JONATHAN COHN APRIL 29, 2012
-
Read Later
READ LATERAvailable only to subscribers. SUBSCRIBE TODAY
-
Listen
ARTICLE AUDIO
- Font Size
Editor's Note: Today TNR begins a series of items examining the details of Governor Mitt Romney's policy agenda. First up is the economy—specifically, how Romney proposes to boost growth and employment. Later installments will look more closely at Romney's plans to change the tax code and his ideas about organized labor, as well as other proposals including health care and energy. Will anybody pay attention to policy quesitons like these? We hope so. Substance doesn't always get the attention it should in presidential campaigns. But in this election, the differences between the candidates seem more stark, and more important, than at any time in recent history.
* * *
What Romney would do: Cut taxes and regulations, shrink government, undo pretty much the entire Obama agenda, and stick it to labor.
The Good: Using independent boards of experts to assign federal research dollars. Allowing more highly skilled immigrants to work and stay in the country. Getting tough with China, assuming it’s done right.
The Bad: Requiring congressional approval of all “major” regulations, apparent reductions in funding of productive investments like education and infrastructure.
The Ugly: Capping total federal spending at 20 percent of GDP, with 4 percent reserved for defense—a potentially devastating reduction in government services that, if implemented swiftly, could also deal a serious economic blow. Then again, his numbers don’t really add up, so who knows what he’d really do?
The Verdict: The focus on lower taxes and regulation will appeal to conservatives who see those as major impediments to long-term growth. The lack of investment in education, infrastructure, and technology will worry everybody else. In some ways, the real story is what’s not here: Proposals designed specifically to boost growth in the short run, despite still-high unemployment.
They Said It: “Our best hope—and not an entirely implausible one—is that presumptive-nominee Romney has a secret plan for the economy. If he doesn’t, we may be in for years’ more stagnation.” - Josh Barro, in the Guardian
* * *
If Mitt Romney has his way, the general election will be just like the one Bill Clinton won in 1992: It’ll be about the economy, stupid. And you can understand why. A recovery is underway but it’s tentative and weak. Large numbers of Americans remain out of work, not to mention the many more who have jobs but still struggle to pay bills. Romney’s pitch to these people is simple and compelling: Hire me, and somebody will hire you.
But how would he do that? It’s a difficult question to answer, in part because Romney’s 160-page manifesto, “Believe in America,” is less specific than you might think. It spends a lot of time offering a story about why the country is in trouble, but only a little on what Romney would do about it. As Reason’s Peter Suderman observed, “it’s sufficiently thorough in its background analysis, yet aspirationally vague when it comes to proposing action items.”
More important, Romney has made some promises that don’t seem possible to fulfill. A central theme of his economic policy is a promise to reduce federal spending dramatically, quickly capping federal spending at 20 percent of GDP and setting aside 4 percent of GDP for defense spending—numbers that would, as the Center on Budget and Policy Priorities has observed, imply a downsizing of government even more dramatic than the one House Budget Chairman Paul Ryan has endorsed.
But if you look past those contradictions and omissions (don't worry, I'll come back to them another day) you will see the outlines of a familiar conservative agenda that, most likely, would guide Romney’s decisions about economic policy. Reducing regulation? Check. Lowering taxes? Check. Shifting authority from Washington to the states? Check. Supposedly this will boost investment and business confidence, unleashing prosperity. If that sounds like trickle-down economics all over again, that’s because it is.
Romney's agenda does have one surprise, however. For all of his talk about how much people are struggling right now, he’s not proposing ideas designed specifically to improve the economy in 2012 or 2013. His premise is that the long-term agenda will take care of the short-term problems—and that attempting to do more right away, as President Obama has proposed with his own jobs bill, will only make matters worse.
* * *
How you feel about this agenda will depend, to great extent, on what you think of what’s become mainstream economic thinking among conservatives.
Consider Romney’s proposal to replace the existing unemployment insurance program with a system of private accounts, into which workers would deposit money they could withdraw for retraining or just sustaining themselves during periods of joblessness. Conservatives have long argued that unemployment insurance discourages the jobless from finding work; according to this argument, personal accounts would remove that disincentive while enabling more individuals to take advantage of training they would find useful. Liberals question the evidence behind the conservative critique and worry that a system of private accounts would be less reliable, leaving many more unemployed workers in serious financial difficulty.
It's the same basic story with the broader ideas in Romney’s agenda. Do you think taxes retard growth more than, say, an undereducated workforce? Do you think Bush-era policies did more to cause our economic problems than Obama-era polices? Etc. And while I'm not precisely qualified to answer those questions, I know a few people who are.
One of them is Jesse Rothstein, an economist at Berkeley, who wrote a widely-cited paper testing the hypothesis that unemployment insurance discourages people from seeking jobs. His method was to study extensions of unemployment insurance to 99 weeks during this recession. His conclusion? The overall affect on unemployment was to raise it by no more than one-tenth of one percent—in other words, it had virtually no effect.
Another person qualified to answer these questions is Paul Krugman, who noted recently that "the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration." MIT's Peter Diamond and Berkeley's Emmanuel Saez take the same essential view. Writing in the Wall Street Journal, they recently observed that "In the postwar U.S., higher top tax rates tend to go with higher economic growth—not lower." Yes, they said, taxes can slow growth. But they'd have to be a lot higher than they are now and a lot higher than virtually anybody is currently proposing.
Not everybody agrees, of course. The Diamond-Saez op-ed provoked a sharp response from the Heritage Foundation's J.D. Foster and Curtis Dubay, among others. "Of course higher taxes would slow economic growth," they wrote. "There are no ifs, ands, or buts about it." But the basis of their argument is that the rich today bear a larger share of the total tax burden, which merely reflects the fact that they're making more money relative to the rest of the population. That's one reason I'm inclined to agree with Jared Bernstein, the Obama Administration veteran who is now with the Center on Budget and Policy Priorities. Via e-mail, he wrote:
I don't expect a lot of specificity from a presidential candidate. I'm looking for a framework, a road map. And it seems undeniable that Gov Romney's road map leads this economy right back over the supply-side, trickle-down, deregulatory cliff from which we're still climbing back.
* * *
To be clear, not quite everything in the Romney economic agenda breaks down along such clean left-right lines. Romney says, for example, that the government should channel its research in energy technology through programs such as “ARPA-E.” That’s a reference to the Advanced Research Projects Agency-Energy, which operates more or less as the government’s in-house venture capital firm on green investment. It’s a knockoff of a similar agency that’s operated for decades within the Pentagon, spawning research that led to global positioning devices and the internet, among other things. (Michael Grunwald has written about this for Time magazine.) President Bush signed the law creating it, but it was President Obama who funded the program and has (along with Vice President Biden) been its most vocal champion.
Then again, whether Romney would also put money into research remains very much an open question, given his determination to radically reduce government spending overall. Romney has also backed off one of his promising promising proposals—linking the minimum wage to inflation, so that it rises automatically with the cost-of-living—although he hasn’t, as best as I can tell, specifically repudiated it.
But let's get back to what Romney’s agenda doesn’t say. Even some writers and thinkers who support the general thrust of Romney’s low-tax, anti-regulatory agenda worry that it doesn’t explicitly address the problems that led to the financial crisis of 2008 and are still hampering growth now. Housing is the most obvious example. Lots of people are struggling with mortgages they can't pay. Most experts agree this is one reason the economy isn't growing faster—and that the Obama Administration still hasn't done (nearly) enough to fix the problem. But Romney's manifesto is virtually silent on the issue, as Josh Barro observed in the Guardian last fall:
…while Romney’s plan has an admirable quantity of detail, it does not contain all the right details. Many of the ideas in Romney’s plan, from tax reform to free trade to revamping job training, are good. But they would also have been good ideas in 2007. What Romney’s plan lacks are ideas that relate to the housing bubble and the prolonged economic crisis that it sparked. Amazingly, none of Romney’s 59 economic proposals addresses housing policy or monetary policy.
David Frum, the former Bush speechwriter, was similarly dismayed by the lack of explicit focus on today's jobless:
A President Romney would take office in January 2013, at a time when even on a best-case scenario more than 10 million Americans will still be unemployed or under-employed, more than half of them for a very long time. What to do for them? On this urgent topic, the plan falls dismayingly quiet. Even if Romney’s policies do raise the long-term growth rate of the United States beginning sometime about 2014, unemployment won’t return to normal levels until a Romney second term. That portends almost a decade of very high unemployment.
I put these criticisms directly to Glenn Hubbard, the Columbia University economist and a top adviser to Romney. Via e-mail, he (graciously) responded that Romney’s focus on bolstering the economy over the long run, by shrinking government and reducing “regulatory uncertainty,” is actually the best way to improve the economy in the short run, as well:
Here your question appears to be based on an idea that the "short run" and the "long run" are different subjects. That is another underpinning of recent policy errors. Getting the long-term right (e.g., a credible and stable path of tax rates instead of periodic Taxmageddons, entitlement reform instead of a spending binge, and regulatory stability instead of regulatory uncertainty) would encourage investment and consumption today. Such long-term action would also give breathing room for properly done short-run action. Hence, it is no accident that Romney has focused on the right long-term policy. If you want to take a look at the real-world consequences of policy uncertainty, you might consider the research by Nick Bloom (Stanford) and Steve Davis (Chicago), which concludes that returning to pre-financial-crisis levels of policy uncertainty would lead to 2.3 million additional jobs over 18 months.
* * *
There's a certain logic, or at least a consistency, to this argument. Hubbard is among those who have argued that the Recovery Act was a failure and that new efforts at stimulating growth, of the sort President Obama has been promoting since last fall, will fare no better. But most independent forecasters, as well as respected non-partisan authorities like the Congressional Budget Office, take a different view. They believe the Recovery Act kept the recession from getting much worse. It may have been too small, it may have had some design flaws, but overall it created jobs and probably quite a lot of them. That was also the consensus opinion of nine leading studies that Dylan Matthews surveyed for the Washington Post last year.
Romney's (and Hubbard's) take on regulation also seems to be a minority view. Although even many liberals would acknowledge that excessive regulation can spook business and impede growth, even conservative Bruce Bartlett, who helped craft economic poilcy in the Reagan and George H.W. Bush Administrations, has said evidence that regulation as a primary cause of our current problems is "very weak." A review of government data by Bloomberg News found that “Obama’s White House has approved fewer regulations than his predecessor George W. Bush at this same point in their tenures, and the estimated costs of those rules haven’t reached the annual peak set in fiscal 1992 under Bush’s father.” (See the graph at the bottom of this item, put together by my colleague Thomas Stackpole.)
It's possible that Romney and his advisers simply disagree. To some extent, I'm sure, they do. But I suspect something else is also going on here: Romney has driven himself into an ideological cul-de-sac.
In order to win the election and, more immediately, to satisfy the extremist instincts of Republican Party primary voters, Romney has been disavowing not just the Recovery Act but the Keynesian logic behind it (i.e., that expansionary fiscal policy can boost growth during a downtown). Like the rest of the Republican field, he’s been promising to focus immediately on deficits, starting with a 5 percent reduction in discretionary spending. Presumably they would come on top of cuts already signed into law.
Romney parses his statements carefully (something else he seems to have learned from Clinton) and, as Krugman has observed, Romney has on occasion acknowledged that too much focus on austerity might be damaging to growth. That suggests that, like Hubbard and fellow Romney advisor Gregory Mankiw, Romney doesn't completely reject the premises of Keynesian economics. But having helped turn “stimulus” into a bad word, he’s implicitly taken a lot of policy options off the table. And that may be true even of initiatives that wouldn’t look just like the Recovery Act. Focusing on housing and monetary policy, Barro's proposed alternatives, are as anathema on the right these days as stimulus spending and health care reform.
It’s possible Romney’s blueprint for the economy is more about posturing than policy-making—that he actually has a “secret plan,” as Barro wrote, to give the economy immediate helps once he gets to office. And maybe, just maybe, he’ll start to introduce that plan soon, now that the primaries are over. But would Romney actually move on such plans in office? And if he did, would they really make a difference? On both counts, there's reason to be skeptical.
Update: I modified the wording in a few places and introduced a few more cites to actual economists, who surely are more qualified to make these judgments than I am.
follow me on twitter @CitizenCohn
38 comments
Typo: "The Ugly: Capping total federal spending at 20 percent of GDP, with 4 percent reserved for GDP". Should be "reserved for defense spending", as it says later in the article. Short version of the article: "Romney's plan is even more radically conservative than Paul Ryan's plan. Even many conservatives hope that he's just pretending and that he really has a 'secret plan' that is moderate and Keynesian, but don't count on it." Did I get that right?
- mrheckman
April 30, 2012 at 12:44am
So, it's 2001 through 2008 all over again -- deregulate, cut taxes, promise to balance the budget but instead follow policies that will blow the deficit out of all proportion. Reagan tried Supply-Side and had to back-peddle, with huge deficits. Bush-II tried Supply-Side and had to back-peddle in September 2008, with enormous deficits. Now Romney wants to try Supply-Side again? Something is terribly wrong with this picture.
- AllanL5
April 30, 2012 at 8:38am
Pretty sure Glenn Hubbard doesn't believe what he wrote to you. I'm too lazy to do it, but it's probably very easy to troll the archives of his writing to find, say, support for the "targeted" Bush tax cuts, which likely went in all directions. First, as a long-run measure (lower taxes are good for the economy), then as a short-run measure (economic growth from stimulus), and then as a summum bonum measure (low taxes setting the table for the 2000s to be even better than the 1990s). And as we all know, that was a can of snake oil even when it was sold that exploded in our faces. The baldfaced thing is that this is the very recent past.
- chaitless
April 30, 2012 at 8:49am
God will provide, but only if the rest of us agree to become Mormons and to tithe more than we do now. On the other hand, if Romney does become President, the "real Romney" will emerge at last, startling all of us (including Romney himself).
- skahn
April 30, 2012 at 9:09am
Replacing unemployment insurance with a system of private accounts? Insurance and savings are two fundamentally different kinds of financial instruments. Yes, it makes sense to prepare for hard times with savings. But cataclysmic losses are too big to handle that way. So we spread this risk. That's why we insure cars and houses. In the normal ups and downs of the business cycle, the risk of job loss is similarly spread and unemployment insurance benefits appropriately match unemployment insurance premiums. Sure, all forms of insurance bear the possibility of moral hazard. But I don't see conservatives lining up to do away with business insuring its capital goods or even the lives of "key men". In serious downturns, like the current Lesser Depression, Congress has usually extended unemployment compensation to laid off employees beyond the period covered by the investment in unemployment insurance. I expect liberals and conservatives to debate the economic conditions which warrant attaching the dole-like component to the pure insurance component. But proposing the substitution of personal savings for basic unemployment insurance shows real contempt for people of modest means.
- ragbatz
April 30, 2012 at 9:18am
"Of course higher taxes would slow economic growth" This is a one-half answer that treats taxation as an end in itself. For instance, what is the effect on growth if government raises top rates or eliminates the capital gains dividend tax preference and uses those new funds for stimulus, or technological education, or unemployment compensation? Or, what is the effect of raising revenue to balance the budget?
- Nusholtz
April 30, 2012 at 12:36pm
Ragbatz' comment about the difference between insurance and savings is quite pertinent. I agree. On a different Romney watch topic, apparently he is "flirting" with Kelly Ayotte of New Hampshire as a Vice-Presidential candidate. After reading a bit about her, I am wondering if she might prove to be a Palin-"light" witches' brew?
- skahn
April 30, 2012 at 1:30pm
ragbatz writes: "the risk of job loss is similarly spread and unemployment insurance benefits appropriately match unemployment insurance premiums." But the benefit of UI is readily achieved by a simple savings program. Some countries force this savings, which is fine. But at the end of the day, we either believe people will save enough for rainy days or they won't. And if they won't, then they really aren't capable of making any grown up decisions. I get it when you are just starting out. But someone who is 35 years old that has not saved at least 6 months of salary is, frankly, a financial mess. The question is: Do we penalize the 90% to help the 10% avert this mess? Remember, this isn't a spate of bad luck. This is a decade of poor prioritization and planning. JCohn writes: "The overall affect on unemployment was to raise it by no more than one-tenth of one percent—in other words, it had virtually no effect." Unemployment checks average around $255/week ($6.50/hour). A guy that would be making $12/hour ($480/week) could make half of that for doing nothing. If he can pick up some cash work on the side while collecting unemployment, then he can likely come out far ahead. When we have potential employees negotiating start dates with employers because they want to maximize their UI benefit, then, Houston, we have a problem. And you misquoted Rothstein's range of impact. It wasn't 0.1%. It was 0.1% to 0.5%. And there are other studies that have estimated it to be quite a bit higher. www.detroitnews.com/article/20100510/BIZ/5100438
- seattleeng
April 30, 2012 at 1:50pm
Ah, Seattle is back, the guy who believes anyone in their mid-20s who has not saved several months of salary already is just irresponsible. Same old tripe.
- JEFF FREY
April 30, 2012 at 2:32pm
just a quick comment to get it out of my system: At lunch I caught a feed of Romney speaking in N.H. Like all Republicans since his the god Ronald Reagan descended from Oylmpus and lived among us mortals, Romney was extolling the virtues of small business, and of course making fun of federal regulations - workplace regulations, OSHA. So onerous. So terrible to small business Well the latest workplace fatality figures I could find from Bureau of Labor is 4,025 in FY 10. 4,025 Americans killed while performing jobs more dangerous than slicing, dicing, and looting companies. Until that number is 0, Mittens, I guess we need regulations.
- dubyadoubte
April 30, 2012 at 2:43pm
Jeff, if a person without a pension needs roughly 10X their salary to retire, then when do you propose a person first hit the milestone of having 6 months of salary in savings? If you save 10% of your salary each month, then after 5 years of working you should be about there. Which means mid to late 20's. At that point, you can self-insure unemployment and save an extra 1% per year, which is absolutely huge. Over a life time, it's several hundred thousand dollars for most. I know, financial responsibility can be such a novel concept. The problem with liberalism is that you need 1% here and there for everything, and and some point you make it impossible for a person to actually control their own destiny. But of course, I understand that is what you want: Total dependence on the government. I get it. Because in your mind, the masses are too stupid to take care of themselves.
- seattleeng
April 30, 2012 at 2:57pm
good lord seattle, ok, say you force people to save the money. What is to prevent people from withdrawing it for another reason, like buying a home or car? Or are you saying that people can only withdraw it if they lose their job? You are essentially holding their money for ransom. You have to lose your job to get your own money. And who does the holding? Wall Street? The Government? Hell, if I had 3 or 4 years of that kind of unemployment sitting around I would line up to get laid off first just so I could get my own money and then I would not work until I got it all. Talk about disincentives.
- blackton
April 30, 2012 at 3:14pm
Private unemployment accounts sound like a good thing until you realize that there are a lot of people living paycheck to paycheck and can't save anything, much less put enough away for an extended downturn. (Same goes for the idea of health care savings accounts.) Helping these people who have made no bad decisions requires a wealth transfer, which is anathema to today's Republican Party. (And the same can be said regarding health care.) The "uncertainty" argument is a non-starter because it doesn't tell you which policies should be the certain ones. We'd have certainty if Romney just agreed with everything Obama proposed, but I doubt Romney would go there. Republicans in Congress have been touting the dangers of uncertainty for over a year, yet they create uncertainty by refusing to compromise and setting up the crises they say they abhor. So there are things they value far more than mere certainty. As for some secret plan, Romney wins only if Republicans do pretty well this cycle. If they do pretty well, then they'll do well in Congress too and the result will be a very conservative legislature. I doubt any secret plan for immediate economic intervention would stand much of a hope getting through, so I think such a plan, if it exists, can be disregarded.
- dsimon
April 30, 2012 at 3:17pm
the masses are too stupid to take care of themselves. No, it is you who think the "masses" ie the American people, at too stupid. I knew a guy who spent years paying into he and his wife's insurance, they were both still fairly young and the guy had to do some renovation on his house so he cashed in his wife's life insurance, lo and behold she dropped dead after work in her company parking lot. Unexpected shit happens all the time, things which would overwhelm most people. And what the hell is your point anyhow? Get rid of all insurance? Maybe you should get rid of life, health, fire, accident insurance and prove to the world how you can "take care of yourself" Honestly, do you write such ridiculous things just to provoke? Romney's idea is totally idiotic.
- blackton
April 30, 2012 at 3:23pm
seattleeng: "I understand that is what you want: Total dependence on the government. I get it. Because in your mind, the masses are too stupid to take care of themselves." I hope this is my only response to this subject because it's probably useless to argue. Over and over, the response has been that that's not what people believe. It's that there are lots of people who make the right decisions but who still cannot afford health insurance, or sustain themselves through an economic crisis, and through no fault of their own. If the market provides for a lot of minimum wage jobs but few high paying ones, should we just accept that outcome? Is that the fault of those who have to take those low-paying jobs? Is that a good result for our economy? Our society? (There was a time when even conservatives supported things like the earned income tax credit--indeed, it was their idea.) Now, perhaps one could argue that intervention in market outcomes is detrimental no matter what. People can disagree. But there is no evidence, none whatsoever, that those who disagree instead want "total dependence on government." It is, simply, an assertion not based on any fact. So can we discuss policy without making unwarranted--and false--assumptions about motivation?
- dsimon
April 30, 2012 at 3:25pm
I recommend the other Jonathan's feature article in yesterday's New York Magazine (http://nymag.com/news/features/paul-ryan-2012-5/), which focuses on the enormous gulf between Paul Ryan the legend and Paul Ryan the actual person. Change the references to Romney in this Jonathan's article to Paul Ryan and the two articles, like the authors' names, are indistinguishable. I'm about convinced that Romney and Ryan aren't real people, or at the very least, aren't earthlings.
- rayward
April 30, 2012 at 3:34pm
Right, this about people saving is fine if you have a big enough salary to leave something left over. A lot of people simply DO NOT. Really, everybody should try living on minimum wage before preaching at us.
- Sophia
April 30, 2012 at 3:56pm
Seattle, I propose that we keep our present system of unemployment insurance because it works, and seriously helps people deal with what would otherwise could be a catastrophic situation. This is a case where individualizing the risk is really a stupid idea. Then I propose that we stop trying to divide people into the categories of "responsible and deserving" and "irresponsible and undeserving", although I realize that is your specialty and a major obsession of today's right wing. Keep a basic safety net and let people decide for themselves how much they want to save for lesser crises. That's what liberals actually want, not total dependence on government.
- JEFF FREY
April 30, 2012 at 4:01pm
Jeff, current unemployment does not work. It has massive solvency problems. Most state UI trust funds are broke are funded by federal loans that will never be re-paid. This is not just due to the downturn. It is a structural problem. Same with student loans. The default rate on student loans says that the loans should require a 6 to 9% interest rates. The ponzi schemes cannot go on forever. Sophia writes: "Really, everybody should try living on minimum wage before preaching at us." When I was a cook I managed to save 10%. Hint: You do without. I know, a novel concept. dsimon writes: " It's that there are lots of people who make the right decisions but who still cannot afford health insurance, or sustain themselves through an economic crisis, and through no fault of their own" Of course. And we shoudl help them. But that is not what is at issue here. What is at issue is whether or not the government should help someone that makes repeated poor choices. According to Nielson, 60% of our population aged 25-35 and earning $15K to $35K per year own a smartphone with a data plan. They are poor, they are adults. And yet they have a very expensive phone and data plan. Something that NOBODY had 10 years ago. Now, assume for a moment that this $1000/year expense is purely frivolous, and assume this person is receiving $1000 in government aid (food stamps or other). If they have $1000 to purchase this frivolous expense, doesn't it mean that BY DEFINITION they were paid at least $1000 too much in federal aid?
- seattleeng
April 30, 2012 at 5:07pm
blackton writes: "And what the hell is your point anyhow? Get rid of all insurance?" Absolutely not. Insurance should cover life altering events. Loosing a job for 6 weeks is not a life altering event if you have >6 months of money saved. An everyone in their late 20's shoudl have 6 months saved regardless of how much you earn. Someone that is 40 shoudl have 4-5 years of salary saved. Someone that is 50 should have 7-8 years of salary saved. Someone that is 65 shoudl have 10 years of salary saved. The COST to get unemployment insurance--1% of your life's earnings--is massive. Paying so much for something that is so easily had through savings is a joke.
- seattleeng
April 30, 2012 at 5:13pm
seattle says "a person without a pension needs roughly 10X their salary to retire, then when do you propose a person first hit the milestone of having 6 months of salary in savings? If you save 10% of your salary each month, then after 5 years of working you should be about there" About where? The retirement point or the 6 months of salary? Say a person, oh I don't know. A young healthy, gal named Sally just out of college lands her first real paying job as an assistant copy editor working at a small-time fashion magazine in NYC. She's hit the big time at $45,000/yr before taxes. And since salaries have flat-lined for non-executives the last 20 years, we'll presume it will take 5 years of working overtime, weekends and evenings before she sees a raise other than the occasional Christmas gift-certificate bonus and office party. Her employer doesn't offer health insurance or a retirement package. But she feels luck to just have a job because her other friends can't find any despite being talented and hardworking. So she's responsible, and saves 10% of her yearly salary. Based on the Seattle fiscal responsibility retirement/self-unemployment insurance & catastrophic health insurance plan. After 5 years she should have saved $22,500. Well on her way to the $450,000 she need to retire. She only needs 95 more years of saving to reach that goal. Out of her $2700 she brings home each month after State & Federal taxes are extracted at 28% tax rate - Sally pays $1200/month for her share of the small "two" bedroom apartment in Brooklyn she shares with another girl. $1500 left, she pays $350 for her student loan, another $150 for the credit card she maxed out using to pay her way through college, $180 in utilities (electric, gas, cable, internet), $50 for her catastrophic health insurance, another $250 for food and entertainment (cooking a lot of beans and rice), pays another $50 a month for the birth control that isn't covered by her insurance, $104 for her monthly subway pass. Finally, she can start paying for those three legs of the Seattle retirement stool. 6 months of her salary in savings ($375/month) as her unemployment insurance, 10% of her yearly salary into "retirement" ($4500/year), and $250/month into HSA savings to cover the $3K deductible on her plan. But since she's only got $366 dollars left after covering all of her expenses which one will she choose? If she chooses the monthly savings does that count towards retirement? If she doesn't put money into her HSA and she has an emergency she can't cover her deductible. What to do? Does she split that $366 dollars equally between the three legs of the Seattle plan? Why at that rate she'll have to work 3,688 years before she's ready to retire with 10x her salary, 11 years to save up the 6 months of salary in case she gets laid off, and only 2 years to save up enough for her deductible. Of course I'm just speaking hypothetically of course. I think the only way we can teach these ungrateful folks who might want a bare-minimum safety net some is to simply tell them to suck it up and stop being a hot, financial mess.
- singlspeed
April 30, 2012 at 5:17pm
Given the types of politicians he's been associated with I'm less inclined to believe Glenn Hubbard the economist on the economy than I am to believe Glenn Hubbard the former Braves second baseman.
- cspencef
April 30, 2012 at 5:26pm
"3688 years" should read "307", forgot to divide out for years. But my point still stands.
- singlspeed
April 30, 2012 at 5:38pm
Singlespeed writes: "bout where? The retirement point or the 6 months of salary?" The 6 months of salary. Singlespeed, I could make the exact same list of why $500K for a stock broker living in NYC isn't enough. Do you have any idea how much private schools are these days? Sounds arrogant, yes? But that is exactly how your $45K earner sounds to the farmer in Africa who has lost 2 kids due to dirty water. Or to the $22K farmer living in Iowa that has never been on an airplane or left his home state. Let alone go to college. The fact is, the $45K earner you note is among the richest 1% in the entire world. If she cannot make it work, then she's a fool. The government has no more to give. Period. You can take a few more bucks from the wealthy, but even if you expire the bush tax cuts on the wealthy it's on $4B per year. That is pocket change. It does not change the plight of your $45K earner at all. So where do you propose this comes from? Now, the $45K earner, with 6% interest per year, will retire at age 54 with 10 years of salary if she can save 10%/year. If she works to 65, she'll retire with $900,000 in the bank. That's 20 years of earnings she's saved! But imagine if instead of saving 10%, she saved 11% because she didn't have to pay unemployment. Then she retires with an extra $100,000 in the bank. A cool million. See how much that 1% of unemployment costs you in the end? Most people never use it. And if they do, they only take $5,000 or so in benefits. But you pay $100,000 for that privilege. Instead, what Romney is advocating is that we all save it and self-insure ourselves. Brilliant. Sure, we'll need to provide a little help to the young person just starting out that hasn't had time to amass their safety net. PS. The 45K earner is needing to save $375/month to ensure a wonderful retirement. And iphone + data plan is about $100/month. Cable is $50. A nice dinner out for the month is $150. 3 very harmless expenses for our $45K earner. But they are the difference between a wonderful retirement and a miserable retirement. Does this make sense? Now, if the $45K earner cannot skip these luxuries for her retirement, why on earth should I have to pay for her retirement??? Aren't you really just asking me to pay for her iphone, a nice dinner and cable every month?
- seattleeng
April 30, 2012 at 7:04pm
PS. There is a book that explores the differences between wealthy and poor called "The Millionaire Next Door" The common factor between the rich and poor is spending versus saving. There are high rollers that are broke. And there are your $45K earners that are millionaires. It has nothing to do with your education. Your job. Your luck. It comes down to the savers versus the spenders. This is such an important lesson. But I think most of the 20-somethings today have no clue how much $50 here and $50 there hurts them. The #1 trait of millionaires is that they live far, far, far below their means. What is the difference between a basic $50 feature phone plan and a $100 cellphone plan? At first blush, you think "eh, it's only $50/month. Plus, I get a cool phone that shoudl help me get laid." But that is a $600 per year difference. Over a lifetime when interest is factored in, that is $140,000 that you don't have because you wanted the latest/greatest in a phone each year. Such a simple decision: Do I make do with a with a lesser phone and save the difference to ensure I have an extra $140,000 at retirement? And most don't even give it a second thought. 60% of poor people have a smartphone instead of featurephones. That means somebody other than the poor person must make up the shortfall in the poor persons retirement. Who should that be? Again, is it right to ask the $80K earner to subsidize the $40K slacker? I'm sure you love to think it will be the $500K earner subsidizing the $40K slacker. But the law of large numbers says it won't be. There aren't enough $500K earners.
- seattleeng
April 30, 2012 at 8:06pm
Why is that every time anyone counters your savings plan you bring up the Sudanese dirt farmer as comparison? The dirt farmer is 10x richer than a Tarahumara indian in Mexico. That's comparing apples to oranges. Now we can compare the stock broker making $500K a year living a similar lifestyle in NYC and I suspect he would make out a tad better than Sally does. But how on earth, from my post do you start conflating a person's ability or inability to save based on your retirement plan with requiring Jay'z pay for this girl's retirement? My example was simply to point out that, despite your particular experience, I know folks who, try as they might are not going to save $1million bucks in 30 years on $45K a year. Even an AMEX savings account at 0.9% APY would net a person $156k by the over 30 years. A nice chunk of change but not the numbers you're talking about. Again, Seattle. Let's say our gal Sally saves 10% of her $45K salary a year. She puts it into an IRA that might give her a solid 6% ROI for the life of the IRA. She might hit that number. I'm not saying she can't do it, but to imply that a person making $45K a year in the NYC is going to retire as a millionaire seems a bit laughable considering all of the things (stupid and wise) that people do with their money. But I suspect you prefer everyone live the aesthetic life of a monk until they retire before accepting the fact that not everyone has the financial acumen and singular will you exhibit. Sally does everything you've asked except she splurged on stay-at-home entertainment (cable) and has a phone with GPS but only has enough at the end of the month to put something of significance into the self-supporting 3-legged stool you sold her. Does she take her remaining $366 dollars and invest only in her IRA? Put it in the HSA for the catastrophic $3K deductible she has to carry? Does she put it in the bank for her 6 month's emergency nest? She has 3 choices. Which one does she make? Does she split her monthly largesse over those three legs equally? If so, it takes 3x as long to reach the tenable goals you've set for her. That's what I was trying to point out. If we want to encourage folks to save it has to be done automatically. In other words, you don't give Sally a choice about putting 10% of her salary into an IRA every month. It's automatic unless she "opts" out. A recent study was done that showed many people would prefer the US government "hold" their tax return at the end of the year because it acts as an automatic way for them to save. It's not as if the majority of folks don't want to be self-sufficient or don't try to be but many don't have the tools to help themselves. So when I hear some people on the Right make blanket statements like "if folks just sucked it up and stopped wasting their money they could be rich I tell you. Rich!" I just have to shake my head. Even folks with discipline can tell themselves to take that extra $50 from their luxury iphone bill and put it towards their savings but they don't. They use it elsewhere, so if folks like you and Romney want to make everyone self-insured, saving scions of the future then it has to be done in, dare I say, coercive way. Kind of like a mandate!
- singlspeed
May 1, 2012 at 1:14am
singlespeed writes: "She might hit that number. I'm not saying she can't do it, but to imply that a person making $45K a year in the NYC is going to retire as a millionaire seems a bit laughable considering all of the things (stupid and wise) that people do with their money." If you're $45K earner in NYC has an iphone, enjoys one moderately nice dinner per month, and spends $100 on something "frivolous" like a new pair of pants or a top every month, then yes, those 3 items alone are pretty much the barrier to her retiring with a lot of money versus with no money. And given that 60% of poor people have a smartphone, I'll bet she does too. I know you want to make this complicated. But it really is that simple. Save 10% of what you earn, and you will retire a millionaire. The problem with the US government holding our money (in the case of SS) is that they deliver a wonderful rate of less than 2%. You can look this up. They compute the ROI every year and publish it. And yes, for your $45K earner, she is paying 15% into SS, far in excess of what she needs to retire a millionaire. But instead of retiring a millionaire, you retire with (effectively) $350K. The governmetn has literally cheated her out of $600 to $700K of retirement. See the problem? And you want to EXPAND these programs? More SS? More unemployment insurance? My god, how much more of a penalty can your $45K earner tolerate?
- seattleeng
May 1, 2012 at 1:53am
Let me try this again. I think it is SeattleEng who is trying to make things complicated. Insurance is a very different financial instrument than savings. Risk spreading is a sound financial strategy for events that are unpredictable at the individual level but predictable for a large pool of people. Unemployment is such an event. Severe illness is such an event. An automobile accident is such an event. I don't give up my kid's summer camp when ever one of the kid's has to go to the ER with a broken bone. Why should I have to give it up if, in normal economic times, I find myself between jobs for a few months? Insurance makes sense. Savings are part of another sound financial strategy. Savings is ideal for a predictable event, like retirement or one's childrens' education. But why should I imperil those savings with the risk of unemployment, when insurance makes sense. Why should my retirement savings be partially depleted when I am unexpectedly unemployed? I don't let them get depleted when I face a similarly expensive and unpredictable medical event or when my car (which cost's a half-year's salary) is stolen and wrecked. SeattleEng's real problem might be that he does not like the fact that UI is organized as a government program. One answer to that is, "So what?" But another, better, answer is that the unpredictability of which firms or even which entire industries will fail dictates that the insurance pool draw upon the broadest possible base. The transaction costs of assembling all firms into one base are significantly lower for a centralized authority like state government than it would be for private insurance companies. Government UI coverage is pretty minimal. And that is why you see so many private insurance companies jumping into the Supplementary Unemployment Coverage market. What? You don't them? Gee, on closer examination, neither do I. Seattle Eng wants to deprive people of the benefit of risk-spreading, and force them to avoid deplete savings they may not even have, why exactly?
- ragbatz
May 1, 2012 at 10:12am
seattleeng: "even if you expire the bush tax cuts on the wealthy it's on $4B per year." That is incorrect. Allowing the Bush tax cuts to expire on incomes over $250k is $700 billion over 10 years, so that's an average of $70 billion a year. http://www.nytimes.com/2010/08/11/us/politics/11tax.html I think you've confused that with the Buffett Rule, which would not raise as much revenue (but still should be done out of fairness considerations). "The government has no more to give. Period." We are a low-tax nation compared to almost all of our peers. One might argue that that's a good thing, but it's simply not true that there is no room for a significant increase in revenues, period.
- dsimon
May 1, 2012 at 10:37am
ragbatz writes: "SeattleEng's real problem might be that he does not like the fact that UI is organized as a government program. One answer to that is, "So what?"" No, I do not like the fact that 1% lifetime earnings premium is charged to deliver such a tiny benefit, especially when said benefit could be had by saving a $4 to $5K in a bank account. It should also make you sick that the government mandates a 15% forced retirement premium on every worker, and instead of giving them all the benefits that come with that massive premium, the government carves off a thin slice and tosses that to the worker. As I said, the poor cannot afford too many more of these wonderful government programs. dsimon writes: "That is incorrect. Allowing the Bush tax cuts to expire on incomes over $250k is $700 billion over 10 years, so that's an average of $70 billion a year" Yes, sorry, you are right. I've noted this before numerous times myself. For the $4B, I was thinking of the Buffett rule. But the point remains: $70B divided among 100M families is $700/family assuming it was transferred with 100% efficiency as cash. That does not change the end game at all for the $45K earner. "We are a low-tax nation compared to almost all of our peers. One might argue that that's a good thing, but it's simply not true that there is no room for a significant increase in revenues, period." I didn't say we couldn't be taxed more. I said the government has no more to give. Which you must agree with given we are in the red $1.5T each year. Increasing taxation to EU rates would require broad tax increases on our working poor and middle class, and yes, the wealthy. But there is no way the masses in this country would stand for this. Effective tax rates on the working poor would need to rise from around negative 5% to around 15%. And what will they get for it? Similar for middle class, but their effective rate would rise from 0% to 20%. Therein lies your problem. So, we are left with nothing left to spend. Our government has no more money. Nor should they get it.
- seattleeng
May 1, 2012 at 11:15am
PS. Ragbatz, the ideal program would be something like a 15% forced retirement program, where certain life-events, such as being laid off, or putting together down payment on your home, etc, could allow you to tap into that fund early. Today, for example, you can borrow from your 401K under certain conditions. Interest rates are low because the money is secured. At 15% forced savings and 5% ROI, a $45K worker would have $75K saved from the ages of 22 to 30. That means if they need a new car, they can walk into a bank and with a signature they can borrow against their retirement and get a loan. Limits need to be set, of course. But the key here is making sure the workers can leverage the pile of money they are accumulating. At the age of 30, our $45K worker has $75K in retirement saved and they no longer need UI. They are effectively self insured. If they get laid off, they should be able to withdraw up to 6 weeks of 50% salary without any questions. For our $45K worker, that means should we tap into $2500 of her $71K. Very reasonable. For the next 6 weeks of unemployment, it could be 40% of salary, etc. And if you don't have anything accumulated because you haven't been working very long, then the gov can backstop that. But that would be very, very rare. These are the types of things that only government can setup. These are innovative and demonstrate a value-add government that learns how to foster and get out of the way, only stepping in if there is a need. Contrast this with the daily dependency our government encourages today, where the government is the center of the dependent's universe, and all monies flow through the massive beast, with a profit skimmed on each transaction to feed the fat pensions of the government worker.
- seattleeng
May 1, 2012 at 11:33am
"Increasing taxation to EU rates would require broad tax increases on our working poor and middle class, and yes, the wealthy. But there is no way the masses in this country would stand for this." A cite to support this unsubstantiated assertion might be helpful. A recent poll showed that 70% supported everyone's taxes going up. http://www.nytimes.com/interactive/2012/02/12/us/relying-on-government-benefits.html They were split as to whether this should be a major or minor factor in getting our fiscal situation in order, but the assertion that there's this widespread opposition to broad-based tax increases may simply not be true. "I said the government has no more to give. Which you must agree with given we are in the red $1.5T each year." How much of that is structural and how much due to current and temporary economic circumstances? Can it be that we can never return to those oppressive tax rates of the (gasp) Clinton years that would take care of much of the problem? This is like saying I can't get anything for you off the top shelf because I refuse to raise my arm above my shoulder, even though I've done it before. "Our government has no more money. Nor should they get it." We'd have another $100 billion a year just by getting rid of the home mortgage interest deduction which disproportionately benefits the wealthy who don't need it and has no confirmed effect on home ownership which is it's supposed purpose. Even conservatives should support its gradual elimination. And that's only one program. Whether government should "get" the money is debatable. Whether the government "has" no more money--or at least is incapable of raising substantially more funds--is not.
- dsimon
May 1, 2012 at 11:37am
Seattle, You keep skipping past my question about which choice Sally should make with regards to savings except to note that if she gives up the iphone and skips a nice dinner once a month she can do it. Where in your world of math does a person making $45K a year manage to retire as a millionaire in 30 years of saving 10% of their salary? The math doesn't work. The highest earning savings accounts earn 0.9% which means in 30 years she's saved $160K. For Sally, the SS ROI of 2% that you snicker at is twice that of the highest earning savings account. But I agree with you that people shouldn't rely solely on SS for their retirement. But the purpose of SS is to act as the third leg. For Sally, she probably sees the SS as a secondary safety net. Her aging parents utilize it and she's thankful that for the time being she can work without the anxiety of having to care for them and support their high medical costs on her ballin' salary. In order for Sally retire as a millionaire in 30 yrs., saving the old fashion way in a regular old savings account she would have to save $30,000/year. I guess if she gives up the iphone she can make it. Let's say Sally takes your advice, lives in SRO hotel (a step up from a half-way house) and pays a modest $400/month rent, ditches her iphone plan, and eats only white rice and water for the next 30 years. She can retire as a millionaire. But for those 30years she's required to live a subsistence lifestyle to meet your requirements of the "responsible" citizen and resigned herself to the fact that the only joy she will have in life is the "afterlife" of retirement. But as I said, Sally's responsible and puts 10% in her IRA and after 30 years she gets close to retiring as a millionaire. But based on her spending, that's the only thing she can save for. However, your plan requires her to self-insure, save for retire and cover her entire medical expenses with a catastrophic insurance plan with a high deductible. Holding everything constant, your hypothetical works if Sally spends only enough money to eat and shelter herself. Any other expenditures are frivolous. While I applaud your will to deny any pleasures in life while in the lifeless pursuit of millionaire-hood, not every person operates that way. That's the reality. Where in MY posts did I say I wanted to EXPAND SS and make everything in life free and paid for on the backs of Seattle, Jay-z and myself? I never did. I simply point out that despite your predilections for the libertarian world of economic freedom, we live in a world that currently doesn't operate like that. Now if we want to pursue the notion of every person taking responsibility for themselves with no safety net period then let's have the discussion about what the positives and negatives would be. The social contract of social stability and cohesion becomes moot when society decides that to help those who are unable to help themselves is not necessary at any level. If that's the road we are willing to take, then by all means let's stop talking around the issue and just say it. Since you think SS is the bum deal that it is, how about we take the privatization route and starting today all funding of SS stops. Full stop. Even for those who paid in. Why should I continue to pay for some retired engineer's lavish lifestyle on Puget Sound when he didn't save properly and now depends on SS disability to get by? Another option is if you make over a certain amount you get no SS benefit period & pay none. What level of income would you put the floor at? I say we scrap the system and then mandate, through stiff penalties, that every citizen is required to save 20% of their earnings every year without fail. That way we can rest assured that everyone retires a millionaire and can pay for their health insurance without burdening or spreading the risk to other people. As I mentioned, the only way to ensure that everyone saves what they're supposed to and not live frivolous lifestyles and live only simply is by mandating they save. Otherwise it's just wishful thinking that they'll save. If they're not saving now, what makes you think dismantling the social safety nets will encourage savings rates?
- singlspeed
May 1, 2012 at 12:57pm
DSimon writes: "A cite to support this unsubstantiated assertion might be helpful" Gallup says 93% of americans say their taxes are "about right" or "too high", which means not very many favor raising them. Seriously, EU rates require a $50K earner to pay $12K to $15K in taxes. They are GETTING money from the government today. Do you really think the $50K earner will eagerly sign up for a $15K bill? No they won't. www.gallup.com/poll/153896/Less-Half-Americans-Consider-Tax-Bill-High.aspx Dsimon writes "How much of that is structural and how much due to current and temporary economic circumstances?" Since we were bleeding in 2006/7 to the tune of $500B, and since SS and Medicare have gotten worse, and we're currently at $1.5T, I'd say 50% structural and 50% due to downturn. DSimon writes: "We'd have another $100 billion a year just by getting rid of the home mortgage interest deduction which disproportionately benefits the wealthy who don't need it and has no confirmed effect on home ownership which is it's supposed purpose." There are a lot of ways to come up with more money. The question is how do you make this all fair, while at the same time ensuring that everyone sees a benefit for working more (from minimum wage workers to CEOs). This is what drives productivity, and it's very important to the health of the country. As the government becomes larger, it makes more sense for everyone to lobby to get "their fair share." And herein lies a big problem: A government that doles out favors to special interest (from poor people to banks) is highly susceptible to lobbying. The lobbying creates special carve outs and rules, which makes the government larger since it needs to enforce those rules. That creates more bureaucrats, which creates more special favors and rules, etc. It is a death spiral. Look to the EU to see where it ends up. Step one is to get rid of all special favors and rules. Simply simplify simplify. That means everything from oil and gas subsidies to EITC. Let's get rid of all deductions and credits. And if we get rid of corp tax, then we can treat cap gains as regular income. Give everyone a $30K deduction, index to inflation, and then everything after that is a flat tax. If we have a shortfall last year, then we increase the tax next year. If people think their taxes are too high, then they scream and fire the folks that did it last year. It's very progressive, very easy to manage. Everyone has skin in the game. Everyone is concerned when we encounter waste. Nobody needs to lobby, because there is nothing to lobby about: the rules are the same for everyone. Of course, if you view the government as a way to covertly transfer hundreds of billions from one group to another, then this simplicity and sunlight is probably repulsive.
- seattleeng
May 1, 2012 at 12:59pm
seattleeng: "Gallup says 93% of americans say their taxes are 'about right' or 'too high', which means not very many favor raising them." Then how do you square that with the NY Times poll I cited? How do we know which view will prevail? It's not legitimate to take two valid polls which conflict and just say the one you prefer prevails. The rest of the post doesn't address the point. We don't have to go to "EU rates" to get a handle on our fiscal issues and provide programs people say they want. There are plenty of options that would achieve that goal without substantial taxes on lower and middle income groups. I came up with $100 billion a year pretty darn quickly. So again, it just seems in error to say that we can't come up with the money. To say that it would be bad policy to provide services is one argument, but to dismiss the option on the claim that there's no money to be had would seem to be plainly incorrect. Anyone can play with these budget simulators to see if the money is really there or not. I managed both goals without doing anything too horrific. http://crfb.org/stabilizethedebt/ (try to stabilize the debt at 60% of GDP by 2018) http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html (close budget gaps for 2015 and 2030)
- dsimon
May 1, 2012 at 3:56pm
DSimon writes: "It's not legitimate to take two valid polls which conflict and just say the one you prefer prevails." Then ignore polls. Did congress extend the Bush tax cuts because they beleived people WANTED taxes raised? No. Polling at the time was very clear: Do not raise my taxes. And it will be the same when it comes up again. Why? Bu let's say the country has an appetite for raising taxes a bit, and let's say back to Clinton levels (repeal Bush). And let's say it happens tomorrow. Then instead of accumulating debt at $1.5T a year, we instead do it at $1.2T/year. And then the economy magically gets better, and we drop back to Bush levels of debt, or $500B/year. Under Bush, a middle 20% earner had a tax rate around 3%. Under Clinton, it was around 5.5%. So, with middle class at 5.5%, we still face $500B shortfall give or take. Now, hold that thought and read on.... Dsimon writes: ' I came up with $100 billion a year pretty darn quickly." Of course. And I could slash $1T of welfare and call it good too. Hell, we'd have a surplus at that point! MY GOD I ROCK! I FIXED A DECADES LONG PROBLEM IN 2 MINUTES! But note I said it has to be "fair". Slashing welfare isn't fair, and slashing a tax benefit that the largest tax payers receive isn't fair either. Of course, this tit for tat is why we are in this mess. Our leaders don't have the ability to actually trade off because they want to keep their pet programs intact. Tell me: what is unfair about a tax system in which everyone gets a $40K deduction, and we all pay a flat rate beyond that? If the flat rate is 25%, then that means a $50K earner pays $2500, or an effective rate of 5% (about the same as under Clinton), and the $200K earner pays $40K, or 20% (about 2% more than Clinton, they get hit the hardest), and a $2M earner pays $500K or 25% (about the same as Clinton). No deductions, no credits for anyone. It's progressive as hell, and likely revenue neutral. Middle earners pay just a hair over what they paid under Clinton. Buffet pays a hell of a lot more, and million dollar plus earners pay about what they did under Clinton (1% less), and about 3% more (effective) compared to Bush. But to make sure the top 1% are at the same as Clinton, we could jigger the numbers to make it so and help the $200K earner. Likely this would be a second tax rate. I'd take this tax system in a heartbeat. So would Paul Ryan. So would all the Fair Tax folks. Even though they all pay more... Who doesn't like this? You should, since you are keen to get rates back to Clinton. And this does just that for middle class on up.
- seattleeng
May 1, 2012 at 7:23pm
Goddammit, Seattleeng - i've had a gutful of your pompous, sanctimonious crap. Telling the not-so-hypothetical Sally and those at the bottom of the economic ladder in the US that they've got it good compared to the misery of those in Africa scraping by on dirty water, or farmers in Iowa who've never ridden on an airplane? What next, a requirement that the poor step off the sidewalk and doff their hats to their economic betters? Should we start referring to the upper class as "m'lord" and "m'lady"? Balzac had it right: "Behind every great fortune there is crime." How about some social justice, before it's too late? Or would you prefer this modest proposal from the past: eat the rich, and give their loot to the world's poor? That solves more than one problem...
- bonsaibush
May 2, 2012 at 7:56pm
seattleeng: "Then ignore polls. Did congress extend the Bush tax cuts because they beleived people WANTED taxes raised? No. Polling at the time was very clear: Do not raise my taxes." First of all, polls are not to be ignored, or cherry-picked. They may reflect inconsistency among some portion of the public. Perhaps polling that inconsistency can get at the issue. But they shouldn't just be ignored. As for the Bush tax cuts, I know you're not that politically naive. There are other pressures than popular opinion that guide legislative outcomes. If we went just by public opinion, taxes on the wealthy would have gone up long ago; there was massive public support for that outcome. Also, health care reform would have had a public option, and we'd have public campaign financing. Heck, many of these measures have majority support among Republicans. But there are rather obvious other ideological and political considerations at work. "Dsimon writes: ' I came up with $100 billion a year pretty darn quickly.' Of course. And I could slash $1T of welfare and call it good too. Hell, we'd have a surplus at that point! MY GOD I ROCK! I FIXED A DECADES LONG PROBLEM IN 2 MINUTES!" Your sarcasm doesn't address the problem or the solution. I came up with a truly wasteful program where phasing it out would cause minimal harm to the nation and result in substantial savings to the government. You don't bring up anything to dispute it. Instead, you change the subject again by suggesting cutting basic safety net programs which avoids the issue. "what is unfair about a tax system in which everyone gets a $40K deduction, and we all pay a flat rate beyond that?" Seattleeng, we've been through this before, and repeatedly. It's because the marginal value of money is far higher for a low income earner than for a high income earner. I'm not going to go through it again. (And once one concedes the initial exemption, then one concedes the idea of a progressive system--which I define as having upper income earners pay higher percentages, not just higher amounts. The only remaining questions become how many brackets and at what rates. Under your proposal, the doctor earning $400k would pay about the same rate as the hedge fund manager making $10 million, so no, I don't think that's "fair.") But all of these protestation again amount to changing the subject which you have still not addressed despite repeated requests to do so. You say we have no money to fund programs, at least not without drastic tax increases. I've shown repeatedly that things are not so dire. There are plenty of subsidies that can be cut. The military can be trimmed. There are modest tax reforms and revenue increases that can be undertaken. Try out the budget simulators I noted above. You wrote "The government has no more to give. Period." But I think the evidence is pretty clear that there are multitudes of options that refute that claim. You can argue that going that route is a bad idea from a policy point of view, but changing the subject doesn't relate to the issue of whether the money is available or not.
- dsimon
May 3, 2012 at 10:49am