But the best way to get rid of the deficit is to grow the economy to make the debt burden smaller relative to the economy. That, together with some mild inflation is what allowed us to repay the massive debt after World War II. If growing the economy was as simple as "cutting taxes on job creators", then I'd support Romney too. But trickle down economics doesn't really work. As for sticking people who have had a productive year - we're talking about over $250K a year here. Statistics show that a high majority of people earning incomes of that amount don't see their incomes vary very highly. Unless you're concerned about the plight of lottery winners, I suppose. I completely agree with that, and I'm not proposing utilizing Keynes' joke of burying gold and then paying people to dig it up. But that money has to come from somewhere. I'm OK paying more taxes to pay for highway construction. Any large organization will have waste. That's true of private enterprise as well. Besides, when people talk about the government building roads, it's not as if the government itself does it - it pays contractors. What difference does that make though? I'm genuinely not sure what you're driving at. I'm not proposing trying Norwegian style economics here. But my real point is that simply saying "there's more government" doesn't really mean anything. Government grows as population grows, and its growth hasn't been nearly as large as people claim. Beyond that, the programs we're concerned about aren't actually going bankrupt any time soon. Now's the time to invest in a growing economy, not slash spending to prepare for a future crisis. We can always cut benefits to elderly people if we can't pay for it tomorrow. Why cut them now instead of trying to tackle the real issue - health care costs? Also, we're very far away from French or Italian style governance. But Spain? Spain's problem isn't remotely government spending, it was private debt. No, I understand that - I merely brought up Obama because of all the claims that he's a socialist (which is silly). As for Romney, I completely agree he makes some valid points, but then again, if you listen to him speak long enough, he's bound to say something that everyone likes.* There is obviously a difference between what Obama proposes and what an ideologist -albeigh an intelligent one- like ratdog or a dogmatic liberal like superdave are arguing in this thread. I am aware that Obama says certain things during the political season to get support from the left, but he's proven to me at times during his first term to be much more subtle and thoughtful than an ideologue when he had to make important economic decisions.[/quote] Obama's very pragmatic, of that there's no question. Which is exactly why it annoys superdave so much. *That's a joke, but actually it's literally true.
Not sure how to take this. I dig technocrats. Obama is a hard core technocrat. But what pisses me off about Obama is that he has the background (community organizer) and the chops (great speechmaker) to do more than be a mere left of center technocrat. That should be his core, sure, but I would be much happier if an element of his presidency was advocacy for a coherent vision. Just to name one thing...the current elite consensus is that the upper bound for inflation should be 2%. That's batshit insane in my view (and I think in yours, too.) And while not going the Full Yglesias, it's a pretty big hindrance to the progressive project as a whole. Obama has done less than nothing to address this.
I agree that trickle down doesn't work in the simplistic way supply-siders claim it does, but I do think that for government to go too hard on high achievers in order to pay for social programs can have a negative impact on the economy. That can vary from place to place. I realize Argentina is a very extreme example, but you can see the effect to some extent in more "normal" economies like France for example. It would certainly be much better if the argument about how and how much to tax was discussed among people who understand economics, conservatives like me, liberals like you, even ratdog, and using as a framework common sense points of views like those found in The Economist's editorial pages. But that's not always possible in the real world of politics, and as long as there has to be a balance, if in the US the myopic libertarian extremists serve as a counterweight to the superdaves of the world, then at least I'm thankful for that. Perhaps that's true, I wish I had more time to look at statistics. My opinion is shaped mostly by experience, by what I see in the world I live in, and I suppose it may be true that the small business segment of the import-export industry in which I've been working for the past 20 years may be an anomaly that influences my way of thinking. But somebody has to stick up for people like me, and I would think that even beyond my own little business environment you'd also find many small business owners, free-lancers and commission based salespeople in many industries who find themselves with a similar predicament in which they provide important services, operate at high risk, and their income varies wildly from year to year with no guarantees. I'd hate to see all these people get swept up because they don't figure greatly in the overall statistics. Yeah, so am I. And I also think that we need to start making some sacrifices in order to pay down the deficit. I just think that we need to study the best way to collect taxes that maximizes not just the revenue to the government but also the overall positive effect on the private sector. That's the challenge, and the debate that we should be having, instead of playing to fears and class hatred to try to get more money. Yes. I have a problem with organizations who have too much size and power, whether they are government, business, or non-profit (such as religious organizations). I think in terms of the private sector, when we get to the point in which government must step in to save companies that are too big - whether it's a car company or a financial institution or even a large retailer like Wall-mart - in order to save the economy, then probably something should be done to ensure that those companies don't get to be that big. That's another challenge. And I agree with the saving of those companies, it was the only sane solution given the circumstances. I just think there has to be a way to make sure that they don't get into that situation in the first place. But how to do it, what kind of regulations to put in place, is a difficult problem even without factoring the politics of it. But in philosophical terms, I'm for limiting the power of big government, big business, big labor, and any other big powerful organization. That when you have a very wealthy nation you can afford to offer generous social programs and it won't have as much of an impact in the economy. An extreme example would be Saudi Arabia. As long as oil is in high demand and prices are high, they can afford to have generous welfare and in their case they can even do it without taxing the citizens. As it applies to the US of the 50s and 70s, my point is that after WWII with so much wealth it was possible to create "the great society" and raise taxes and still have a relatively vibrant economy. In today's US, I don't think we'd see the same positive results. About Scandinavia, let me just say that some of my points are not directed specifically at you. Some posters here and many people I know in real life do seem to want to always use them as an example of how things ought to be. As far as Spain, I was giving general examples of countries with higher taxation and in general bigger government than the US, and that are more "respectable" in some circles than Argentina. Obviously they each have different challenges. In some ways countries are a bit like businesses, and some inherently work better than others and can do more for their citizens. Maybe Apple can be more generous with its employees than Hewlett Packard, and maybe Germany can afford to be more generous with its citizens than Italy, because it's simply a better ran place, or one with a better corporate culture. But each country like each business has to find the right balance based on its own reality. For an Argentine to demand the benefits offered by Sweden is like one of my employees coming to me and demanding the benefits that his friend who works at Google is getting. Yeah. I get that Romney will say anything to get elected. I'm not a big fan of his, although he was better than his opponents during primary season, once Huntsman proved to be an unrealistic alternative. Based on his time as governor, I think he'd be a pragmatic president sort of like Clinton, and he'd probably rule by polls to a large extent in an attempt to remain popular. But that's just an impression I get, certainly there is risk in thinking of him in that way. Obama is probably a lesser risk in that we already know he is a pragmatist. The question for me is whether I'd be willing to take a higher risk to pick the guy who I think is pragmatic and who's a bit closer to me ideologically, and then what if he turns out to be a puppet of some bad people, like W Bush was to some extent, or else go with the safe guy who I know is his own man and pragmatic but maybe philosophically a bit farther from me. But what factors into my decision is also that I don't think Romney and Obama are as far apart as they claim to be -other than maybe on some social issues that may manifest themselves primarily in their Supreme Court picks- and that is something that has me leaning towards the safer pick. Not that it matters. I vote in California.
I don't agree with everything in this post, but the thoughtfulness of the reply is the sort of thing that makes this forum one of the best places on the webz.
True, but I think part of the problem today stems from the rather unequal tug of war going on in the US (much like it's unequal in France in the other direction). The Democrats are advocating for a return to the rates under Clinton, which were hardly punitive, whereas the Republicans, while claiming to view deficit borrowing as an unmitigated enemy, want to cut taxes an additional 20% across the board. This seems especially odd given that Americans are actually taxed less today than at any time in the last 60 years (if I recall correctly). I personally agree that raising tax rates to 75% is extremely counterproductive, even on incomes beyond $1,000,000, which is the reason I find Montebourg and his ilk in France so ludicrous. But the discussion we're having isn't between punitive tax rates and low tax rates, it's between reasonable tax rates and ridiculously low tax rates - Romney has proposed reducing the capital gains tax rate to zero(!!). So while I agree - balance is quite good, and it is healthy to have a party that values liberty over redistribution within a reasonable framework (i.e., northeast Republicans rather than "tear down the state" libertarians), we simply don't have that right now. The current generation of Democrats are basically old school Republicans on economic policy; Clinton shrank welfare, Obama has slowed the rate of federal hiring, and during his administration the amount of state employees has shrunk pretty dramatically. Given that we're essentially having a debate between a party of economic moderates (who, for instance, adopted a corporate friendly health care plan developed by the Heritage Foundation) and one of economic zealots, the balance you want simply isn't there. Balance has to be real - it can't simply exist in a vacuum because both sides have an idea. One side can't reasonably hold Grover Norquist's views and provide meaningful opposition. The closest analog to Grover is probably Bernie Saunders, who calls himself a socialist, but if Stalin called Mao a "margarine socialist", then Bernie's clearly a "I can't believe it's not butter" socialist. In short, in order for balance to be useful it has to be a real balance rather than one created by one party ratcheting ever further to an unreasonable extreme borne out of a free market ideology that doesn't have any rational justification beyond "government bad". I suspect that's true, but I also suspect even your experience doesn't result in wildly divergent swings. For instance, is it your experience that people swing wildly from a personal income of, say, $80,000 to one of $500,000? (Remember, this discussion is only meaningful once you get above $250,000.) While that is certainly possible, it's not a particularly effective basis for tax policy. All tax policy will, to an extent, hurt someone at the expense of someone else. But there are no perfect laws. A simple answer would be to have a rolling period of years on which taxes are based for businesses - I have no problem with this approach but don't know enough about business taxes to speak to it meaningfully. But I don't think it's "class hatred" to suggest that people who make over $250,000 a year can pay more in taxes. They have most of the money! If not them, then who? Besides, studies consistently show that increases in marginal tax rates have no real bearing on the willingness of people to work. The simple reason is that the majority of people paying those taxes are on salary. I, for instance, couldn't work less even if I wanted to. Neither can anyone else on salary. Besides which, even the math is silly. If we raised taxes by, say, 5% on income above $250,000, a person making $1 million in salary would pay an extra $37,500 in taxes. That's not nothing, but do you really think he's going to start working less because of $37K when he's making a million? It's very, very unlikely. Beyond which, again, almost no one has the ability to simply proportionally lower their income to the amount of time they work. Jobs simply aren't flexed like that. That's really another topic of debate, but I'd argue that modern life creates these institutions as a necessity. Given the size of our capital markets and their interconnectivity having 100 small banks rather than 10 huge banks simply wouldn't work. The real solution would be to decrease their leverage, which has been my position from the beginning. Make them more like utilities. That's a longer discussion, but I don't think that's really at issue in this election anyway. The more conservative wing of the Republican Congress isn't interested in limiting power, it's more interested in keeping the government so small they can "strangle it in the bathtub", in the words of Norquist. But I don't understand what that has to do with the wealthy nation's ability to do this vis a vis the wealth of other nations. Besides which, we taxed the hell out of Americans in the 50s and 60s, which didn't stop growth. While higher taxes don't cause growth (obviously), there's really no indication that they hinder it either (so long as they're not punitive). Agreed. Well, yes, obviously - that's basically the Greek problem. But I don't think this really applies to the US today. Other than health care (which most Americans already do have), what is it that Americans are asking for from the government? In Europe the citizenry often makes unrealistic demands. Here, rather bizarrely, the argument is that the government should give us less despite the havoc that would wreak on the economy. I don't think Clinton and Romney are comparable. Clinton, whatever his faults, had reasonably liberal principles allied to a pursuit of power. After all, he was the first President since Truman to push for universal health care and generally promoted liberal policies without mucking about too much with economics. Romney's principles are almost entirely corporatist. One of the few moments in his campaign that felt genuine was his "corporations are people" retort. It's when he speaks about business that he's particularly energized, and I have no doubt he believes, for instance, that lowering capital gains taxes to zero would be good for the economy.* I don't view that as pragmatic, just like I consider Clinton's pragmatism to be limited. There are few men who rise to public office that are truly pragmatic - very often it's their consultants that are. While some are obviously more pragmatic than others (Romney vs. Paul Ryan), none of them would run if they didn't have some kind of vision of what they'd do for the country. While Romney's vision doesn't scare me as much as Paul Ryan's does, I'm still not comfortable with it. Especially because we all suspect that he's really a pragmatist. But given that he has said so many divergent and different things, the problem is that we simply don't know. Besides which, if he's truly pragmatic, the agenda will be set by his party, which I'm not comfortable with, given the mess Cantor and his ilk made of the debt ceiling fiasco. (If ever there was an irresponsible moment!) While I addressed some of this above, I'm not sure how you can really say Romney is closer to you ideologically than Obama. How can you really know? You think he's really the liberal governor of Massachusetts.........but how can you be sure he's not the "severely conservative" (haha!) governor he claimed to be? The truth is, who the hell can tell? Arguing Romney was a "pragmatist" as governor isn't very valid either, because his legislature was over 80% Democrat. Obviously he had to get things done on a bipartisan basis - otherwise he would have spent his entire term doing literally nothing but vetoing. When you're forced to be bipartisan because your legislature can override your veto anyway that's not being "pragmatic", that's having no choice. Besides that, I think Romney and Obama are pretty far apart on many issues, including social issues and, say, health care (which is a huge issue to me). Romney's contention the other week that "no one dies for lack of health care because they can go to emergency rooms" is a shocking statement. I'm sure he believes it, because having grown up with privilege he never encountered anyone who didn't have health insurance, and it makes sense. But I recall in college one of the students in the dorm across the street died from meningitis because he didn't want to go to the ER since he had no health insurance and it was expensive. And that's beside the issue of chronic diseases - what treatment will you get from the ER when you show up with cancer? They're not going to put you on a treatment plan - they'll discharge you. How is that not a huge difference? While I don't view perspective as a prerequisite for public office, it's worrying to me that we have a man running for public office who has never faced any of these issues and is comfortable claiming corporations are people while denying people health insurance. Liberalism and corporatism aren't particularly similar. Well, yes, quite - I vote in New York (and may not vote given how little it matters). Anyway, if you're ever in town, let me know - I owe you a bottle of Pontet-Canet. *My favorite moment of the second debate was when Romney said his assets have been in a blind trust for 9 years. Yet he's a "job creator"! So, apparently, all it takes to be a "job creator" is to buy some shares of Apple, in which case everyone who owns a single share of any company is a job creator! The notion that wealthy people are hard at work creating our jobs is ludicrous if they're creating those jobs by literally doing nothing!
Nicephoras, what a great post... Not only because I share your views but because you make a sound case for logical policies that many people fails to see. I would give you 100k reps if i could..
Yes, sound material, and a great deal of work that went into it. The sound material impresses me but the amount of work even more.
This is quite an interesting point. I mean the most important job creators of all are the big US corporations, who of course are sitting on huge piles of loot following record profits and spending cutbacks. Tax policy that encouraged those corporations to use it or lose it are more likely to stimulate investment, employment and demand rather than lower it.
Give the job creator a tax cut, and he;ll buy muni bonds, or Treasuries, or stocks. Which is what the Chinese are doing. So why are we bashing the Chinese? They are job creators.
But the reason they're holding all this cash is weak demand - I think setting tax policy (which is hard to change) to force them to spend would just create another bubble. The Fed increasing inflation targets is the better way of handling this, I think.
If you like technocrats, then you can't complain they're not good at articulating a coherent vision. That's precisely what they're not good at.
I sort of see your point, but I'd put it a different way. Suppose that you, as a manager, prefers central defenders who are "defense first" types. That's your preference. But in an ideal world, you'd have a guy who was great at the defending part of his job AND could play the ball out of the back. Being a technocrat doesn't preclude being able to push a broader vision. It just means it's not a core skill. It doesn't have to be tax policy. If the elite just accepted that the inflation ceiling, the number above which inflation becomes a problem, was the same number it was under Reagan, that would encourage businesses to stop sitting on cash. EDIT: what nicephoras said.
Easiest way to make corporations use their cash and incentivize consumption: Raise the minimum wage!!!!!! Maybe throw a few mandatory paid vacation days and/or maternity leave....
That wouldn't do anything unless a huge segment of the population works minimum wage. Besides which, in this environment, if you raise the minimum wage too much, you'll just get people to reduce headcount and force the remaining workers to be more productive. A lot of industries with high salaries are already seeing that effect.
The last part of that article aside (which is just wrong), all that says is that raising the minimum wage won't have much of an effect. Which, of course, is exactly what I said. Unless the entire population works for the minimum wage, raising it to $10 won't do anything to force companies to spend money.
If you increased taxes on people that are saving, (such as people on $250k+ pa), and spent it on stuff that increased overall efficiency such as road, rail and other infrastructure, as well as long term investment in schools, etc, then it would mean MORE job creation, both now and in the future. That's what's so annoying about the IMF's latest volte-face when they said the negative multiplier from austerity was only 0.5 whereas they NOW think it's 1.7. http://www.guardian.co.uk/business/2012/oct/13/imf-george-osborne-austerity-76bn?newsfeed=true Rather reminiscent of this fella... Good discussion, btw
I don't agree with this article in it's totality (for instance, nobody's going to remember who Romney was in a few years) but in it's big-picture view of the parties, this article is well worth your time. http://www.tnr.com/article/politics...scandinavia-red-states-are-guatemala?page=0,1
It's not a volte-face, it's a revision of their numbers once more evidence came in. Blanchard has been anti-austerity for some time.