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Friday, November 25, 2011
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| | If only pigs really could fly | |
By Wesley Pruden The congressional super-duper, new-and-improved deficit committee, organized to enable Congress to do what it was sent to Washington to do, failed. |
Or, in the spirit of the holiday season, “faileth.” Handel should write an appropriate oratorio. The talk-talk has gone on long enough. It’s the fault of the Republicans, of course. We have the word of dozens of pundits, correspondents and other bearers of “news.” If only the troglodytes would raise taxes, the planets would come together in perfect alignment, all the smooth places would have been made plain and everyone would live happily ever after.
If only. If only there was no profound (insert word “partisan” here) and angry disagreement over how to find a detour from the road to financial oblivion. If only the Democrats would agree to cut the size of government. If only the Republicans would agree that big government is the answer. If only pigs could fly. |
| Sen. Pat Toomey offered to support new revenues of $500 billion. Exactly who’s being obstructionist? | |  |
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But they can’t, and neither can the partisan divide be bridged by a pontoon, however well meaning the pontoon men may be. Money is only part of what the debate is fundamentally about. Big government, designed to grow ever bigger with the turning of the seasons, is what the modern Democratic Party is all about. The Democrats are committed to building a bigger trough. The Republicans are committed to dismantling troughs. It’s all in the DNA.
President Obama is not to blame. He is a true believer in the European model of the welfare state. Everybody who was listening learned that three years ago. The fact that the European welfare states are crashing is irrelevant to him; true believers are never rattled by facts, not even facts that slap them in the face like a cream pie. The opportunity to impose a failing welfare state on America is what drew him to the presidency in the first place. The congressional elections last year, the Republican rout that Mr. Obama rightly called a “shellacking” of his party, made no impression, either. The results were all about cutting taxes and dismantling government, but not to Mr. Obama. Those elections were merely a few pebbles in the road to Utopia.
The president, with a con man’s confidence in the sound of his own voice, is, in the observation of the Wall Street Journal, “making it clear that he is running for re-election on a platform of consolidating the expansion of government of his first two years and raising taxes to finance it.” He makes everything clear to anyone listening, threatening to veto any cuts in government spending unless he gets $1 trillion in new taxes. This put a deal on the table that he knew the Republicans had to refuse.
The game continued, with Republicans offering “revenue increases”—in the spirit of the game, we don’t call taxes by their rightful name—far short of what Mr. Obama insisted he must have. When Sen. Pat Toomey of Pennsylvania offered to support new revenues of $500 billion, the Democrats said no. It was a trillion dollars or nothing doing. So who’s being obstructionist?
Everyone knows that unless someone does something, everything will be swallowed by one of those black holes from outer space. Health-care costs, which already consume 3.7 percent of the Gross Domestic Product, will take almost twice that by the year 2020. Democrats are determined not to reform any of that. Who will still be in Washington then? The distance to 2020 might as well be measured in light years. Next year is the short run, where Washington measures all. In the long run, as Winston Churchill famously said, there is no long run.
Mr. Obama, who understands that you can’t survive very long if you betray the people who put you at the public trough, knows very well that the Republicans, many of them beholden to Tea Party voters who sent them to Washington, couldn’t take his deal even if they wanted to, so soon after winning office on an iron-clad, cross-their-hearts-and-hope-to-die promise of no new taxes. And die they would.
You don’t have to have such a long memory to recall what happened to George Bush the Elder. He lit up the skies above the Republican National Convention in New Orleans with his famous invitation to “Read my lips: no new taxes.” A nice majority of Americans did read his lips, and soon he was no longer the president. Lip-reading is even more popular now.
Wesley Pruden is editor emeritus of The Washington Times. |
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Okay Tom, let's get serious about the data. Go here and look at Table 1360. It shows -- for the last 20 years -- the relationship between national debt, government spending, and government revenue for countries around the world….
ReplyDeletehttp://www.census.gov/compendia/statab/2012/tables/12s1360.pdf
Compare the U.S. to other counties in 1990, 2000, and 2011 (see, for example, that it has just been in the last 10 years that our federal budget has gone to hell with simultaneous tax cuts and spending increases).
It is just a simple mathematical FACT that gross debt is a direct function of the gap between expenditures and receipts. It is not just all about spending. In fact, as you can see, the U.S. -- even in 2011 -- is spending less money as a percent of GDP than 92% of other OECD counties. On the other hand, the U.S. is collecting less in taxes than every other OECD country. If we simply got our receipts up to the OECD average, we would have a budget surplus again without cutting a dime in federal spending.
Personally, I favor the Simpson-Bowles balanced approach to deficit reduction that has both spending cuts and revenue increases to get both balanced at about 20% of GDP. But before we can have an informed discussion about this, we have to get serious about the data.
--David
David, I do not see the same relationships that you see with the data. Are you saying that we should raise our percentage to 60% and match Sweden or Greece or Italy? At least two of those countries are basket cases and are not what we should be doing.
ReplyDeleteI would have loved to see something happen and Simpson Bowles at least did some work to control our out of control spending. We don't have an income problem, we have a spending problem.
Nearly 50% of American citizens (and some major corporations) pay no taxes. Zero taxes and many get money back from the government. Should we say that every person must pay a minimum of taxes?
You write, "Are you saying that we should raise our percentage to 60% and match Sweden or Greece or Italy?"
ReplyDeleteNo, we should raise taxes and cut spending to get them in balance. That is what Simpson-Bowles, Gang of Six, etc. recommended.
You write, "We don't have an income problem, we have a spending problem."
You are not getting serious about the data. Our expenditures as percentage of GDP in 2011 were LESS than 92% of the other countries. On the other side of the ledger, EVERY other country had more receipts as percentage of GDP. As I said, if we just raised our receipts to the AVERAGE level of these other countries, we would have a budget SURPLUS again even if we didn't cut any spending. Look at Norway, for example. They spend more than the U.S. as percentage of GDP, but nevertheless have a large budget surplus. Do they have a "spending problem"?
You write, "Nearly 50% of American citizens (and some major corporations) pay no taxes. Zero taxes and many get money back from the government. Should we say that every person must pay a minimum of taxes?"
What taxes are you talking about? Income taxes? Sales taxes? Payroll taxes? Property taxes? Some combination of all taxes? I trust you understand that poor people pay a much higher percentage of their income in taxes than do millionaires.
If capital gains were taxed as normal income rather than at 15%, that would go a long way to balancing receipts with expenditures. I saw an interesting statistic today: half of all capital gains go to the top 1/10 of the top 1%, and a disproportionate number of these people are Wall Street executives who got their bailouts after ruining their own banks and collapsing the global economy. Let's start there!
--David
Is the "GOP dual-trigger nightmare" a nightmare or is it $6 trillion in deficit reduction? Here's your chance!
ReplyDeletehttp://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-the-gops-dual-trigger-nightmare/2011/11/23/gIQA1BmxnN_blog.html
--David
It doesn't matter since the world ends in December 2012!
ReplyDeleteSince neither side wants this massive increase, one would hope that sensible people would come together to make changes. If not, then our economy will go further into the depression we will be in by that time.
David,
ReplyDeleteYou need to re-look at the data on the census info. Except Sweden, Norway and South Korea the majority have greater EXPENDITURES.
50% pay no income taxes but don't they benefit from government services. Why should not they not pay? All Americans should pay their fair share.
I am sure most of you realize that if you taxed the top 10%, 100% of their income, it would not even cover the deficit. Taxes have to be paid by everyone!
Additionally, capital gains are paid by people who buy investments (stocks, bonds, buildings, businesses, etc) and then sell them later. It is not only wealthy people who buy investments, every 401k--which most people have, get charged with capital gains.
Rats! You didn't get my question to you. Here, look at the graph in this article…
ReplyDeletehttp://www.washingtonpost.com/blogs/ezra-klein/post/the-gops-dual-trigger-nightmare-in-one-graph/2011/11/25/gIQAQSAYvN_blog.html
You have consistently said we need to cut deficit and balance the budget. The dual-trigger cuts the deficit by $6 trillion if the "do nothing" Congress continues to gridlock through 2012. The $6 trillion would be MORE deficit reduction than ANY of the other plans in this graph. So my question to you: Would you support it, or not?
You write, "You need to re-look at the data on the census info. Except Sweden, Norway and South Korea the majority have greater EXPENDITURES."
Yes, and that was precisely my point! We are spending LESS than nearly all these countries. So, how does that translate into "the U.S. has a spending problem"? Moreover, we have the lowest receipts of all countries as percentage of GDP -- lowest in the U.S. since 1950s. Add these two facts together and the idea that "We have a spending problem, not a receipts problem" makes no sense. What we have is a GAP problem (between spending and receipts), and Simpson-Bowles, Gang of Six, and most other economists recommend that we reduce the deficit by attacking it at both ends -- cut spending and increase receipts. The gap is -9.4. So, if we cut 4.7 from spending, and increase receipts by 4.7, we arrive at a balance budget, and we can do that without throwing masses more of the population into poverty (which is what happens if you try to do it all by Draconian spending cuts alone).
You write, "50% pay no income taxes but don't they benefit from government services. Why should not they not pay? All Americans should pay their fair share."
Again, I ask what taxes are you talking about? Income taxes? Sales taxes? Property taxes? Excise taxes? As I said, when you combine all taxes (local, state, federal), poor people are already paying a higher percentage of their income in total taxes than do millionaires (who benefit from tax shelters, low capital gains taxes, tax expenditures, etc., etc.). So tell me who is, and is not, paying the more "fair share"?
You write, "I am sure most of you realize that if you taxed the top 10%, 100% of their income, it would not even cover the deficit. Taxes have to be paid by everyone!"
That is true, but not germane, since I have not seen any proposal to do that. If the Bush tax cuts expire, their rate goes up by only 3%. As far as applying an income tax on "everyone," even your guy Herman Cain says he would not apply the 9-9-9 to people below the poverty line. What's the point in giving them assistance with one hand, and then taking it back with the other?
You write, "Additionally, capital gains are paid by people who buy investments (stocks, bonds, buildings, businesses, etc) and then sell them later. It is not only wealthy people who buy investments, every 401k--which most people have, get charged with capital gains."
This is another area where we need to get serious about the data. First, nearly all capital gains go to the top 1%. See here…
http://flyingkumquat.xanga.com/656621669/capital-gains-tax-vs-income-level/
But that doesn't tell the full story. Within the top 1%, most of it goes to the top 1% within the 1% (i.e., the top 1/1000th). AND, within this tiny group, the financial industry is very disproportionately represented. Everyone else below the 1% has comparatively little capital gains, and, by the way, you don't pay capital gains on stocks in a 401K. When you take the money out, it is taxed as regular income.
--David
David, The problem that we have is that in the past (Reagan, Bush 1) when taxes were increased and spending cuts were agreed to, Congress increased spending and did not cut spending.
ReplyDeleteWe can prepare all sorts of charts and arguments but we need to reduce spending. I still like the Republican proposal for net tax cuts and massive cuts to spending.
As far as your 401k, yes you are correct that when you take out your money it is regular income, however, every year the accounts pay capital gains. And the trillions in 401ks that is large even in bad years.
Additionally, the government has looked at converting (seizing) 401ks and moving them into Social Security and giving participants a guranteed income (3-5%) for their dollars. When the person reaches social security age, the amount that was moved over would be calcuated into the monthly payment. Of course this plan has problems, like if you die, the money stays with the government.
Wait a minute. The fact is, no matter what Congress does, future Congress can change the law. That applies to taxes equally as much as it does to spending.
ReplyDeleteFor example, all those tax loopholes (about $1 trillion in lost revenue over the next 10 years) were added by Congress one at at time in response to corporate lobbyists. Each successive Congress changed the tax code established by the prior Congress. Except for briefly in the Clinton administration, taxes rates have gone one direction -- DOWN -- for the last 30 years, resulting in the lowest revenue as percent of GDP in 60 years, making us the lowest in receipts of all OECD countries. You seem to be denying that this a major contributor to the deficit. The budget was in surplus before the the Bush tax cuts and wars began. This is why I showed you the OECD data to illustrate that the countries that have reduced receipts have gone into deficit -- even those that CUT spending (e.g., Sweden).
The Bush tax cuts are another excellent example of future Congress rescinding tax laws of previous Congress. The Bush tax cuts were supposed to expire at the end of 2010, but Congress extended them through 2012. They may never expire. This is the mirror image of your point that Congress increasing spending levels. Congress loves to play Santa Claus giving tax cuts as much as they do with spending increases. It cuts BOTH ways, Tom.
So, your idea that we should focus all deficit reduction on expenditures and almost nothing on receipts because future Congresses increase spending but will not continue to cut revenue is not realistic. It is not consistent with U.S. history of the last 30 years. Indeed, the Toomey plan does very deep cuts in taxes on the 1% by dropping their marginal rate to 28%. That revenue loss will utterly swamp the small ($400 billion over 10 years) revenue that he proposes to get from "user fees"(?), sale of government property, and whatever else he had in mind. Is there ANYTHING in his revenue that hits the super rich financial executives? If so, I haven't seen it.
Those who want only spending cuts to address the budget deficit are either not yet serious about the data, or else politically owned by the 1% and doing their bidding (Toomey), knowing very well that it will make the deficit and the national debt even worse.
Since nobody can control the actions of future Congress anyway, why not take the "bird in the hand" and grab the $6 trillion in deficit reduction at the end of 2012 rather than extend the Congress gridlock indefinitely hoping to get something different later? All the time you are waiting, the debt is growing. Right? Aren't you the guy who says we are getting close to fiscal disaster again?
--David