Fiscal Cliff Political Stupidity

[Airbrush]

The Republicans and Democrats cannot agree on a fiscal plan. One of the main issues is this. What will happen when you put a higher tax on everyone who earns over $250,000 a year? It will bring in a lot more money, but will it stiffle the economy? Boner says that people earning over $250,000 will stop hiring people because the extra tax will be too much for them. They won't be able to afford to hire anyone new. This will slow the economy and even less taxes will be collected in 2013. Do the best economists agree with this? But what about the tax plan of rich getting tax credits AFTER they hire someone? Also, is the kind of economic activity that rich people stimulate also benefit the nonrich equally? If the rich can't afford to buy a new luxury item, does it matter all that much to the nonrich? This should be decided by economists, not politicians.

 

Why don't they have a debate between their best economists? The only way to solve this scientifically is to have a plan approved by experts in economics. Whatever compromise the best economists agree on, or the winner of a great debate between economists on both sides of this argument, is what we should do.

Edited December 20, 2012 by Airbrush

[uncool]

The Republicans and Democrats cannot agree on a fiscal plan. One of the main issues is this. What will happen when you put a higher tax on everyone who earns over $250,000 a year? It will bring in a lot more money, but will it stiffle the economy? Boner says that people earning over $250,000 will stop hiring people because the extra tax will be too much for them. They won't be able to afford to hire anyone new. This will slow the economy and even less taxes will be collected in 2013. Do the best economists agree with this? But what about the tax plan of rich getting tax credits AFTER they hire someone? Also, is the kind of economic activity that rich people stimulate also benefit the nonrich equally? If the rich can't afford to buy a new luxury item, does it matter all that much to the nonrich? This should be decided by economists, not politicians.

 

Why don't they have a debate between their best economists? The only way to solve this scientifically is to have a plan approved by experts in economics. Whatever compromise the best economists agree on, or the winner of a great debate between economists on both sides of this argument, is what we should do.

And how do you determine who wins a "great debate"? Do you have a debate between two groups of professional debaters? A vote by the economists? A phone-in survey?

=Uncool-

[Airbrush]

Thanks for your reply Uncool. This can be done in any number of different ways, but let's have the expert economists for each side argue this issue. That is the scientific way to solve the fiscal cliff. Not by politicians repeating themselves over and over again, with nothing of substance to back up their claims.

[uncool]

Thanks for your reply Uncool. This can be done in any number of different ways, but let's have the expert economists for each side argue this issue. That is the scientific way to solve the fiscal cliff. Not by politicians repeating themselves over and over again, with nothing of substance to back up their claims.

Do you think that isn't being done? Why do you think that the economics debate would be anything more than economists "repeating themselves over and over again"?

=Uncool-

[iNow]

Boner says that people earning over $250,000 will stop hiring people because the extra tax will be too much for them. They won't be able to afford to hire anyone new. This will slow the economy and even less taxes will be collected in 2013. Do the best economists agree with this?

In a word, no.

 

Companies hire only as a last resort, when demand for their product increases enough to justify additional payroll and healthcare and benefits expenditure. Taxes are not what's preventing companies from hiring right now. What's preventing companies from hiring is decreased demand for their product and surplus capacity in their product. Study after study after study again shows that raising taxes on the rich does not result in the apocalyptic consequences that right-leaning republicans claim.

 

Companies hire when there is enough demand for their product to warrant it. Reverting tax rates to those we had under president Clinton... a time when the economy boomed more than ever before... will not cause companies to "stop hiring." IMO, it's a ridiculous nonsense assertion put forward to fool those who are uneducated enough to know better.

[Sergeant Bilko]

The Republicans and Democrats cannot agree on a fiscal plan.

 

The Republicans and Republicans cannot agree on a fiscal plan! Please can these guys get their idealogical heads out of their idealogical asses and just get on with the job they were elected to do.

[overtone]

This is just the most recent of the crises brought about by the takeover of the Republican Party by the "authoritarian corporate right" ( we are not even allowed to use the formerly standard term for that ideology). It has nothing to do with the Democratic Party per se, or reality based economic debate. There aren't "two sides" to this - there's one faction, with power, and its agenda.

 

The basic economic issues involved were settled sixty years ago with the solid multi-generational worldwide success of Keynesian economic policy, and tested repeatedly in real life by various trials of alternative theory in places like Haiti, Peru, and Russia. The emergence of "supply side economics" in the US was a political event (it's silly bs as economic "theory") and can only be dealt with in the political arena - as the pedestal placement fo Reagan shows, it is not vulnerable to factual or even economic analysis.

Please can these guys get their idealogical heads out of their idealogical asses and just get on with the job they were elected to do.

The Repuiblican Congressmen currently in office were elected to transfer as much of the wealth and power of the US as possible to the ruling corporate elite, and protect it there. They have no ideology, other than that.

[Airbrush]

Do you think that isn't being done? Why do you think that the economics debate would be anything more than economists "repeating themselves over and over again"?

=Uncool-

 

At least reputable economists can back up their assertions with valid, proven, economic theory. I have not heard ANY economic theory to support either the Democrats or Republicans. As far as I know, the results of raising taxes on everyone who earns over $250,000/year is the great unknown.

 

I have heard one argument against the Republicans, but I cannot repeat it here in detail. I have not heard ANY argument supporting the Republicans.

[iNow]

I have not heard ANY economic theory to support either the Democrats or Republicans. As far as I know, the results of raising taxes on everyone who earns over $250,000/year is the great unknown.

 

It's not a "great unknown." Not at all. It's actually rather well understand, and has been for decades, and evidence with each new study only further supports the point that there is no impact.

 

It's just that ideology tends to cause people to ignore that knowledge.

 

http://www.cbpp.org/cms/index.cfm?fa=view&id=3756

 

Recent Studies Find Raising Taxes on High-Income Households Would Not Harm the Economy

Many policymakers and pundits assume that raising federal income taxes on high-income households would have serious adverse consequences for the economy. Yet this belief, which has been subject to extensive research and analysis, does not fare well under scrutiny. As three leading tax economists recently concluded in a comprehensive review of the empirical evidence, “there is no compelling evidence to date of realresponses of upper income taxpayers to changes in tax rates.”[1] The literature suggests that if the alternative to raising taxes is larger deficits, then modest tax increases on high-income households would likely be more beneficial for the economy over the long run.

 

<...>

 

These findings from the research literature stand in contrast to assertions of extensive economic damage from increases in tax rates on high-income households, which are repeated so often that many policymakers, journalists, and ordinary citizens may simply assume they are solid and well-established. They are not.

 

Supplementing the above, tax cuts also don't lead to economic growth according to 65-year studies like this:

 

http://www.theatlantic.com/business/archive/2012/09/tax-cuts-dont-lead-to-economic-growth-a-new-65-year-study-finds/262438/

 

Analysis of six decades of data found that top tax rates "have had little association with saving, investment, or productivity growth." However, the study found that reductions of capital gains taxes and top marginal rate taxes have led to greater income inequality. Past studies cited in the report have suggested that a broad-based tax rate reduction can have "a small to modest, positive effect on economic growth" or "no effect on economic growth."

 

Well into the 1950s, the top marginal tax rate was above 90%. Today it's 35%. But both real GDP and real per capita GDP were growing more than twice as fast in the 1950s as in the 2000s.

 

<...>

 

 

In short, the study found that top tax rates don't appear to determine the size of the economic pie but they can affect how the pie is sliced, especially for the richest households.

 

The paper is a good reminder to be humble about taxes as a tool for growing the economy.

 

Further illuminating the problem:

 

http://www.forbes.com/sites/rickungar/2012/11/02/non-partisan-congressional-tax-report-debunks-core-conservative-economic-theory-gop-suppresses-study/

 

What do you do when the Congressional Research Service, the completely non-partisan arm of the Library of Congress that has been advising Congress—and only Congress—on matters of policy and law for nearly a century, produces a research study that finds absolutely no correlation between the top tax rates and economic growth, thereby destroying a key tenet of conservative economic theory?

 

If you are a Republican member of the United States Senate, you do everything in your power to suppress that report—particularly when it comes less than two months before a national election where your candidate is selling this very economic theory as the basis for his candidacy.

 

Initially released on September 14, 2012, the study—authored by Thomas Hungerford who is a specialist in public finance at the C.R.S.—correlated the historical fluctuations of the highest income tax rates and tax rates on capital gains dating back to World War II with the economic growth (or lack of the same) that followed.

 

The conclusion?

 

Lowering the tax rates on the wealthy and top earners in America do notappear to have any impact on the nation’s economic growth.

This paragraph from the report says it all—

 

“The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”

 

These three sentences do nothing less than blow apart the central tenet of modern conservative economic theory, confirming that lowering tax rates on the wealthy does nothing to grow the economy while doing a great deal to concentrate more wealth in the pockets of those at the very top of the income chain.

 

Not surprisingly, the results of the study caught the attention of a great many conservatives—so much so that, according to a New York Times piece, Republican’s in the United States Senate successfully pressured the Congressional Research Service to withdraw the report shortly after it was released. The withdrawal came over the objection of the CRS economic team and the author of the study.

[overtone]

At least reputable economists can back up their assertions with valid, proven, economic theory. I have not heard ANY economic theory to support either the Democrats or Republicans. As far as I know, the results of raising taxes on everyone who earns over $250,000/year is the great unknown.

We have centuries of experience on five continents and fifty national economies with the consequences of taxing, or not taxing, the rich. We had forty years of experience in the the US with tax rates on the rich double what they are now, and more. The experience was one of great prosperity and economic progress unprecedented on this planet.

 

We are now experiencing the consequences of haveing drastically reduced the taxes on the very wealthy.

 

One reason you have no idea what theory etc would be "backing the Democrats" is that you don't know what the Democrats have been proposing.

Edited December 23, 2012 by overtone

[Moontanman]

During the economic boom of the mid 20th century taxes were many times higher on the rich than they are today. Corporations should not be considered people, the fact is that what party someone belongs to is far less important than who owns them and most are owned by the extremely wealthy and corporations. Just how much more in taxes would someone making $250,000 a year pay extra in taxes? This reminds me of people playing a video game, they collect points (wealth) at all costs and seem to think that who ever dies with the most money wins, insanity IMHO...

 

 

I have no problem with people being wealthy, I would like to be wealthy, but I see no reason why the wealthy should pay tax rates lower than the middle class. The very wealthy can hide most of their income in ways that make it non taxable or much less taxable than the middle class.

 

I have always paid something like 33% of my income in taxes of one type or another, multimillionaires pay less than half that routinely, how can that be fair? how can anyone justify not paying taxes? If you live in our country taxes are like paying rent on something you have to have but cannot own and if you think that one political party wastes money and the other does not you have not been paying attention...

In some ways this reminds me of the United Way, when I worked for DuPont i was in charge of the United Way several years and the excuses people came up with to avoid paying a few dollars a year for the United Way were classic. I paid $500 plus a year to the United Way, i never missed it, $10 a week, i wasted far more than that on beer, but people would squeal like little children over paying $50 a year taken out a dollar a week.. I never could understand why they hated to help others so much, they claimed it was due to money but i know it wasn't that at all....

[swansont]

I think the main issue is that any solution now looks like you are raising taxes, and too few Republicans will go for that (though it's barely possible if all the lame-duckers do) But if we go over the cliff, then any bill look like a tax cut, even if it doesn't include the >250k crowd. Much easier to get a solution passed then, I think.

[waitforufo]

What will happen when you put a higher tax on everyone who earns over $250,000 a year? It will bring in a lot more money, but will it stiffle the economy? Boner says that people earning over $250,000 will stop hiring people because the extra tax will be too much for them. They won't be able to afford to hire anyone new. This will slow the economy and even less taxes will be collected in 2013. Do the best economists agree with this?

 

I think Obama agrees that this tax increase will cause a drag on the economy. Not only less hiring but less spending by those who will be taxed more. To offset this economic drag, Obama's fiscal cliff plan includes $255 billion in stimulus.

 

This tax increase will do little to reduce our $1 trillion annual deficits, particularly when it is just window dressing for more government spending. The only way we are going to get out of the hole we are in is to grow the economy in a significant way. Unfortunately may people, and the politicians they elect, think our economy is too big right now and would like to make it smaller. The little foot print crowd wants to have their cake, entitlement spending, and eat it, reduce consumption, at the same time. A bigger economy would increase prosperity and provide the resources for government spending at a lower percentage of GDP. This is how we got out of the hole we were in after WWII and every recession in our history. Unfortunately this is unacceptable to the little foot print crowd.

[iNow]

...this tax increase will cause a drag on the economy. Not only less hiring but less spending by those who will be taxed more.

This is false, and has been addressed already in post #9.

This tax increase will do little to reduce our $1 trillion annual deficits

This is also false, and has been addressed by doing math.

 

 

Btw - We grow the economy by investing in it, not by putting forth the type of austerity that has ruined the European economy these past several years.

[Airbrush]

Thanks for all the info above about the economic theories behind tax increases. That is very interesting stuff.

 

How about raise taxes on everyone who earns over $150,000 per year? My wife and I work hard at our jobs and our combined income is less than $150,000/year. If consumer spending is not so directly and inversely related to tax increases, maybe a lot more tax money can be raised without putting the breaks on the economy.

[iNow]

How about raise taxes on everyone who earns over $150,000 per year? My wife and I work hard at our jobs and our combined income is less than $150,000/year. If consumer spending is not so directly and inversely related to tax increases, maybe a lot more tax money can be raised without putting the breaks on the economy.

The point is that consumer spending at higher income levels are not so directly and inversely related to tax increases. That's not quite as true the lower you get in salary ranges.

 

As you get lower and lower in the salary ranges the greater the impact of taxes. Of course having additional families paying more taxes would raise more revenues (which seems like a net good). However, the lower and lower you go in combined annual salary the greater and greater the impact on spending power and purchasing behavior.

 

$250k seems to be where we think makes sense right now as a reasonable cutoff that has more benefit than harm. $150k might make sense too, but I suspect such a proposal would decrease public support of the idea (since you're no longer talking about just the top few percent of income earners, but instead a much larger population).

[overtone]

How about raise taxes on everyone who earns over $150,000 per year? My wife and I work hard at our jobs and our combined income is less than $150,000/year. If consumer spending is not so directly and inversely related to tax increases,

As soon as the topic of who works hard and who doesn't comes up, we have left the realm of sensible economic discussion and are traveling in the realms of propaganda and political bs.

 

Consumer spending depends on income level - the poor spend all their income, the very rich spend little of theirs. You can tax the income of most very rich people at a marginal rate (if you don't know what "marginal rate" means, you don't understand the basic issue) of 90% without affecting their consumer spending at all. Tax a low income at that rate, and every nickel is subtracted from their purchases of basic consumer goods.

 

That's why Obama's payroll tax reduction worked as a stimulus, and the Bush era reduction of high bracket income tax rates worked as a drag.

Edited December 24, 2012 by overtone

[Airbrush]

The point is that consumer spending at higher income levels are not so directly and inversely related to tax increases. That's not quite as true the lower you get in salary ranges.

 

As you get lower and lower in the salary ranges the greater the impact of taxes. Of course having additional families paying more taxes would raise more revenues (which seems like a net good). However, the lower and lower you go in combined annual salary the greater and greater the impact on spending power and purchasing behavior.

 

$250k seems to be where we think makes sense right now as a reasonable cutoff that has more benefit than harm. $150k might make sense too, but I suspect such a proposal would decrease public support of the idea (since you're no longer talking about just the top few percent of income earners, but instead a much larger population).

Good explanations iNow and Overtone. That is the kind of economic info I was looking for. Then why the hell doesn't Obama bring that up every time the media is listening to him?

 

This makes it look like Obama was bending over backwards to please Boner when he agreed to $400,000/year annual incomes as the cutoff. But Boner didn't think that was high enough. What a jerk!

 

Edited December 24, 2012 by Airbrush

[iNow]

This makes it look like Obama was bending over backwards to please Boner when he agreed to $400,000/year annual incomes as the cutoff. But Boner didn't think that was high enough. What a jerk!

IMO, it's less about Boehner and more about what his fellow Republicans in the house would and would not vote for.

[Airbrush]

IMO, it's less about Boehner and more about what his fellow Republicans in the house would and would not vote for.

As usual you are correct Sir. Boehner has to deal with a BUNCH of jerks.

 

There has to be some economic theory that the Republicans are clinging to, and yet nobody can say what it is.

 

Any Republicans out there that want to explain the economic theory behind no tax increases on the rich? Yes, I would like to hear from the "Taxed Enough Already" Tea party.

 

Edited December 27, 2012 by Airbrush

[overtone]

As usual you are correct Sir. Boehner has to deal with a BUNCH of jerks.

He's one of the bad guys, has been for thirty years now.

There has to be some economic theory that the Republicans are clinging to,

Not really. Preventing tax increases or regulatory oversight from being imposed on the wealthy and corporate elite is not a matter of economic theory - some phrase length echoes of Straussian bs or long debunked "supply side" hypotheticals might come up in political speeches, find their way to a bumper sticker somewhere or go into heavy canard rotation via the Murdoch Media, but actual economic theory? That would get in the way.

[waitforufo]

 

As usual you are correct Sir. Boehner has to deal with a BUNCH of jerks.

 

There has to be some economic theory that the Republicans are clinging to, and yet nobody can say what it is.

 

Any Republicans out there that want to explain the economic theory behind no tax increases on the rich? Yes, I would like to hear from the "Taxed Enough Already" Tea party.

 

 

Simple.

 

1) Taxing more only leads to spending more. We have a spending problem. Government is already too big and will continue to grow to the bounds of taxation. Let’s keep those bounds tight.

 

2) Taxing the "rich" only makes taxing people with middle incomes more acceptable once "fairness" has been achieved. The way things are today you can't tax me more because that would only make the perceived injustice even less fair.

 

3) What's wrong with letting people enjoy the fruit of their labors and property that belongs to them?

 

Now some questions for you. Why do you covet what does not belong to you? Why can't you see someone else’s success and think "good for them"? When you see the success of others, why does their success not inspire you to make your own? Why do you think wealth is a zero sum game?

 

There can always be more wealth. You just need to make your own. Quit coveting mine.

[iNow]

Taxing more only leads to spending more. We have a spending problem. Government is already too big and will continue to grow to the bounds of taxation. Let’s keep those bounds tight.

This approach is known as "starve the beast," and has been shown not to work. Our problem is not that we tax and spend. Our problem is that we spend even when not taking in enough revenues to cover those expenditures. Instead of paying for what we spend, reducing taxes just causes our borrowing (and hence debt levels) to raise.

 

Taxing the "rich" only makes taxing people with middle incomes more acceptable once "fairness" has been achieved.

Not sure what you mean here. What does this comment mean, and how does it add to the discussion?

What's wrong with letting people enjoy the fruit of their labors and property that belongs to them?

Nothing, but let me ask you a question in return. What's wrong with asking people who have benefited from our common infrastructure to give back and help pay for that same infrastructure once they've realized that benefit?

Why do you covet what does not belong to you? Why can't you see someone else’s success and think "good for them"?

I don't covet others success, and I DO think good for them. You seem to be arguing against a strawman of my (and countless other people's) position.

There can always be more wealth. You just need to make your own. Quit coveting mine.

Here's where your disconnection with the reality before shows most profoundly, IMO. It's not due to lack of effort or hard work that so many people are seeing falling or stagnant wages, nor is it due to lack of effort that inequality has become so magnified in recent years.

 

 

 

The rich have disproportionately benefited from our policies, not just through hard work. The idea is that this asymmetry is a sign of deep economic unhealth and should be corrected... It has nothing to do with coveting or any other silly claim like that you've made.

 

 

Even worse, look at just the last decade... Income has DECLINED for the bottom 90% and ALL of the growth went to the top 10%:

 

 

 

 

Again, this has nothing to do with hating people for being successful. That's little more than propaganda from Fox News and does not represent anyone's position. This is about getting ourselves back into a healthy economy that grows across income levels, not just among the very few.

[overtone]

1) Taxing more only leads to spending more. We have a spending problem. Government is already too big and will continue to grow to the bounds of taxation. Let’s keep those bounds tight.

Government spent more than it taxed - now it has to tax more than it spends, to pay its bills.

 

2) - - The way things are today you can't tax me more because that would only make the perceived injustice even less fair.

What the rich perceive as unfair is beside the point.

 

3) What's wrong with letting people enjoy the fruit of their labors and property that belongs to them?

Nothing belongs to anyone who hasn't paid their bills. The wealthy can keep whatever is left over after they've paid for their government, the wars they started and made money from, the handouts they received.

[waitforufo]

What's wrong with asking people who have benefited from our common infrastructure to give back and help pay for that same infrastructure once they've realized that benefit?

 

Interesting use of the word “asking.” I don’t ever recall anyone “asking” me to pay my taxes. Wouldn’t a more appropriate word be forcing? Forcing at the point of a gun with the threat of imprisonment. Also, I have never considered my response to force as something to be described as giving or helping. Perhaps you meant to say the following.

 

What’s wrong with forcing people who have benefited from our common infrastructure to pay from the fruit of labor for utilizing that same infrastructure once they've realized that benefit?

 

Not as nice sounding, but honest.

 

I believe the answer to your question has to do with fairness. As you mention this infrastructure resource is held in common. Using my own life as an example I fail to see how I have used this resource any different than any other common citizen. So why should I pay more? Particularly, why should I be forced to pay a higher percentage? In fact, I could easily argue that I have used these common resources less than most. That is why I have wealth. So why shouldn't I pay less?

 

How was spending more time at work than the average person utilizing our common infrastructure more than someone who spent less? How was delaying personal gratification so that I could fully fund my 401k aggressive use of our common infrastructure? How was working full time jobs while attending college? How was always trying to live near work so I could walk to work abusive infrastructure use? How was driving second hand cars and fixing them myself using more of this common resource? How was taking jobs that others would not take using more than my fair share? In fact, I think all of this points to a gentle and considerate use of our common infrastructure. So why should I pay more? My outcome has been very good not because of an over utilization of our common infrastructure but by my lack of use.

 

Your problem is that you only look at the current outcome. You believe that someone who made immediate choices throughout their lives should be taxed less and receive more from government. I know plenty of people with nearly identical backgrounds and life circumstances to mine own that have far less wealth. If they went to college, they maxed out their student loans instead of working. Some skipped college because the commitment it took got in the way of their current desires. They drove new cars. They went on expensive vacations every year. They purchased homes they could not afford. Now they are broke. I do not begrudge these people for the life of pleasure that they have lead. For them it may have been the correct choice. I do however expect them to live with the consequences of their decisions. Also, they should be ashamed of themselves for coveting the wealth I have accumulated through sacrifice and hard work. Now it is my turn at pleasure. They should be happy for me.

 

Perhaps you should read “The millionaire next store.” It may show you a path to wealth. Happiness comes from accepting responsibility for your own choices and circumstances. If you don't who will?

 

http://www.nytimes.com/books/first/s/stanley-millionaire.html