McCain's Budget Whopper
George W. Bush took the largest budget surplus in history and transformed it into a giant deficit. McCain's economic plan, announced today, will to even worse. McCain says he’s going to balance the budget by the end of his first term (actually, he didn’t literally say that – he just “demanded” it – implying that a Democratically-controlled Congress would be ultimately responsible if it didn't happen). And then McCain came up with numbers that will blow the deficit into the stratosphere.
The non-partisan Congressional Budget Office projects that the budget deficit will be $443 billion in 2013, the end of the next president’s first term, if Bush’s tax cuts are made permanent (which McCain pledges to do). So start with this $443 billion hole. Now add in McCain’s promise to cut corporate taxes by a hundred billion a year ($4 billion of this for American oil companies, more than a billion for Exxon-Mobile alone). Then add in McCain’s promise to get rid of the Alternative Minimum Tax, designed to ensure that the very rich pay at least a minimum percent of their income in tax. Obama would properly index it to inflation but McCain will let the rich pay as little as they can get away with. Non-partisan tax experts put the ten year cost of this at $1 trillion. All told, McCain promises more than $650 billion of new tax cuts per year. (That doesn’t even include McCain’s promise to allow corporations to immediately expense all their investments – which, he asserts, would add nothing to the budget deficit at all!)
Who gets all these cuts? Mostly, the very rich and big corporations. The non- partisan Tax Policy Center estimates that 25 percent of McCain’s cuts would go to people earning over $2.8 million a year (the top one-tenth of one percent). Each would get an average tax cut of $269,000, over and above what George Bush gave them.
Back to McCain’s promise to balance the budget by the end of his first term. The big question is how he proposes to fill the giant budget hole he’s dug for himself, over and above the $443 billion already there. Answer: He doesn’t say. He calls for $160 billion in unspecified spending cuts, and unspecified “reform” of entitlements. Whaaaa?
Supply-side economics is one of those unfortunate half-brained theories actually to have been tried in practice, and failed miserably. Now we have a candidate for president of the United States who says to the American people, in effect: I know you know supply-side economics is a crock. Well, I’m going to do the biggest supply-side tax cut in history, mostly for corporations and the well-to-do. And I’m going to tell you I’ll balance the budget. If you believe this, you’ll believe anything.
The non-partisan Congressional Budget Office projects that the budget deficit will be $443 billion in 2013, the end of the next president’s first term, if Bush’s tax cuts are made permanent (which McCain pledges to do). So start with this $443 billion hole. Now add in McCain’s promise to cut corporate taxes by a hundred billion a year ($4 billion of this for American oil companies, more than a billion for Exxon-Mobile alone). Then add in McCain’s promise to get rid of the Alternative Minimum Tax, designed to ensure that the very rich pay at least a minimum percent of their income in tax. Obama would properly index it to inflation but McCain will let the rich pay as little as they can get away with. Non-partisan tax experts put the ten year cost of this at $1 trillion. All told, McCain promises more than $650 billion of new tax cuts per year. (That doesn’t even include McCain’s promise to allow corporations to immediately expense all their investments – which, he asserts, would add nothing to the budget deficit at all!)
Who gets all these cuts? Mostly, the very rich and big corporations. The non- partisan Tax Policy Center estimates that 25 percent of McCain’s cuts would go to people earning over $2.8 million a year (the top one-tenth of one percent). Each would get an average tax cut of $269,000, over and above what George Bush gave them.
Back to McCain’s promise to balance the budget by the end of his first term. The big question is how he proposes to fill the giant budget hole he’s dug for himself, over and above the $443 billion already there. Answer: He doesn’t say. He calls for $160 billion in unspecified spending cuts, and unspecified “reform” of entitlements. Whaaaa?
Supply-side economics is one of those unfortunate half-brained theories actually to have been tried in practice, and failed miserably. Now we have a candidate for president of the United States who says to the American people, in effect: I know you know supply-side economics is a crock. Well, I’m going to do the biggest supply-side tax cut in history, mostly for corporations and the well-to-do. And I’m going to tell you I’ll balance the budget. If you believe this, you’ll believe anything.
posted by Robert Reich | 2:38 PM
57 Comments:
UFB !!!!
Remember the Keating Five. McCain is a crook. Now he is trying to sell us his supply-side big money tax break crock.
The people of America need a tax break to pay for food and gas.
Corporate America is investing abroad and sending jobs abroad, so supply-side economics don't work for most Americans...only for investors (rich republicans).
Supply-side will only work if corporate tax breaks are proportionally awarded to the corporate jobs that are created in America.
The more jobs a corporation creates, the more taxes they save. The incentives need to be aligned.
This will be an interesting test of the media. Can they still be trusted to cover policy or is our media so far gone that they will report Straight-talks balanced budget claim without pointing out how bogus it is? My bet is that the media will trip over themselves to talk about how fiscally responsible he is.
The brilliant insight of Karl Rove was realizing that no matter how insane and demonstrably false a claim, the media would not challenge it in a serious way as long as it was made by a Republican.
I have a question. McCain also said, if I'm not mistaken, that he will also reduce the deficit by putting the money we save when we "win" the wars in Iraq and Afghanistan into reducing it. This sounds crazy. If we are only not spending more money o n the wars, won't we just be not increasing the deficit? We won't be reducing it, will we?
I'm not very sophisticated when it comes to economics but it doesn't take a rocket scientist to figure out that we had a balanced budget when Bill Clinton left the White House and we are just plain "broke" now and if we were a corporation or an individual we would probably file for bankruptcy protection. This supply-side mumbo jumbo has got to go along with all its proponents. We need to have an economic policy that considers the poor and the middle class, not just the rich who seem to get richer no matter what. So I'm with you on this.
Joyce Krutick Craig
The Bush-McCain Budget, meh. I continue to recommend search Google for Financial Ninja, then read a selection of the links he posts on the right hand side of his blog. Here is Mish's URL for coming credit card reform:
http://globaleconomicanalysis.blogspot.com/
I've been listening closely for which Presidential candidate will take on credit card practices. The Fed and the Democrat Congress seem poised. I stated in the last blog credit card companies will accept zero, when Americans declare bankruptcy, or they will accept a greatly reduced amount of payment, given the jobs lost from America to offshore.
With the economy in the state of decline that it's in, I don't think it's McCain as much as it's Roger Ailes who will be put to a supreme test to find that one gotcha, broadcast it, and ensure Republicans win the White House in November. With the US economy in decline, it's a free comedy to watch and count the days.
Our tax policy is so fundamentally flawed that it is drowning us. If income and investment are good, why are we penalizing them by taxing them?
I believe that tax policy should be used to encourage good things such as income, investment, education, etc. and discourage bad things such as pollution, waste, inefficiency, etc.
The proposed carbon tax that Dr. Reich and many others have talked about would be a good start.
I also like "pay to play" taxes such as road tolls.
The point is, taxes should reflect what we want our society to be, not an election-year slogan.
We need elected officials to stand up and tell us what we want not to hear but what we need to hear. Here's a quote from FDR's inaugural speech of 1933:
"Only a foolish optimist can deny the dark realities of the moment." This is the same speech that included the famous "the only thing we have to fear is fear itself". Can you imagine an elected official standing up today with such brutal honesty???
McCain will balance the budget by destroying, evaporating Social Security, Medicare and Medicaid, the GOP wet dream. Anything that helps ordinary Americans is socialism to the GOP, so the New Deal and the Great Society must be killed, cremated and ejected from this planet at all costs.
Doc:
It is very clear that McCain knows even less about economics than he stated he did. But he does have that bastion of economic thought, Phil Gramm, I'm sure, busily pouring out this economic mumbo-jumbo. Phil Gramm is from the school of, promise them tax cuts and anything you tell them will be believed.
The really bad part, we all know Gramm is a charlatan, both he and his wife, is what they have done to Carly Fiorina. This is one bright lady and they have turned her into a blithering idiot. She's out there everyday pandering this 21 or 23 million small business owners filing taxes as individuals BS and now she is adding that the ATM is targeted at middle class folks.
Not sure if she's wrapped up in the Veep sweepstakes or fishing for a cabinet post or just plain prostitution. She sure as hell ain't using her brain in support of ol' Straight Talk.
He's got an even bigger selling problem. He hasn't a clue how to use a teleprompter. Reading from the teleprompter he's like a deer in the headlights. He can't even figure out where the laugh/applause lines are.
All in all, am not real impressed with the Obama's general election campaign, so far, but there may be a school of thought that suggests just shut up and McCain will bury himself.
I really do like McCain's maverick tendencies and it's such a shame that his party can't appreciate those. I wouldn't vote for him regardless but I could appreciate those that would, if he would focus on that sell. Though trite and overworked, he really is Bush III and I'm quickly coming to the opinion that he's not as bright as Bush II. Given the respect I have for Bush II's intellect, that statement is really damning.
I am at an age where I won't be that affected, for too many years, by another idiot in the White House. For my kid's sake I would hope for a Dem, with a strong Dem Congress, to reverse some of the inanity of the past 7+ years and I will vote to help make that happen. If it should turn out that the American public elects McCain, the Bush II wannabe, I can sit back and relish in the fact that they will get what they wished for and will deserve every bit of it.
I differ with you about supply-side theory. It was never really a theory, it was a farce from the get-go. You know it, I know it, and most of those visiting your sight know it. It was a sham, foisted on us by the Great Communicator. Another one who knew nothing about economics. Reagan started us on this voyage, so aptly put by Toast, as a trip in a handbasket, and we are fast approaching the point where, "All the king's horses and all the king's men" ain't gonna be able to do squat.
That, dear friends, is how Mrs. Lincoln feels about "other than that".
The wealthiest 1% of the population earn 19% of income and pay 37% of income taxes. The top 10% pay 68%. The bottom 50% pay 3% of income taxes. U.S. tax rates on the wealthiest Americans are down from 91% in the 1960s to 35% today, yet the percentage of taxes paid by the wealthiest has more than doubled during this time. Supply side economics has actually made taxes more progressive not less.
2007 tax receipts were $2.6 trillion, up from $2 trillion in 2000. (I will admit that tax revenues went down for a bit after the cuts; however, the revenue has come back and and messing with the rates (and the resultant turmoil for those it impacts) doesn't make sense to me.)
The current economic environment will see revenues flat to slightly down in 2008, but assuming a normalized growth rate in 2009 and beyond, we will see solid expansion at current rates.
Government spending, on the other hand has nearly doubled from around $1.8 trillion in 2008 to nearly $3 trillion today. A big chunk of this is the war effort, but it is irresponsible nonetheless. Curbing this growth will do more for the defecit than any tax increase will create. Bush has been a big disappointment here.
Corporate taxes are a bit tricky, because the principle behind the Laffer curve would tell us that lower domestic taxes will create more investment in the U.S. and thus more jobs. But, it is hard to morally support a big cut for a company as profitable as XOM.
That aside, I still think it makes sense to consider cutting the corporate rate. I am an executive in finance for a Fortune 500 retail company, held a similar position in a major software company and came up through the ranks at one of the largest companies in the world. I can speak from experience when I tell you that all three of these firms have gone to great lengths to offshore operations in order to drive down tax rate and deliver stronger EPS. When then go to great lengths to repatriate cash. Cutting the corporate rate would eliminate a lot of these shenanigans and might even bring some jobs back to the U.S. I like the idea that another commenter made about creating jobs and tying that to tax savings.
Speaking personally, as one of those people that pays a considerable portion of taxes, raising the marginal rate back to 39% would cost me about $750 per month. This is $750 I won't be able to spend at places like Target, Starbucks, restaurants, etc. People that work there will lose their jobs when people like me no longer shop in these places. In short, tax increases are a good idea in a recessionary environment...if you want to create a depression.
Now, some might argue that the government would take my $750 each month and plow it back into the economy in the form of spending on infrastructure, but that has never worked. It didn't work under FDR (WWII revived the economy, not the new deal) and it won't work today.
So, who's rhetoric is worse? The supply siders who can back it up with data or the tax and spenders who can't?
You're a smart man, but postings like this wouldn't last five minutes in Corporate America. You've got to back it up with FACTS. Please, please, please be a responsible leader, focus on the facts, and lay off the rhetoric. We have serious problems and petty sniping and partisanism will not get us there.
"Who gets all these cuts? Mostly, the very rich and big corporations." I heard that and nearly jumped outta my skin, again.
Here I am to _________* again. My electric bill is $70 more than it was this month last year, and I only used 935 kWh, same as last year. The rate automatically went from .125 to .189 with no notice & 2 weeks to pay it without a penalty. Glad I knew that my year long rate contract was up I locked in a rate this month. Next month it'll be .159 kWh. Oh, what a relief, she said sarcastically.
I'm not a family of 4 in a house. One can only guess what folks using 3,000 or 5,000 kWh are gonna pay this month in TX. Actually we could compute it. WOW! 3,000 kWh = about $560 semolians and 5,000 kWh = about $900 clams. Car gas is $4.00/gal. Ohhh, I'd say that this is a RECESSION.
I hope the political folks see this as I am one of the little, We the People.
*
South = fuss
North = bitch
tt
esther, he IS crazy and makes NO sense.
There's a reason his eyes are brown.
tt
Do people believe that promising tax cuts will solve a budget deficit?
His proposals are such a joke, but, this is who you have running for a president. Good luck (from UK, where things aren't much better)
I'm getting tired of reading that President Clinton left a budget surplus because it's very misleading.
Looking at the government's own numbers show a year over year decrease in the budget deficit during Clinton's last term but at no time was there more revenue than spending.
How did this surplus appear you ask? I'm glad you asked. You use some very deceptive accounting by counting social security, which supposedly goes into a "Trust Fund" and is technically a liability owed to taxpayers, as an asset... bingo, a surplus magically appears!!
Using that logic the home equity loan you owe should INCREASE your net worth.
One more point...it wasn't Reagan who first pushed a supply side approach. It was Kennedy who lowered the top marginal tax rate from 91% to 70%.
Ask not what your country can do for you...
"If you believe this, you’ll believe anything."
Looking at recent history, we've been willing to believe anything. So, McCain's admission that he can and will balance the budget through the powers of personal wonderfulness is way believable.
I wish the conservatives here would give a tagname instead of "anonymous" so we can be a little more friendly in discussing things as to the curious eliptical argument about how why and how their argument always comes down to how much the rich pay in taxes while ignoring the bulk of taxes most people pay to the federal govt. are in the form of payroll taxes. As usual this fact is always left out and that the regressive taxation of earned income is often left out of their arguments. Just a thought!
Also another thought...suppose the very well-off do pay most of the taxes. Is that good? Doesn't it just mean they have a greater and massively larger pile of money and wealth over the rest of us? Again is that good? It seems to me that we had a more stable and prosperous society when we had a more equitable distribution of wealth. I do recognise that many gadgets have been developed in the past 40 years but that ultimately average purchasing power is decreasing due to higher costs due to inflation of financial, insurance, housing and health care, four rather unproductive centres of wealth in our nation. The engineering manufacturing sectors are losing in their acquiring the piece of the pie while producing what semblance of 'progress'. We've also accrued far greater monthly payments for 'required' needs now: that cell phone bill as example...or the usury of credit cards......the gadgetry is nice...but at a price. Lives in the more progressive taxation era circa 40s, 50s, 60s, and seemed relatively more benign before the inflationary pressures of our credit inducing greater conservative era of concentration of wealth. Must of us now feel like we're working longer time for less of a future.
Just reminding myself of how little most of us save now. All the substantial saving seems to be done by those with huge tax breaks and money to burn. And they are gaining by billing our 401Ks for massive fees that most people don't even know about.....and most people don't even have any sort of pension let alone a corrupted 401K.
A Question for Mr. Reich
How do you define "public policy'? When it becomes law, is it still public policy? What do you call it while it is in the debate period, before a clear policy is identified?
thanks -
Got a proof reader?
M.
Anonymous here again...Payroll taxes do bring the percentages paid down, but the story is still the same. In that instance, the taxes paid by the top 20% are at 72% of the total (down about 10 points from the income tax only portion). The bottom 20% pay just 4/10 of 1 percent.
It's not as big as you think because bottom quintile get back most of their payroll tax through the EITC.
But, if you want have that debate, I am more than happy. My name is Matt, by the way. I don't have a google/blogger account.
SS taxes max out at $102K per year, which means that someone earning more than that pays $6,240 in SS taxes for the year. The medicare portion has no cap.
First, I think we all need to point out that SS payments are supposed to be going to a trust fund, which would build over time, earn interest, etc. The amounts being paid in today, if saved properly, would create an adequate fund for future generations. Unfortunately, our leaders--Democrat and Republican alike--treat these dollars as fungible and spend them on things other than social security. I say again, it all comes down to a spending problem.
If you or I or anyone else got into debt and needed to pay that debt off, our best bet would be to scale back on expenses and start chipping away. I say this becauase it's not as likely that any of us (except, you know, professional athletes) could go out and get that huge raise to immediately or more quickly take out the debt. Why do we hold the government to a different standard? Allowing them to raise taxes (which will turn the current economic environment more negative and result in less revenue, by the way) is tantamount to giving your kid a lollipop when he or she misbehaves.
Second, we need to note that the price for this cap is that somone like me is limited in the 401K contributions that he can make. This is because of corporate matching and the desire to keep it fair. I am only allowed to put in 5% of my income on a tax free basis because of this. I'm not complaining, mind you. I recognize that I am lucky; however, taking away the ss cap would also mean taking away the 401K cap, at least if we want to be fair.
Now, for your comment about 401K fees, etc. You're probably right. Bankers would just assume leave you with your socks and a smile.
I also want to be clear that I don't mind paying taxes and am certainly willing to pay at roughly twice the rate (I'm talking total taxes/total income here) in order to fund benefits for those less fortunate than me. But, to say that we need to raise taxes on the rich strikes me as partisan rhetoric at its worst.
I believe that we need to have a debate about our spending priorities and we need to get that in-line before we talk about raising or lowering taxes. Our spending has doubled in the last eight years (and it's rate of growth under Clinton wasn't exactly slow). This is a problem and more revenue (more candy for the bad kids) isn't the answer.
Now, I know that we're all nostalgic for Fonzy and Happy Days, but our standard of living has risen dramatically since then. Credit cards and the like are a problem, but this has more to do with easy money, the Fed and bad consumer behavior than it does with the President/Congress. I feel bad for people that have gotten into debt, but only if they have been using cards to pay for heat, water and gas along the way. If they've been buying TVs and fun stuff and now find themselves in a pinch because they accumulated more debt than their income can support, who's fault is that? Why should I bail you out?
The government policies of the 50s and 60s are what got usinto trouble in the 70s. Keynesians based most of their argument on the Phillips Curve, which is an inverse relationship between inflation and unemployment. We got away with it for a while, but it didn't work in the end.
The world was different and much larger in the 40s, 50s and 60s. Goods and funds transit the globe in hours, not days and weeks. Our tax policies haven't kept up with this change as it is...see my post above about the gymnastics companies go through to avoid the high U.S. corporate rate (and the primer below). Rolling them backwards certainly won't help the situation.
Just to give you a primer on the corporate tax thing, though. The way we work it is to set up an offshore corporation, which then sells the goods to the U.S. corporation. The U.S. corporation then sells the goods in the U.S. and receives a "commission" from the offshore company for selling those goods. The bulk of the taxable profit from the sale of the good stays offshore. The small commission barely covers the corporate overhead and woohoo, no taxes for big corporations. It's silly.
Lower the corporate taxes and we won't have to go through all these gymnastics. We could build and sell the goods in the U.S. The tax savings from a lower rate and reduced transportation costs (container ships are not cheap) would likely offset a good enough chunk of the higher U.S. wage rates that we could see lots of jobs coming back. It is, afterall, easier to manage something in your own time zone than it is to manage an entity that is open while you are asleep. Again, I like the earlier idea someone had about tying the tax reduction to jobs creation.
Taxes have also contributed to the demise of pensions. 39% domestic marginal corporate rate. 8% corporate match on payroll taxes. A corporation gives over 40% of profits away and you want a pension?
You are, of course, right about what is happening to living standards right now. Folks are spending a greater portion of income on nondiscretionary items like food and fuel, but the government is a big part of the problem here. Corn subsides. Ethanol subsides. etc. Forget the Iowa Caucus pandering and let the market find the best solutions. $4 gas creates a lot of opportunity for more fuel efficient vehicles (that's how Toyota and Honda entered in the 70s) and $150 oil creates lots of opportunity for alternative fuels. It will all come, but unfortunately it will take a couple of years. More unfortunate is that it is all going to be built in China with the U.S. entities only earning a small commission and paying little to no taxes.
Anonymous here again...Payroll taxes do bring the percentages paid down, but the story is still the same. In that instance, the taxes paid by the top 20% are at 72% of the total (down about 10 points from the income tax only portion). The bottom 20% pay just 4/10 of 1 percent.
It's not as big as you think because bottom quintile get back most of their payroll tax through the EITC.
But, if you want have that debate, I am more than happy. My name is Matt, by the way. I don't have a google/blogger account.
SS taxes max out at $102K per year, which means that someone earning more than that pays $6,240 in SS taxes for the year. The medicare portion has no cap.
First, I think we all need to point out that SS payments are supposed to be going to a trust fund, which would build over time, earn interest, etc. The amounts being paid in today, if saved properly, would create an adequate fund for future generations. Unfortunately, our leaders--Democrat and Republican alike--treat these dollars as fungible and spend them on things other than social security. I say again, it all comes down to a spending problem.
If you or I or anyone else got into debt and needed to pay that debt off, our best bet would be to scale back on expenses and start chipping away. I say this becauase it's not as likely that any of us (except, you know, professional athletes) could go out and get that huge raise to immediately or more quickly take out the debt. Why do we hold the government to a different standard? Allowing them to raise taxes (which will turn the current economic environment more negative and result in less revenue, by the way) is tantamount to giving your kid a lollipop when he or she misbehaves.
Second, we need to note that the price for this cap is that somone like me is limited in the 401K contributions that he can make. This is because of corporate matching and the desire to keep it fair. I am only allowed to put in 5% of my income on a tax free basis because of this. I'm not complaining, mind you. I recognize that I am lucky; however, taking away the ss cap would also mean taking away the 401K cap, at least if we want to be fair.
Now, for your comment about 401K fees, etc. You're probably right. Bankers would just assume leave you with your socks and a smile.
I also want to be clear that I don't mind paying taxes and am certainly willing to pay at roughly twice the rate (I'm talking total taxes/total income here) in order to fund benefits for those less fortunate than me. But, to say that we need to raise taxes on the rich strikes me as partisan rhetoric at its worst.
I believe that we need to have a debate about our spending priorities and we need to get that in-line before we talk about raising or lowering taxes. Our spending has doubled in the last eight years (and it's rate of growth under Clinton wasn't exactly slow). This is a problem and more revenue (more candy for the bad kids) isn't the answer.
Now, I know that we're all nostalgic for Fonzy and Happy Days, but our standard of living has risen dramatically since then. Credit cards and the like are a problem, but this has more to do with easy money, the Fed and bad consumer behavior than it does with the President/Congress. I feel bad for people that have gotten into debt, but only if they have been using cards to pay for heat, water and gas along the way. If they've been buying TVs and fun stuff and now find themselves in a pinch because they accumulated more debt than their income can support, who's fault is that? Why should I bail you out?
The government policies of the 50s and 60s are what got usinto trouble in the 70s. Keynesians based most of their argument on the Phillips Curve, which is an inverse relationship between inflation and unemployment. We got away with it for a while, but it didn't work in the end.
The world was different and much larger in the 40s, 50s and 60s. Goods and funds transit the globe in hours, not days and weeks. Our tax policies haven't kept up with this change as it is...see my post above about the gymnastics companies go through to avoid the high U.S. corporate rate (and the primer below). Rolling them backwards certainly won't help the situation.
Just to give you a primer on the corporate tax thing, though. The way we work it is to set up an offshore corporation, which then sells the goods to the U.S. corporation. The U.S. corporation then sells the goods in the U.S. and receives a "commission" from the offshore company for selling those goods. The bulk of the taxable profit from the sale of the good stays offshore. The small commission barely covers the corporate overhead and woohoo, no taxes for big corporations. It's silly.
Lower the corporate taxes and we won't have to go through all these gymnastics. We could build and sell the goods in the U.S. The tax savings from a lower rate and reduced transportation costs (container ships are not cheap) would likely offset a good enough chunk of the higher U.S. wage rates that we could see lots of jobs coming back. It is, afterall, easier to manage something in your own time zone than it is to manage an entity that is open while you are asleep. Again, I like the earlier idea someone had about tying the tax reduction to jobs creation.
Taxes have also contributed to the demise of pensions. 39% domestic marginal corporate rate. 8% corporate match on payroll taxes. A corporation gives over 40% of profits away and you want a pension?
You are, of course, right about what is happening to living standards right now. Folks are spending a greater portion of income on nondiscretionary items like food and fuel, but the government is a big part of the problem here. Corn subsides. Ethanol subsides. etc. Forget the Iowa Caucus pandering and let the market find the best solutions. $4 gas creates a lot of opportunity for more fuel efficient vehicles (that's how Toyota and Honda entered in the 70s) and $150 oil creates lots of opportunity for alternative fuels. It will all come, but unfortunately it will take a couple of years. More unfortunate is that it is all going to be built in China with the U.S. entities only earning a small commission and paying little to no taxes.
"George W. Bush took the largest budget surplus in history and transformed it into a giant deficit."
Speaking of whoppers: starting off your post with this bald-faced lie pretty much discredits everything that comes after.
The so-called "budget surplus" was a projection, not an actual surplus, based on revenue projections that were made when the tech stock bubble was at its highest. That "surplus" projection fizzled when the air went out of the tech bubble. And that started in the summer of 2000 -- months before Bush was even elected, let alone before any policy of Bush's that could have impacted the federal budget could have taken effect.
Congratulations Dr. Reich!
Terminology in political campaigns, especially with a press that reports what is said without question, is vital to a campaigns success. It's about time we start labeling the garbage that the conservatives have been dumping on our country since 1980 as exactly what it is; a crock, trash, garbage...
I disagree with you about supply-side, and agree with Art. Calling it half-brained gives it far too much credit. Supply-side was no more an economic theory than conservatism or communism are political philosophies. They are all excuses!
Communism is the excuse that brutal dictators use to keep their power and to suppress their people.
Supply-side is the excuse that greedy, selfish people use to get as much money as they can at the expense of others and their country.
Conservatism is actually an excuse trinity.
1) The supply-siders: who say, cut my taxes, subsidize me, and give me free government services. They are the Ferengi of the universe. They use curves drawn on the back of napkins(laugher, I mean laffer curve) as the basis of an excuse to lower their taxes.
2) Religious fundamentalists: Who simply want to impose their bizarre belief system on everyone else. They tend to be extremely dishonest and portray themselves as defenders of all religions until they get their foot in the government door where they immediately start excluding almost all other religions.
3) The ignorant: These are people who get their information from places like fox news, Bill O'Reilly, Rush Limbaugh, and the numerous right wing web sites that repeat the same trash. The purely ignorant are actually a relatively small part of the trinity, but this leg is mostly made up of the members of the other 2 legs.
I have never met a conservative who, in a brief amount of time, can't be shown to belong to one or more of the legs of the conservative trinity.
For the last several campaign cycles I have been dismayed that the Democrats continue to attack the conservative individuals they are running against, and don't attack the excuse of conservatism itself and finally drive a nail into the coffin of this phony political philosophy!
Maybe when people like Dr. Reich start using terminology like "crock", "half-brained", trash, garbage ... to describe the absurd and destructive excuses the "conservatives" put forth, then just maybe the rest of America will wake up, before it's too late.
Dr. Reich,
Following TABLES provide a simple historical summary of our economy's Financial Performance. I've kept my comments to a bare minimum. READERS can analyze and come to their own conclusions and interpretations of following interesting FACTS.
Data is mainly from the White House Office of Management & Budget and the U.S. Dept. of Labor.
Data is in current Dollars and includes on and off budget figures. It also includes, to my regret, Social Security. and Medicare figures which is standard practice... but I consider this to be very distortive of what´s happening to normal (non/trust fund) spending and receipts. I´ve talked about this on other posts to you.
___________________________________
TABLE 1: AVE. ANNUAL GDP GROWTH
___________________________________
Johnson.....1963-68.......7.3%
Nixon.......1969-73.......8.6%
Ford........1974-76.......9.8%
___________________________________
Carter......1977-80......11.5%
Reagan......1981-88.......7.9%
Bush Sr.....1989-92.......5.5%
Clinton.....1993-20.......5.8%
Bush Jr.....2001-08.......4.6%
Bush Jr.....2008 Est......3.0%
SUMMARY;
Carter/Clinton Years......7.7%
Reagan/Bushes'Years.......6.1%
COMMENTS:
GDP growth rates averaged unusually high under Carter (helped by soaring inflation) and strong under Reagan, Bush Sr., and Clinton.
Excluding abnormal inflation starting in Ford's term and continuing in Carter's term, GDP growth rates have been about the same for Republican and Democratic administrations over past 32 years. However, 2008 looks like a historically LOW GDP growth of 3% due to cyclical recession combined with exploding energy/commodity prices and a shrinking job market.
___________________________________
___________________________________
TABLE 2 DEFICITS AS A % of GDP
___________________________________
Johnson................ -1.1%
Nixon.................. -1.0%
Ford................... -2.7%
___________________________________
Carter...................-2.4%
Reagan...................-4.3%
Bush Sr..................-4.0%
Clinton..................-0.8%
Bush Jr..................-2.3%
Bush Jr....2008 Est......-3.4%
SUMMARY:
CARTER/CLINTON Years.....-1.3%
Reagan/Bushes'Years......-3.5%
COMMENTS:
National Budget Deficits under two Democratic administrations were far below those of three Republican administrations. Clinton's last three years showed surpluses reaching 2.4% of GDP in 2000 due to strong economy and control of spending growth (see Table 3).
Both Reagan and Bush Jr. exploded Defense expenditures in absolute terms while reducing Taxes going mainly to top 10% of society. This caused a "Double Hit" to Tax Revenues, thereby leading to very high Deficits. Reagan saw this happening and cancelled his 2nd planned tax cut. The small tax funds reaching the bottom 80% was used mostly to retire sky high personal debt in Reagan´s term.
___________________________________
TABLE 3 AVE. ANNUAL INCREASE IN FEDERAL OUTLAYS/RECEIPTS
___________________________________
--------Outlays-Receipts-$Deficits
Johnson...8.5%....7.6%....$-66 Bil
Nixon.....6.6%....8.4%....$-12 "
Ford.....14.8%....9.0%....$-44 "
___________________________________
Carter...12.2%...14.5%....$-57 "
Reagan....7.6%....7.3%...$-167 "
Bush Sr...6.8%....4.6%...$-233 "
Clinton...3.0%....8.0%....$-10 "
Bush Jr...6.2%....3.3%...$-271 "
SUMMARY:
Carter/Clinton Years
..........6.1%...10.1%....$-26 "
Reagan/Bushes'Years
..........6.9%....5.2%...$-222 Bil
COMMENTS:
Over last 32 years, Federal Outlays have grown slightly faster on the average under Republican administrations. Clinton's administration, however, had extremely low spending rate increases (3%)combined with high rate of increase in Tax Receipts (8%).
Republican administrations have tended to spend more than they receive with resultant high Deficit history -- making it necessary for the succeeding administration to raise taxes, as Bush Sr. was forced to do after Reagan and most likely Bush Jr.s' successor will be forced to do for investment stimulation package, health care, education, etc.
___________________________________
___________________________________
TABLE 4 ANNUAL % DEVALUATION OF DOLLAR
___________________________________
Carter...............-2.7%
Reagan...............-0.6%
Bush Sr..............-0.1%
Clinton..............+1.6%= +13% Bush Jr..............-4.9%= -39%
SUMMARY:
Carter/Clinton Years.+0.2%
Reagan/Bushes'Years..-2.2%
COMMENTS:
The Dollar has devalued 39% during Bush Jr.'s term. In contrast, it increased 13% in value in Clinton's term helped by a healthy economy and Budget surpluses.
The Dollar's sharp fall reflects huge increase in cumulative National Debt from $5.0 trillion to expected $9.6 trillion year-end 2008; the burgeoning trade deficit; imported inflation in form of accelerating oil price rises; sub-prime fiasco; exploding credit card debt -- stimulated by Fed's cheap money policies 2001-2007.
___________________________________
___________________________________
TABLE 5 SAVINGS AS % OF GDP at YEAR-END of EACH ADMINISTRATION
___________________________________
Carter....1980...........9.3%
Reagan....1984...........9.1
Reagan....1988...........7.5%
Bush Sr...1992...........7.7%
Clinton...1996...........7.9%
Clinton...2000...........2.4%
Bush Jr...2004...........2.3%
..........2005...........1.7%
..........2006..........-1.1%
..........2007..........-1.5%
..........2008 Est......-1.7%
COMMENTS:
Until 1989, the U.S. was a CREDITOR to the rest of the world. But foreign claims on U.S. far exceed U.S. claims abroad. We have become the world´s greatest DEBTOR.
At same time, Savings have been used up past eight years as households have taken on huge personal debt to finance Consumption in a situation where lower-middle class income has been stagnant for over two decades.
The bottom 80% of households resorted to Savings, selling assets, refinancing based on rising asset prices ... a market debt casino stimulated by cheap money to support Consumption and household standard of living.
-----------------------------------
-----------------------------------
TABLE 6 AVE.ANNUAL DEFENSE EXPENDITURES AS % OF GDP (Including Veterans Benefits)
-----------------------------------
Johnson...............9.3% Vietnam
Nixon.................8.2% Vietnam
Ford..................6.4%
-----------------------------------
Carter................5.6% $133 Bil
Reagan................6.6% $261 Bil
Bush Sr...............5.6% $325 Bil
Clinton...............4.0% $317 Bil
Bush Jr...............4.5% $525 Bush Jr.2008 Est......4.8% $610 Bil
SUMMARY:
Carter/Clinton Years..4.5%
Reagan/Bushes´Years...5.6%
COMMENTS: Over past 32 years, Republican administrations have escalated Defense Outlays as a % of GDP, and especially in absolute terms. In Clinton´s 2nd term, Defense spending stabilized at 3.5% of GDP and then peaked at over 5.5% of GDP under Bush Jr. due to Iraq/Afghanistan wars.
As stated earlier, Republican administrations tend to create large Deficits by combining much increased Defense spending with Tax Cuts that do not result in compensating growth in Consumption and hence, Tax Receipts.
TABLE 3 confirms very low Tax Receipts during Bush Jr.s´ term. This is because the Bush tax cuts went largely to top 10% of society where the `Trickle Down Theory´is just that.... a theory. The growth in Tax Receipts that did occur during 2003-2007 was mainly due to the explosion in total credit market debt.
-----------------------------------
-----------------------------------
TABLE 7 AVE.ANNUAL % INCREASE IN DEFENSE EXPENDITURES
-----------------------------------Johnson.................7.4%
Nixon...................0.0%
Ford....................7.1%
-----------------------------------
Carter.................10.0%
Reagan................. 9.3%
Bush Sr................ 1.0%
Clinton.................0.4%
Bush Jr.................8.6%
SUMMARY:
Carter/Clinton Years...3.4%
Reagan-Bushes´Years....7.3%
COMMENTS:
Bush Sr. and Clinton managed to reduce the rate of growth in Defense spending considerably after 12 years of relatively high absolute increases (see TABLE 6) during Carter and Reagan Presidencies.
Reagan conservatives have long claimed Reagan´s high Defense spending brought Russia to its knees in the Cold War. But anyone familiar with Russia´s post WWII economic history knows they were on the precipice of bankruptcy long before Reagan´s term in office.
-----------------------------------
-----------------------------------
TABLE 8 YEAR-END (Q4) UNEMPLOYMENT RATES
-----------------------------------
Ford...1976.....7.8%....Very High
Carter.1977.....6.0%....Very High
Carter.1980.....7.2%....Very High
Reagan.1981.....8.5%....Very High
Reagan.1984.....7.3%....Very High
Reagan.1988.....5.3%....Moderate
Bush Sr..1989...5.4%....Moderate
Bush Sr..1992...7.4%....Very High
Clinton..1993...6.5%....Very High
Clinton..1996...5.4%....Moderate
Clinton..2000...3.9%....Very Low
Bush Jr..2001...5.7%....Moderate
Bush Jr..2004...5.4%....Moderate
Bush Jr..1996...5.4%....Moderate
Bush Jr..2008...5.7%....High
Forecast.2009...6.4%....Very High
SUMMARY:
Average Annual Q4 Unemployment:
Republicans.....6.5%
Democrats.......5.5%
COMMENTS:
Reagan and Clinton administrations showed a marked improvement in employment levels in their last years in office -- with unemployment at historical low of 3.9% at end of Clinton´s term. In contrast, unemployment rates have been very high under Ford, Carter, Bush Sr. and are at high levels for Bush Jr. and forecast to go much higher in 2009.
-----------------------------------
-----------------------------------TABLE 9 DISTRIBUTION OF WEALTH AND INCOME 2004 by HOUSEHOLDS
-----------------------------------
..............WEALTH......INCOME
TOP 5%........58.9%.......21.8%
TOP 20%.......84.7%.......50.0%
4th 20%.......11.3%.......23.2%
3rd 20%........3.8%.......14.7%
Bottom 40%.....0.2%.......12.1%
COMMENTS:
Distribution of Wealth among households is much more unequal than the Distribution of Income, especially when focusing on bottom 60& of households. The bottom 60% of Households own 4% of our nation´s wealth while it earns 26.8% of all income.
Greenspan always thought that Wealth more fundamentally represents the ability of households to consume.
As mentioned, the Fed´s cheap money policy 2001-2007 caused Households to sell/refinance assets to amintain living standards. This resulted in an explosion in total credit market debt to over 320% of GDP by Q1 2007 ... with all the financial repercussions crunching system liquidity, wealth and incomes now.
The above Wealth Distribution data has hardly changed at all since 1983.
SOURCE: Survey of Consumer Finances: Sponsored by the Federal Reserve Board
-----------------------------------
-----------------------------------
TABLE 10 EFFECT OF 2002-03 BUSH TAX CUTS ON HOUSEHOLD INCOME
-----------------------------------
LOWEST 20%.........+0.4%
MIDDLE 20%.........+2.3%
TOP 20%............+4.6%
TOP 1%.............+6.8%
Incomes Over.......+7.6%
$ 1Million
COMMENTS:
Above means Bush´s last Tax Cuts have been regressive as high-income households hold a larger share of the nation´s after-tax income as a result of the tax cuts. So tax cuts of Bush are regressive, not progressive.
The Top 1% have ended up paying a slightly larger share of total income taxes while getting a substantial tax cut. In short, changes in the percentage of taxes paid have NO connection to tax progressivity, which relates how taxes affect the distribution of income. Nor does an increase in the percentage of taxes that a Group pays means the Group is shouldering a larger tax burden.
`Trickle Down´ conservatives argue the middle class should be thankful to the rich because the latter pays most of the nation´s taxes despite all the exotic tax loopholes for the well-healed and advised. This is a logical and self-fulfilling result when the Tax Code is keeping the bottom 50% relatively poorer as well as the economic system keeping middle class wages stagnant.
It´s a great piece of propaganda for making the top 20% richer and the rest poorer ... a perfect illustration of Mike Hudson´s recent description of our broken down system as, `The Two Economy Society.´
Source: Center of Budget and Policy Priorities
-----------------------------------
Dr. Reich, I wish you would be more specific about the pros and cons of the so-called LAFFER CURVE which is being used to justify Tax cuts for the already rich and breadcrumbs for the bottom 50%.
Also, can you not clarify simply to JOE DOE how Bush´s cuts are regressive and not progressive...
and how they result in intensifying Budget DEFICITS rather than SURPLUSES.
After much study, I understand what´s obviously happening but many Americans naturally are in a quandry about the economic FACTs and underlying math. I´ve tried my best to open people´s eyes a bit with above Summary Information.
Frank Thomas, The Netherlands
McCain said he's no expert on the budget.
I believe him.
tt
just a few points
1) I wouldn't say Carly Fiorina is that bright. Her acquisitions were horrible strategic moves, and she's a bit unethical (alothough that doesn't disqaulify her from politics.) We don't need another CEO President or VP, we need a statesman, and someone who doesn't suffer from the arrogance.
2) The laffer curve would does imply that companies would reinvest non-tacxed income, but in fact they give it to executives and shareholders and invest overseas.
3) Phil Gramm should not be allowed anywhere near the policy making apparatus. He was instrumental in overturning New Deal banking regulations that kept us out of fiscal tempests such as the one we are in.
4)
"Bernanke Says Fed May Continue Lending Into Next Year"
"...the central bank may extend its emergency-loan program for investment banks into next year."
http://www.bloomberg.com/apps/news?pid=20601068&sid=a5zMHu3rx3JM&refer=home
tt
There should be a place in the Obama administration for this dude. And he doesn't need the pay check.
"Pickens backs renewable energy plan"
http://www.bizjournals.com/sanantonio/stories/2008/07/07/daily13.html
Oh, and he's an oil man.
tt
Pickens seems to be someone who loves America more than he loves money. A leader at age 80.
Talk radio guy Neil Boortz was using 'trickle down' explanations as to why his listeners should oppose Obama's tax cuts for the middle class and increases for those who make over $250 k.
Alex:
Might want to revisit budget surpluses. The excess of federal revenues over expenditures results in a "budget surplus". This phenomena occured in 98, 99, and 2000 on an annual, actual basis, not a projected one. Granted the projected continuation of surpluses is often touted as the total surplus turned over to Bush and that is a little misleading. But that definition is not new and has been used in the past and current to reflect the extent of extrapolated deficits/surpluses over a window of time.
poppymann:
The success of all strategic decisions is not the yardstick for judging one's intellectual capacity. Carly is a very bright lady. Hell, Hewlett-Packard is a fairly sophisticated company not given, historically, to promoting slouches to CEO positions.
Until her ill-fated Compaq acquisition she was doing a pretty fair job.
I would agree wholeheartedly that we don't need former CEOs or business executives in positions of running all or part of the government. The two worlds are polar opposites.
The only seeming overlap would be in cost containment and even that is not a truly comparable area. Cost efficiencies in business are to increase profits. Governments do not use profits as motivations for cost cutting. Businesses are measured in sales cycles with profits as the primary goal. The government operates with a multiplicity of goals within each operating department and their responsibilities are ongoing and not necessarily given to an annual review as to ultimate success or failure.
If nothing else, government accounting and budgeting protocals would drive a businessperson nuts.
anonymous (Matt):
You have delineated a great deal of misinformation that I will need time to evaluate and oppose.
Never fear, I am up to the task and will respond to show you the error of your ways.
Until then have a nice day.
Frank:
Love ya guy but I shudder to think about what your post would be like if you had not held it to a "bare minimum".
Just kidding.
Art:
No bigge. Take your time. I love the debate and the fact that we can all have different opinions.
Let me be clear, though. I haven't decided who I will vote for yet. I just think that spending is a much larger part of the problem and that we should all be working to get our arms around that.
Toast:
I would like to see you become slightly more assertive. Your posts tend to be wimpy at times.;)
Robert said….
“If you believe this, you’ll believe anything.”
Engaging in a budget whopper can be forgiven but war criminality makes McCain morally unacceptable.
People believe that John McCain is a war hero. By his own admission and objective evidence he is actually a war criminal: “I am a war criminal; I bombed innocent women and children.” (1997 interview with “60 Minutes”)
He volunteered for this duty when LBJ opened up operation “Rolling Thunder” the massive bombing of North Vietnamese military and civilian infrastructure. He knowingly killed many innocents during his 20+ bombing missions as a naval aviator.
Sounds far more like a criminal than a hero. At least he’s well prepared if he becomes president. Most U.S. presidents don’t become war criminals until they’re actually in office. I wonder how long it would take Obama to join this group if he were to win; Obama had this to say about McCain: “I respect and admire his war service”. Yikes!!
Dear Anonymous Rich Guy ("The wealthiest 1% ..."),
You say that increasing the top marginal tax rate to 39% would cost you $750 a month, i.e., $9,000 a year.
The 35% tax bracket cuts in at $349,700. Taking it up to 39% would be a 4% increase, so the higher top rate would apply to $9,000/0.04 = $225,000 of your $349,700 + 225,000 = $574,700 annual income.
Assuming you are married filing jointly, your present tax liability is $94,601 + 0.35 * $225,000 = $173,351. This leaves you with $401,349 after federal taxes, or $33,445 per month.
You have the gall to whine that taxing you an additional $750 a month will cut into your Starbucks budget? Cry me a river!
Anonymous:
Congratulations on doing the math. You forgot the AMT impact, by the way.
So I make a lot of money. It's not like somebody just handed it to me. I grew up in a small house in a small town. I studied really hard. I got into good schools and then worked really hard after that. It's paying off. Since when is it wrong in this country to work hard and live the dream?
You're right, the $750 doesn't hurt me, but that isn't really the point. Why should I keep giving more and more money to the government when the problem is spending. Every American's share of the current defecit plus the unfunded off balance sheet liabilities of future social security and medicare outlays is $175,000. When will we address this issue? Instead, both candidates are promising more and more without really saying how they will pay for it.
Believe it or not, my wife and I set a budget every month and do our best to live by it. So much for expenses, so much for discretionary items, so much for savings. I did this back when I graduated from college and made $14K a year and I do it now.
Indebted Americans need to start doing this and the government does too.
Also, please remember that money doesn't go as far in some parts of the country as it does in others. For example, a modest home on Long Island within commuting distance of the city will run you $400K to $500K and milk costs $5 a gallon. the same home in Dallas is something like $150K and milk is $4 a gallon.
Anonymous Matt
"You have the gall to whine that taxing you an additional $750 a month will cut into your Starbucks budget?"
I didn't see anyone "whining," and it doesn't matter what he would otherwise do with the additional money you're proposing to extract from him. It's his money that he earned, and therefore his to dispose of as he pleases, and he has every right to object to you and the author of this blog proposing to help themselves to it in order to do otherwise. The only "gall" I see is in those sitting around the societal cannibal-pot who presume the right and authority to take arbitrarily the fruits of others' labor through governmental coercion.
And "notsofast," you are a liar. Here's the partial transcript of McCain's 60 Minutes appearance:
WALLACE: (Voiceover) People who know McCain well say he can hold a grudge. He also has a legendary temper. But if McCain can be hard on his friends and even harder on his enemies, he can also be very hard on himself.
Sen. McCAIN: I m--made serious, serious mistakes and did things wrong when I was in prison, OK?
WALLACE: What did you do wrong in prison?
Sen. McCAIN: I wrote a confession. I was guilty of war crimes against the Vietnamese people. I intentionally bombed women and children.
WALLACE: And you did it because you were being tortured...
Sen. McCAIN: I...
WALLACE: ...and you'd reached the end of the line.
Sen. McCAIN: Yes. But I should have gone further. I should have--I--I never believed that I would--that I would break, and I did.
There are reasons not to like McCain, but you shouldn't have to dishonestly Dowdify quotes to come up with them.
Alex said….
“notsofast you are a liar”
Yes I am at times but this wasn’t one of them. This was a very hurried read by me of the McCain quote on one of the many blogs I follow and despite missing the entire quote, nothing changes to alter my judgment on John McCain. Given the context of his bombing civilian infrastructure, he’s a war criminal for this alone. I’m also very confident that he killed many innocent people during his many sorties. Engaging in crimes against humanity and war crimes is cowardly and morally reprehensible. He volunteered to go on these bombing runs. No one ordered him to engage in such. He therefore is a very dangerous man and not someone who should be commander-in-chief. Humanity wins if he doesn’t become president.
btw : I’m not a journalist. I’m making blog comments and opinions based on my own observations that may or may not be mind-independent verifiable.
Speaking of lying, I leave you with a brief excerpt from one of Bertrand Russell’s books:
“I do not deny that there is too much lying in the world and that we would all be the better for an increase in truthfulness; but I do deny, as I think every rational person must, that lying is in no circumstances justified. I once in the course of a country walk saw a tired fox at the last stages of exhaustion still forcing himself to run. A few minutes afterwards I saw the hunt. They asked me if I had seen the fox and I said I had. They asked me which way he had gone and I lied to them. I do not think I should have been a better man if I had told the truth.”
Matt:
I have enjoyed your posts. I am from a small town too, and have achieved what I have by working hard and saving. I understand your frustration regarding the current debate centering on wealth transfer as opposed to sensible spending, and policies that encourage hard work and saving. I have debated this with Mr. Layman quite extensively in the recent past, and look forward to monitoring your future posts.
Matt (Cont.):
Also, congratulations on your success. Sometimes I think people forget that the achievement of success does require hard work and sacrifice.
I have always wondered why those "income earned/income tax paid" arguments are always quoting adjusted gross incomes.
If you want to be "fair" about it, considering the size of the tax code, shouldn't the right comparison be "taxable income/income tax paid"?
psu77
PSU...I think it's because AGI is the common denominator. For example, a self employed person may have higher nominal income, but lower AGI than someone who works for a company because they have to pay a greater portion towards medical, etc.
Anonymous Matt
I understand that.
But shouldn't the numbers reflect income after "basic necessities" are deducted?
We don't tax a corporation based on revenues, but on profits.
People are no different. The basic deductions, which go to everyone, really are for the purpose of not taxing people until they pay, for want of a better term, for three hots and a cot.
Or, to complete the corporate analogy, until after they deduct their expenses.
If I want to come up with some "income/income tax paid" numbers, I have to take into account those things. Especially since the basic deductions are given to everyone, while most of the itemized deductions are not.
Why do I think those "AGI/TAx paid %'s" I see so often would not be used if a common sense approach was used?
psu77
Matt (anonymous):
You know it’s not big deal to set up a blogger account. You don’t even have to establish a profile, you can just get a name and save yourself some keystrokes. Sorry, you won’t make any more money by doing it though.
PART I Rebuttal:
We finance guys are a curious lot. We throw about figures, often only posing as facts, and wow our audience with our command of the real truth because we are the only ones who understand our figures.
The wealthiest 1% of the population earn 19% of income and pay 37% of income taxes. The top 10% pay 68%. The bottom 50% pay 3% of income taxes. U.S. tax rates on the wealthiest Americans are down from 91% in the 1960s to 35% today, yet the percentage of taxes paid by the wealthiest has more than doubled during this time. Supply side economics has actually made taxes more progressive not less.
Using AGI (Adjusted gross Income) from IRS data from 2005, an update to your numbers, The top 1% earned 21.2% of AGI and there tax share increased to 39.4%. The top 10% earned 46.4% of AGI and paid 70.3% of total federal individual taxes.
Now Adam Smith said: "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."
Does it not then follow from Mr. Smith’s argument that the progressive tax system is working as intended? Now from your less than complete stats you conclude that: Supply side economics has actually made taxes more progressive not less. Either from lack of understanding or a desire to spin you abbreviate the primary argument of “Suppy side” economics. The principal argument was not that the wealthy, or higher income earners, would pay more taxes and therefore increase government tax revenues; it was that those with higher incomes would, being unburdened from oppressive tax rates, reinvest those tax dollars creating new jobs and higher incomes for all (remember the phrase, “A rising tide lifts all boats”?) and would therefore increase tax revenues from the entire base of income earners.
Let us see what happened. In 1980, the bottom 50% enjoyed a 17.7% share of all AGI. In 2005, that share had dropped to 12.8%. The top1% saw their share rise from 8.5% in 1980 to 21.2% in 2005; the top 10% from 32.1% to 46.4%, respectively. It would appear that some of the boats had leaks.
On the one hand, one could posit that you didn’t attain your lofty status by such logic tactics as you exhibited here, on the other hand, my experience would tell me that faulty logic might have been precisely what led you to such heights.
A minor lesson in progressive tax systems. As the AGI share of those in the higher tax brackets rises, so too will the share of taxes they pay. Taxes on earnings increases occurring at a 35% tax rate will fast eclipse taxes on earnings increases for those at a 15% tax rate.
Government spending, on the other hand has nearly doubled from around $1.8 trillion in 2008 to nearly $3 trillion today. A big chunk of this is the war effort, but it is irresponsible nonetheless. Curbing this growth will do more for the defecit than any tax increase will create. Bush has been a big disappointment here.
A little hard to argue with your opening contention since we are still in 2008 and I don’t believe government spending has increased $1.2 trillion in the past six months. Your second statement, regarding war effort spending is typical of accounting/finance people as they move up the ladder. They lose their roots. Most, while moving up, go through stages where they are buried in details; the minutiae of all the business’s activities that pose the real understanding of what is taking place. At certain levels, and beyond, analysis tends to result in rather obscure, meaningless variance explanations. One would think that when asserting a rise in government spending of 40%, a more precise statement might be in order that just “a big chunk”. Most executives I have worked for would have hung me out to dry if I told them that “a big chunk” of the decrease in profits was due to increased costs. Your “big chunk” gives me no idea of what other spending I should look to "curbing".
I would not dare to argue that the war spending has been other than irresponsible, wasteful and just plain absurd. Unfortunately, we are where we are and there are not a lot of options for “curbing” that spending in the near term. It’s kinda like a retail company contracting for a multi-year delivery of chrome polish only to realize that chrome bumpers no longer exist in new cars.
I am breaking my response into parts to minimize the impact of the many readers here and to facilitate my other priorities.
More to come.
Art:
Sorry for my intellectual laziness with the big chunk comment. You're right. I would ream an analyst for that one.
My answer is that we have to look at everything for cuts. Over the last 40 years, the defecit has averaged 2.3% of GDP. Projections are for this to widen in the future. A little more than 60% of this year's budget will go towards interest payments and entitlements with tha balance going towards discretionary. About half of this discretionary will be defense related and the other half will go to everything else (schools, parks, museums, etc.)
If left unchecked, the deficit created by current spending trends will result in interest payments being the single largest line item in the budget. This would obviously be bad news.
I don't pretend to have the answers. I do know that we need to start addressing the problems and that trying to grow our way out of it with revenues probably won't work. I wish either McCain or Obama would get serious about looking at this.
Revenues alone will not work. Spending cuts alone will not work.
It has to be both. Unfortunately.
Sorry
psu77
Dr. Reich,
Regarding my 10 TABLES on our Government's FINANCIAL PERFORMANCE, I forgot to include an important, if not the most important, Table dealing with how our Tax Money is spent.
___________________________________
TABLE 11 2006-7 FEDERAL EXPENDITURES BY GROUP IN Billions of Dollars
___________________________________
...............2006.....2007
I. Defense....$535.9...$527.4=18.1%
...Veteran......70.4.....73.9 =2.5%
Benefits
II.Global War..150.0....150.0 =5.1%
on Terror (Iraq/
Afghanistan: Estimate)
III.Interest...110.1....123.6 =4.3%
Paid on FED Debt
Incurred on Past
Military Outlays (Excl.Off-Budget)
TOTAL MILITARY:866.4....874.9=30.0%
IV. Balance....110.0....123.7 =4.2%
Interest on Debt (Excl. Off-Budget)
V. Human.....1,636.8..1,713.7=58.6%
Resources, Comprising:
...Soc.Sec.....554.7....585.9
...Medicare....360.6....367.2
...All Other...721.5....760.6
VI.Physical....168.1....147.7 =5.1%
VII. Other.....149.7....154.4 =5.3%
Functions
VIII.Undistributed
Offsetting
Receipts.......-72.4....-94.3=-3.2%
TOTAL FED....2,858.6..2,920.1= 100%
OUTLAYS
..Excluding..1,943.3..1,967.0
Soc.Sec/Medicare
TOTAL DEFENSE OUTLAYS as
a % of FED OUTLAYS
Excluding
Soc.Sec./Medicare and
Off-Budget Interest on
Debt
..............44.3%....44.5%
___________________________________
COMMENTS:
This data indicates some startling things. First, Defense expenditures are extremely HIGH, especially when one includes the Interest on our national Debt caused by Deficits, caused by Defense expenditures. For there's no doubt that many of our Deficits have been directly the result of aggressive Defense spending ... Deficits that have had to be funded by floating Treasury bonds abroad.
Note that I also exclude Social Security and Medicare when calculating what percentage of our budget goes to Defense ... as that is mixing oranges and apples. It's very distortive by making the HUMAN NEEDS part of the budget seem LARGER and the MILITARY part seem SMALLER. Funds for Soc.Sec. and Medicare are raised and spent separately from income taxes. We should be focusing separately on putting these funds in good order. In essence, they are Trust Funds.
I've assumed only 50% of the total Interest Paid on our national debt has been caused by past and present Defense Expenditures. Many experts believe the figure is closer to 80%. I've also excluded Off-budget Interest expense.
My conservative assumptions show we are spending 45% of our annual national budget on Defense including an estimated provision for the "Global War on Terror (Iraq/Afghanistan). If Off-budget Interest expense were also included, our Defense spending would almost reach 50% of the national budget (excluding Soc.Sec./Medicare).
The point is that the major area where spending is Out-of-Wack is in Defense, especially when you also consider all the waste, proliferation of 700 bases everywhere, with troops doing almost nothing in Japan, Germany, South Korea etc., and enormous cost overruns on projects amounting to more than $30-40 billion alone, annually.
When one excludes Soc.Sec./Medicare and Defense outlays from above 2007 budget total of $2,920.1 trillion, the remaining cost base is $1,192.1 trillion. The maximum cost reductions here are likely in the order of 4-5%, or %40-50 billion annually... very, very important but hardly the Big Waste Pot suggested by the honorable McCain.
In contrast, there are probably real cost savings in the order of magnitude of $150 billion annually in Defense spending. Eliminating waste, duplication and converting to a high tech fast in-and-out force, in addition to geting out of Iraq should release such savings over next 4-6 years. Signing a contract with Iraq to pay us back for all funds put into thier economy for things we didn't destroy as well as for any future "military backup troops" is certainly a necessity.
The truth of the matter is that in our efforts to be the world's social engineer for democracy and military protector and enforcer, we for too long have grossly neglected the HUMAN and INFRASTRUCTURE investment sides of our own society ... to the extent we can't even fix the Katrina destruction in a timely and effective manner. NO MONEY!
All this talk about excessive SPENDING is laughable ... the main area where it's happening is in DEFENSE... thanks to Pres. Bush's invasion escapades. It's mind boggling when one contemplates what a well-planned, funded (-+$5-10 billion) assasination of Saddam and his cohorts could have simply and quickly achieved.
AS I and others have said ... historically, nations have gone bankrupt with overzealous military investments and exploits. And we're stretching our limitations in this regard on earth and outer space.
We have a 10-12 year strategic window to get our Financial House greatly strengthened as China or India have their hands entirely full controlling their rampant, rapid industrialization, severe environmental pollution and wealth gaps. They are not interested in wildly escalating war budgets in coming years unless pressured by a weapons race from the U.S. The same holds true for Russia. These countries want the spoils of the developed world...NOW.
Dr. Reich,
Correction:
VI. Should read:
Physical Resources
(It includes Agriculture, Interior, Transportation)
Dr. Reich,
In prior posts, I have argued for a return to Clinton's Defense spending level of 3.5% of GDP, excluding Veterans Benefits and costs of Iraq war.
The figures come out as follows:
(GDP in Trillions and Defense Expenditures in Billions)
___________________________________
TABLE 12 FORECAST OF DEFENSE COSTS AS % GDP
___________________________________
............2007...2008...2012
GDP........13.8....14.3..16.4=+3.5%
Defense.....536....527.....575=+2%
Veterans.....70.....74......90=+6%
Benefits (a)
Interest....110....124....150=+5.5%
Paid on FED
Debt for Past
Military Outlays
Global......150....150.....50
War on Terror
(Iraq/Afghanistan)
Sub-Total...866....875....865
Defense.....6.3%...6.1%...5.2%
as % of GDP
NOTE:
Defense.....4.0%...3.7%...3.5%
Excluding:
--Veterans Benefits
--Interest Cost
--Global War on Terror
(a) Excludes Military Retirement Costs ___________________________________
COMMENTS:
The above shows reasonable cost level targets to get Defense expenditures down to 3.5% of GDP or $575 billion by 2012 -- excluding Veterans Benefits, Interest Cost, and Global War on Terror Costs...or to 5.2% of GDP or $865 billion including such costs. These are still huge absolute spending numbers!
This 3.5% of GDP target is exactly what Clinton achieved by year 2000in his term of Office... with no undermining of our National Security.
By 2012, I assume Global War on Terror cost of $50 billion is mainly for Afghanistan. All backup military costs for Iraq I assume will be paid by Iraq but I show no inflows from Iraq for refund of billions in infrastructure costs the U.S. paid for them to date.
All in all, a very reasonable scenario that would appear to present no threat to our National Security. Home Security budget costs are separate and not included in any of my figures in TABLES 11,12.
Just one Overview to put Defense Spending Facts in perspective.
Dr. Reich,
TABLES 11, 12 exclude any positive effect of Western and Asia nations gradually taking up greater share for protecting the world.
It doesn't seem unreasonable to expect Europe and Asia to increase their annual Defense expenditures modestly form lows of 1.5-2% of GDP to 1.7-2.2% of GDP. The U.S. represents 4.5% of world population, but we are paying for almost 50% of world's military arms and equipment.
Besides being absurd, how long can we financially sustain this?
You’ve read the propaganda (rooted in Marxist Class Warfare), now read the objective, quantitative facts.
Finance makes a vital role in defense but we should make proper investment.
Mr. Reich, You are brilliant. I hope that Mr. obama taps you for a post in his cabinet.
Sincerely,
Loretta Davis
Skippack, PA.
徵信, 徵信社, 感情挽回, 婚姻挽回, 挽回婚姻, 挽回感情, 徵信, 徵信社, 徵信, 捉姦, 徵信公司, 通姦, 通姦罪, 抓姦, 抓猴, 捉猴, 捉姦, 監聽, 調查跟蹤, 反跟蹤, 外遇問題, 徵信, 捉姦, 女人徵信, 外遇問題, 女子徵信, 外遇, 徵信公司, 徵信網, 徵信, 徵信社, 外遇蒐證, 抓姦, 抓猴, 捉猴, 調查跟蹤, 反跟蹤, 感情挽回, 挽回感情, 婚姻挽回, 挽回婚姻, 感情挽回, 外遇沖開, 徵信, 徵信, 徵信社, 抓姦, 徵信, 徵信社, 外遇蒐證, 外遇, 通姦, 通姦罪, 贍養費, 徵信, 徵信社, 徵信社, 抓姦, 徵信社, 徵信社, 徵信, 徵信, 徵信公司, 徵信社, 徵信, 徵信公司, 徵信社, 徵信社, 徵信社, 徵信社, 徵信社, 徵信公司, 徵信社, 徵信, 徵信, 徵信公司, 女人徵信, 外遇, 外遇, 外遇, 外遇
徵信, 徵信網, 徵信社, 徵信網, 徵信, 徵信社, 外遇, 徵信, 徵信, 徵信社, 抓姦, 徵信, 徵信社, 外遇, 徵信社, 抓姦, 徵信社, 徵信公司, 徵信, 徵信社, 徵信公司, 徵信, 徵信社, 徵信公司, 徵信社, 徵信社, 徵信社, 徵信社, 徵信, 徵信社, 徵信社, 徵信社, 徵信,
cheap wow power leveling buy wow power leveling cheapest wow gold CHEAP power leveling BUY wow gold CHEAPEST wow powerleveling WANGGONGwow goldwow goldffxi gilwow gold
Post a Comment
<< Home