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November 13, 2012

Comments

Even the rich don't have enough money to close a trillion dollar deficit year after year.

HS,

When it comes to analyzing stuff like the Glenda Moore hoax, you are without peer.

When it comes to the economy and the real world, you are hopeless.

We should never have had the Bush tax cuts in the first place. That pushed us towards the cliff. By the time Bush left office, we were $8 TRILLION in debt. Now, with Obama's reckless policies, we are $16 TRILLION in debt.

When the tax cuts expire, middle class families' tax rates will rise by at least $2K per year.

Stop saying they are mostly in "value transference" fields. These are small businessmen, doctors, etc.

They will feel this, bigtime, and adjust their spending.

Small businessmen will cut back hours and won't hire full time employees due to Obamacare and other confiscatory regulations.

We will have 9% unemployment by the middle of the Obama administration.

Many people are living off dividends, and the fact that the stock market is doing well.

If the stock market takes a nose dive, all bets are off.

You are totally off the mark here.

There's serious talk of limiting deductions, perhaps in addition to increases in rates. This will hurt blue states with high state income taxes the hardest.

Why, again, did you vote for Mitt Romney?

He promised to give the wealthy (including Hollywood liberals, pro athletes, and media elites) a huge tax CUT of 20%, while you've continuously supported raising taxes on the rich -- as has Obama. Yet you voted directly against your own interest. Why?

Moreover, you could have justified a vote for Obama on this criterion, and somewhat inoculated yourself against charges of racism -- though your wholehearted support for suppressing black voters didn't help on that front.

I don't think this standoff will end how you predict it will. Obama has every reason to reject the shitty deal the GOP congress will offer and let the Bush tax cuts expire. He can then go on television and tell Americans that the Republican establishment -- the people that backed aristocrat Romney -- punished the middle class because they didn't want to see the wealthy pay slightly more taxes.

Democrats could then introduce sub-$250,000 tax cuts -- the Obama Tax Cuts -- to correct the problem and then watch the GOP caucus fracture as they twist in the wind over what to do: oppose the man and party who just kicked their asses in the election or oppose Grover Norquist's mantra that any tax cut is good, thus destroying their image as a party of low taxes for the middle class.

You're wrong Halg Sigma. This country actually is running very moderate to low deficits. But that doesn't matter. The key issue is the only way for money to be created is either via deficit pending on the part of the sovereign or by taking out more loans. You don't seem to understand how the banking system works, but when a new loan is issued, i.e. the money is created, the borrower has to pay back the principle PLUS interest. The loan only creates the principle. The interest that must be paid back must be created in the future.

If a sovereign doesn't institute sufficient deficit spending, people end up taking more loans on as a result. This is why today the average American household spends twice as much of their income on debt service today as compared with the late 1990s and the surplus madness began.

There is a recession because people don't have the money to spend on anything that boosts employment. They are struggling just to pay their bills.

And, for the record, Keynsian theory has predicted the futility of your plan perfectly this entire recession. Your idea is being implemented all throughout the Western world and it is a total, utter dismal failure that is pushing several countries to the brink of civil war.

No, what we are witnessing right now is a total failure of neoliberal economic theory. Everything these people have predicted has been wrong. Everything. And Keynes has been right about EVERYTHING.

jay,

"Stop saying they are mostly in "value transference" fields. These are small businessmen, doctors, etc. "

No, they aren't. Go look up the actual data. And most of the money is owned by the 0.1%.

Jay,

Rather than rushing to condemnation, perhaps you should actually read what Half Sigma wrote. You said:

"When the tax cuts expire, middle class families' tax rates will rise by at least $2K per year."

HS knows this, which is why he said:

"I prefer the Obama plan for only letting tax cuts expire for taxpayers with incomes above $250K"

It was the highly-emotional, innumerate conservatives such as yourself who cannot do simple math let alone parse complex demographic statistics that caused Republicans to be so stunned by Romney's crushing defeat.

Stop trying to unskew reality. You can't win in politics if you're this obtuse, and Half Sigma knows it.

The fiscal cliff is the best solution. Actually, the fiscal cliff is the result of the Budget Control Act of 2012. In other words, the "cliff" is the compromise, and I don't understand why we need another compromise.

I say more tax cuts and more spending. All the evidence is that Cheney was right and deficits don't matter. We have record, mind-numbing deficits, and absolutely no adverse effect. I can't understand it, but there you are.

Deficits don't matter. The US will not collapse, because today is not like the Roman Empire. Everything is tightly and intimately connected today. If the US collapses, the world goes with it. That will not happen.

Tell that to the people of Greece, Spain and the UK HS. The UK has been able to keep interest rates low to offset some of the pain but even there reducing spending has been offset by reduced revenues. In Greece, where the Germans have forced the central bank to keep relatively high interest rates, the cuts in spending resulted in reduced revenue greater than the cuts themselves not to mention civil disorder.

The idea that it will only hurt Chinese jobs is wrong. Most of the money earned here is spent here (and re-earned and re-spent etc.) American corporations didn't move their factories to China so they could reduce profits.

The fiscal cliff would cut spending by ~$400 billion next year, which even without a multiplier would cut total GDP by 2.5%, with a realistic multiplier it's more like >5%. That would be a new recession when we're just beginning to get out of this one.

One wonders why unemployment shot up in 2008-2009, just as aggregate spending was collapsing from trend. Perhaps technology didn't hit an inflection point just as spending was collapsing...

Almost looks as though the economy operates just as economics says it does. With big drops in spending leading to higher unemployment, due to sticky wages and fixed nominal debt contracts.

The collapse isn't coming; it is occurring and has been for a few decades now. It will take a few more centuries to complete. The Roman Empire didn't collapse in a day. The collapse happened so slowly that most people were unaware of it really. It happened for the same reasons too: deficit spending and immigration.

Deficit spending does not result in bankruptcy for superpowers, instead it results in the gradual decay of capital and society. Where are the new interstate highways? Where are the new bridges? Where are the new hydroelectric damns? Where are the moon colonies? They aren't coming. Instead infrastructure decays.

This happens because deficit spending IS inflation and inflation causes people to shift their time preference away from saving and towards selection. Inflation makes it irrational to save money. Thus deficit spending pushes people away from K strategies towards r strategies. Deficit spending makes whites live like blacks and blacks live like animals. Deficit spending is dysgenic.

Libertarians are always waring us about what Keynesian does to the economy, and they are right about that. However it is even worse than they say, because they don't appreciate the dysgenic effects. Anyone who is HBD-aware needs to be terrified of deficit spending. Not for the short term, but for the long-term and irreversible degradation of the people.

I made a pretty big typo, where I said "selection" I meant "consumption".

Peter,

Thanks for the reading lesson. Yes, I got hot under the collar and I missed that sentence.

Does it disprove my basic point? that there is a real day of reckoning coming, at some point, and that we need to get our house in order? Isn't that what HS is saying here?

What about the essence of my point is wrong?

Are deficits good? You tell me.

As for the crack about Romney, that was irrelevant. You are still angry because I pointed out you said dumb stuff about Glenda Moore. Get over it.

"we are witnessing right now is a total failure of neoliberal economic theory. Everything these people have predicted has been wrong. Everything. And Keynes has been right about EVERYTHING."

Lol. You're so wrong. The whole world is using half of Keynes' economics: deficit spending.
The other half is saving money, building budget surplusses, and paying off the debt. Note how nobody ever does these.

Seriously you must be stupid or ignorant to miss the constant spending sprees of European countries and Japan. Especially Japan is a prime example that spending yourself out of a recession does not work and they've been at it for two decades.

All these countries have to show for themselves is debt, debt, and more debt.
Their solution to that problem of course is not to cut government spending to match tax income, but to inflate their way out of it.

The money will be less worth, meaning prices will rise to compensate. Wages and benefits will trail adjustment as usual, if ever.

Now tell me Eryximachus, when people's money is less worth, how can they afford to pay their bills?

Peter: I wrote in haste and anger. Even a putz can make a good point, and you did.

What I object to in HS's post is this: "I wouldn't worry about this 'fiscal cliff' stuff." Then he goes on to advocate increased taxes and lowered spending. Great ideas - I agree with them myself. Did you read my comment, where I said I disagreed with the Bush tax cuts?

Thing is, it won't happen. Both sides are calcified into their positions, like dogs with their teeth sunk into each others' legs. Neither side will give in.

So I do worry about this "fiscal cliff" stuff.

OK?

Regarding your Romney crack, I was shocked but not surprised by his loss. Bad numbers, lousy candidate = loser.

XVO,

With the possible exception of Greece (I don't really know what the net effect there is) both spending and deficits were way up around the world. Hardly austerity. What the Krugmen's of the world call austerity I call spending increasing very fast but not as fast as Krugmen wants.

Anyway, I concede you point that jobs can be created by spending money. Whether those jobs are useful is up for debate though. I consider many of the jobs created by Keynsianism today "capital cannabalizing".

"He promised to give the wealthy (including Hollywood liberals, pro athletes, and media elites) a huge tax CUT of 20%"

Actually he promised to reduce marginal rates and get rid of numerous deductions, which is a tax increase. For the kind of people you're describing, the legal definition of taxable income is what determines their taxes, not marginal rate, which is largely irrelevant to people with that kind of wealth. It's easy to say taxes should be raised on the rich when it's not going to affect you. Make more of their income taxable and watch them scream. Warren Buffet doesn't have a lower effective tax rate than you because he's in a lower bracket; it's lower because such a huge percentage of his income is exempt from taxation.

Jay -

Peter hasn't participated in this discussion. It was I who noted your hasty reading of what Half Sigma said, but I will try to address you in good faith.

We agree that getting the fiscal house in order is necessary, we disagree on how best to do it.

The crack about Romney was relevant because your type of heated and rushed 'analysis' is what passes for intellectualism in conservative circles.

I said nothing of Glenda Moore except to say that she was stupid for doing what she did. Perhaps you're conflating myself and the actual Peter?

How can you be "shocked but not surprised" ? Isn't surprise inherent to, and a less emotionally severe version of shock?

And yes, I saw where you said the Bush tax cuts should never have happened, and I agree, but the fact is you voted for a guy that promised to double down on the Bush tax cuts without ANY hope of reconciling the revenue loss -- thus exacerbating the deficit.

You can't be a deficit hawk and support a guy promising to blow up the deficit.

"Where are the new interstate highways? Where are the new bridges? Where are the new hydroelectric damns? Where are the moon colonies?"

They don't exist because they are not needed. Should we be building bridges and highways to nowhere, and lots of ghost cities like the Chinese, just to prove we aren't "collapsing"?

[HS: They wanted to build a train tunnel under the Hudson, like the one we built over a hundred years ago, but Governor Christie canceled it because we couldn't afford to do what we were able to do in the distant past.]

" If people have less money to spend, then they buy less crap manufactured in China. Chinese people lose jobs, not Americans."

No, because the percentage of the final consumer price that goes to the actuall manufacturer of a physical product is fairly small. When you buy some crappy Chinese toy, or electronics item, or clothing a significant proportion goes straight to the retailer, then the next slice to the American or European corporation that designed and marketed that product, then a slice to the Taiwanese or South Korean company that manages the manufacturing process and finally a small bit goes to the Chinese factory that actually made it.

On top of that, a lot of prole disposable income goes to junk food and entertainment - and most of that is actually produced here in the US.

JP,

The need for all sorts of infrastructure, or even just maintainence of current infrastructure, is readily apparent in this country. The army corps of engineers also concurs.

Whether we are capable as a society of doing these things that should be done is another story.

Do we actually NEED a new train tunnel under the Hudson? Anyway, I am sure the reason we couldn't afford to it is that such projects require too many parasitic, non-essential employees among the contractors and too much bullshit "oversight" by corrupt, inefficient government bureaucrats.

Yet more inefficient and bureaucratic big businesses and more government employees are exactly what you recommend in your "Thomas Campenni on small business job creation".

Apparently we want to hire people, so they have jobs, but it doesn't matter if they can actually achieve anything. Your policy prescription is sounding more Brezhnevite than ever...

"The country is running massive deficits. Combined tax increases and spending cuts is exactly what we need to put our house in order. The idea that this bitter medicine would be ruinous is based on outmoded Keynesian thinking which no longer applies to a value-transference-based economy."

Germany did this 10 years ago. They have Europe's strongest economy now.

"I prefer the Obama plan for only letting tax cuts expire for taxpayers with incomes above $250K (who mostly transfer value rather than create it), but I predict that Republicans, who shamelessly pander to the rich (who don’t even return the favor with votes), won’t let that happen."

Last week Howard Dean said this may be the best thing to do.

Bill Kristol pointed out on the Fox Sunday talk show that almost 50% of $250+K households voted for Obama, so if you raise rates and/or limit deductions you mostly hurt Blue-staters...Maybe that would lead them to start voting GOP?

@blograju, you are correct. But Obama is bringing up the $250K tax-increase thing because, imo, it's the smallest number associated with millionaires* (Romney), and he wants to permantely tar** the GOP as the out of touch rich (white) guy party.

*250k = quarter of a MILLION. Million as in millionaire. Millionaire as in Romney.

**I think this is sad. We were a country that celebrated success, which leads to young smart people trying to do cool things. Which leads to a better future. We're turning into France: http://techcrunch.com/2012/10/07/how-frances-government-screwed-its-entrepreneurs-so-hard-they-became-pigeons/

"Combined tax increases and spending cuts is exactly what we need to put our house in order."

There will be no net tax increase on the rich. Published rates ≠ actual payments. That is why Obama pushes mega legislation with mega loopholes and exemptions and waivers for his friends. His friends won't be taxed more.

An older surgeon I work with was practically foaming at the mouth the morning after the election. He said to me "I don't understand why your generation isn't rioting in the streets like they are doing in Greece. You guys are fucked and they are all lying to you. You should be rioting!"

He is right. The deficit alone is scary, but add on the unfunded liabilities of Medicare and anyone in their 30s or younger is looking at a very bleak future. The $38.6 trillion in unfunded benefits Medicare is expected to pay over the next 75 years equals $328,404.43 for each of the 117,538,000 households in the United States in 2010. This isn't included as part of the official deficit by the CBO, but it is essentially debt that will need to be paid by future tax payers. Essentially I am being used as a credit card to pay for a government program that I will never see the benefits of.

J1 or J! -

This guy makes an excellent point. There is a big difference between the tax table and the tax code. The tax table is what 90% of the tax issue for public consumption is made.

Marginal rates are only half the story. What determines taxable income is the tax code. The wealthier you are, the more you can take advantage of the tax code to pull vast quantities of your wealth and income off of the tax rolls.

That's why the Democrat "tax the rich" argument is nothing but a colossal bait and switch. They always talk about raising marginal rates while knowing that the tax code will take care of their rich buddies. No plutocrat will ever face a a Democrat tax increase no matter how much above $250,000 he makes.

After all, Nancy Pelosi and John Kerry did not become politicians to raise taxes on themselves.

And another thing: you do not want to give up deductions. What happens if the home mortgage deduction disappears? Whole swatrhs of the middle class will lose their homes.

The fiscal cliff isn't the problem, it's a partial solution to the problem, which is our ballooning debt. It's worth noting how partial it is: even if it kicked in fully, we'd probably still run a deficit next year at least as large as Bush's largest deficit.

Given how weak our economy is now, the fiscal cliff could trigger a short-term recession. Politicians act as if this is the worst thing in the world, but is it better to have 8 years of anemic ~1.5% growth just to avoid a brief recession?

Recessions serve a purpose in an economy, like brush fires serve in a forest ecology. They are little bursts of destruction that strengthen the economy/ecology, and by artificially preventing them, you can increase the risks of an extended malaise/forest fire.

If the GOP were smart, rather than fight to defend the Bush rates on the top 2%, they'd demand that Obama let them all expire. Democrats always remind us of how great the economy was under Clinton; so let's bring back the Clinton rates for everyone and watch the good times roll again.

If the economy takes off (unlikely), in a few years, the GOP can run on tax cuts again. If the economy keeps sucking wind, the GOP can also run on tax cuts again in a few years. But if half the country isn't paying any income tax (as is the case now, thanks in part to Bush's highly progressive tax cuts), then you can't run on tax cuts.

The pink elephant is the massively bloated defense budget. Forget saving peanuts here and there, focus on whittling down on defense spending.

Patrick,

Sorry for getting your name and ID wrong. It was a Freudian wordo.

I don't want to get into a circular argument whether shock is different from surprise and how my fuzzy brain is so indicative of piss-poor conservative intellectualism.

All I can say is that when you vote for a Presidential candidate, you get a chance to say No to the other guy, as well as Yes to yours. That's about it.

I thought, incorrectly, that with Romney, we'd have a chance to hold the bastard's feet to the fire and start to work our way to fiscal sanity.

I agree that his stand on taxing the rich is both economically illiterate, and immoral.

The Republicans have two major weaknesses which dooms them w/white working class (what they call proles here) voters: abortion and taxing the rich AKA economic fairness.

Perhaps the party really is over.

"[HS: They wanted to build a train tunnel under the Hudson, like the one we built over a hundred years ago, but Governor Christie canceled it because we couldn't afford to do what we were able to do in the distant past.]"

Most infrastructure spending goes to generous salaries and pensions and that sort of thing these days. That's why New York City can spend so much and still have sort of shabby infrastructure in some ways.

Patrick,

Another thing. You are right about this, too: "The crack about Romney was relevant because your type of heated and rushed 'analysis' is what passes for intellectualism in conservative circles."

Happy? I overreacted to HS's flip comments about not worrying because I can't afford NOT to worry. Both parties suck. Both parties stand for things that are crushing me and my family. I hope Obama does tell the GOP to fuck off about the tax cuts. That would be a step in the right direction.

But please look at the other side of Obama. He really does represent the wing of the Dem party that thinks it's OK to keep a lot of people on a permanent dole. Not people who get "entitlements" here and there, but who live a womb to tomb existence taking and taking. That as much as anything else will destroy our country.

Peace out.

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