Comments on: How to solve the fiscal dilemma

By: mckibbinusa

mckibbinusa — Thu, 10 Jun 2010 01:21:25 +0000

Like it or not, the people are not going to consent to austerity measures, and the government is never going to allow a default. That leaves only the inflation route (i.e., “printing” money), which requires neither a public referendum or mandate. More about using inflation to reduce the deficit and rout entitlements at:

http://wjmc.blogspot.com/2010/05/using-i nflation-to-reduce-public-debt.html

Thank you for the opportunity to comment…

By: Danny_Black

Danny_Black — Wed, 09 Jun 2010 16:22:17 +0000

Sensei, in the UK the deficit this year is over 12% of GDP. To have that wiped out by 4 months of growth would imply an annual growth rate of over 30%. Hands up who thinks that is likely?

Off the top of my head the US federal government has been running a deficit for the last 30 years – with the exception of a few years under Clinton – during a general strong growth period.

By: Danny_Black

Danny_Black — Wed, 09 Jun 2010 16:13:30 +0000

Think about how much good tax advice costs and how much organising your affairs to minimise your tax income costs. As long as the saving on tax is more than the cost of getting that saving “soaking the rich” isn’t going to work.

Also the “enormous” budget cuts actually turn out to be tiny. Remember the argument in the UK election was whether making a cut of less than 1% of government expenditure would collapse the economy or not.

The fact is that the governments can’t afford their social welfare system.

By: sditulli

sditulli — Wed, 09 Jun 2010 14:16:20 +0000

Are we not talking about something different than income taxes though? It seems to me we already have rather hefty income taxes especially after the Bush Cuts are removed. 39.6% plus 2.9% for medicare and State taxes adds up to a pretty high rate. I think an upper bound on income taxes is probably 50% before people cut back income production. We are talking about tax reform that broadens the tax base and raising middle class taxes which are virtually nothing (Except for the SS tax)

By: PaulV

PaulV — Wed, 09 Jun 2010 13:21:24 +0000

MORALITY AGAIN!
‘I don’t think middle-class opposition to tax hikes on the rich comes primarily from pecuniary self-interest; I think it’s primarily moral.

Posted by dWj ”

Does dWj think that Eisenhaur — a republican — was immoral, when he raised the top tax rate to 90 percent. Funny, how morality comes in when you tell people not to default on their mortgages and not to tax the rich — not when teachers get fired and garbage in the street is uncollected or Americans simply die because they do not have insurance.

By: robertwaldmann

robertwaldmann — Wed, 09 Jun 2010 11:48:46 +0000

Thanks for the link. It was especially generous as I was just adding more evidence to Yglesias’s post.

By: VENTURES

VENTURES — Wed, 09 Jun 2010 11:34:21 +0000

The U. S. government is already in the Venture Capital business. We own 61% of General Motors which just launched its $100 million General Motors Venture Fund to support new transportation technology. The Government Services Administration could futher generate new jobs and businesses in America by transferring its billions in excess real estate to American entreprenuers that create new American jobs. This would not cost the GSA any new money, as they already own the real estate and need a creative new avenue to use it. What a concept!!!!

By: tyates

tyates — Wed, 09 Jun 2010 07:01:56 +0000

It’s always funny when leftists complain that the American public is too stupid to understand their own interests. They don’t get that these “dumb” Americans are smart enough to see how wealth redistribution worked in other countries and they don’t want any part of it. I wonder at what point do you guys abandon the socialist high-tax government-run utopia vision and say that there won’t be any money for anyone to spend unless we can put some pro-growth policies in place ASAP.

By: breezinthru

breezinthru — Wed, 09 Jun 2010 04:15:52 +0000

The truth? There are a lot of stupid non-wealthy Americans.

A case in point: There was legislation designed to only tax the estates of America’s wealthiest people when they died. Savvy politicians working on behalf of the wealthy elite renamed the tax as the Death Tax and ran ads making it appear that that tax would effect everyone, rich and poor alike.

Poor, stupid Americans who would not have been affected at all by the tax fought vehemently to prevent it from becoming law.

And they succeeded because not that many people in Washington DC really wanted that bill to become law anyway.

By: Andy_McLennan

Andy_McLennan — Wed, 09 Jun 2010 02:31:34 +0000

No doubt you’ve already seen the poll data that Matt Yglesias posted. It is the case that raising taxes on the prosperous is unlikely to happen soon, but not because the people don’t want it. Politicians face a variety of pressures: fund raising, social milieu, and especially what kind of job they’ll get after they leave office. Blanche Lincoln didn’t prostitute herself for the Walton family because the voters of Arkansas demanded it, Evan Bayh doesn’t think the people of Indiana would cruficy him he advocated raising the top bracket rate, and Chuck Schumer isn’t looking at polling data when he chooses his position on the carried interest exemption. These people think that the voters are unlikely to punish them very much for doing things that will be richly rewarded in other ways.

By: CDNrebel

CDNrebel — Tue, 08 Jun 2010 23:58:49 +0000

My gut tells me that income tax raises don’t work because it’s too easy for the rich to get around it. I’m thinking that increasing capital gains tax on people with more than say $10m in play and reducing/eliminating it for people with less invested (maybe reduction in $1-10m range, elimination for under $1m)… that will see some real tax movement and allow the public at large to invest and see some meat on their investment and not have to chase risk so much.

By: Sensei

Sensei — Tue, 08 Jun 2010 22:01:02 +0000

False dilemma. The deficit is really a non-issue – it rises and falls cyclically, growing as the economy contracts and narrowing as the economy expands. A few months of solid GDP growth and all this debt hysteria will look pretty foolish. The size of the deficit (in absolute or relative terms) shouldn’t scare us into adopting contractionary policies: slashing spending and/or raising taxes. Don’t push a drowning man.

The real deficit we should fear is the ever-expanding intelligence deficit in the economics profession. And the fact that press and politicians seems to take their foolishness as gospel.

By: AnonymousChef

AnonymousChef — Tue, 08 Jun 2010 17:32:09 +0000

I don’t know that there really is a general middle class aversion to tax hikes on the rich. After all, they elected Obama, who openly planned to raise taxes on families making more than $250,000 a year. Rather, I think almost no one has any idea what their tax liability is, and so when they hear the inevitable attack that “X raised taxes,” they’re willing to believe their own taxes have been raised, even if they demonstrably have not been.

In the months after the stimulus, the only change to most Americans’ tax liability was the making work pay credit, which slightly reduced taxes. Yet there were plenty of polls showing that a substantial number of Americans (particularly the tea party types) believed their taxes had risen substantially.

By: Corvallis

Corvallis — Tue, 08 Jun 2010 17:30:48 +0000

Unlike most nations, Americans blame the poor and powerless for the ills of society, rather than the rich and powerful. Common American knowledge holds that poor people control the banks and oil companies, while the rich dedicate themselves to philanthropy and good works.

By: DanHess

DanHess — Tue, 08 Jun 2010 17:09:10 +0000

This much is certain. In November, the GOP will win a lot of seats in the House, either a majority or near a majority. Even without a majority, there will be enough Blue Dog Dems to erect an antitax wall.

Meanwhile, Obama will still be in the WH and the Dems will likely still have the Senate. They aren’t going to want to to cut spending.

Can anyone say California, but with a printing press?