[I am presenting the other side of the tax coin. Can you weigh in on it? He recommends “That’s a broad hint that one sensible way to overcome our difficulties would be to revert to tax rates more or less as they were under President Clinton. That single step would solve three-quarters of the deficit for the next five years or so.” Could someone do the research and tell us how much revenue would result assuming such a tax increase doesn’t slow the economy. That tax increase would affect everyone and not just the rich. He is saying raise everyone’s taxes rather than cut their entitlements. Ted Belman]
By NICHOLAS D. KRISTOF, NYT
That ugly truth looms over today’s budget battles, but politicians have mostly preferred to run from reality. Mr. Obama’s speech was excellent not only for its content but also because he didn’t insult our intelligence.
There is no single reason for today’s budget mess, but it’s worth remembering that the last time our budget was in the black was in the Clinton administration. That’s a broad hint that one sensible way to overcome our difficulties would be to revert to tax rates more or less as they were under President Clinton. That single step would solve three-quarters of the deficit for the next five years or so.
Paradoxically, nothing makes the need for a tax increase more clear than the Republican budget proposal crafted by Representative Paul Ryan. The Republicans propose slashing spending far more than the public would probably accept — even dismantling Medicare — and rely on economic assumptions that are not merely rosy, but preposterous.
Yet even so, the Republican plan shows continuing budget deficits until the 2030s. In short, we can’t plausibly slash our way back to solid fiscal ground. We need more revenue.
Kudos to Mr. Obama for boldly stating that truth in his speech — even if he did focus only on taxes for the very wealthiest. I also thought he was right to say that we need spending cuts — including in our defense budget. Mr. Obama didn’t say so, but the United States accounts for almost as much military spending as the entire rest of the world put together.
As I see it, there are three fallacies common in today’s budget discussions:
• Republicans are the party of responsible financial stewardship, struggling to put America on a sound footing.
In truth, both parties have been wildly irresponsible, but in cycles. Democrats were more irresponsible in the 1960s, the two parties both seemed care-free in the ’70s and ’80s, and since then the Republicans have been staggeringly reckless.
After the Clinton administration began paying down America’s debt, Republicans passed the Bush tax cuts, waded into a trillion-dollar war in Iraq, and approved an unfunded prescription medicine benefit — all by borrowing from China. Then-Vice President Dick Cheney scoffed that “deficits don’t matter.”
This borrow-and-spend Republican history makes it galling when Republicans now assert that deficits are the only thing that matter — and call for drastic spending cuts, two-thirds of which would harm low-income and moderate-income Americans, according to the Center on Budget and Policy Priorities. To pay for tax cuts heaped largely on the wealthiest Americans, Republicans in effect would gut Medicare and slash jobs programs, family planning and college scholarships. Instead of spreading opportunity, federal policy would cap it.
• Low tax rates are essential to create incentives for economic growth: a tax increase would stifle the economy.
It’s true that, in general, higher taxes tend to reduce incentives. But this seems a weak effect, often overwhelmed by other factors.
Were Americans really lazier in the 1950s, when marginal tax rates peaked at more than 90 percent? Are people in high-tax states like Massachusetts more lackadaisical than folks in a state like Florida that has no personal income tax at all?
Tax increases can also send a message of prudence that stimulates economic growth. The Clinton tax increase of 1993 was followed by a golden period of high growth, while the Bush tax cuts were followed by an anemic economy.
• We can’t afford Medicare.
It’s true that America faces a basic problem with rapidly rising health care costs. But the Republican plan does nothing serious to address health care spending, other than stop paying bills. Indeed, Medicare is cheaper to administer than private health insurance (2 percent to 6 percent administrative costs, depending on who does the math, compared with about 12 percent for private plans). So the Republican plan might add to health care spending rather than curb it.
The real challenge is to control health care inflation. Nobody is certain how to do that, but the Obama health care law is testing some plausible ideas. These include rigorous research on which procedures work and which don’t. Why pay for surgery on enlarged prostates if certain kinds of patients turn out to be better with no treatment at all?
Ever since Walter Mondale publicly committed hara-kiri in 1984 by telling voters that he would raise their taxes, politicians have run from fiscal reality. As baby boomers age and require Social Security and Medicare, escapism will no longer suffice. We need to have a frank national discussion of painful steps ahead, and since I’m not a politician, let me be perfectly clear: raise my taxes!?
Dr.Mitchel PHD Economist wrote
So he has a major point. We are going into an inflationary period. Inflation is a tax itself. Throw government taxes into the soup and people will be enslaved with a burden that could incite riots. Wait a second…Isn’t that happening in the Middle East?
I’m sick of my posts being lost.
Socialism is a proven failure. Why is it still being promoted?
yamit #4 gets it correct although he does not need to cite Krugman. Douglas Holz-Eakin is a better source as he published academic papers proving that supply-side does not work. All the Bush43 tax cuts were part of that “starve the beast” policy from the Club for Growth – drive up deficits so big that America can return to 1924.
anyway, since exposure to Kristof (and Krugman) is bad for my health, I would just note that all of the Bush43 tax cuts should have ended on schedule. The reason they had that expiration date was because, at the time, Alan Greenspan only gave his blessing if his then-forecast of dangerous surpluses came true.
yes, spending is also out of control, but not because of Social Security. ALL of the FICA tax surpluses that Reagan put into place were stolen by subsequent Congresses, who included those planned surpluses to hide the real deficit, even during the Clinton years.
and Medicare is already broken, by Obama and the Dems. Ryan’s plan is NOT the solution. I am personally applying for the death panels to start-up because I can no longer manage my complex medical conditions when Medicare refuses to allow the doctors (who still take their payments) to do simple blood tests. Lipid panel? New rule: once every five years. have a heart attack!
let all the Bush43 tax cuts expire, except for how dividend and cap gain income are treated, and put Mitch Daniels in charge of cutting everything else.
Medicaid is what is actually bankrupting the states. and Defense spending has more than doubled since 9/11/2001. USA should start charging for military services.
just try to get anyone to stop the subsidies for corn ethanol…
a pox on all of them, left and right. the rest of us are too depressed to do anything except google “cute puppy” images
Why We Need a FAIR Tax?
I agree with Yamit #8 and most of Shy Guy #9. A flat tax is fine, if it includes a personal exemption that truly reflects the cost of living.
On the spending side, the biggest burden seems to be the military, which gobbles up half our federal discretionary spending. It’s ridiculous that a cash-strapped country such as the US should bleed so much life into the military coffers, to buy the most advanced aircraft, rockets and ships, only to be brought to its knees by a handful of Arabs with box cutters. The US military needs brains, not cash.
My comment was blocked Ted
The economy will be run according to the needs of the Wall St financial interests and banks. Obama is their boy even more so than GWB.Obama’s New Chief of Staff a Top Banker With Strong Chamber Ties:
“Obama named Bill Daley his new chief of staff… when he was JPMorgan Chase executive…. Daley has strong ties to the Chamber of Commerce, which opposed the financial reform bill that was a cornerstone of the administration’s agenda last year.
From Kevin Connor, co-director the Public Accountability Initiative, a nonprofit research organization:
‘From 2005 to 2007, he co-chaired a Chamber of Commerce committee on financial (de)regulation. The ‘Commission on the Regulation of Capital Markets in the 21st Century’ eventually became the Chamber’s Center for Capital Markets Competitiveness, which played a prominent role in attacking derivatives regulation and consumer protections last year”. Daley also signed on to a March 2009 Chamber manifesto on ‘Restoring Confidence in US Capital Markets,’ the Chamber’s opening PR move in the financial reform debate.’
The new chief of staff has publicly opposed the concept of an independent consumer financial protection agency….”
Now, for the icing on the cake, Obama’s pick to replace Larry Summers as his top economic advisor is Tim Geithner’s right-hand confidant, former Goldman executive and Rubin disciple Gene Sperling. Sperling was also a Clinton-Rubin-Summers compadre who held this same position under Clinton, playing a direct role in implementing the very policies that fueled our current crisis.
Daley was Clinton’s NAFTA czar (job exporting specialist) and he even has deep ties to the organization responsible for creating the explosion in CEO pay, all-time record-breaking inequality of wealth and shipping millions more jobs overseas.
Gene Sperling Made Millions On Wall Street As Economy Tanked
Paul Blumenthal from
the Sunlight Foundation focuses on the ever-spinning revolving door between Washington and Wall Street:
It doesn’t matter whether Republicans or Democrats are in the WH. Both are controlled by Wall St.
I salute this statement. However, the tax hikes are trivial compared to government expenditures. The Fed is out of control. Its growth is cancerous.
Look what can happen when you do things the right way: Sandy Springs, Georgia: The city that outsourced everything
That’s at the miniscule municipal level. Imagine it at the national level. Aren’t people tired of ten thousand dollar toilets for the military?
Follow through on getting back a government designed to work for the people and no one will be thinking of taxes any more.
Again: slaughter the pigs.
BTW, I’m for a flat tax – rich or poor. Sample annual filing form here. Of course, that would mean reducing the entire IRS nationwide structure by about 95%. What a horrible thought!
I’m no fan of Krugman,but even he gets some things right. Lets say that even taxing more the rich who have millions of legal loop holes by which to reduce or even eliminate their tax burden the so-called middle glass doesn’t. The poor don’t pay income tax some (40% of American wage earners.) The link you produced has incomplete and selective statistical data to support his premise.
Tax cuts have had no positive effects on money supply ( real cause of inflation) and budget deficits. The crisis that exists today is the direct results of years of overspending and borrowing to support an unsustainable system of consumption without production, Coupled with near zero savings. Tax cuts have shown to have either marginal or no effect on tax revenues and those who benefited most were the top 15% of income earners especially the top 1%. There is no case for even trickle down effect to support those cuts.
Any tax increase must be supported by serious cuts in government spending with concurrent incentives for savings by the public like higher interest rates.
An end to fiat currencies would go a long way to restructure American and world economies. There is no way around it Americans must have their standard of living reduced and the American economy must be restructured in line with the current realities. Don’t worry about the rich most of their wealth is derived not from income/wealth, but from investments.
The only problem I have with most of those who have the most wealth is the wealth to Power ratio. Wealthy have all of the means to assert influence on governments in order to legislate to protect and increase their wealth at the expense of everyone else. So it’s a self interested perpetual system. Remember that income is only a single factor in determining the overall wealth of the wealthy. Taxing is only a way of leveling the income distribution on an uneven playing field and possibly reducing some of the influence and power of the 1-15% of the most wealthy in the society.
I am not into egalitarianism, just a more equitable playing field with as few moral hazards as possible. Housing bubble, Banking/wall st. malfeasance etc.
I remarked back a month or so that the Republican conservatives/tea party have built their own potential defeat in the next elections by promoting small fiscally responsible policies. To make a dent in deficits and bring Federal spending under control they will have to advocate policies that necessarily hurt a large diverse swath of the American public. I haven’t even touched on state and local authority debt. Oil and commodity price rises outpacing income which amounts to a hidden tax and effects the middle class and poor more than the rich who have invested in commodities heavily and will be the big gainers.
Re: trusting the private sector? They first ran to Japan, then to HK, Taiwan, Korea and Singapore. Now China. Their loyalties are to profits and stockholders not the national interests. GE pays no taxes and neither do a lot of big American Corps. although they show a lot of profitable revenues. This goes to my point that the wealthy through their wealth influence politicians who legislate to secure their own interests and maximize wealth.
America is a semi closed economic and social system were the wealthy get wealthier and the poor get poorer. I use here the wealth index where income is only in most cases an insignificant part.
Here’s what Steve McCann wrote in the American Thinker article
In comparison, Kristoff is saying that if we go back to the Clinton tax rates on everybody, we would raise 3/4 of the deficit or a little over $1.2 Billion. But will such a tax increase hurt the economy and reduce the total tax revenue. So everybody would experience a tax increase. Politically would they favour a tax increase over a spending cut which may or may not affect them.
WSJ editorial: The Presidential Divider – Obama’s toxic speech and even worse plan for deficits and debt
And just for fun:
Mark Steyn: Budget Cuts Priced to Clear!
Wrong again and again, Yamit. What are you going to solve by raising the taxes on the “wealthy”? Even assuming that the tax hike was relatively massive, what do you think will be accomplished?
The problem with Bush’s tax cuts wasn’t that they prevented the government from going into debt. There would have been massive debt in any case.
Gad! You’re resorting to quoting Paul Krugman?!
http://blogcritics.org/politics/article/the-lefts-big-lie-about-repealing/
TheDebate:
The Economists’ statement opposing the Bush tax cuts was a statement signed by roughly 450 economists, including ten of the twenty four American Nobel Prize Laureates alive at the time, in February 2003 who urged the U.S. President George W. Bush not to enact the 2003 tax cuts; seeking and sought to gather public support for the position. The statement was printed as a full-page ad in The New York Times and released to the public through the Economic Policy Institute. According to the statement, the 450 plus economists who signed the statement believe that the 2003 Bush tax cuts will increase inequality and the budget deficit, decreasing the ability of the U.S. government to fund essential services, while failing to produce economic growth.
In rebuttal, 250 plus economists who supported the tax plan wrote that the new plan would “create more employment, economic growth, and opportunities for all Americans.
The Congressional Budget Office (CBO) has estimated that extending the Bush tax cuts of 2001-2003 beyond their 2010 expiration would increase deficits by $1.8 trillion dollars over the following decade. The CBO also completed a study in 2005 analyzing a hypothetical 10% income tax cut and concluded that under various scenarios there would be minimal offsets to the loss of revenue. In other words, deficits would increase by nearly the same amount as the tax cut in the first five years, with limited feedback revenue thereafter.
Cutting marginal tax rates can also be perceived as primarily beneficial to the wealthy, which commentators such as Paul Krugman see as politically rather than economically motivated.
Krugman, Paul (2005-12-23). “The Tax Cut Zombies”. New York Times.
In 2003, the Wall Street Journal declared the debate over supply-side economics to have ended “with a whimper” after extensive modeling performed by the Congressional Budget Office (CBO) failed to support the most extreme claims of supply-side policies. It was also suggested that Dan Crippen may have lost his chance at reappointment as head of the CBO for failing to support supply-side inspired dynamic scoring.
Before President Bush signed the 2003 tax cuts, the progressive, nonpartisan Economic Policy Institute (EPI) released a statement signed by ten Nobel prize laureates entitled “Economists’ statement opposing the Bush tax cuts”, which states that:
Nobel laureate economist Milton Friedman agreed the tax cuts would reduce tax revenues and result in intolerable deficits, though he supported them as a means to restrain federal spending. Friedman characterized the reduced government tax revenue as “cutting their allowance”.
Later analysis of the Bush tax cuts by the Economic Policy Institute claims that the Bush tax cuts have failed to promote growth, as all macroeconomic growth indicators, save the housing market, were well below average for the 2001 to 2005 business cycle. These critics argue that the Bush tax cuts have done little more than deprive government of revenue, and increase deficit and after-tax income inequality.
ECONOMISTS’ STATEMENT
OPPOSING THE BUSH TAX CUTS
It really was Bushes fault, compounded by Obama
Paul Ryan Is Very Disappointed With The President: ‘Demagoguery Not Solutions’
Sen. Marco Rubio on the President’s Debt Speech
If Mr. Kristof’s intelligence is not insulted, he must not be very intelligent. I, however, do have the ability to engage in critical thought and the ability to apply commonsense. Obama insults my intelligence. He pulled those numbers out of his a$$$. He plans to reduce spending by……spending more. His new motto of “shared sacrifice and shared responsibility” equates to forced income re-distribution – pure socialism. His desired authority to raise taxes all by himself is a pure power grab, an attempt to diminish the authority of the House of Representatives in Congress who, by the way, are the only folks even trying to stop his madness. As Obama spoke of all those who would be injured by spending cuts, as he waved the banner of victimhood and as those crocodile tears welled in his beady, little eyes, I realized that Ann Coulter was right – unlike Teddy Roosevelt, the Left today speaks loudly and carries a small victim EVERY TIME.
The Democrats would rather see all of us impoverished than see someone do better than everyone else, regardless of ability, innovation and hard work. The only way they can make us all equal is to make us all poor and that is a price that they are willing to pay. No, wait…..it’s the price they are willing to make YOU pay so they can have their way. Beware!
You need to raise taxes to fill the government’s ever expanding slop trough.
Slaughter the pigs.