Saturday, August 06, 2011
Scoring the downgrade
Who is to blame for yesterday's downgrade of the debt of the United States to AA+? Both parties, going back at least a generation, for lacking the courage to state the obvious: That the financial sustainability of the "entitlement" programs of FDR and LBJ depends on each generation having at least as many productive children per capita as it did. That has not happened. Shrinking families mean that there are too few workers to support the long, subsidized retirements of an American public that has been taught to believe that 40 - 45 years of productive work in a life of 80 years or more is quite enough. We have stopped having lots of children so we need to change the programs, but no federal politician, apart from a few mavericks and the Tea Party crowd elected last fall, is willing to say so, much less actually do anything about it.
The politics of the matter are quite a bit different from the reality. President Obama is going to take the downgrade in the shorts for at least two reasons. First, it happened on his watch, and presidents get the benefit and bear the burden of all sorts of things that happen during their terms whether or not they were responsible. Second, and perhaps more importantly, President Obama has been jaw-dropplingly inconsistent on the question of spending and deficits since the moment he took office. Philip Klein pretty much nails it (bold emphasis added):
Defenders of Obama will attempt to pin the blame on his predecessor, President Bush, and on intransigent Tea Party radicals in the current Congress. But that would leave out the part in between. For his first two years in office, Obama’s party controlled both chambers of Congress – for part of that period, he had a filibuster proof majority in the Senate. During that time period, he and his fellow Democrats could have passed his supposedly ideal, long-term, deficit-reduction package -- one that represented a “balanced approach” between spending cuts and tax increases. It also could have delayed the deficit reduction for several years, so it wouldn’t have affected the current weak economy or the “investments” he considers crucial. Forget about actually accomplishing serious deficit reduction -- he didn’t even attempt it.
When Obama came into office, he argued that we needed deficit spending to boost the economy, so he passed a $800 billion stimulus package. Then, in one of his first supposed pivots to the deficit, he convened a ‘fiscal responsibility summit’ in February 2009. But that actually turned out to be part of a different pivot altogether. It was during that summit that then White House Budget Director Peter Orszag declared, “health care reform is entitlement reform.”
And so, for the next 13 months, Obama spent all of his energies trying to get health care legislation across the finish line. The end product was a plan that, according to both the Congressional Budget Office and actuary for the Centers for Medicare and Medicaid Services, did not bend the health care cost curve down. Let’s even set aside the argument over the accounting gimmicks that were employed to obtain a CBO score that showed modest deficit reduction. The reality is this: the law used money raised through tax hikes and Medicare cuts that otherwise would have been available for deficit reduction, to instead expand Medicaid by 18 million beneficiaries and create a massive new health care entitlement.
Of course, there’s more. After health care passed last March, Obama punted on the debt for the rest of the year as he awaited a report from his fiscal commission. He then ignored its recommendations and released a budget so ludicrous that within two months, it failed 0 to 97 in the Senate and he himself rejected it. He instead delivered a speech about his deficit reduction vision, which didn’t have enough details for the CBO to score. And then he spent the last few months arguing that he was prepared to offer Republicans a “grand bargain,” but to this day he hasn’t released details of this supposedly awesome deal that Republicans refused, beyond calculated leaks to favored reporters.
Of course, the ultimate political consequences will shrink in to nothingness if there are no financial consequences, which will take days if not months to develop. But if there are, nobody will believe the New York Times when it tells us to blame George Bush and the Tea Party and Rush Limbaugh.
28 Comments:
By 
darovas, at
Sat Aug 06, 09:31:00 PM:
The "filibuster-proof majority" was always a Platonic ideal far removed from reality. A more nuanced assessment would acknowledge that the Congressional Democrats - particularly in the Senate - were ideologically diverse. It is hardly clear that they could have come to an agreement on big cuts to both entitlements and defense as well as on tax increases, all three of which are necessary to address our debt problem.
By Georg Felis, at
Sun Aug 07, 01:58:00 AM:
There is a false premise that the Democrat leadership has the good of the country as their goal. To the contrary, they have proven quite plainly they want really what is good for the Democrat party, and to hell with the rest of us. From socialized medicine rammed through the House and Senate, to the giant political contributor goodie bag they mutated TARP into, all the way to using EPA as a “Hit Agency” to cripple states and businesses they dislike (i.e. Texas and their nasty air conditioners and drilling rigs), the agenda of the Democratic party is to exert control over every aspect of our lives.
To disagree, please state one thing the Democrats have done in office that gives the average citizen a greater degree of freedom in their daily lives.
By 
, at
Sun Aug 07, 09:17:00 AM:
And they call the Tea partiers terrorists.
By , at
Sun Aug 07, 09:53:00 AM:
"The "filibuster-proof majority" was always a Platonic ideal far removed from reality."
To take an objective reality, a filibuster-proof majority in the Senate, and try to obscure it's importance through a meaningless abstraction ignores the obvious: the Democrats owned the Senate absolutely, and had the ability to pass whatever they wished to pass. This is in fact the properly "nuanced assessment". The President and his party have failed the country in spectacular fashion, and the question for leftist commenters, and eventually historians, is did they fail by going too far down the Progressive policy path (as many would have it) or did they not go far enough (as many prominent lefty intellectuals argue, see, for example, Klein or Krugman).
How the question is answered will determine our future in America, I believe.
By sirius, at
Sun Aug 07, 02:28:00 PM:
"And they call the Tea partiers terrorists."
Well, according to John Kerry, they are responsible for this mess.
Of course, John Kerry is an ass-hat and inveterate political tool.
By , at
Sun Aug 07, 05:14:00 PM:
In the extreme near-term, I'd expect Treasury rates not to change that much. The stock market sell-off on Thursday now looks to have been a prior response to the S&P downgrade, as it had been will signaled beforehand. Do stocks drop more? Where else can money go right now? We've already got trillions sitting on the sidelines.
But then what? Will the Fed now launch QE3, or an equivalent? If not, who buys Treasuries in volume to cover our deficits? The Chinese may not sell, but they're not going to buy. So who does?
I'd still expect significant 2nd and 3rd order knock-on effects from the S&P downgrade. Will S&P downgrade other debt issuers in lock-step? What about municipal debt issuers like Illinois? What about credit default swaps, etc?
The last two weeks of Debt Ceiling Chicken played out with all the principal insider negotiators knowing that S&P would likely downgrade, given the tack that the negotiations had taken. Think on that.
I don't know that Boehner could have gotten a better deal -- but all he really did was not allow a tax increase to happen. The promised cuts are a bad joke. Also, payroll taxes already go up in 2012, and Obamacare taxes -- including increases on high earners -- start in 2013.
Federal Revenues vs. Federal Spending since 1965
How can you not look at this graph and not see a problem? Yet the Democrats and MSM want to blame the Tea Party. Our Establishment has gone insane -- it's not just Obama. I haven't seen any major media outlet work the story with actual numbers -- it's just "he said / she said" mud wrestling.
"Saving public sector jobs" hasn't been helpful. It's actually part of the problem. Nothing against "cops, firemen and teachers" -- but the total burden is overwhelming the private sector's ability to support.
Keynes would be aghast at what's happening today. He actually wrote in 1936 about using government spending as pump priming after a private sector Big Bust had already happened, and when governments were relatively small -- not about using huge deficit spending to prop up a government-induced debt bubble.
Ironically, Obama & Co want us to become more European in many respects. There's a great one-sentence history of Japan: We are not Chinese. We Americans have an equivalent: We are not European.
By darovas, at
Sun Aug 07, 08:59:00 PM:
Rather than speculate and spin, why not read the actual S&P analysis, available here:
http://www.ft.com/cms/af2c4fac-bfc2-11e0-90d5-00144feabdc0.pdf
The opening paragraph of the "Rationale" on page 3 reads,
"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade."
Many conservatives insist that the downgrade was inevitable given our total debt, and that the Tea Party's intransigence which forced an 11th hour compromise was irrelevant. Libertarians view the Tea Party as playing some salvific role. But to read S&P's document, it is clear that "prolonged controversy" over raising the debt ceiling was a major factor in their decision to downgrade. Republicans were quick to note that their tactics would be repeated in future such deliberations, ensuring it "will remain a contentious and fitful process."
Note also how S&P's rationale explicitly refers to the failure of "reaching an agreement on raising revenues" as well. That means tax increases, folks.
Reading through the entire report, it is clear that this was a "Tea Party Downgrade".
By , at
Mon Aug 08, 02:38:00 AM:
@davoras
You're either ignorant of what actually just happened with the S&P downgrade, or something else entirely.
In the prelude to Debt Ceiling Chicken, S&P sent a clear prior signal that they would downgrade without something meaningful happening -- which at one point S&P went public as saying meant "$4 trillion in deficit reduction over ten years". So S&P drew a line in the sand. What got delivered in the end was well short of this, so S&P acted on their word. QED. We shouldn't be surprised with what S&P did -- they did what they said they would do, given the result out of Congress.
In the circus we just witnessed there was nothing concrete ever put on the table that would have satisfied S&P except either of the two bills passed out of the "Tea Party influenced" House. If memory serves, spending bills are supposed to come out of the House. Something about the Constitution.
There is no Tea Party as such, at least not yet. But we just saw a landslide midterm result in November 2010 based on "Tea Party" principles, the results of which many Democrats want to wish away. Especially in the House, many of the newly elected "Tea Partiers" have only acted in accordance with what they told their electorate they would do, if elected. Yet some call that "terrorism".
Lacking control of Senate and White House, the only thing the Boehner/Tea Party resistance could really accomplish was to stop another tax increase. But no tax increase can fix our problem. That's because the math doesn't work. Even if your primary objective is to 'spread the wealth around", THE MATH DOESN''T WORK.
We've collectively run out of other peoples money. RE-READ THAT LAST SENTENCE SLOWLY. This means that we can't finance the current level of our government spending consistent with having a free society. RE-READ THAT LAST SENTENCE SLOWLY.
Hence the S&P downgrade wasn't caused by the Boehner/Tea Party resistance. It's the end result of decades of build-up in fiscal profligacy, accelerated over the last five years by a federal government dominated by the Democratic Party -- assist to many Republicans, some still in office, and at least one guy on a ranch in Texas.
USA Downgrade wouldn't have happened if the Democrats in the Senate and White House had passed on some version of either of the two bills that came out of the House.
You can selectively quote from the S&P report all you want, but that doesn't address what I've just laid out. We can't tax our way of our predicament, even if we wanted to. S&P is just a messenger. The S&P downgrade is just a symptom. I've ranted here -- in detail -- about these issues for three years. And I haven't been alone.
So Davoras, where am I wrong?
By darovas, at
Mon Aug 08, 10:55:00 AM:
Where you are wrong is in failing to acknowledge that *both* spending cuts *and* tax increases will be necessary to save the economy.
Did you actually read the S&P report? For example, the paragraph which begins,
"Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act."
By , at
Mon Aug 08, 11:00:00 AM:
Ignoramus is exactly correct and darovas is mistaken.
Spending is the problem. S&P took no position on the balance of spending cuts to tax hikes to resolve the spending "dynamics".
The reckless spending by both parties dug the hole. Obama has been digging deep and faster.
Math doesn't work for Progressives. Solution has to be tax reform (pro growth not punitive), entitlement reform and outright cuts.
As a parent I am disgusted by attempts to ignore the problem. We defeated our useless go-along congresswoman last Fall and put in a Freshman who did what he promised us he would do in this debate.
By darovas, at
Mon Aug 08, 11:14:00 AM:
Anonymous is apparently unable to read plain English. S&P did not specify a specific mix of spending and revenue measures, but its report indicated in several places that failure to increase revenues contributed to their revised baseline assumptions.
By TigerHawk, at
Mon Aug 08, 11:18:00 AM:
Fingerpointing over the downgrade is silly, as is attacking S&P. It's just a bunch of analysts who express opinions, as it is free to do under the First Amendment. Setting aside a few details in regulation that will be addressed post Dodd-Frank, those opinions only matter because investors do or do not agree with those opinions. The Obama administration ought to ask itself whether attacking S&P is going to increase or decrease the likelihood of investors agreeing with S&P. I think the desperation of the administration's attacks create credibility for S&P, rather than tearing it down.
By , at
Mon Aug 08, 11:29:00 AM:
If ending the Bush tax cuts would "solve the problem", I'd be for it. I've said that here before.
But it won't. Not even close. We could double the personal income tax on everyone and we'd still have a gap. So we can't tax our way of this problem.
Raising taxes with the promise that a multiple of the tax raise (2x, 3x, etc) would follow in spending cuts has been tried before. The cuts never get made.
A cynic would say that Obama & Co always intended to increase federal spending to over 25% of GDP and beyond to create a new foundation for the Ultimate All-Encompassing Welfare State. That the tax raise necessary to pay for it would in effect liquidate the American middle class.
Hence the Tea Party insistence on seeing this as spending problem, not a revenue problem.
The core problem is healthcare spending. On a per capita basis, we pay nearly twice what other big countries do with little to show for it. And the spending continues to grow at rates far higher than our historic GDP growth rates. Paging Congressman Ryan .....
To the extent that we service our growing debt load "honestly" by not defaulting or inflating, we increase the tax burden of future generations. That's a common observation.
But what's particularly pernicious about this isn't much talked about: this burden won't fall evenly. It'll fall on those who would have relatively high W-2 ordinary income. Kids with rich parents will already be rich. Capital gains will lessen the tax bite on many. But if your Daddy's Not Rich, forget about being an ophthalmologist or starting a business, unless its a cash business.
If a generation sees this coming, many of them won't even try. If you want to create a rigid class structure -- with little mobility -- that's exactly what I'd want.
Bienvenidos a Argentina! Obama is Peron without the gold braid.
By , at
Mon Aug 08, 11:36:00 AM:
First Anon here: As a fact matter, Darovas is incorrect in claiming that the absence of tax increases led in any way to the S&P action. There is no such statement anywhere in their report.
Having said that, it is obviously a mark of desperation on the part of lefty partisans to argue that, somehow, the 800 pound gorilla of failed spending policies, a total and complete leadership vacuum (I still find it incomprehensible that the presidents last budget proposal was criticized by him two months after he submitted it, and was voted down unanimously by his own party!) and amateurish negotiating practices in relations with the Republicans (only an inexperienced idiot introduces a demand for $400 billion in new taxes at the very last second, as the President did, after you've already made a deal for $800 billion in new taxes with your negotiating partner).
S&P is practically beside the real point of reducing incredible federal spending levels, and US debt has been trading as a AA credit anyway for some time, but misrepresenting what S&P said, as Darovas does, is not helping matters.
By darovas, at
Mon Aug 08, 01:07:00 PM:
Indeed S&P made no recommendations as to the specific mix of spending and revenue that would be deemed satisfactory to maintain AAA credit:
"Standard & Poor's takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.'s finances on a sustainable footing."
However, it is crystal clear that failure to increase revenues played a significant role in S&P's revised baseline scenario:
"Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act."
By , at
Mon Aug 08, 01:46:00 PM:
"Indeed S&P made no recommendations as to the specific mix of spending and revenue that would be deemed satisfactory to maintain AAA credit."
S&P specifically cited the dysfunctional leadership in it's downgrade, and also specifically blamed excessive entitlement spending for the mess. No "recommendations" were made for tax increases, as darovas now admits, because those are beside the point S&P was making.
It is in fact "crystal clear" that tax revenues had literally nothing to do with S&P's analysis. It is a lie to say otherwise, as anyone can see once they read the report.
The larger point is even more clear, though darovas ignores it completely: US debt has traded down at AA levels for months now, once the President repudiated his own budget prosal, and after it had been voted down 97-0 in the Democrat controlled Senate. Until the administration can bring itself to propose and pass a budget, which will actually require them to negotiate honestly and even (oh no!) compromise with Republicans, the criticisms S&P made will stand unanswered.
What is even more obvious is that lefty partisans, like this foolish darovas, are happier fighting a rearguard rhetorical action of false assertion after false assertion rather than answering the straightforward, almost simple, criticism S&P made.
By darovas, at
Mon Aug 08, 02:19:00 PM:
Once again,
"Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act."
This makes explicit what should be clear even to the ideologically blinkered like Anonymous, i.e. that S&P's baseline scenario has been readjusted due to Republican intransigence over raising revenues. It is patently absurd to claim that tax revenues had "nothing to do" with S&P's analysis.
Is failure to increase revenues our only problem? Of course not.
By darovas, at
Mon Aug 08, 05:26:00 PM:
Jack is right that it is foolish and even counterproductive for the U.S. to be criticizing S&P in the wake of our credit downgrade. All the more puzzling that in the very next sentence he himself dismisses S&P as "just a bunch of analysts who express opinions, as it is free to do under the First Amendment." Whistling past the graveyard?
What I don't understand is how trashing S&P's reputation helps the U.S. After all, S&P was famous for giving strong ratings to crap mortgage-backed securities and to firms like Bear Stearns and Lehmann Brothers right up to the moment of their precipitous collapse. Not sure I'd want to draw any parallels to their AAA and now AA+ rating of U.S. credit if I were an administration official.
I'm terribly disappointed in Obama. I think he should have come out strong in favor of the Simpson-Bowles commission's suggestions. It's a sad commentary on our political process that neither party supported it. Many conservatives opposed it simply because it contained revenue increases, even though it would have decreased the top marginal tax rate. Go figure.
By , at
Mon Aug 08, 05:33:00 PM:
How can you describe me as "ideologically blinkered"? What evidence is there for such a description in anything I've said?
You simply cannot support that statement. We are not even arguing about politics! Don't you get even that simple point?
You refer to "Republican intransigence over tax increases". This is, of course, yet another complete fabrication. Boehner agreed to an $800 billion increase, according to the White House itself. The President of the United States says you are full of shit, darovas. Are you calling him a liar? Perhaps it is you, and not me, who are the partisan...
Nah, don't worry, I know you are not arguing with Obama, you are simply lame, confused and blindly devoted to the daily talking points.
By darovas, at
Mon Aug 08, 05:54:00 PM:
What part of "the majority of Republicans in congress continue to resist any measure that would raise revenues" don't you understand, Anonymous? Your problem is with S&P - go whine to them.
By the way, even Boehner was careful to say that the $800 billion "was not raising taxes". See
http://www.foxnews.com/politics/2011/07/24/house-republicans-prepared-to-act-alone-on-debt-plan-boehner-says/
Personally, I think Boehner's remark that it was not a tax increase makes your claim that Boehner agreed to a tax increase look kind of ... well, since you are apparently overwrought and resorting to foul language I'll let you use your imagination!
As you should know, what actually transpired between Boehner and the WH is a contested matter. Whatever the truth of that matter is, I would say with the benefit of hindsight that it would have been far better for the country had either party capitulated back in July. Whether or not it was $800 billion or $1.2 trillion, and whether or not it was principally from tax increases or from broadening the tax base, it was at least a revenue increase. On the other hand, maybe all the fallout from the credit downgrade will light a fire under the super congress and they'll actually do something useful. I wouldn't hold my breath though.
By darovas, at
Mon Aug 08, 06:29:00 PM:
One more thing regarding the stillborn Boehner-Obama agreement. Clearly it is one thing for Boehner to agree on a particular package and another thing entirely for House Republicans to vote for it. We learned this quite recently, on July 28, when Boehner was forced to postpone a vote on the debt limit because he lacked the necessary support. What makes you think that the Tea Party faction would have accepted $800 billion in new taxes? Do you understand how the government works, Anonymous?
By Gary Rosen, at
Tue Aug 09, 04:04:00 AM:
Yeah, increasing tax rates while the economy is tanking is a great idea. If that's what S&P is actually claiming - well they are some of the idiots who got us into this mess in the first place by giving glowing ratings to subprime junk loans. Maybe they happen to be right about the downgrade, but you know what they say about broken clocks, blind pigs and acorns etc.
By darovas, at
Tue Aug 09, 10:03:00 AM:
Conservatives certainly are consistent on this issue. "Now is no time to raise taxes!" they say. [Choose one of the following:] "The economy is strong and new taxes will make it fragile!" or "The economy is fragile and new taxes will make it stall!" or "The economy has stalled and new taxes will make it worse!"
Talk about your broken clocks!
By , at
Tue Aug 09, 11:19:00 AM:
"Talk about broken clocks"
Taxes won't fix the problem, but you insist on talking only about taxes. Or blaming S&P. Or blaming "Tea Party terrorists".
Anything but spending.
I'm curious. Do they actually send you obfuscating talking points each day or are you already advanced to the point of a groupthink mind meld?
By darovas, at
Tue Aug 09, 12:43:00 PM:
But I don't "insist on talking only about taxes". I've made it clear (see above) that I supported Bowles-SImpson. We have to cut spending particularly on entitlements and defense.
Taxes *by themselves* won't fix the problem. Of course I agree, and I never claimed otherwise.
Nor did I blame S&P. I do think that the ratings agencies have been part of the problem, and people across the political spectrum agree on this. But I also think the reasons S&P gave for our credit downgrade were undeniable: government paralysis, an ineffective compromise with insignificant short-term spending cuts, and the intransigence among Congressional Republicans to increase revenues.
What is quite telling here is to see how conservatives are so dogmatically opposed to revenue increases. They even opposed Simpson-Bowles when it would have *lowered* the top marginal tax rates! It's nutty anti-government ideology.
By darovas, at
Tue Aug 09, 12:47:00 PM:
I should have said that I *do* blame S&P and the other ratings agencies, as does anyone who is familiar with their track record during the past five years, but I am not challenging their assessment of our credit worthiness which led to the downgrade. Just want to make that clear.
By , at
Tue Aug 09, 08:23:00 PM:
I just saw that California's tax revenues for July are 10% below what was budgeted.
If you look at the graph that I linked above (Sunday 5:14pm) that compares historic federal revenues vs spending, it shows an alarming drop-off in federal revenue in recent years from the historic average of about 17-18% of GDP. We're back at the same level of revenue that we had in 2003 and 2004, but it's a smaller percentage of GDP. On current trajectory, 14-15% of GDP could be the new normal.
Darovas & Co will say that we need to raise tax rates in response, but there's a deeper explanation and a better response.
Both the federal government and California rely a lot on a personal income tax that's quite progressive. When you do that you're "highly levered". If you kill growth, so the "rich" don't make as much money, your tax revenue plummets. So we are all in this together. Capeche? As California goes on this, so goes the nation.
If we don't find our way back to 3.5% GDP growth or better, we're fucked. We can't tax and spend and regulate our way to it. Recent experience proves this. Just compare Texas to California, or North Dakota to Illinois.
I had a long rant here about a year ago about what a pack of lies the then proposed White House Budget was. To mask projected trillion dollar deficits to the end of time, it assumed greater than 4.0% GDP growth for a decade -- including many years over 4.5%. It still blew up. Then White House Budget Director Peter Orzag oversaw this budget. He's now Vice Chairman Without Portfolio at Citigroup, where he just said "Those who in January were predicting growth of 4 percent or more for 2011 did not sufficiently appreciate the evidence". He neglects to mention that he's the prime culprit. I go into this in some detail because we'll never fix the problem if our collective leadership keeps lying to us and themselves about what's going on.
"Growth" doesn't happen because you plug a variable into a spreadsheet.
Neither will tax revenues go up just because you raise nominal rates. Sixty years of data proves this.
If we get back to growth, tax revenue will pick up. "Jobs" will get better. It may take years, but it will happen if government doesn't get in the way. We need to face up to the debt bubble that got built. It'll be painful. Like pulling off a band-aid.
But there's no credible scenario where we can sustain current and projected federal spending. Not unless we all want to be forced into a monolithic Borg, where some pigs will be much more equal than others.
So I conclude that anyone who keeps obsessing over tax rates is either (1) woefully ignorant, or (2) has another agenda.
Your move, darovas.
By darovas, at
Tue Aug 09, 10:23:00 PM:
As I said, I favor a mix of spending cuts and revenue increases. If revenue can be increased by eliminating tax shelters and loopholes while simultaneously lowering the highest marginal tax rates, that's terrific. (I don't think mortgage interest deduction on a millionaire's summer home is doing much to create jobs.)
What I find remarkable is the doctrinaire opposition most Republicans nowadays exhibit against any and all tax increases. They rage over how we are unable to pay off our debt, and in the very next breath they explain that tax increases are unnecessary. It's crazy. And again, we can even raise revenues and *lower* the tax rates. Under the Simpson-Bowles "Zero Plan", with no credits or deductions, there would have been three personal brackets of 8, 14, and 23 percent.
It is patently ludicrous to accuse me of "obsessing over tax rates". It's just rhetoric, perhaps because this argument isn't going so well for you guys. I'm in favor of several non-revenue reforms as well: increasing retirement age, increased benefit progressivity, aggressive anti-fraud controls in Medicare, increased Medicaid co-pays, substantial cuts to the Defense budget, substantial reductions of farm subsidies, total elimination of ethanol subsidies, etc. How's that?
I also think we need to spend *more* in certain areas, particularly in research and development for energy storage. I strongly favor nuclear power, even in the wake of Fukushima. I think we won't ever see significant health care savings unless we move to a single payer scheme (yes, more "socialized").
I think balanced budget proponents are nuts. Most of us here, I imagine, at one point or another, have carried mortgages on the order or 300% of our yearly salaries. Borrowing helps us do great and important things. We just need to make sure it doesn't get out of hand to the point where noone wants to buy our debt. And it is just bullshit to say it is unfair to saddle our kids and grandkids with debt. So long as that debt is not onerous, it is extremely fair to do so. My kids benefit from an infrastructure that was unthinkable to my parents. Just think of how transportation, communication, health care, and information systems have improved over the past 50 years. So yeah, let them pay for some of it.
And now, I am off on vacation. By the way you can all call me Daniel.
