Mitt's tax plan: Cut taxes for the rich, raise them on everyone else

[True Federalist (진정한 연방 주의자)]

The adoption of the flat tax will need massive spending cuts coupled with shifting spending decisions onto the states wherever and whenever possible.

So why do you favor Mitt who calls for massive spending increases?  A buck is a buck even when spent to buy guns instead of butter.

[Politico]

(This should not come as a surprise when one considers that nearly over half of the population does not pay any federal income taxes whatsoever)

No, that is a malicious lie.

Over half of the population does not even work, so how is it a malicious lie?

I assume over half the population makes purchases subject to sales taxes, for instance.

Fixed.

Context is lost on some folks, I guess...

[Politico]

The adoption of the flat tax will need massive spending cuts coupled with shifting spending decisions onto the states wherever and whenever possible.

So why do you favor Mitt who calls for massive spending increases?  A buck is a buck even when spent to buy guns instead of butter.

Mitt knows the difference between politics and economics. I believe that Mitt, for better or worse, is our best only hope in achieving fiscal sanity before the end of the decade. If we do not have our house in order by 2020, meaning we need drastic changes over the next four years, I cannot even imagine what type of poor sight we'll be.

[Beet]

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The spike in the deficit is mostly due to falling revenues, which was tied to the recession. The increased spending can also be attributed to the effects of the recession. The solution is to stimulate the economy and we've learned from Europe (and the Great Depression) that just cutting spending alone doesn't stimulate the economy. It can actually make the economy worse.

Besides, I know this'll probably go over your head, but the deficit is a deeply misunderstood phenomenon. I'll let Edward Harrison from Credit Writedowns explain this:

I’ll let you in on a secret: before this crisis, when I thought about the budget deficit I was like everyone else in that I paid no attention to how the government budget interacted with the private and trade sector balances. This is a big error. If you do that, you treat the government budget deficit in isolation, when the reality is that the government is an integral part of an open economy with households and businesses that trade domestically and abroad. When the government balance changes, the balances for those businesses and households change too. If you are talking about deficits then, you need to know how changes in the government balance affect the rest of the economy.

Here’s the thing: when we exchange goods and services with each other, from an accounting perspective, it’s a wash; if you buy my goods, I get money and you get goods of equivalent value. If you pay for those goods with an I.O.U., with a debt, your liability, your deficit in the year we made the transaction, is exactly equal to the asset on my balance sheet and my surplus for the year. I mean this is basic accounting, folks. There’s no hocus pocus. Any person’s, any household’s, any business’s, any group’s, any government’s debt is someone else’s asset. Any person’s, any household’s, any business’s, any group’s, any government’s deficit is someone else’s surplus. Again, it’s basic accounting.

Read the entire article, it's good.

http://www.creditwritedowns.com/2012/05/why-cant-people-understand-national-accounting.html

The point is not that "deficits don't matter", but that the government deficit of the past 3 years has actually been a way to allow the private sector (the much bigger part of the US economy) to rebuild its balance sheets by cutting its borrowing, while still supporting final demand somewhat so that private individuals and companies can continue to earn income. The 2008 crisis was brought on by catastrophic private sector balance sheets (primarily in the consumer and financial sectors) and we as Americans collectively haven't given ourselves enough credit for turning it around. As a result of this turnaround, future government deficits will be much lower than they otherwise would be. Private sector leveraging has been shown on an international basis to have major costs to public sector debt once the private sector can no longer support its levels of debt. Private sector deleveraging will have the opposite effect.

That is not to say that further deficit reduction in the long run is not needed. Obama and Boehner, both agree on this. After the election, no matter what happens, I think you'll see some moves towards fiscal consolidation.

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In 2010, the latest year for which figures are available, there were 2.133 million federal employees. In 1967, there were 2.251 million.

http://www.opm.gov/feddata/HistoricalTables/ExecutiveBranchSince1940.asp

In other words in the past nearly half century when the population went up 60% and and the economy more than tripled in size, the federal workforce has actually fallen. So no, my point doesn't only apply to state and local governments.

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How would the flat tax ensure public debt will get under control when the government can simply borrow? Your plan does nothing to ensure that people 'feel the pain' of government spending because the tax rate can simply be set at an unrealistically low rate while deficits continue to be run. If anything, it would increase the resistance to tax hikes, thus making the deficit worse.

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Another absurdity. We will not "die" (as a nation) on account of fiscal issues, no matter what happens. At the end of the day this nation's wealth is in it's people, it's capital, its laws and values, its technology, its natural resources, it's institutions, it's protection by the oceans, it's international image and brand, and the like. You know, real things. Unlike what conservatives think it does not lie in shiny objects or numbers written down on a piece of paper.

[Warren 4 Secretary of Everything]

The adoption of the flat tax will need massive spending cuts coupled with shifting spending decisions onto the states wherever and whenever possible.

So why do you favor Mitt who calls for massive spending increases?  A buck is a buck even when spent to buy guns instead of butter.

Mitt knows the difference between politics and economics. I believe that Mitt, for better or worse, is our best only hope in achieving fiscal sanity before the end of the decade. If we do not have our house in order by 2020, I cannot even imagine what type of poor sight we'll be.

Everyone knows you don't go on a strict diet when you weigh 60 pounds. The same goes for economics. You don't make massive spending cuts when you're in recession or recovery. You only do that when you're experiencing strong growth (What Reagan should have done after 1984 and what Clinton did in 1993) and it won't send us into free fall. Ironically, it's Romney who is offering the European Style economic policies, in the form of austerity.

[Politico]

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The spike in the deficit is mostly due to falling revenues, which was tied to the recession.

TARP necessitated a massive increase in borrowing. Obama's stimulus added to the pile. Obama's Obamacare can only be projected to add further to it.

Obviously we've seen a fall in overall tax collection, but the deficit is largely the result of largesse. The federal government has become morbidly obese, and needs to be turned into a lean, efficient machine that focuses upon law/order, national defense and BASIC infrastructure (e.g., interstate highways and scientific research, not funding broke public union pension plans that could not possibly be saved without turning the private sector, including private unions, into the Santa Clause of public unions).

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Yes, which can be done via tax cuts. There is no reason why a flat tax cannot end up being a net tax cut on the whole for the population if it is coupled with spending cuts on WASTE. The ensuing boost to confidence can increase real investment in real things that consumers want, not what special interests want.

Where you and I largely differ is you buy into the notion that government can stimulate the economy with spending. I realize that most of the federal government is inherently inefficient. Feeding the beast simply makes the economy more inefficient as funds, whether they are taxes or borrowed funds, are moved from the efficient private sector to the inefficient public sector.

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Cutting taxes while cutting spending on waste is a net benefit for the economy. The economy becomes more efficient, growth ensues, the pie becomes larger, etc.

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How do you think the interest on debt is going to be serviced down the road (we're not all dead in the long-run)? The only way it can be: Increased taxation on the private sector either explicitly or implicitly (i.e., seigniorage).

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There is no way to test this hypothesis, so this claim is nonsense.

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You're being intellectually dishonest. Yes, we have nearly as many workers in the federal government now as we did in 1967. But do you wish to compare the numbers to 1996, back when Bill Clinton declared the era of Big Government to be over? That number would be 1.934 million. This number went down from 1996-2001. What happened in 2001? 9/11, of course, necessitating an increase in workers in Homeland Security. The number of federal workers was relatively constant from 2002-2007. Since Obama came into office, we've seen about an 8% spike in the federal workforce. This is coming at the expense of the private sector.

Unlike some folks, the people in the private sector know what deficits mean: Tax hikes in the future. They are tampering their spending and investment accordingly in anticipation of this. We need to restore confidence by eliminating these anticipated tax hikes. We can do so with a flat tax coupled with spending decreases. It is possible to cut taxes, decrease spending, and boost confidence in the private sector enough to avert a severe recession (although a mild one would be unavoidable in the short-run). The end result, how things will look four years from now, will be a lot better than four more years of the past four years.

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If the lack of confidence in the stimulus shows anything right now it's that people do not want higher taxes later to pay for more government spending now, especially if it is going to be wasted on special interests. Apparently this notion will not sink into the heads of many people in Washington until after the Republicans dominate the election...

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No, we will not die, but we will end up like Europe if we continue with four more years of Obama. Eurosclerosis is pretty much the economic version of "dying" (Or becoming a has-been who is a shadow of their former self).

[Okay, maybe Mike Johnson is a competent parliamentarian.]

Eurosclerosis is dying? The whole tax-cuts-for-growth economic program in the current American economic environment is the equivalent of a fluffer begging an exhausted porn star, a self-absorbed Romney supporter perhaps, to get it up one last time.

[Beet]

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No it didn't. Thanks to the Obama administration's policies, what was originally projected to cost $700 billion only needed $416.1 billion disbursed, and of that, $350 billion has already been paid back, leaving only about $66 billion left outstanding. Less than one-tenth what the Bush administration thought it would cost (http://www.treasury.gov/initiatives/financial-stability/briefing-room/reports/tarp-daily-summary-report/TARP%20Cash%20Summary/Daily%20TARP%20Update%20-%2007.25.2012.pdf).

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That's not true; the nonpartisan CBO has said time and time again that Obamacare reduces the deficit. (http://www.tnr.com/blog/plank/105327/cbo-obamacare-deficit-medicaid-expansion-cost-revenue-exchange). Repealing it would inrease the deficit (http://www.rawstory.com/rs/2012/07/24/cbo-repealing-obamacare-would-increase-deficit-by-109-billion/). These are the facts, not bluster.

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What percentage of the federal budget is spent on public union pension plans? You do know that public union pension plans are funded by states, right? The federal government has nothing to do with it.

The deficit is due to Bush's policies and the bubble that he oversaw.



And you want to put the GOP back in power with the same ideas as under Bush?

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The Credit Writedowns post went over your head, just as I knew it would. If it hadn't you would have understood that there is no net effect from deficit spending on an accounting basis. If the government borrows from the private sector and spends it, the money goes right back out into the private sector and is earned by the private sector as income. Additionally, the bonds that the government gave in exchange for the funds it borrowed become an asset on the private sector's balance sheet. The deficit is essentially allowing the private sector to earn income while still paying down debt. It stimulates the economy be propping up final demand, thus keeping more people in jobs. It doesn't matter if you think a worker is inefficient, a worker who is working is always more efficient than a person who is not working. It also stimulates demand through the multiplier effect.

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Who is against cutting "waste"? Your points are nothing more than hollow platitudes. What, exactly do you consider to be waste? Cutting taxes will reduce revenue and increase the deficit. If cutting taxes were the path to prosperity, the massive tax cuts of the Bush years should have led to prosperity. Instead, they led to 2008. Besides, it's not as if Obama hasn't cut taxes: Americans paid the lowest tax rates in 2009 since 1950 (http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm). So what was it? Either low taxes lead to prosperity, in which case the low taxes that we currently have are the right path, or the economy currently is still struggling, and low taxes weren't he panacea they are made out to be by the GOP, despite trying them again and again. Bill Clinton, by the way, raised taxes in 1993. The Republicans predicted it would lead to a recession. They were wrong. To top it off, Obama's plan would leave taxes for the vast majority of Americans lower than Romney's plan, so even if your statements are accepted on face, they make no sense as an argument for Romney.

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The interest on the debt can be easily serviced. Interest rates right now are at 60-year lows, some even negative, which means that the private sector is paying the government to hold onto its money. And who do you think would be collecting the interest, if interest rates went back up? The private sector. So it would be funded with taxes on the private sector, and what it is, is payment back to the private sector. Net effect zero.

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Maybe not, but there is a huge amount of evidence from many historical incidents across many countries that excessive levels of private debt get transferred onto governments, whereas countries countries that are able to run government surpluses do so at times when the private sector balance sheets are healthy enough to enable it to create final demand by leveraging itself. This then contributes to higher government revenues.

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That's not dishonest; those are the facts. The long term trend in absolute size of the federal workforce is relatively stable, and as a percentage of the population it is falling. If you made a chart with all the data points there, you would see the same thing. I deliberately excluded World War II because the war effect was so dominant. An 8% increase over 16 years is still not a lot. The US population has increased at a faster rate. So even by your own standards, the federal workforce as a percentage of the population was lower in wartime, post-9/11 year of 2010, than in 1996, when Bill Clinton declared the era of Big Government to be over.

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Forgive me if this sounds arrogant, but attempting to engage you reminds one of an Aesop's Fable:

"The Owl is a very wise bird; and once, long ago, when the first oak sprouted in the forest, she called all the other Birds together and said to them, "You see this tiny tree? If you take my advice, you will destroy it now when it is small: for when it grows big, the mistletoe will appear upon it, from which birdlime will be prepared for your destruction." Again, when the first flax was sown, she said to them, "Go and eat up that seed, for it is the seed of the flax, out of which men will one day make nets to catch you." Once more, when she saw the first archer, she warned the Birds that he was their deadly enemy, who would wing his arrows with their own feathers and shoot them. But they took no notice of what she said: in fact, they thought she was rather mad, and laughed at her. When, however, everything turned out as she had foretold, they changed their minds and conceived a great respect for her wisdom. Hence, whenever she appears, the Birds attend upon her in the hope of hearing something that may be for their good. She, however, gives them advice no longer, but sits moping and pondering on the folly of her kind."

And with that, it being 3:39 AM here, and I being a hardworking, full time professional, I must keep my promise...

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You know nothing about the situation in Europe. The root of that problem is countries that don't control their own currencies, it has nothing to do with any of the debates in the US, except that it shows that austerity doesn't work.

[Politico]

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No it didn't. Thanks to the Obama administration's policies, what was originally projected to cost $700 billion only needed $416.1 billion disbursed, and of that, $350 billion has already been paid back, leaving only about $66 billion left outstanding. Less than one-tenth what the Bush administration thought it would cost (http://www.treasury.gov/initiatives/financial-stability/briefing-room/reports/tarp-daily-summary-report/TARP%20Cash%20Summary/Daily%20TARP%20Update%20-%2007.25.2012.pdf).

You'll have to excuse me for using TARP as a catch-all term for not just the assistance given to the banks, but the takeover of Fannie Mae and Freddie Mac along with the bailout of AIG. All of these events happened in late 2008 and they caused a massive spike in the deficit at the time (I believe the deficit doubled from 2007 over 2008, and much of it was increased borrowing for these events).

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The CBO can tell me that the sky is red, but that does not make it so. You cannot add an entitlement for poor people and expect it to lead to lower spending, thereby reducing the deficit. That is like telling a fat person that eating pizza everyday for the rest of their life will decrease their intake of unhealthy fats.

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Have you ever stopped and wondered why Obama's federal stimulus funds did not stimulate the economy to the degree Keynesian theory would anticipate? I'll give you a hint: Special interests. Go do some digging, my friend. You may not like what you uncover.

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The deficit has been over $1 trillion for each and every single one of Obama's years in office. I was not a fan of Bush, but the deficits on his watch were sustainable; these deficits are not. Obama has no plan to address them other than massive tax hikes. Obama ought to owe up to the fact that his plan is the same plan that Walter Mondale had for America: Massive tax hikes.

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That post is not science. It's finance masquerading as economics, and it's dead wrong.

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If the government borrows from the private sector and transfers it to various states so they can find clever ways to prop up public unions and pension funds that made promises that cannot be kept, those are real resources that could have been put to use in a productive way creating tangible goods/services that consumers want that were instead wasted on special interests. This is precisely what happened to a large degree, and it's why the stimulus did not stimulate the economy as predicted by Keynesian theory.

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Public unions and their servants in the Democratic Party.

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Not if it is coupled with spending cuts, and causes a real multiplier effect in the real economy.

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If you want to see the difference between increases in government spending versus tax cuts as a way of stimulating the economy and all that entails, compare the 1970s to the 1980s. The differences could not be more stark. We are better off today than we would otherwise be because of the adoption of tax cuts as a better, more efficient way of stimulating the economy. Tax cuts return income to the efficient private sector to spend as they see fit. Economic decisions and power are dispersed to millions of consumers/producers, rather than being made out of a centralized Washington hierarchy that cannot possibly know how to efficiently allocate resources given the immense complexity of the demands of the aforementioned millions of consumers/producers.

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Tax cuts have nothing to do with 2008. 2008 would not have been a big problem if commercial banking and investment banking were separate as was the case before Clinton repealed Glass-Steagall. Allowing investment banks to go belly up is not a threat to the money supply; allowing banks that engage in both commercial/investment banking to fail would have led to a massive decline in the money supply for obvious reasons. That's why what's done was done.

If there is another financial crisis, separation of commercial banking and investment banking will inevitably be restored. The public will demand it, both from the left and the right. The banks know this, so I would say they will likely be more prudent in the future and a repeat of 2008 is unlikely. The problem is that in 2008 they knew they could be reckless and still be bailed out, so we should not have been surprised when they did exactly that.

On a related note, a big problem was the government implicitly forcing banks to give out loans to people who could not possibly payback the loans. Government programs and the poor decision to separate commercial banking and investment banking are what ultimately led to 2008, not Bush's tax cuts.

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Low taxes coupled with unsustainable deficits causes most everybody to anticipate massive tax hikes down the road. Confidence and spending is lowered. We need low taxes and fiscally responsible spending.

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Bill Clinton is an infinitely better president than Barack Obama, but he had the good fortune of being president during the emergence of the Internet and all that entailed. Policy had little to do with the good times of the 1990s. The tax increase of 1993 had absolutely nothing to do with it. Getting spending under control, as he did in 1995-onward, did help.

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The plans submitted by both are meaningless. Everybody knows that Obama has a strong desire to raise taxes if he gets re-elected (he will not cut spending just like the Republicans will not budge on no new taxes); if he cannot do it with tax hikes because of a Republican Congress, he'll put in a new Chairman of the Fed who will do it via seigniorage.

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You've definitely been drinking the Kool-Aid hardcore the past few months, I see. The interest rates will only go back up once inflation goes back up. If you tax the interest earned before inflation is taken into account, which is precisely the case, you're basically transferring real value from the efficient private sector (which produces the real goods/services that consumers choose freely) to the bloated bureaucracies that produce/consume goods/services that taxpayers are forced to pay for via taxes. To a large degree, we transform market diversity into government conformity. I thought we were discussing economics, not finance/accounting.

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You're conveniently ignoring the fact that federal workers earn more than their private sector counterparts who do equivalent work. This was not the case decades ago when the government was seen as the employer of last resort. In other words, the secretary who pays taxes in the private sector is seeing a portion of their income (and therefore some of the fruits of their labor) transferred to a secretary in the public sector who gets paid far more to do equivalent work. Do you think that is fair, or will lead to efficient allocation of resources?

When Bill Clinton declared the era of Big Government over, he actually cut the federal workforce and confidence in the economy increased afterward. There is no reason to believe that similar cuts today would not have the same effect on confidence moving forward.

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It's actually an 8% increase over four years.

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Sorry, but it's our turn now...

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The root of that problem is the belief in excessive government intervention.

[Beet]

Why am I still awake. Why O Why.

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The link I pasted included AIG. The Obama Treasury has been regularly earning back the AIG money (http://www.bloomberg.com/news/2012-03-15/aig-said-to-boost-u-s-tarp-recovery-to-80-with-payment.html) that the Bush Treasury spent.

Yes the government lost money on the takeover of Fannie Mae and Freddie Mac, but the losses in the mortgages giants were directly tied to the overinflated value of housing in the mid-2000s, at the height of the Bush Presidency, aided and abetted by deregulation that he accelerated, and a conservative Republican Fed Chairman who looked the other way. In 2004 Bush campaigned for reelection on the housing bubble, bragging about the "homeownership rate" and benefitting from the temporary construction jobs created by the bubble. To use those losses as a reason to reward the same party that caused the calamity selling the same ideas that caused the calamity would be blaming the victim- not as bad as impriosning a rape victim for being raped, as they do in some areas of Pakistan, but the same principle. It would be heinous.

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There are cuts to Medicare, as well as increased taxes in Obamacare that more than offset the entitlement for poor people. Hence, it leads to a lower deficit. If you can't understand that you are really stupid. The CBO's projection is actually conservative, as it only covers the years to 2022. Once you go past that, the deficit reduction from Obamacare is even greater. Also, the CBO actually has a history of overestimating entitlement costs (http://insuremekevin.com/2012/05/10/prescription-drug-plan-cost-overestimated-by-cbo-healthcare-reform-also/) so there's a chance that they're actually being too harsh on Obamacare.

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A stimulus that was 28 percent tax cuts and cut taxes overall for 95 percent of Americans? Keynesian theory says nothing about where the money is spent; in fact Keynes himself once drew the analogy that the economy would be better off if the government hired people to dig useless holes, because at least it would get money flowing. I've already posted a list of nine studies of whether the stimulus worked (http://www.washingtonpost.com/blogs/ezra-klein/post/did-the-stimulus-work-a-review-of-the-nine-best-studies-on-the-subject/2011/08/16/gIQAThbibJ_blog.html) and most of them say that it did have a large positive impact. If anything, the stimulus was too small. A bigger stimulus would have helped even more.

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Go back and read what I wrote about deficits up above.

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No, it's simple accounting, the same kind you can find in any freshman-level 101 economics textbook. National accounts are the F = MA of economics. In any case, nowhere have you shown that you even understand what was being presented, let alone begin to formulate a response to it.

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LOL. Public unions have taken a massive hit in this country in the past few years. Have you ever heard of Wisconsin? In Wisconsin, it wasn't even the benefits that the unions were attempting to defend, it was merely their right to negotiate, and they still lost. Even Andrew Cuomo has cut the public unions' benefits. The massive losses in state and local government jobs compared to all the previous postwar recoveries show that state and local public workers have been hit hard. And before that, Republicans as well as Democrats fed them richly.

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And the GOP opposes even the modest regulation that was passed under Dodd-Frank.

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That is bullsh**t-- read the Financial Crisis Inquiry Report. The vast majority of problem loans came during the private sector subprime bubble of 2003-07, when mortgage shots like Ownit, Golden West, and Countrywide were shovelling bad loans to Wall Street with assembly-line efficiency, since they thought they could offload the risk and Wall Street thought it could offload the risk through securitization.

[Beet]

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Well low taxes and unsustainable deficits is exactly what you'd get under Romney, who wants to cut taxes for the rich and increase spending.

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Without the tax increase of 1993, the budget would have never been balanced. The Internet didn't only grow during Clinton, it also grew during Bush. Bush also had the housing bubble going for him. He also had massive tax cuts, supposedly, going for him. Two rounds of them, in fact. Yet his record was worse than Clinton's.

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LOL. He already had a chance to put in a new Chairman of the Fed and he reappointed the Republican, Ben Bernanke. Romney would do the same. There is no difference between the two on who they'd put in as Fed Chairman. And it's hard to argue Obama has had a raging hard-on for raising taxes when he cut taxes in 2009 and again in 2010 during the lame duck session, and wants to extend the vast majority of the Bush tax cuts.

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Now you're confusing real interest rates with nominal interest rates. I'm talking about real interest rates. But including inflation as a variable changes nothing, b/c interest rates are judged on a real basis. If you tax the interest that is earned on government debt, and then use that tax money by spending it in the real economy, the money still goes right out back to the private sector. The private sector still earns it as income. Nothing in my point is changed. Ironically, the only way that the government could reduce the balance sheet of the private sector, is if it ran a budget surplus. In that scenario, the government would be taxing the private sector, but not buying from the private sector in the same quantity, thus it would be taking from the private sector on an accounting basis. Economics is based on accounting; you don't have economics without numbers, so there's a distinction without a difference in this case.

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This is unsupported. FactCheck.org, which critically analyzed and debunked the claims from both sides, concludes that "In reality, the question of whether or not federal employees are overpaid doesn’t have a simple answer, according to Charles Fay, a professor at Rutgers University and former Federal Salary Council member. Those in entry-level jobs in the government might earn more than entry-level jobs in private practice, he notes, while the opposite is true for those in management and specialized fields requiring years of experience. "The higher you go, the more they’re underpaid," Fay says. "The lower they go, the more they’re overpaid." (http://www.politifact.com/truth-o-meter/statements/2010/feb/10/jon-stewart/stewart-claims-stimulus-bill-one-third-tax-cuts/)

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There is no reason to believe that it would. Clinton's cuts to the federal workforce were miniscule, and they're a miniscule part of the economy. And the economy was already recoverying strongly in 1993 and 1994, before the GOP took over the House, and before Clinton's shift of message to a more economically centrist approach. In any case, Obama has been to the right of Clinton when it comes to tax rates.

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To still a lower level than Clinton had in 1996, once all federal government workers are included (http://www.opm.gov/feddata/historicaltables/totalgovernmentsince1962.asp). And as a percentage of the total population, an even lower number than that.

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First of all, nice dishonesty, posting a chart with the last data point having unemployment at 9.1% when the most recently available data shows it at 8.3%. But I've already addressed that chart in a previous post. See here.

And yes, over 8% unemployment is not good. In the past 80 years only one President has been reelected with over 8% unemployment (FDR). But the main difference between 1936 and the other economic downturns that doomed incumbent parties in 1980, 1992 and 2008 is that in 1980, the economy was worse than in 1979, in 1992 it was worse than 1991, and in 2008 it was worse than 2007. Wheres in 1936, it was better than in 1935 and had been improving since FDR's first year in office. Similarly the economy this year is better than last year and it has been improving, albeit more slowly, since 2009. Hence Obama still has a chance, since we're heading in the right direction. People don't want to go back to the failed policies that got us here in the first place.

[anvi]

Hey Beet, whoever the Obama campaign has that is handling their policy and economic messaging, they should fire that person and hire you!  Well done.

[SUSAN CRUSHBONE]

Hey Beet, whoever the Obama campaign has that is handling their policy and economic messaging, they should fire that person and hire you!  Well done.

Too complicated for the average voter.
No offense is intended, of course.

[Vosem]

My support for the flat tax is really hypothetical -- the fair policy that we won't have for various reasons but would in a perfect world. (Abolishing the NHS is a UK-politics analogue). The comment was meant to express that depending on how its done, Romney's plan might make taxation fairer, not less fair, and that I would support Romney anyway.

[SUSAN CRUSHBONE]

http://www.politico.com/blogs/burns-haberman/2012/08/obama-its-romneyhood-131270.html

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Romney's campaign has lost what little connection to reality it still had.

[Politico]

Beet, I cannot be bothered wasting my time responding to each point in your post. You're grasping at straws by defending $1+ trillion deficits. Numerous businesses not being able to adequately borrow because the federal government is borrowing too much is not a good thing. Go ask Bob Rubin and Bill Clinton. Not every business needs to deleverage. The government cannot spend borrowed funds better than America's entrepreneurs, the people who have created so many goods/services that have enhanced our standard of living.  Yes, the government can take from the private sector in the form of taxes, turn around and re-spend it in the private sector, but that does not necessarily lead to an efficient allocation of resources. Take a look at Solyndra (and god knows what else; the Romney Administration will uncover all of the boondoggles soon enough).

Economics is not about numbers on ledgers; it's about resource allocation in a world of scarcity. Government intervention alters incentives, creates negative (sometimes positive) spillover effects, and produces deadweight loss. With Obama's reliance on overwhelming levels of spending and excessive regulation, his version of government has created a toxic environment for the private sector. Businesses, who create the vast majority of jobs in America (always have and always will), are overwhelmed by uncertainty and malaise. Good intentions do not make up for poor results and unintended consequences. The problem with the $820 billion deficit is not that it was too small; it's that it was not allocated properly. We would have been better off just dumping $820 billion into the coffers of scientific research. Seriously. I mean, doing so surely would have produced something more remarkable than this failure of a stimulus.

Everybody on here should refer to Taylor's analysis of the stimulus. Here is a mainstream report:

http://online.wsj.com/article/SB10001424052970204138204576600630985154132.html

[Beet]

Nor will I respond to your post point by point.

I will make a few minor points- first of all, what you linked to was not a study, not really even a "mainstream report", as you put it- it was an opinion piece. Although the WSJ is certainly reputable and Taylor is reputable, the piece itself consisted only of a series of stylistic representations of historical events with no quantitative founding whatsoever. The heavily misleading style of the article can be found in the fact that no mention is made that monetary policy was the primary driver of economic shifts 1980-83, or that GDP and jobs growth was very strong throughout 1975-79. These omissions are enough to discredit the article because the authors do know better, but they deliberately misrepresent.

Secondly regarding the borrowing costs of US businesses- what are they? As usual you make assertions that are the direct opposite of the actual truth, which you seem to think you can get away with on account of not actually citing the relevant facts:



There are your corporate borrowing rates. Collapsing.

Rather than respond to the rest of your points I will simply note that the central thrust of your argument, that 'Obama is hurting business' argument just won't fly. Why? Let's see- The value of major American public companies has surged since March 2009. The NYSE Composite is 73% higher today than when the stimulus passed. Other major indices have doubled. The Dow is up 103% in just three years. The S&P is up 110%. The Nasdaq, which represents the leading technology edge of corporate America, is up 137%. These are not my judgments or the result of anything you or I, or Obama or Romney, say; they are the judgments of the free market, of millions of people putting their trillions of dollars where their mouths would be if they spoke what they thought.

And they would be right, for the profits of US companies are in fact surging:



The economy is not a monolith. It has various parts and components. It baffles me that you- and Romney, are focusing on the one are of 'the economy' where things are going the most smoothly. One can argue that Obama hasn't created enough jobs. One can argue that income growth hasn't been fast enough. One can argue that people are struggling. One can argue the deficit. The one thing one cannot argue with a straight face is the condition of American business.

[Beet]

Hey Beet, whoever the Obama campaign has that is handling their policy and economic messaging, they should fire that person and hire you!  Well done.

Thank you anvi. Yes, it may be too complicated, but surely there is room for messaging at different levels. Anyway - the points above are not all that complicated.

[Fuzzybigfoot]

Hey Beet, whoever the Obama campaign has that is handling their policy and economic messaging, they should fire that person and hire you!  Well done.

^^^

[Beet]

I will caveat my position to say that there's a big difference between large business and small businesses. Small businesses are much like the rest of the economy - they're struggling much more than large ones. Of course, they also don't compete with the government to borrow.

[mondale84]

Congrats, Beet. You have officially roasted Politico with a thoughtful and thorough explanation of the current macroeconomic environment and why we are in the sour spot we're in. He will only respond with his FAUX News talking points and platitudes. Hopefully your roasting will now encourage him to go back into hiding.

[Torie]

Beet, to pick at one of your points at random, unfortunately rank is a pyramid, so there are far more "overpaid" folks at the low end, than underpaid folks at the high end. And if the higher end folks are underpaid, why don't they quit, and get a job commensurate with the market for their skill set?  Maybe there are reasons they choose to work for less than they are worth, as it were. In which event, they don't need to be paid more, no?

Granted, state and local government employees is where the real abuse is, more than the Feds with the GS system, which does keep things from spinning totally out of control.  Plus federal employees in my experience do tend to be of higher quality in my experience than the state and local government all too often slugs - particularly at the higher end, where some of them are excellent.

And aside from pensions, not that much money really is involved relatively speaking. Which gets back to entitlements. Sigh.

[○∙◄☻¥tπ[╪AV┼cVê└]

Beet, to pick at one of your points at random, unfortunately rank is a pyramid, so there are far more "overpaid" folks at the low end, than underpaid folks at the high end. And if the higher end folks are underpaid, why don't they quit, and get a job commensurate with the market for their skill set?  Maybe there are reasons they choose to work for less than they are worth, as it were. In which event, they don't need to be paid more, no?

Granted, state and local government employees is where the real abuse is, more than the Feds with the GS system, which does keep things from spinning totally out of control.  Plus federal employees in my experience do tend to be of higher quality in my experience than the state and local government all too often slugs - particularly at the higher end, where some of them are excellent. That

And aside from pensions, not that much money really is involved relatively speaking. Which gets back to entitlements. Sigh.

No one earns the $50,000+ a day that people like Mitt Romney make for not working. I'll agree that some government workers have some pretty nice pensions, but compared to Mitt Romney, they are nothing. Even that $500,000 a year from that corrupt guy from Vernon, CA.

[pbrower2a]

... grasping at straws by defending $1+ trillion deficits.

Inevitability is its own defense. When the corrupt boom of the Double-Zero Decade imploded, much of what Americans thought were desirable assets were no longer worthy of being considered assets. The corrupt boom committed capital to investments that eventually failed.

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Only rarely has capital been so cheap as it is now. People are still scared that there might be another economic meltdown that leads to a realization of a Great Depression as nasty as that of the 1930s. People are certainly not building single-family houses when so many are available for less than the cost of new construction due to foreclosures.

As John Maynard Keynes put it in the last Depression, we are in a liquidity trap. 

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You describe a situation out of the 1950s in which business was investing heavily in plant and equipment and in marketing efforts. People were spending heavily on big-ticket items (cars, appliances, furniture, televisions) that were costly by the standard of the time. Workers could prosper because what they worked to make in the factory was scarce... and because their toil was necessary. Today labor and manufactured goods are cheap.

By the technological standards of the 1950s we have solved the question of scarcity by reducing the material cost of almost everything tangible. The $20 calculator can calculate far faster than a mainframe computer of 1952 can, and without the need of a high-paid programmer and a bunch of maintenance people, and that is before I even discuss what your computer can do. You can get a 32" screen TV for about $250  that offers a bigger and better picture than the 25" monitor that cost $600 in 1980... and the new one has a remote control and is cable-ready. To be sure, the newer TV has less material in it; you can hang it on your wall almost like a painting. Add to that, you don't need a projector and screen to watch a roll of celluloid film off a reel.

We have resolved the problem of scarcity but we have neglected the value of humanity. People who get treated badly will always be unhappy. Right-wing ideologies that force a race to the bottom will create suffering that no economic growth can mitigate.     

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Which is not to say that government can always avoid boondoggles in direct investments and in political sponsorship. If you thought Solyndra was bad (this was a technological failure), then recall Enron Corporation which had the sponsorship of right-wing American politicians (including George Worthless Bush). There have been some spectacular Roads to Nowhere (Interstate 180 in Illinois... built to facilitate the distribution of steel from a mill that since closed) and unnecessary airports. But there have also been some very good investments.

Government and business can both make bad investments -- and, as with the real-estate fraud of the last decade, can waltz together off an economic cliff.   

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Numbers on ledgers is, of course, accounting and not economics. But add the ledgers and you get much of the economic data. When scarcity disappears, then we need ask how we allocate the rewards. If the abolition of scarcity leads to the debasement of humanity, then something is very wrong with the technologies that abolish the scarcity or at least the bureaucratic choices of tycoons and executives.   

So how do we adjust to a world in which scarcity is greatly abated? Maybe we can invest in people. Maybe we can get people to go back to school to learn the humanities that offer an alternative to the reptilian lives that so many Americans live (sex&drugs&rock-n-roll... and material indulgence, comfort, and bureaucratic power).

Numbers on ledgers is, of course, accounting and not economics. But add the ledgers and you get much of the economic data.

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At least give credit to the 112th Tea Party Congress for stopping that.

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Not if we have a Socialist revolution that overthrows a capitalist order that creates indulgence only for a few and suffering for the vast majority. The first step to a Marxist regime is a corrupt, brutal, hierarchical, inequitable order that fails to create mass happiness despite its ability to meet human needs.   

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Much of the deficit results from wars for profit in Iraq and Afghanistan... and tax cuts targeted at the super-rich. Neither has created prosperity for any but a few well-connected people. I can think of  better investments. Mass transit. Retraining of displaced workers. Replacement of "Blood Alley" stretches of highway. Basic science -- of course. 

[Oldiesfreak1854]

Not true.  There is no tax increase on anyone other than the "rich" in his plan.  Where did that study come from anyway?  Romney's plan calls for making the Bush-era rates permanent and moving toward a flat tax.