OK, maybe not all of us. But a lot of us. Really a lot. Cornell political scientist Suzanne Mettler has an article in the Washington Monthly about what she calls the “submerged state,” or the massive amounts of money at play in various tax deductions (eg. the mortgage interest deduction) that benefit particular populations.
As the chart below shows, there are all kinds of tax deductions that many people take, but those same people continue to insist that they don’t get any help from the government. Mettler’s point, backed up by her survey data: despite their cost, these programs are invisible to the public, making the public more susceptible to claims that government is too big.
James Fallows posts a comment from a businessman on what really creates jobs:
“IT’S DEMAND, STUPID!…A few more customers and I’ll hire another worker. Look, guys, that’s what we do out here! Don’t worry about cutting my taxes, don’t concern yourself with over-regulating me, don’t fuss about the “death tax” depriving my progeny of the joy of running my business. That is all trivia! This is all about Demand Side Economics.”
Exactly. Businesses don’t base their hiring decisions on taxes or uncertainty. They invest (in people or machines) to meet demand.
Also in the economic vein, here is Joe Stiglitz on the failure of pure free market economics.
John Boehner has a choice: he can lead the Republicans, or he can save the country. He can’t do both.
The vote on the recent budget deal showed that compromises won’t get votes from tea party Republicans. Fifty-nine Republicans voted no on the agreement, and Boehner had to team up with Democrats to get something passed. Pundits are discussing whether Boehner will move right to get a unified Republican caucus. He’ll have to if a unified Republican caucus is his goal.
But Boehner’s goal should not be keeping his party together; it should be fixing the country. Instead, of moving right to pass “Republican” bills that will get vetoed by the President, what he should do is move left and pass meaningful reform with strong bipartisan support. Boehner can team regular (non-tea party) Republicans with conservative Democrats to come up with a common sense approach to solving our fiscal problems. America is a centrist country and Boehner has a chance to create a centrist solution.
The reality is that everybody knows the logical way to solve our debt problem. We need cuts in all spending: discretionary, military and entitlements, coupled with revenue increases. The debt is too big for either spending cuts or tax increases alone to solve the problem. We also need to control health care costs, which are driving Medicare and Medicaid to such extreme levels.
So stop jerking around with politics and start solving the problem. Boehner can lead the charge, and be a hero, if he is willing to walk away from his extreme fringe. He just needs to be less of a Republican and more of an American.
By the way, there is a similar situation in the Senate, with Tom Coburn in the bipartisan gang of six fighting with legendary douchebag Grover Norquist over tax increases.
Grover Norquist: Pompous Douche
With President Obama recently saying that he plans to let the Bush era tax cuts expire, it seems like a good time to clear up some myths about US taxes. Fortunately, Pulitzer Prize winning tax journalist David Kay Johnston did exactly that in a long article printed in a variety of weekly newspapers. You can read it here, or read Felix Salmon’s summary here. Two brief tidbits:
- The bottom 90% of wage earners saw their income grow by 1% from 1980 to 2008. Not 1% per year. One percent total. Folks in the top percent of wage earners saw their income double during the same time.
- The federal income tax is less that half of federal taxes and only 20% of taxes paid at all levels. Social security, medicare, unemployment, sales taxes….they make up the other 80%.
Here is a really interesting article comparing the airline industry to the public health system, with full service hospitals being the legacy carriers, serving everyone and subsidizing low fare services with high fare ones. Specialty hospitals are the upstart airlines, able to focus on only providing profitable services. And as they all cut capacity to remain profitable, what happens when crisis hits? We just saw what happens to airlines when a blizzard strikes; so what happens to hospitals when a pandemic hits?
Here is a new article with data showing a direct correlation between how GOP leaning a state is and how much federal money it sucks down. This follows up on my posts on this very topic.
Increase in national debt...by president
The Wall Street Journal recently ran an article by Jonah Lehrer asking whether humans might not be as averse to paying taxes as our political discussion currently assumes. He describes a study by scientists at Caltech which showed that people dislike inequality. Study participants were put into scanners, and the pleasure areas of their brains lit up more when money was given to others than when money was given to them. This was especially true of those who had started the study “rich,” which was determined by random assignment. Following this study to its logical conclusion, perhaps people who are well off might not be as unhappy as politicians seem to think about paying higher taxes to help the less fortunate.
However, Lehrer points out that the random assignment of riches skews the study. Other studies have shown that this altruism effect is less powerful when the rich feel that their wealth is earned. When we bring this back to politics and tax rates it opens a whole can of worms. What is “earned” in a society where massive advantages (not just wealth) are passed down through the generations? I won’t open that can of worms here, but point you to this post from last year on some of the challenges of “earning” wealth for the lower classes.
The bipartisan deficit panel has come out with its first set of recommendations, and everyone is hopping mad. Lefties say the cuts in spending are unacceptable, and conservatives are adamant that tax revenues never go up again. Good! I have no opinion about the specific recommendations made by the panel chairmen, but I know that if both sides are pissed off then the panel must be doing something right.
Listen people…this deficit is serious business. It will bite us in the ass if we don’t fix it, and fixing it is going to require some pain on everyone’s part. We’ve been living for too long with this fantasy that government could increase spending while cutting taxes. Now the party is over, and the hung over cleanup has to begin. Headaches? Nausea? Yes, exactly.
So liberals, accept the fact that spending will be cut, and not just military spending. I hate it too, but Social Security has to be on the table. Increasing the retirement age by two years over the next 65 years? That’s really not so bad. Tying other benefits to inflation? Also not unreasonable. We need a safety net, of course, but we need to be smart about it.
And conservatives, you too are in for some pain. Face facts: spending cuts alone won’t balance the budget. We need to increase taxes. You like to claim that any tax increase will kill the economy, but the facts don’t bear that out. This chart shows that in Germany tax revenues are 40% of GDP, far more than America’s 28%. And yet Germany’s economy is doing fine, kicking our ass in exports, despite having to absorb East Germany. This chart shows that marginal tax rates for individuals are lower than ever. In fact, during America’s economic heyday, in the 50s and 60s, top marginal rates were in the 70%-90% range, far higher than today’s 35%, and yet there was still plenty of investment, of people working hard, of entrepreneurs starting businesses. All the arguments the right uses against raising taxes are belied by that glorious period of American business. Speaking of that great Happy Days era, the chart below shows that the share of taxes paid by the wealthiest citizens back then was significantly higher than it is now. Again, showing that higher taxes do not necessarily stifle economic growth.
There will be plenty of unpleasantness to go around; Democrats and Republicans will each get their share. Our legislators need to get off their high horses, stay away from the cameras and microphones and acknowledge that their pet causes are secondary to the national cause. But as either Mark Shields or David Brooks (I still can’t tell their voices apart on radio) said on the PBS NewsHour, our politicians won’t make this happen until the public forces them to. Our culture needs to accept the need for hard choices, and then push our politicians to make them.
Posted in Business, Politics
Tagged bailout, Business, congress, economics, GOP, greed, Politics, republicans, taxes, tea party
Following up on my prior post about the European economic model, the Wall Street Journal reported Saturday that the German economy is expected to grow 3.5% this year, its best performance since reunification. Moreover, much of this growth is coming from internal demand, balancing the economy away from its already strong export base. In other words, the high wage, high tax rate German economy has already recovered from the global recession and is starting to kick our ass.