finish and the worst economy since the depression the debt grew about $3.5T. So Palin is telling a $7T lie. How can anything be accomplished on the economy when the de facto leader of the so-called republicans is out spewing lies?

  14. reid says:

    tom p: Never mind that it is far from orthodoxy on the left that it “can all be fixed by taxing high level income earners”. The opposite seems to be true; most on the left are open to reforms and some spending cuts. That statement seemed like a strawman to unnecessarily feed Patrick types.

  15. john personna says:

    @Wanye, do you remember the bipartisan deficit reduction commission?

    Their first step was in fact spending cuts:

    On November 10 Commission co-chairs Simpson and Bowles released a draft proposal for consideration by other commission members. The proposal presented five “steps.” The first step was a $200 billion reduction in discretionary spending[12] with proposed cuts including reducing defense procurement by 15% and closing one third of overseas bases, eliminating earmarks, and cutting the federal work force by 10%. The second step was $100 billion in increased tax revenues through various tax reform proposals,[12] such as introducing a 15 cent per gallon gasoline tax and eliminating or restricting a variety of tax deductions such as the home mortgage interest deduction and the deduction for employer-provided healthcare benefits. The third step was controlling health care costs by maintaining the Medicare cost controls associated with the recent health care reform legislaton,[12] in addition to considering a public option and a further increase in the authority of Independent Payment Advisory Board. The fourth step was a reduction in entitlements, including farm subsidies, civilian and military federal pensions and student loan subsidies.[12][13] Finally, the fifth step was modifications to the Social Security program to raise the payroll tax and to increase the retirement age.[12] The co-chairs also recommended some measures they felt would stimulate economic growth, such as a cut in the corporate tax rate from 35% to a more internationally competitive 26%.[12][14][15]

    The striking thing about that bipartisan effort is that NOBODY could get on board with the findings.

    Everybody wanted to play the game you do above, “you go first.” But even when tax cuts do go first, it isn’t enough.

  16. john personna says:

    (I meant of course “even when spending cuts go first” thought really, we’ve tried it both ways.”

  17. CB says:

    Probably half of the people I have known that left for that reason eventually come back, or want to come back but are unable to make it work financially.

    just to play devil’s advoacte, but is that not directly related to levels of taxation? in my wonderful state of NJ, i can say that property taxes, and the unwillingness to do anything about them, most definitely ARE a driving force behind migration out of state.

    maybe im confusing issues, but still.

  18. john personna says:

    Where are they going CB? If it is to a nearby state, similar in ways other than taxation, I might believe you. If it’s to Florida, not so much.

  19. hey norm says:

    Wayne –
    the only republican who has ever cut spending was Bush ’41 and he was driven out of office. thats when the republican catechism of no revenue increases started. look at how spending continued to decrease through the clinton years (before the republican contract on america) until republicans took over again. go back to the carter years and you will see the same thing until reagan started spending money. this idea that democrats don’t cut spending is just total bs. the facts don’t match your ideology.
    http://en.wikipedia.org/wiki/File:CBO_Revenues_Outlays_Percentage_GDP.svg

  20. john personna says:

    (Some of our friends here might move to Florida, play golf in the sun, and complain in the clubhouse that it was taxes made ’em do it 😉

  21. CB says:

    i know multiple families that have left for eastern PA, literally right across the delaware. others are in MD or DE, and yeah a few outliers i know moved to NC.

    i profess to know nothing about this, honestly. im ‘just asking questions’, in a non-batshit glenn beck kind of way.

  22. Steve Verdon says:

    Really, by the way, I think that this is at the heart of the Ryan Plan: the goal is not to find a way to fix Medicare and Medicaid, but rather the goal is to simply find a way to reduce overall federal spending so that taxes can be further cut.

    At this point I’d be happy with both some tax increases and some spending cuts. The middle road…or more likely the middle of the road where you can get hit by both the Right and the Left.

    Pinning all this on Republicans shows a blind spot Steven. Spending cuts, especially to Medicare and Social Security, are something that the Democrats are just about as crazy about as well (I predict within 5 posts after this at least one person saying there is nothing wrong with Social Security, or that we can fix it easily ignoring the larger fiscal context). Our problem isn’t just that the Republicans are being truculent jack asses, but that both sides are being truculent jack asses.

    Anjin-san,

    I have lived in California for 52 years. Never once have I known anyone to move out of state because taxes are too high.

    Do you ask everyone who moves out of state? For the record I know at least 3 people who have. All three were retiring and looking for lower cost of living and that included taxes.

    hey norm,

    The fact is that the ACA cuts $500B in Medicare over 10 years.

    Even Medicare’s chief actuary doesn’t believe that. I know people like to point to it, but it is widely believed that many of those cuts will be watered down or eliminated like they have in the past. One such “savings” is how much doctors are paid for treating medicare patients. However, that has been something that comes up every year. And every year Congress kicks it further down the road to the following year.

    @Wanye, do you remember the bipartisan deficit reduction commission?

    I do, and I remember the NY Times had an application that let you play around and come up with your own proposal, mine was a mix of tax increases and spending cuts.

    CB,

    just to play devil’s advoacte, but is that not directly related to levels of taxation? in my wonderful state of NJ, i can say that property taxes, and the unwillingness to do anything about them, most definitely ARE a driving force behind migration out of state.

    maybe im confusing issues, but still.

    No, in CA property taxes are kept low by Prop. 13. What is not kept in check by Prop 13 are income taxes. It is part of the overall cost of living though, so I imagine some percentage of people leaving are doing it for taxes.

  23. @Steve:

    Pinning all this on Republicans shows a blind spot Steven.

    While I will agree that that is plenty of jackassedness to go around, I do think that it is possible to get the Dems to go with spending cuts (indeed, they have agreed to cuts–although inadequate ones) but it is currently impossible to get the Reps to agree to anything on the revenue side.

    The legislative record of just the last 6 months demonstrates this: we have seen some (albeit moderate) spending cuts. We have also seen tax cuts.

    No, in CA property taxes are kept low by Prop. 13

    Well, yes and no.

    It keeps property taxes low if you bought a house decades ago and don’t move. Not so much if you move. Indeed, what it has done is shift the property tax burden increasingly to new home buyers.

  24. hey norm says:

    well steve – then every single piece of legislation ever written is open for criticism because there is absolutely no guarantee that they won’t be watered down or eliminated in the future. by that very same logic (non-logic) Ryan’s Tea Party Manifesto can be completely discounted because future congresses may decide abolishing Medicare is not a good idea.
    as for both sides being truculent jack-asses…there is one party that believes in magic-onomics, that tax cuts pay for themselves, that revenues can never be increased, that iraq will cost $60B tops, that the magic hand of the free market is all the regulation needed, and that as you say $500B in cuts is not $500B in cuts.

  25. ej says:

    steve,

    I’m not saying this is as much as negotiation now, (i dont think anyone is seriously trying to negotiate at this point) but more to set up what is ultimetally to come. Both sides seem to be wanting to play political games until after the 2012 election because both think they will have more power after that. But both sides also know something will eventually have to happen.

    Hey Norm,

    1. no it did not cut $500 billion. It just said it would pay doctors less for the same services – thats a price control. The only actual benifit they cut was medicare advantage. And they they took those savings and just spend it away multiple times over.

    2. since the deficit reduction commissions came out and Ryan’s plan, the standard repsonce has been you cant cut ss or medicare. There have been a few individual dems who have stated cuts need to be made, but as a whole no. There are handful of republicans sho have said taxes are on the table.

    Can you find me any democrat in singifigant position of power that has offered up any specific entitlment cuts?

  26. mantis says:

    Pinning all this on Republicans shows a blind spot Steven. Spending cuts, especially to Medicare and Social Security, are something that the Democrats are just about as crazy about as well (I predict within 5 posts after this at least one person saying there is nothing wrong with Social Security, or that we can fix it easily ignoring the larger fiscal context). Our problem isn’t just that the Republicans are being truculent jack asses, but that both sides are being truculent jack asses.

    Was any spending cut from Medicare in the PPACA? Did the White House put out a proposal in April that cuts trillions in spending over the next 12 years, including $480 billion from Medicare and Medicaid? Have the Democrats not come to agreements with Republicans to cut spending in a number of bills over the past couple of years?

    The answer to the above, of course, is yes. Now answer this question: have Republicans proposed or supported any increase in taxes whatsoever over the past two years?

    Democrats want to cut spending and raise taxes. Republicans want to cut spending but never, ever raise taxes for any reason. One side is reasonable. The other is not. Any attempts to claim they are the same are ludicrous.

  27. ej says:

    Steve,

    “I do think that it is possible to get the Dems to go with spending cuts (indeed, they have agreed to cuts–although inadequate ones) but it is currently impossible to get the Reps to agree to anything on the revenue side.”

    Another part of this is what the status quo currently is. At full employment is not the tax side of things that is out of the historical norm. Revenues based on current law are projected to be 19-20% of GDP once the economy recovers, which is higher than the normal 18.5%. The imbalance is because spending it much higher than normal. So if you are a republican who doesnt want higher taxes, you look at this as being the the spending side that is the problem.

    Imagine if the budget situation was in the other direction. What if tax revenues had been trending downward and spending had stayed constant. Do you think democrats would be eager to fix the gap by cutting spending? Espcially is a very large tax cut had just gone through – the inverse of what has just happened, a massive spending increase?

    If this is just a continuation of the 80 year struggle over the size of the federal government, those who advocate a larger one have been winning in recent years.

  28. anjin-san says:

    Do you ask everyone who moves out of state? For the record I know at least 3 people who have. All three were retiring and looking for lower cost of living and that included taxes.

    Steve – You and I are both naming the same driver, high cost of living. And yes, taxes are part of the equation. But only part – my point is I have never known anyone to say “I am leaving Cal because of the high taxes”, and while as you cleverly point out, I have not spoken to everyone who ever left the state, I have been hear a long time and I know a lot of people. Worked in clubs and restaurants for 25 years, you meet thousands of people that way.

    When you move from CA to OR, you get an immediate 10% increase in spending power because they have not sales tax, and everything costs less there. Despite this, a lot of folks end up moving back if they can.

    Patrick said people are “leaving CA in droves” because of high taxes. This is patent nonsense. Taxes are but one facet of a complex cost of living equation, and folks often find that simply moving to a lower tax state does not solve all their financial problems and/or that the California lifestyle justifies the higher cost. California always looses population in a bad economy. The drivers are overall cost of living and brutal competition in the job market.

  29. Patrick T. McGuire says:

    @Patrick, I don’t believe there are any good studies to show tax-driven migration.

    Believe what you want, it doesn’t change the facts.

  30. anjin-san says:

    Patrick –

    You do know that a white paper from a think tank with a political bias does not necessarily equate to a fact, don’t you?

    Oh, wait. Obviously you don’t.

  31. george says:

    If people leaving California can be assumed to be doing so because they dislike the taxes, does that mean that people moving there can be assumed to do so because they like the taxes?

    I think either argument is ridiculous – people move for a lot of reasons (typically work, often family), but almost never because of taxes.

  32. anjin-san says:

    No, in CA property taxes are kept low by Prop. 13.

    You might want to do some research on Prop. 13. It’s not quite that simple.

  33. anjin-san says:

    As a fifth generation Californian on my father’s side, I have to say that if a few million people want to leave the state, I don’t have a problem with that.

    California’s core problem is that there are just too many people here now. By almost any standard, California has the demographics of an important independent nation, not a state.

  34. ponce says:

    The only things religion spreads is poverty and ignorance.

  35. Andy says:

    Mantis,

    Yes the Democrats cut spending from Medicare and other sources but they then used that money to fund a new entitlement. They also raised taxes to help pay for that entitlement. That really isn’t cutting spending – at least as I’d define it since federal obligations will go up and not down. Plus, there’s no guarantee the cuts will actually materialize in the amounts predicted in which case we’ll have yet another underfunded entitlement.

    IMO both parties subscribe to orthodoxies which are unsustainable which is not good for the American future IMO.

  36. Rick Almeida says:

    @Andy

    Yes the Democrats cut spending from Medicare and other sources but they then used that money to fund a new entitlement. They also raised taxes to help pay for that entitlement.

    If you’re referring to Medicare Part D, I hope you agree that paying for this program is preferable to simply financing it 100% with debt.

    If you’re not referring to Medicare Part D, could you be more specific?

  37. michael reynolds says:

    Because of my line of work I can live anywhere. I moved to CA. Did the 10% tax bite make me gulp hard? Yeah. I just ten minutes ago mailed another $9 grand to the CA Franchise Tax Board.

    But would I live in FL or TX where the state income tax is zero? Never again.

    Hollywood and Silicon Valley, beaches, mountains, deserts, LA and San Francisco, palm trees and flowers, and best of all: 70 degrees, zero humidity and bright sunshine in freaking February. While Texans and Floridians are hiding inside in the air conditioning, and poor freezing northerners and midwesterners slosh through the sleet and cower before the wind, I sit at an outdoor cafe drinking wine and eating avocados.

    California, baby. Worth 10%? Hell yes.

  38. michael reynolds says:

    By the way, you know why CA is more expensive than TX? For the same reason the Four Seasons is more expensive than Motel 6.

  39. David M says:

    Yes the Democrats cut spending from Medicare and other sources but they then used that money to fund a new entitlement

    Your statement is exactly the problem. This is literally the dictionary definition of fiscally responsible / fiscally conservative legislation, but Republicans don’t like it. The current deficit is mostly due to the fiscally irresponsible Republican policy of not paying for things. (In case anyone needs a reminder, Medicare Part D, Iraq, Afghanistan and tax cuts.) Why anyone thinks the arsonist that started the fire and cheered it on for 8 years should be listened to over the fire chief is beyond me.

  40. best of all: 70 degrees, zero humidity and bright sunshine in freaking February.

    …so you think the weather would be nicer in Texas and Florida if only they’d pass an income tax?

  41. Rob in CT says:

    Revenues need to go up, but obviously the best way for that to happen is to experience economic growth that creates a bundle of jobs. Tax rates will be secondary to that, I believe, though I definitely support rolling them back to Clinton-era rates (actually, I’d prefer comprehensive tax reform that would rip out most if not all deductions and re-balance the marginal rates… details, details).

    The GOP is being unreasonable, sure. They abandoned any pretense of reason some time ago, which is sad. Many folks up here who are or lean Republican are downright embarrassed at this point.

    Anyway, the Dems want to make a deal (certainly Obama does), but they suck at negotiating. The GOP believes, with quite a bit of justification, that if they just hold firm the Dems will largely fold. And so it goes…

  42. Tsar Nicholas says:

    It’s sort of funny — an a tragedy-comedy sense — to observe liberals on the Internet whining and complaining that taxes should be raised as part of reducing the deficit.

    It’s like watching someone try to clap with one hand.

    There’s also the substantive point that raising taxes at a time of ghastly unemployment, horrible GDP growth and a catastrophic housing market would be the dumbest idea in history; even dumber than lowering the minimum voting age.

    There’s also a Quixotic component to all this. For the simple reason that taxes won’t be raised anytime soon. That’s the reality. Like it or not.

    Internet liberals can scream and shout, pout and sulk, stamp their feet, throw tantrums, hell, the left could self-immolate and tax hikes still won’t be on the table. So, ergo, lemmings, it’s either massive spending cuts or fiscal armageddon. Make your choice, lefties, but choose wisely.

  43. steve says:

    “Even Medicare’s chief actuary doesn’t believe that. I know people like to point to it, but it is widely believed that many of those cuts will be watered down or eliminated like they have in the past.”

    If you read his statements, he is suggesting that political intervention may undercut the program. That is true of any bill, including Ryan’s. If you want to evaluate political viability, then the IPAB comes out ahead with its base closure like set up. It can still be ignored, but it takes a lot of votes.

    Otherwise, I agree that both the GOP and Dems are at fault. I agree that some combo of revenue increase and spending cuts is the way to go.

    Steve

  44. Wayne says:

    @ JP
    You mean the bipartisan commission that Obama established by Executive Order 13531? The bipartisan commission that had more Democrats than Republican? The bipartisan commission Obama has ignored? Yes I remember them.

    I know that Steven said “both spending and revenues have to be addressed”. However that is one sentence out of many. His title is “it is all about taxes”. His comments except for that one sentence talk about the need for higher taxes. So bringing up the “bipartisan commission” doesn’t refute any of my points unless you consider talk of a commission that no one has paid much head to as proof that they are taking spending levels seriously. Talk is just that talk. I want to see the walk.

    Re ” But even when tax cuts do go first, it isn’t enough.”

    No it is not. Spending need to be address and IMO it need to be address first and foremost.

  45. Ben Wolf says:

    Patrick’s Heartland “study” almost exclusively cites newspapers and magazines for its “data”. No studies to determine the effects of tax rates on migration were referenced in the paper. The “study” also uses statistical tricks to make its point. It includes Hawaii, because of its relatively high tax rate, but only includes Hawaii for the year 1995.

    Get it? That was the only year Hawaii experienced a decrease in population. So our conservative brethren at Heartland included years where high tax states lost population, but excises years when populations were stable or increased.

    Heartland’s people are either incompetent, lazy or deceitful, probably all three.

  46. ponce says:

    There’s also the substantive point that raising taxes at a time of ghastly unemployment, horrible GDP growth and a catastrophic housing market would be the dumbest idea in history

    Because all those people making $250,000 a year and more would definitely quit their jobs if they had to pay 3% more in taxes!

    It’s so sad to see working class Republican monkeys dancing and spouting lies for their rich masters.

    What do they hope to get out of it?

    Admittance to Republican heaven through the servants entrance after they die?

  47. Andre Kenji says:

    Just a point: it´s not wise to keep deficits for indefined time during recessions because the cost of paying for it. You can´t keep high deficits and low interest rates forever. When the Chinese decides that they can´t keep paying up for Uncle Sam debt then interest rates will have to go up, and worse, Treasury bonds are going to absorb money that would be used for investiment.

  48. hey norm says:

    ej…
    you twist yourself into contortions and repeat republican memes to allege that $500B in medicare cuts are not $500B in medicare cuts and then say that no one on the democratic side has proposed specific entitlement cuts. you can’t make up how ideologically blinkered that is.

  49. Wayne says:

    @Norm
    As I have shown many times before, total Government revenues have increased for a great deal of decades now. Trying to use smoke of mirror of it hasn’t increase as a % of this or that doesn’t fly. Is % of GNP relevant in some sense? Yes but nowhere near as much as many try to use it as and it doesn’t change the fact that total government revenues increase year in and year out.

    Yes Clinton sort of saved money by gutting the military and intelligence service his first two years in office. Remember the Republican took control in 1994. Spending as % GNP went down mostly during their years.

    A projected revenue as % GNP is close to the so called “Clinton glory years” but theprojected spending is still higher. So using your logic, if we want to get back to those glory days we must reduce the spending as %GNP back to what it was in Clinton years.

  50. hey norm says:

    “…raising taxes at a time of ghastly unemployment, horrible GDP growth and a catastrophic housing market would be the dumbest idea in history…” well based on actual history the facts don’t bear that out – but certainly slashing government spending and jobs at a time of ghastly unemployment, horrible GDP growth and a catastrophic housing market would have to rank as one of the dumbest ideas in history…it was tried once before and only ww2 rescued us from that economic idiocy. those who ignore history are……..

  51. Wayne says:

    One more thing as for where many of the NY and NJ business went, try North Carolina and other places with better tax rate and friendlier business environments.

  52. MarkedMan says:

    @EJ, I know it is popular to shout “a pox on both their houses” and equate the Democrats with the Republicans, but it is just bull when it comes to the health care act. And you are mistaken in your above post for a number of reasons.

    The main driver of the $500M savings is the elimination of the private insurer subsidy. You may recall that politicians, predominantly but not exclusively Republicans, believe that the private industry is magic and just having a corporation touch a service will “poof” save money. Some years ago, Republicans inserted an amendment that gave insurers a supplement to get involved in Medicare. Essentially, a certain percentage of Medicare is now billed with private insurers acting as a middleman between the government and the providers, with the government paying them a significant percentage to act as this middleman. The rationale behind this was that through the magic of the free marketplace, the private insurers would be so much more efficient that the subsidy could gradually be removed. I don’t know which is more depressing: the idea that Republicans actually believed this bull when they proposed it, or that they are such tools of the insurance industry that they feel they’ve furthered their cause by sticking us with additional billions of costs. In any case, no surprise, the magic efficiencies never materialized and we are still stuck with the subsidies.

    The “paying the doctors less” thing that you are talking about could be correct, but it is complex because there is actually a mixture of incentives and penalties aimed at steering providers into more efficient and effective ways of providing treatment, and penalizing those that end up with, say, a much higher than average hospital acquired infection rate. Which is actually pretty smart by the way, because it saves money by paying the bad actors less and promotes changes that are known to result in fewer infections in the first place, which saves additional money.

    What I think you have bought into the mix, though, is the “doc fix” wherein every year congress passes a one year increase in Medicare payment rates. The healthcare plan doesn’t actually involve this since it is based on percentage of payments (i.e. a 2% incentive or a 1.75% penalty) and doesn’t address absolute rates at all.

    Finally, for anyone who has made it through this lengthy post, comparing a real, complex and excrutiatingly negotiated and reasoned Democratic plan with some Republican bag of dreams and whistles scratched on the back of an envelope is absurd on its face. The Democrats have stepped up. The Republicans have not. End of story.

  53. David M says:

    Wayne perfectly illustrates the problem again. Going back to the spending rates in the 90s is fine, but no way on the 90s tax rates.

  54. Steve Verdon says:

    Because all those people making $250,000 a year and more would definitely quit their jobs if they had to pay 3% more in taxes!

    Taxes come with a deadweight loss. As such increasing them will likely increase this loss, and it is truly a loss. The government doesn’t get it, the person/firm on the demand side doesn’t get it, nor does the person/firm on the supply side, it is simple gone. So it isn’t like these people would see a 3% reduction in their take home pay, but the government gets a 3% increase in their revenues so its a wash.

    Also, this ignores the part about spending cuts, or at least holding spending constant. That is if the government gets 3%*top bracket of $250,000 in income*people earning $250,000 they are still going to be spending the exact same amount of money. It is like taking money out of one pocket and moving it to the other and dropping some of it in the process.

    So no, most people wont quit. But people who earn money at that level can do things to avoid taxes such as time shifting income.

    However, taxes do need to go up, and if you are going to raise revenues substantially it will have to be on the top half of the income distribution. But a phased in approach would probably be best given the rather fragile nature of the economy right now (I contend we are on the edge of another recession).

    steve,

    That is true, any legislation can be watered down after the fact. However, with Medicare we’ve seen it happen year after year already. Dave has pointed out the doctor reimbursement issue before. So while it is true in general I’d say the probability it happening with Medicare is vastly higher, in fact I’d put the probability close to 1.

  55. anjin-san says:

    Yes Clinton sort of saved money by gutting the military and intelligence service his first two years in office.

    You never tire of repeating this BS, do you? Clinton continued with the cuts GHW Bush started. After the fall of the Berlin wall, everyone thought it was a pretty good idea. The cuts were bipartisan. Bush 41 had his faults, but on national security he was pretty damn good. It was the right thing to do.

    The intelligence failures leading up to 9.11 were structural in nature, not a result of spending cuts. The military we had on hand before the vast post 9.11 runup on defense spending was more than up to the job in Afghanistan.

    Seriously Wayne, up your game…

  56. Many posters here go for tax hikes. Some agree that spending must be cut too. The only reason I can think of to raise taxes is to create a surplus that can be used to buy down the national debt. But that is not very likely to happen once the money rolls in, simply because the left will find a way to divert it to other ends, such as new and critical “entitlements”. So the taxpayer will get hit again to pay for increased “entitlements” and to hell with the debt. The few and paltry spending cuts won’t amount to much, either, so we will end up with a still growing national debt, and a bigger “entitlement” package to pay for every year. Plus, as things are going now, a much larger government to pay for by some 13% or so, and sundry giveaways too.

  57. ponce says:

    Taxes come with a deadweight loss. As such increasing them will likely increase this loss, and it is truly a loss.

    A wingnut admitting that the $1 trillion a year of taxpayer money that goes to the war department is a loss?

  58. Pete says:

    But a phased in approach would probably be best given the rather fragile nature of the economy right now (I contend we are on the edge of another recession).

    Steve Verdon: Did you read the link I posted on another thread yesterday to a blog by David Goldman? http://blog.atimes.net/?cat=1

    Here’s his take on a double dip recession:

    I’ve been boring the CNBC audience since the end of 2009 with a gloomy outlook on employment, insisting that without startups, the American economy will have destruction (slimming down to increase productivity) without creation ( the new industries that make the jobs). Today’s ADP report that the US added only 38,000 private sector jobs last month rather than the 175,000 expected by the consensus forecast ought to make clear, once again, that this is NOT, NOT, NOT a business cycle. It’s a transition from a vibrant if error-prone capitalist economy to a sclerotic but stable socialist economy.

    That is why there won’t be a double dip recession. There’s no risk to liquidate, no excess labor to fire, no inventories to sell off (except of course in the housing market), no problem financing the enormous government deficit. Remember the bond Armageddon that was supposed to befall us in 2011? Just before 9 a.m., the 10-year note was trading at just 3.01%. That’s because there’s nothing else for bond investors to buy: few corporates, almost no mortgages, no asset-backed securities of other kinds, almost no municipal bonds.

  59. anjin-san says:

    buy down the national debt. But that is not very likely to happen once the money rolls in, simply because the left will find a way to divert it to other ends,

    Well, “the left” was paying down the national debt. Then came Bush, two unfunded wars, and various other brilliant ideas.

    There must be some websites about history. You might want to look for one. When you get there, try and find an era when Republicans actually practiced fiscal responsibility.

    Or you could just continue to spout nonsense on blogs. That will get our bills paid!

  60. You just might try to find any era at all where Dems have been fiscally responsible, including the purely accidental Clinton era. But then, you have FDR with his New Deal, LBJ and his Great Society, Carter and chaos, and now Obama and trillions down the tubes. The net of it is that Liberals have mortgaged our future for generations. I say that your attempt at covering up these trillions DTT by blaming Republicans is ludicrious in the extreme. We are talking about a trillion or two DTT for wars in Republican times, while we are already down 7 trillion in the Obama era alone, and growing! While both parties and their representatives need to stiffen up, it is the Dems that have gone apeshit in the last two years, and, it seems, so have you.

  61. steve says:

    “So no, most people wont quit. But people who earn money at that level can do things to avoid taxes such as time shifting income.”

    There is the substitution effect and then there is the income effect. Actual studies on high earners, see Goolsbee, show that the income effect dominates, at least for very high earners.

    “You just might try to find any era at all where Dems have been fiscally responsible, including the purely accidental Clinton era.”

    Debt, as a percentage of GDP, dropped under Truman, Kennedy, LBJ, Carter and Clinton. In fact, it dropped under GOP administrations also, up until Reagan. Part of our problem is that the GOP used to define fiscally responsible as balanced budgets. In the modern era, the conservative considers himself fiscally responsible if he cuts taxes and ignores the debt, at least as judged by the results.

    Steve

  62. anjin-san says:

    While you are catching up on your history reading, you might want to refer back to the runup to the depression, when governments sat on their hands while the house was burning down. While there is blame aplenty for both parties, the right’s convienient amnesia about the historic disaster that Obama found on his desk in Jan. ’08 has really gotten old.

    Seriously, when was the last time a Republican administration practiced actual fiscal responsibility? Bottom line is the GOP has pretty much owned the White House for the last 30 years. The one time Democrats did, we had fiscal responsibility, prosperity, a surplus, and payment on the debt. I do credit a pragmatic, reform minded GOP Congress for their part in this. Our government was working pretty well, until Newt went insane and decided to impeach Clinton.

    Interesting that you are unable to give Clinton any credit. My father always said that the inability to give credit when it is due is a sign of a small man. It’s noteworthy that our country had a pretty long run of good times under Clinton, and things started to suck pretty much to the day when Bush took office.

  63. anjin-san says:

    http://www.nytimes.com/interactive/2008/10/14/opinion/20081014_OPCHART.html

    This chart detailing stock market performance (S&P) under Republicans and Democrats is interesting. Seems the market does not love the fiscally responsible, free market loving GOP all that much. And the right is always talking about the primacy of the marketplace, no?

    Also worth noting that this chart does not include the strong, lengthy market rally that started under Obama.

  64. john personna says:

    manning, your post is a perfect example of right-wing psychosis.

    You say you can’t do the right thing (balance the budget) because you fear an imaginary thing (future spending taking the balance away again).

    With that kind of imagination, why do anything right? A bad thing might come later and ruin it all.

  65. Steve Verdon says:

    A wingnut admitting that the $1 trillion a year of taxpayer money that goes to the war department is a loss?

    Well, we all thought you were an idiot, but now we know for sure.

    Pete,

    That is why there won’t be a double dip recession. There’s no risk to liquidate, no excess labor to fire, no inventories to sell off (except of course in the housing market), no problem financing the enormous government deficit. Remember the bond Armageddon that was supposed to befall us in 2011? Just before 9 a.m., the 10-year note was trading at just 3.01%. That’s because there’s nothing else for bond investors to buy: few corporates, almost no mortgages, no asset-backed securities of other kinds, almost no municipal bonds.

    Not convinced. Ed Leamer thought the samething in 2007 when his models were saying recession. He was looking at manufacturing jobs and thought they can’t go any lower….so no recession. He was wrong.

    For example, bond investors can decide not to buy bonds.

  66. ponce says:

    Well, we all thought you were an idiot, but now we know for sure.

    Ah yes, the ad hominem attack.

    The wingnut’s way of saying, “I surrender.”

  67. mannning says:

    JP:
    I simply hate the debt numbers and the spenders that keep increasing the debt numbers, and then yell for more tax revenue. I hate the way funds are shifted around to make Liberal objectives solvent (do you know where all the stimulus money went?), and then the cry for more tax revenues comes again. The liberal answer today appears to be spend, spend, spend all you can and then try to make it up with taxes, even if the national debt peaks at a level we cannot afford. Does anyone here really understand what we are spending our money on? There is no budget, so whoopee! Throw a few billions around! Then, too, Moody’s has a rather dim view of our fiscal situation now. Irresponsible, I call it, and apportion the blame honestly where it falls.

    A freeze on taxes coupled with an across the board spending cut just might force the Senate and this radical President to rethink their spending priorities. Hopefully, in 2012 we will be rid of the big spenders, and can start rebuilding the economy and give our citizens jobs.

    As usual, past performance is a sure indicator in this crowd of future performance—by either party. One sort of significant change is at hand, however, that will force a different mindset on the nation: we are headed into a depression with our coffers empty, and our debt out of sight. It will not be business as usual from 2012 on, no matter who wins.

  68. Scott O. says:

    manning, your post is a perfect example of right-wing psychosis.

    That was worth repeating after another fine example.

  69. mannning says:

    My remark about Clinton’s accidental surplus was based on an article I believe in Forbes or Money some 7 or 8 years ago that to my recollection thoroughly deflated the idea that Clinton himself had much to do with the successful economy at that time, which I accepted as accurate. I was not a Clinton fan. Of course, when I’d love to produce the article, I cannot find it on line. Nor can I repeat the essence of the argument with any accuracy, memory being what it is. So be it. Following the usual practice, the surplus came on Clinton’s watch, so he got the credit whether his policies or decisions had bugger all to do with it.

  70. anjin-san says:

    You have to wonder where guys like manning were when Bush was engaged in a massive expansion of the size, power and cost of the federal govt.

    most of the “small government, cut spending” crowd was standing on their chairs, cheering him on…

  71. anjin-san says:

    Great analysis manning. Good things happen on Clinton’s watch? Not his doing. Bad things happen on Obama’s watch? All his doing. Does your license plate say “tool”?

  72. ponce says:

    You have to wonder where guys like manning were when Bush was engaged in a massive expansion of the size, power and cost of the federal govt.

    Plunging his snout in the federal trough, no doubt.

    The federal budget increased 50% under conservative George W. Bush in case y’all forgot.

  73. David M says:

    I get the feeling that the Manning types are the ones that don’t believe the federal revenue (%GDP) is lower now than it has been in 50 years. They’ve also carefully sheltered themselves from news regarding the effect of the 2001/2003 tax cuts on revenue, as well as the lack of funding for Medicare Part D and our recent wars.

    I wonder, in the alternate reality they’ve created, did the 1990/1993 deficit reduction packages and PayGo just not happen at all, or did they fail?

  74. Steve Verdon says:

    Ah yes, the ad hominem attack.

    Coming from you this is just pathetic. HTFU

  75. steve says:

    ” So be it. Following the usual practice, the surplus came on Clinton’s watch, so he got the credit whether his policies or decisions had bugger all to do with it.”

    So surpluses while Clinton was in office were not due to his policies, but debt while Obama is in office is his fault? Observational bias? Does that mean that you also hold blameless the GOP for the debt they incur? I hope not.

    “Does anyone here really understand what we are spending our money on?”

    It is in the budget. Most of it goes to defense, SS and Medicare/Medicaid.

    “I simply hate the debt numbers and the spenders that keep increasing the debt numbers”

    You realize, as pointed out above, that the current increase in debt stems largely from revenues dropping to 1960s levels? Long term debt, if that is your concern, is largely Medicare/Medicaid with a much smaller SS contribution.

    Steve

  76. Duracomm says:

    Democrat’s are working hard to prove they are

    1. Clueless about the nature and magnitude of the fiscal problems facing the US.
    2. Incapable of dealing with the problem.

    Dems Refuse To Deal With Their Fiscal Mess

    It’s been over two years since the Democrat-led Senate last passed a budget…

    President Obama issued a do-nothing, status-quo plan in February that even members of his own party took as a joke. It was voted down last week 97-0 in the Senate.

    Next, the president asked for a “clean vote” — without any pesky spending cuts added — on raising the nation’s debt limit by $2.4 trillion. He got one Tuesday, and lost by a convincing 318-97 margin in the House.

    Bush was a big spending disaster.

    The problem is obama and the democrat’s spending binge makes bush look like a fanatically frugal miser.

    Well, for the record, in Bush’s last year in office, the deficit was just $258 billion; this year, the red ink will hit $1.7 trillion, a 559% jump.

    Spending in 2008 stood at $2.9 trillion; this year, it’ll reach $3.8 trillion, up 31%. As for total federal debt, it’s soared 44% from $9.9 trillion to $14.3 trillion.

    The politicians don’t need an increased spending limit on their credit card they need to have it taken away from them.

  77. john personna says:

    lol mannning, there was a bunch of mostly-boring argument up-stream about the nature of the Bush deficits, but however you think of them, it is right off the map to go on about “liberal spending” after that history.

  78. Scott O. says:

    Well, for the record, in Bush’s last year in office, the deficit was just $258 billion

    Well, for the record, this is false.

  79. Sam Penrose says:

    I would love to see you advance the debate by specifying a method for asking whom we should tax, for what, and at what level.

  80. Liberty60 says:

    I am pretty late to this thread, but I have to comment on this nonsense about rich people/ corporations leaving because of high taxes.

    Manhattan, Kansas has very low taxes, and a very inexpensive labor pool.

    Manhattan, New York has very high taxes, and a very expensive labor pool.

    So where to the world’s leading financial firms choose to locate?

    As Michael Reynolds alluded to, cities and states are able to charge higher taxes and still retain their business base, when the overall location factors like transportation, proximity to education centers, make it worthwhile.

    This is why the center of our high technology sector is in California, not Mississippi (AKA West Bangladesh).

  81. @ Steve

    Dear God, what budget? There IS no budget!

  82. JP

    For heaven’s sake, when the difference in spending is on the order of 5 to 1 between Obama and Bush, it looks like you’d back the hell off of the Bush accusations as a matter of common sense. The problem is here and now, and it is headed by Obama and his merry gangsters.

  83. Scott O. says:

    the difference in spending is on the order of 5 to 1 between Obama and Bush

    Well, for the record, this is also false. 2008 total spending was $3,035 billion. 2010 was $3,618 billion.

    http://www.heritage.org/research/reports/2010/06/federal-spending-by-the-numbers-2010

  84. anjin-san says:

    Yea JP, back the hell off.

    Or manning will make up some more stuff!

  85. Duracomm says:

    Scott O. said,

    Well, for the record, this is false.

    Do you have a cite?

  86. Duracomm says:

    Scott O,

    Found the information from your link to the heritage foundation in a later comment. It lists the 2008 deficit as 467 billion.

    The same link says the 2010 deficit was 1.5 trillion, 1 trillion dollars greater than the 2008 deficit.

  87. Duracomm says:

    Liberty60 said,

    I am pretty late to this thread, but I have to comment on this nonsense about rich people/ corporations leaving because of high taxes.

    Taxes are not the only issue. Regulations also play a significant role in decisions to leave a state.

    California’s high tax, high regulation environment shows how the combination of these two factors kills jobs dead.

    ASSESSMENT OF CALIFORNIA COMPETITIVENESS

    Bain’s extensive interviews with company decision-makers confirmed the clear-and-present danger facing the California economy.

    Of the mobile sector companies interviewed, 55 percent have plans to move jobs out of California….

    Half of all companies interviewed have formal policies proscribing the addition of jobs in California.

  88. Scott O. says:

    Duracomm, The comment saying that the 2008 deficit was 467 billion is probably true based on the fiscal year. The Federal budget for 2008 starts in October ’07 and ends in Sept. ’08.

    http://www.cato-at-liberty.org/dont-blame-obama-for-bushs-2009-deficit/

  89. Scott O. says:

    Well, for the record, in Bush’s last year in office, the deficit was just $258 billion

    This was the estimated fy 2008 deficit, not actual. And of course fy 2008 is not the same as “Bush’s last year in office” so the statement was misleading in several ways.

  90. matt says:

    Well I’m reasonably sure by 2008 Bush was still paying for Iraq and Afghanistan with emergency spending bills that weren’t included in the official budget. When Obama came into office he unlike Bush actually put the true cost of those two wars on the books which accounts for a large portion if not most of the increase in budgeted spending..