Excellent analysis of Clinton's tax plans:
1. The $52 billion estimate seems high to me. The CBO reports that each percentage-point increase in the top two income tax rates--singles making over about $150K, married taxpayers over about $180K--increases tax revenue by only $6.5 billion in 2009. Multiply that by 4.6 (the proposed rate increase), and you get $29 billion, not $52 billion. And even that $6.5 billion is an overestimate, because it includes the top two rates, not just the top rate. I would guess that the Clinton campaign included other tax increases in the $52 billion figure, such as increases in the taxes rates for dividends and capital gains.2. Even taking the $52 billion estimate at face value, it shows how little revenue would come from increasing taxes on the rich. This is only about 1/3 of one percent of GDP.
3. The passage from Leonhardt makes clear that Senator Clinton wants to spend the extra revenue on other proposals, instead of using it to reduce the long-term fiscal gap.
4. The passage says that this revenue will "help pay" for her other proposals, instead of fully paying for them. The entire package seems to involve either an expanded deficit or other taxes increases (or spending cuts) to be named later.
I don't want to hear any more about how the Democrats are the party of fiscal responsibility; none of them are planning to close the current deficit, much less deal with the now-seriously-it-really-is-looming entitlement problem. Their tax code changes will claw back only a small fraction of the revenue lost in the Bush tax cut. If you are surprised, it is probably because the Democrats and the Republicans have a different definition of the tax cuts going "mostly to the rich". If you mean, "which individuals got the biggest benefit from the tax cuts?", rich people did, because they pay the most taxes; that is the definition Democrats use. But if you mean "which class of people got most of the money?", then the answer is "the middle class". There just aren't that many rich people; it costs a lot more to hand out a modest amount of cash to 200 million than to hand out a lot of cash to 500,000. So when Democrats repeal only the tax cuts on the top one or two brackets, this may be symbolically rewarding, but it will not actually generate that much revenue for the treasury.
Democrats are, of course, planning to spend every bit of the money from their tax increases on new spending, plus it looks like some more. You may now return to forgetting that you ever thought you cared about the budget deficit.
when is the podcast with Austin Golsbee going to be up, Megan.
-MJ
That's assuming, of course, that Senator Clinton plans to actually enact everything she has proposed in the campaign and is not saying some things just to pander.
Given the often enormous gap between what people campaign on and what people do when in office, it is a pretty lousy assumption if your desire is to judge which is more likely to achieve your objective.
More effective could be to look at what that party / people like him/her in that party do / did when they actually get into power. So, we know that Republicans, whatever they say about decreasing deficits, certainly will increase them when elected. For Democrats as a whole it is mixed, but Senator Clinton's wing of the party certainly has a stronger record on this point than any challenger on the Republican side.
Or we could just sit in the corner and harrumph about all the bad things she will do that will probably never come to pass, while supporting / electing somebody who actually will do much worse things than what he is promising. That's a strategy too...
More effective could be to look at what that party / people like him/her in that party do / did when they actually get into power.
If I remember correctly, history shows that the best combination is a Republican Congress with a Democrat President (E.G. Clinton years), the second best is a Democrat Congress and Republican President (Reagan, Eisenhower, but on the other hand also Nixon administrations).
Give the Republicans both branches and they go on a pork fest only slightly inhibited by their stated ideals.
Give the Democrats both branches and they go on a pork-fest actively encourage by their stated ideals, and at best you get LBJ's "Great Society," at worst you get the New Deal.
Ralph:
So do you think the New Deal or LBJ's "Great Society" are bad things? When did the Dems ever run up deficits like the Republicans? And it is funny how Mankiw critiques Clinton's plan when he would never dare do the same to Bush's.
I agree with Vermando.
We've got a track record here in the past 7 years of fiscal irresponsibility.
If you're happy attacking Clinton for what may happen, why not attack Bush for what has happened? He had six years with a veto proof majority and accomplished nothing on the "looming" entitlement problem and nothing on closing the deficit gap. Remember he inherited a budget surplus.
Oh go ahead; just forget the facts; let's just create another mindless partisan battering ram.
When did the Dems ever run up deficits like the Republicans?
Well, subtract the New Deal and the Great Society from our current spending, and the deficits disappear. So does the need for the income tax, for whatever Ron Paul acolytes are still around.
As bad as pork is for many reasons, it's a rounding error compared to entitlements.
Megan, how does "the party of relative fiscal discipline" work for you, since your lot wants to cut taxes AND stay in Iraq forever? Perhaps when Mankiw's kids are dragooned into Jeb Bush's Global War on Weapons of Mass Destruction Related Activities, he'll take the blinders off.
Oh, and remember the advice of Herr "Doktor" Greenspan, Republican deficits don't matter.
So do you think the New Deal or LBJ's "Great Society" are bad things?
The "New Deal" was when the Federal government started to get truly huge and asserted the right to regulate everything under the Commerce Clause. In the 1920s alcohol prohibition required a Constitutional amendment, but the "war on drugs" has proceeded without one. You can thank FDR for that change in how American politics worked between then and now.
One of the great achievements of the Clinton era was welfare reform, which largely consisted of (partially) fixing stuff that LBJ's "Great Society" had screwed up.
I like to use a larger dataset than one President's administration. If you look back further than 7 years, the lesson seems to be that gridlock is good, because then goverment can't do stupid and wasteful things as quickly.
Yes and during the past seven years while she was in office Senator Clinton has either (a) voted for the current levels of spending or (b) voted for or called for even higher levels of spending.
To me it looks like Mankiw's thumb is securely on the scale.
-Mankiw bases his "excellent analysis" on the CBO publication "Budget Options 2005." That's over two years in the past today, and will be four if you count the fact that in 2009 we will spend most of the year tied to Bush's last budget. What do more recent CBO publications say about the "budget options" going forward? Looking at their "Budget Options 2007" publication, the exact same line Mankiw refers to ("Raise the top two ordinary tax rates by 1 percentage point") has increased from 32.7 to 36.6 billion dollars for the coming 4-year periods (2007-2011 and 2008-2012 respectively). The precise data point he used as a baseline, 2009, has increased from 6.5 to 6.6 billion. What might the CBO projections be in 2009 for the period 2010-2014? Who can say, but the trend seems to be up not down.
-He seems quite taken with the 52 billion figure and its relatively puny size. If we quit shoveling huge sums of borrowed money down the Iraq rathole, that should go quite some ways towards closing the "long-term fiscal gap" he frets about. And that's only one possible source of fiscal-gap-closing.
-He's quite put off by the term "help pay" vs. "fully pay" and cites that as proof positive that a Clinton presidency would either expand the deficit or raise taxes severely; the alternative, spending cuts, he puts in pooh-pooh parentheses because as we all simply know to be true, Democrats don't cut spending.
-And finally, rather than himself go to the Clinton campaign website or try to pin down a Clinton economic adviser on exactly what the Clinton plan uses to come up with that horrid 52 billion figure, he relies on this NY Times reporter's anonymous attribution from "the Clinton campaign" which he might have gotten based on any question whatsoever and in any possible context, and which in itself is just a number with no evidence pro or con to back it up. Was the Clinton campaign even accurately quoting the effects of their own plan? (Campaign staffers have been known to get numbers wrong, among other things.) Mankiw's gut instinct is to dismiss the number, and he goes looking for data to back that instinct up. That's "excellent analysis?"
This is not "excellent analysis" at all. This is just Mankiw's opinion based on sketchy evidence and his own preferences and biases. Simply having a few numbers in it does not make it excellent analysis.
From what I see, the true believers (Lyman, Phelan, and probably Megan) would like to scrap Social Security, Medicare, Medicaid, and, of course, the minimum wage. Is this really true? I'm curious about how far you guys would like to go.
Hate to break the news to you but George W Bush isn’t running for reelection this fall nor is any Republican legislator who voted for the current levels of spending. The only Republican presidential candidate (with a serious chance) who was in Washington ias John McCain who voted against things like Medicare Part D, the Farm Bill(s), earmarks, etc. On the other hand, each of these things were either supported by Hillary Clinton and Barack Obama or opposed because they didn’t spend enough.
Add to that the fact that only the Republican candidates are calling for fixing the entitlement mess and yes, any of the three likely GOP nominees – Mitt Romney, John McCain, or Rudy Giuliani have more credibility when it comes to restraining spending than either Clinton or Obama.
I'm curious to know how anyone has concluded that I'm a "true believer" or opposed to the minimum wage based on two comments: one, a lighthearted response on the impossibility of convincing liberalrob that social spending was a good idea (how do you disprove an axiom?) and another, in response to someone who blames Republicans for deficits, pointing out that the elimination of Democrat-enacted programs would do vastly more for those deficits than elimination of Republican initiatives such as small tax cuts.
Whether or not FDR or LBJ ran a deficit during their respective administrations, their ideas and legislative accomplishments have more to do with our current problems than anything Bush has done.
Oh, my bad, the liberalrob comment was in another thread.
If you're happy attacking Clinton for what may happen, why not attack Bush for what has happened?
As Thorley said, Bush isn't running for reelection. "Attacking" him seems pretty much pointless except for those who need a little emotional boost.
liberalrob,
You're quibbling over details and missing the point. Replacing the $6.5 billion number from the 2005 report (which actually reflects March 2006) with the $6.6 billion number from the 2007 report increases the total for 2009 only marginally, from $29.9 billion to $30.4 billion. Obviously, this is still way less than $52 billion. Where's the rest going to come from?
Your comments about Iraq are also irrelevant. Every time anyone points out that the Democrats' budget numbers don't add up, someone like you responds with some version of "Well, if we just stopped fighting this illegal-war-of-aggression(TM) in Iraq..." If Clinton intends to obtain the balance of the funding needed for her spending proposals from military cuts, then she should say so. Where does she say this?
...and yes, any of the three likely GOP nominees – Mitt Romney, John McCain, or Rudy Giuliani have more credibility when it comes to restraining spending than either Clinton or Obama...
Only if you are willing to give them a pass on the massive boondoggle that is Iraq. None of these candidates wants to leave, and McCain saying that he's willing to be there for 50 years re-imagines war itself an entitlement. War is very, very expensive.
Your comments about Iraq are also irrelevant.
If we are having a discussion about who is or isn't likely to bring fiscal restraint, why is one of the most expensive items on the table irrelevant?
If Clinton intends to obtain the balance of the funding needed for her spending proposals from military cuts, then she should say so. Where does she say this?
All of the democratic candidates have said they want to withdraw from Iraq. Here's Hillary's site on the issue.
Unless you are suggesting that military spending is the same whether or not we are conducting a war in Iraq, this seems pretty clear to me.
Much more important than Iraq is the rapid growth of the big entitlement programs. Medicare and Social Security present the real long-term fiscal challenges, and the Democrats have shown no desire at all to do anything about them.
Fred Thompson and John McCain have at least addressed the issue. And McCain/Thompson, might well be the Republican ticket.
We have to slow the growth of benefits. There is no reasonable alternative.
If we are having a discussion about who is or isn't likely to bring fiscal restraint, why is one of the most expensive items on the table irrelevant?
The discussion is about Hillary Clinton's budget proposals, and more specifically her claim that she will get $52 billion from tax increases.
All of the democratic candidates have said they want to withdraw from Iraq.
"Wanting" to withdraw from Iraq doesn't get you any money. In fact, Hillary's stated position on Iraq is so vague and ambiguous it's hard to draw any meaningful conclusions about its budgetary implications. She proposes to "start" bringing troops home, but gives no clear indication of the timescale of this withdrawal. She also refers vaguely to "aid" intended to "stabilize" Iraq but gives no clear indication of the magnitude or type of aid she has in mind.
To my knowledge, she hasn't spelled it out line by line anywhere. My point is that Mankiw (and you) just blindly assert that there is no basis for this $52 billion figure because some staffer threw the number out there and you found some CBO data that doesn't back it up. Did the Clinton campaign use that CBO data? Is it even applicable to the Clinton proposal? Do they have some other rationale behind the $52 billion figure? You (and I) have no idea, you just want to bash Hillary (and all Democrats) and this is a convenient club. Not fair. Get the full facts, then bash those. Until then, you and Mankiw are just stating your opinions. I don't consider opinion based on incomplete information to be "excellent analysis."
"I don't want to hear any more about how the Democrats are the party of fiscal responsibility;"
I recognize that Megan does not want to hear it. Megan also did not want to hear that the conservative movement really believes that tax cuts raise revenue. But they do. Even John McCain, the best of them, peddled a ridiculous lie on the subject (“Every time in history we have raised taxes it has cut revenues").
In the world of actions, Republicans recently blocked efforts by the Democrats to pay for the AMT tax fix. Several commenters here castigate the Democrats for not offering constructive plans on spending. I'll agree with that. How about some acknowledgement that the leading Republican candidates are offering fiscally destructive plans, and damaging illusions on the taxes side?
Tom
To my knowledge, she hasn't spelled it out line by line anywhere. My point is that Mankiw (and you) just blindly assert that there is no basis for this $52 billion figure because some staffer threw the number out there and you found some CBO data that doesn't back it up.
No, Mankiw says Clinton's number "seems high" given her proposed tax increases and explains why, on the basis of bipartisan budget data.
If you think she has a budget plan that adds up, then show us this plan.
I recognize that Megan does not want to hear it. Megan also did not want to hear that the conservative movement really believes that tax cuts raise revenue.
There is no monolithic "conservative movement" and certainly nothing like a consensus among self-identified conservatives on the effects of tax cuts.
Mixner,
The president, vice-president, the current front-runner (McCain), the previous front-runner (Giuliani) have all made the claim (that tax cuts raise revenue).
It is true that there are honest conservatives out there who acknowledge reality - our host and Mankiw spring to mind. But I can not think of any prominent conservative politician who has spoken up. Megan's book review got rejected from conservative magazine because she would not accept it.
As a political force in the United States, the conservative movement has embraced the idea.
Tom
NY Times, Aug 13, 2004:
Much more important than Iraq is the rapid growth of the big entitlement programs. - rwe
"More important" is a very subjective definition. I spend a lot more on food than I do on my health club membership, but if I had to cut my budget, I'd eliminate the health club membership, because eliminating food is pretty hard to do. Similarly, if our budget deficit is structurally about $200 billion in the red, we need to first eliminate the strategically useless counterinsurgency training exercise that costs us well over $100 billion a year; after that, we can start arguing about whether we need to cut health care for Americans.
"I don't want to hear any more about how the Democrats are the party of fiscal responsibility;"
Again, this is a silly thing to say. John McCain may think that evangelical religious fervor plays too large a role in American politics, not that he isn't willing to pander to evangelicals when it helps his campaign, and he's by some measures the GOP front-runner; but if I now say "I don't want to hear any more about how the GOP is the party of Christian evangelicals," that would be absurd.
Democrats have a 52-year post-WWII history of cutting the national debt in real terms every single time the party has the Presidency. The GOP now has a 27-year history of ballooning the national debt every time it has the Presidency. Even if Hillary's estimates, in one proposal, of how much revenue she plans to raise through tax hikes are overly optimistic (she's proposing TAX HIKES! In a presidential campaign! I'm sorry, but this is a pretty strong signal of fiscal responsibility), that doesn't make the Democrats less fiscally reponsible than a party which continues to universally push for tax cuts and maintains that they will, by doing so, raise revenues.
Absolutely nothing in that statement is true.
Similarly, if our budget deficit is structurally about $200 billion in the red, we need to first eliminate the strategically useless counterinsurgency training exercise that costs us well over $100 billion a year;
Strategically useless? So if we gave up the fight, and Iraq did indeed become a cesspool and safe haven for Al Qaeda to train and equip unmolested by security forces while Iraq oil exports slowed to a trickle, it would have zero strategic effect on U.S. interests?
Are you smoking crack?
brooksfoe,
Can you explain how your comment meshes with the following facts:
-There have been only 63 years since WWII, but you list 79 years combined
-There have been only 28 years of Democratic presidents since WWII
-There have been 35 years of Republican presidents since WWII
Besides those, it would seem nearly impossible, though possible, for 0 years under a democratic president to have resulted in increased national debt.
Skullberg: I'm sorry, I meant a 62-year history since WWII, not 52; slipped a decade there. In other words, in the 62 years since the end of WWII, in every Democratic president's tenure, the real size of the national debt has always shrunk. Meanwhile, since Reagan acceded 27 years ago, in every Republican president's tenure, the real size of the national debt has grown dramatically.
No need to dignify Thorley Winston with a response. The facts speak for themselves: look at national debt relative to GNP at the beginning and end of every Democratic president's tenure. Then do the same for every Republican. Eisenhower does well; Nixon/Ford isn't too bad; the subsequent GOP presidents are wastrels.
As for Jason Van Steenwyk: Al Qaeda is for the most part based in northern Pakistan and southern Afghanistan. US troops in Iraq are helping to tamp down violence between Iraqi Sunnis, Shiites, and Kurds. Al Qaeda was for a time a substantial minority presence among Sunnis resisting US occupation, but those Sunnis turned against Al Qaeda some time ago, and Al Qaeda will have even less support among them once the US leaves. The reason Al Qaeda had a presence in Iraq was in large measure to drive the US out of Iraq. If the US were not in Iraq, Al Qaeda would not likely have much of a presence in Iraq. The Iraqi government may fall apart after the US leaves, but the alternative is to stay forever; there's no signal whatsoever that the Iraqi government is developing any more of a popular base while we remain.
There is no reason to believe that Iraqi oil exports will slow down significantly if the US leaves. There is no place in the world where large oil reserves remain unexploited for long due to security concerns. There's too much money to be made. As in the Niger delta, accommodations for exploitation and graft will be reached by the rival forces.
Well, look, a better argument would simply be that all the Democratic candidates have some kind of health care plan that's going to cost a lot of money if it ever gets legislated. If we stopped burning money in Iraq, that still wouldn't compensate for the expense of a new entitlement program, and actual reductions in military spending, even if they were enacted (here I mean non-intervention spending), wouldn't close the breach either. The problem is two-fold: On the one hand, Democrats at least rhetorically like to beat Republicans with the "fiscal responsibility" stick, but, on the other hand, a lot of liberals believe that we are looking at a new era of progressive dominance, and they want to finally get legislation passed that they've been talking about for years. I think given a choice, fiscal responsibility gets shoved aside this go-round. I've seen this all over the place: a lot of democrats are pissed off by the apparent pattern of republicans who come into power after democrats have restored the economic balance and burn all the capital away on ill-conceived tax cuts and massive increases in "defense" spending. I wouldn't want to generate a revenue surplus that my ideological opponents are just going to turn around and spend willy-nilly. Why be the responsible party if it can't seal you the electorate and in the long run it actually aids your opponents?
Ummm, Brooksfoe, that's because the Democrats before Clinton presided over some gnarly inflation that ate away the value of previous debt, not because they ran a balanced budget
The discussion is about Hillary Clinton's budget proposals, and more specifically her claim that she will get $52 billion from tax increases.
We are having two different discussions then. From Megan's first line of the post ("I don't want to hear any more about how the Democrats are the party of fiscal responsibility;") I thought this was a more general argument about the relative fiscal responsibility of parties. That had seemed to follow in the comments as well.
"Wanting" to withdraw from Iraq doesn't get you any money.
This is true in exactly the same sense that wanting to cut entitlements doesn't get you any money. If your point is that details and execution matter, of course they do. In fact, this might auger well for war cost cutting over entitlement cost cutting -- the likelihood of any administration actually being able to oversee the former seems greater to me.
She proposes to "start" bringing troops home, but gives no clear indication of the timescale of this withdrawal.
Withdrawal on any timescale would be less expensive than a continued occupation over several years, followed then by a withdrawal on some timescale. Up is not down -- one is quite predictably more expensive than the other.
She also refers vaguely to "aid" intended to "stabilize" Iraq but gives no clear indication of the magnitude or type of aid she has in mind.
Well, true. But I am betting that any post-war package, out of any administration, will involve "aid" intended to "stabilize" Iraq. In the meantime, the "war" intended to "stabilize" Iraq continues to cost "money."
Megan, you've said that before, and I looked at it, and it doesn't seem to be true. Inflation under Truman seesawed back and forth and averaged about 5-6% I think, which certainly doesn't account for much of the staggering debt reduction that occurred on his watch. Kennedy/LBJ inflation was very low. The worst inflation problems in the postwar period occurred under Nixon, Ford and Carter. (Carter, as it happens, was a deficit hawk and cut the budget deficit in half. Nixon ordered his Fed chief to increase the money supply in '72 to help with his election; he literally said, "Nobody ever lost an election because of inflation.") And then we had the low-inflation, high-growth Clinton years.
I mean, to make it clear: inflation was higher under Reagan than under Kennedy/LBJ.
US troops in Iraq are helping to tamp down violence between Iraqi Sunnis, Shiites, and Kurds.
Al Qaeda was for a time a substantial minority presence among Sunnis resisting US occupation, but those Sunnis turned against Al Qaeda some time ago.
Yes. Don't you think the successful prosecution of a counterinsurgency campaign had something to do with that?
The counterinsurgency campaign you dismissed as "strategically useless?"
Or do you think this stuff just sort of happens by magic?
Inflation under Truman seesawed back and forth and averaged about 5-6% I think, which certainly doesn't account for much of the staggering debt reduction that occurred on his watch.
Just. Wow.
Don't you think NOT having to fight World War II anymore might account for just a teeny piece of that "staggering deficit reduction?"
If you had a Democrat rooster, you would no doubt credit him every morning for "a staggering increase in daylight."
McCain is the only Senator running who has consistently fought against higher spending, even against the wishes of his own party.
McCain is the candidate with enough foreign policy experience and military sense to bring our troops home from Iraq in victory, rather than defeat.
McCain's age is an advantage because it gives him the moral authority to build consensus on entitlement reform, the most important long term expense in our budget.
"Meanwhile, since Reagan acceded 27 years ago, in every Republican president's tenure, the real size of the national debt has grown dramatically."-brooksfoe
Brooksfoe keeps trying to make the case that Ronald Reagan was fiscally profligate while Kennedy, Johnson and Carter were models of fiscal prudence. As one fine economist explains, the truth is rather different:
I posted this before, but brooksfoe seems to have missed it. And I am always happy to contribute to his education in the fundamentals of economics.
McCain's age is an advantage because it gives him the moral authority to build consensus on entitlement reform, the most important long term expense in our budget.
Uh, you mean the old people are going to let him stick it to them because he's old? I doubt he depends on social security or medicare for his well being, and I doubt many old people believe he does. From that perspective, I don't think he's enough of "one of them" for it to make a difference.
In 2005, those in the top 1% of income paid 39.4% of the total income tax (but only earned 21% of the total income) while those in the 50-75% range paid 11% of the total income tax (while earning 20% of the total income). Those in the bottom 50% paid only 3% of the total income tax.
Those in the top 1% of income paid an average of 23% of their income in taxes. Those in the 50-75% range paid an average of 7% of their income in taxes. So the guy who earned $1.2 million, paid $276,000 in income tax while the guy who earned $57,000 paid only $3,990 dollars in income tax.
Don't worry, the rich are still paying plenty of income tax. They are in little danger of freeloading off of the poor.
All data from http://www.irs.gov/pub/irs-soi/05in05tr.xls
Nelson:
What makes you think "Saint" McCain even wants to bring the troops home? He has stated having troops there for one hundred years. Also he has mentioned bombing Iran. Is that how he parlays his experience? What foreign policy experience does he have? Just because he was a fighter pilot who got shot down over Vietnam? Or because he is a corrupt Senator(Remember the "Keating Five")? What moral authority does McCain have? He voted for the Mess-o-patamia. He doesn't correct his supporters when they call Hillary a bitch. Should I go on?
Earnest Iconoclast:
So why is there corporate welfare? Like building stadiums with public money. Or giving Comcast tax breaks to build a shiny new HQ. Also, what taxes are you talking about? I know I get 22% taken out of my paycheck every week(and I earn between $35,000 and $65,000/yr).
Don't you think NOT having to fight World War II anymore might account for just a teeny piece of that "staggering deficit reduction?"
Of course. But Megan said it happened because of inflation. That, as far as I can see, isn't the case. Incidentally, Truman did fight a little war called Korea, and the salient distinction between his administration and those of Reagan and Bush would be that Truman actually paid for it.
rwe, I noted this argument of Kotlikoff's the last time around, but it has nothing to do with Megan's claim that Democratic deficit reductions were due to inflation. Also, you keep posting it without any statistical backup, and when Kotlikoff has to lead off by saying "from the perspective of generational accounting", it kind of puts a parentheses around the whole thing. The $1.1 trillion saved through Social Security reform in 1983 was carefully preserved through the Clinton administration, and then promptly nicked by Bush II for two tax cuts which largely benefited the rich and the ultra-rich. It's gone now. That's from the perspective, again, of "generational accounting".
In 2005, those in the top 1% of income paid 39.4% of the total income tax (but only earned 21% of the total income) - EI
Careful, sweetie, you're undermining your own argument. You were supposed to be claiming that raising taxes on those in the highest income categories doesn't produce much income.
It is always useful to learn new things! I learned just now that there are fewer reich people than non-rich. But who has more money?
Take then our last two presidents: one gave us a balanced budget...and the current person? Now it will be explained to me that it is the war that has caused this. Oh? Why did we get into this war?
Korean war? the North invaded the South, encouraged by China. We had an agreement with the South. Now explain the Iraq invasion, please.
> The report calculated that households with incomes in that top 1 percent were receiving an average tax cut of $78,460 this year, while households in the middle 20 percent of earnings -- about $57,000 a year -- were getting an average cut of only $1,090.
The top 1% paid much more in income tax than the middle 20%. The middle 20% paid less than 20% of the total tax burden while the top 1% paid much more than 20%.
One can only cut taxes for people who are paying taxes.
What fraction of the total tax burden should be paid by the top 1%? Is it really good that a around half of americans pay SSI/Medicare (which they'll get back, albeit at a low rate of return) and nothing more?
JKc,
re: McCainiac, please do. If that cat gets the (R) nod, who's taking wagers that "The Manchurian Candidate" will run (over/under) 13 times, on basic Cable/broadcast, during September/October?
Also, he has 3 children 19-23: In 1984 McCain and his wife Cindy had their first child together, daughter Meghan. She was followed in 1986 by son John Sidney IV (known as "Jack"), and in 1988 by son James. Somehow they aren't humpin' a ruck in the ME, doing their part to, friggin' gag me, "Win with Honor".
past all that: Here's the FedRes' take on CPI, over time: http://www.minneapolisfed.org/research/data/us/calc/
here's the chart from 1913- : http://www.minneapolisfed.org/research/data/us/calc/hist1913.cfm
(gee, I wonder why they don't have a .gov domain name)
Those in the top 1% of income paid an average of 23% of their income in taxes. Those in the 50-75% range paid an average of 7% of their income in taxes.
Ah, sleight of hand. You mean those in the 50-75% range paid an average of 7% of their income in INCOME taxes. Put payroll taxes back in, and they're paying about 20% too. Because payroll taxes are capped at around $90,000, and because the capital gains rate is much lower than the earned income rate, the top 1% actually pay a total tax rate not much higher than the middle and lower quintiles.
This is why, if you ask the median American wageearner whether it's fair that he hardly pays any taxes, he'll clock you.
Brooksfoe: "...which certainly doesn't account for much of the staggering debt reduction that occurred on his watch."
Yeah, but something else besides the Democratic Party/Truman deserves credit. Namely, the Soviets holding the Russian Front, assisted by the 101st Airborne and Enola Gay, to name a few. Time to acknowledge mortifying error or backtrack and explain how you meant something different, Brooksfoe.
"Kennedy/LBJ inflation was very low. The worst inflation problems in the postwar period occurred under Nixon, Ford and Carter."
Anyone recall how spending policies during Vietnam era impacted later inflationary pressures? I remember hearing about those in Macro 201 many years ago. Don't remember the details though.
"And then we had the low-inflation, high-growth Clinton years."
Which came after the GOP murdered health care entitlements in the crib and Clinton skulked back to the center following a humiliating '94 defeat. Don't get me wrong, I give PResident Clinton plenty of credit for pulling the Democratic Party out of the fiscal policy dark ages, but bear in mind he had other things on his agenda when he entered office. The deficit was not primary among them.
I. "...you keep posting it without any statistical backup, and when Kotlikoff has to lead off by saying 'from the perspective of generational accounting', it kind of puts a parentheses around the whole thing. The $1.1 trillion saved through Social Security reform in 1983 was carefully preserved through the Clinton administration, and then promptly nicked by Bush II for two tax cuts which largely benefited the rich and the ultra-rich. It's gone now. That's from the perspective, again, of 'generational accounting'".-brooksfoe
Brooksfoe, I'm not making a partisan point. President Bush has been quite reckless. But President Reagan was not. That's my point. As Kotlikoff argues, you can't just look at current deficit figures, you have to look at long-term changes in the fiscal situation.
So, when Franklin Roosevelt created the Social Security system, it actually moved the budget toward surplus--but tremendously worsened the country's budget outlook over time. So too, President Bush did far more damage to our finances with the prescription drug benefit than is evident in any recent budget figures.
Kotlikoff has two books explaining generational accounting and substantiating the argument above. If you are interested, look here and here.
II. "I noted this argument of Kotlikoff's the last time around, but it has nothing to do with Megan's claim that Democratic deficit reductions were due to inflation."-brooksfoe
Hey, it's not my job to defend Megan's claims. I frequently disagree with her. And however much I enjoy reading her posts, I often find her dogmatic and unwilling to admit mistakes.
I was just taking issue with your broader point that Democrats have generally been fiscally responsible while Republicans have not. The Democrats were not all that responsible after all, as Kotlikoff--himself a Democrat--explains. They largely created the long-term entitlement mess we face. And Ronald Reagan at least was quite responsible.
1) There is no party of fiscal responsibility -- only two parties of different kinds of fiscal irresponsibility.
2) To "Joe Klein's Conscious", the two main reasos we're battling chronic budget deficits *are* the New Deal and the Great Society. Isn't that plainly obvious by now?
bear in mind he had other things on his agenda when he entered office. The deficit was not primary among them.
This is a terrible rewriting of history. Deficit reduction was among the primary drivers of the entire DLC movement in the Democratic Party. Every serious Democratic candidate in the '92 primaries was strongly committed to deficit reduction. Remember Paul Tsongas? Clinton took office and very quickly began pushing for deficit reduction, and movement towards sharp reductions began already in the spring of '93. Hillary's health care plan wasn't even proposed until '94.
In fact, looking back to Mondale '84, I'm not sure there's been an election since 1976 where the Democrat wasn't running on reducing the deficit. Carter did in '80.
Posted by I.M. Snooping | January 22, 2008 11:15 AM
I.M., if 'New Deal'=1933, try Snooping, the time line, two decades previous to get: "main reason(s) we're battling chronic budget deficits.."
see also: "If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." -Thom. Jefferson
""The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, (and) more selfish than bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe...corporations have been enthroned, and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed."- A. Lincoln
I think the point is that democrats keep running on deficit reduction yet, at the same time, keep promising more entitlements. How's that going to happen? Oh yeah, tax those 'evil rich people'. Meanwhile, rich people will just move their money off shore.
brooksfoe,
Ah, sleight of hand. You mean those in the 50-75% range paid an average of 7% of their income in INCOME taxes. Put payroll taxes back in, and they're paying about 20% too. Because payroll taxes are capped at around $90,000, and because the capital gains rate is much lower than the earned income rate, the top 1% actually pay a total tax rate not much higher than the middle and lower quintiles.
The sleight of hand is yours. What do you mean by "total tax rate?" Total taxes as a share of what? It can't be income, because you're including capital gains.
brooksfoe,
Carter, as it happens, was a deficit hawk and cut the budget deficit in half.
Er, the deficit as a share of GDP was the same in Carter's first year in office as his last, 2.7%. In dollars, it increased from $54 billion to $74 billion.
Of course, a more fundamental error in your running commentary here is attributing budget outcomes to the president alone, as if congress and other influences had nothing to do with it.
What makes you think "Saint" McCain even wants to bring the troops home? He has stated having troops there for one hundred years.
Everyone wants to bring the troops home. The 100 years thing just means that it might end up like Germany, Japan or S. Korea where we still have troops.
Also he has mentioned bombing Iran. Is that how he parlays his experience?
He said that in the context of protecting Israel.
What foreign policy experience does he have? Just because he was a fighter pilot who got shot down over Vietnam?
Have you ever heard him speak? He knows a lot more about foreign policy than Bush or Clinton did before they took office.
Or because he is a corrupt Senator(Remember the "Keating Five")?
McCain is certainly not corrupt. He was found not to have broken any laws in that scandal. Afterwards he made campaign finance reform a top item on his agenda, even at the cost of losing support from his own party.
What moral authority does McCain have? He voted for the Mess-o-patamia. He doesn't correct his supporters when they call Hillary a bitch. Should I go on?
Hillary voted for the same war McCain did. You can not go to war to begin with, which is fine and often preferable. But if you do go to war, you better get serious about it. McCain is serious. He realized Rumsfeld's "low troop level" strategy was wrong and called him out on it. Instead of advocating retreat which would have cost even more Iraqi lives than staying, he said we should increase our presence there. This surge has increased security, but more clearly needs to be done.
> Because payroll taxes are capped at around $90,000, and because the capital gains rate is much lower than the earned income rate, the top 1% actually pay a total tax rate not much higher than the middle and lower quintiles.
Not so fast. Payroll taxes are capped because SS payouts are capped. (Medicare isn't.) SS advocates argue that the cap is essential because without it SS would, with payouts roughly proportional to pay in, as today, be paying rich retired people several hundred thousand/year or, if the payouts were capped, it would become more obviously an income redistribution program. The former is a public relations disaster and the latter puts SS on the radar of people with high incomes, and not in a good way; it becomes yet another welfare program (It's already moving that way people who don't put much in get a much better return than people who max their "contributions".)
If you advocate unlimited SS "contributions", you have to tell us which evil you choose.
Under the current system, SS and Medicare are (at worst) a time-shift; for most poor people, it's a modest return on investment. It doesn't go to pay for govt.
Income taxes do.
Mixner, you're right, I should have kept capital gains out of it. The relevant figure is the Effective Federal Tax Rate. That was, by quintile, 8, 11, 16, 19, and 22 percent in 2004. So, just moderately progressive. Within the top quintile, there's almost no progressivity; pcts 81-95 pay about the same rate as pcts 96-99 and the top 1%.
If you include state and local taxes and sales taxes (which most conservatives want to see more of) then it goes to 20, 25, 29, 32, 35. Again, almost no progressivity from percentile 81 up to the top 1%.
Joe Klien wrote:
Ralph:
So do you think the New Deal or LBJ's "Great Society" are bad things? When did the Dems ever run up deficits like the Republicans? And it is funny how Mankiw critiques Clinton's plan when he would never dare do the same to Bush's.
________________________________________________
Are you being serious? In December the report on unfunded entitlements put it at 54 TRILLION dollars, and growing by $1-3T a year.
By comparison the 200+ year old public debt is just over 5 trillion dollars.
The vast majority of the $54T is Social Security and Medicare, both products of Democrat Presidents with a Democrat Congress.
You dont hear much about this colossal mess because SS should stay in the black for another decade, and Medicare just slipped into the red in 2004.
If you need more exiting history on how much the Democrats gave away on these 2 programs in the early years, let me know.
People still tell me Democrats are more responsible because "Clinton balanced the budget"- and do so with a straight face.
______________________________________________
bear in mind he had other things on his agenda when he entered office. The deficit was not primary among them.
This is a terrible rewriting of history. Deficit reduction was among the primary drivers of the entire DLC movement in the Democratic Party. Every serious Democratic candidate in the '92 primaries was strongly committed to deficit reduction. Remember Paul Tsongas? Clinton took office and very quickly began pushing for deficit reduction, and movement towards sharp reductions began already in the spring of '93. Hillary's health care plan wasn't even proposed until '94.
Posted by brooksfoe | January 22, 2008 11:17 AM
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Baloney! Read Bob Woodward's excellent "The Choice" about Clinton from 94-96 election.
Just after the 1994 election rebuke, Clinton wanted to settle with a $200B/year deficit so that he could afford all the spending he wanted, including expanded government health care. Democrats had had enough of him and joined Republicans to nearly unanimously deny Clinton the deficits he wanted.
The $200B in 1994 is a much more sizable deficit than the $150B deficit of 2007, in real dollars.
And dont forget the budget showdown with Gingrich was because Clinton wanted more, not less, spending.
MEH...
So "banks" and "corporations" are the reason we can't afford the bills of government? I'd ask you to explain exactly how that's the case...but I'm not sure it would be worth my time to read what would inevitably be a ridiculous answer.
So, save it.
We've simply bitten off more than our economy can chew for any extended period of time. That's why we were where we were by the 1970s. Since then, we've gotten taxes back into a growth-oriented position. But our spending has never been corrected.
Eventually, we're going to have no choice but to trim entitlements.
Snoop,
If you don't know that U.S. Treasury securities are the basis of FOMC operations, all I can do is wish you Good Luck!~
brooksfoe,
That was, by quintile, 8, 11, 16, 19, and 22 percent in 2004. So, just moderately progressive.
Huh? "just moderately" progressive?
From the numbers you give above, the "tax rate" of the top quintile is almost three times that of the lowest. You seriously think an increase of a factor of three can reasonably be characterized as "not much higher," do you?
And by the way, where are you getting your numbers from, anyway? Give us a link.
brooksfoe,
Never mind, I found a CBO document. Your misrepresentations are even worse than your numbers indicate. Here is the Total Effective Federal Tax Rate by Income Group for 2007:
Lowest Quintile: 5.7%
Middle Quintile: 15.9%
Top 1%: 30.9%
So, the tax rate for the top 1% is twice the tax rate for the middle quintile, and more than five times the tax rate for the lowest quintile. This is what you described as "not much higher."
And liberals wonder why we don't trust them to present economic data and analysis honestly!
Oh, and for all the fools who hate defense spending, I would like to point out that at least defense spending is called for in the Constitution. SS, Medicare, midnight basketball? not so much.
Mixner:
http://www.csmonitor.com/2005/0414/p03s01-usgn.html?s=t5
Those data were 2004, yours are 2007, so probably different.
In December the report on unfunded entitlements put it at 54 TRILLION dollars, and growing by $1-3T a year.
That's no doubt the "infinite horizon" figure. I'm not really terribly worried about how we'll fund Medicare after the sun has been extinguished.
brooksfoe wrote:
"bear in mind he (Clinton) had other things on his agenda when he entered office. The deficit was not primary among them."
No, getting tail was.
In December the report on unfunded entitlements put it at 54 TRILLION dollars, and growing by $1-3T a year.
That's no doubt the "infinite horizon" figure. I'm not really terribly worried about how we'll fund Medicare after the sun has been extinguished.
Well I guess as long as you're dead, the problem's solved! This coming from someone who's probably droned about Bush passing debt onto our children at cocktail parties!
One problem: Medicare is ALREADY in the red and is draining the general fund to the tune of $50B a year and growing fast. SS will join it in 9 years. And all this will accelerate rapidly as the boomers start collecting in a few years. So every year will forever be more difficult to achieve surplus than the one before.
So you wont get the chance to grab what you can now and pass the cost off to future generations that our parents did. Its a rapidly declining curve, the most rapid coming sooner, then leveling decades down the road after the boomers are all in.
And if you followed the news today, the first fiscal year fully managed by a Democrat Congress is now projected to yield a deficit over DOUBLE the size of last year.
According to the Tax Foundation, the most recent data, from 2005, shows:
Cato charts the data here. And Stephen Moore has a good overview in the Nov/Dec 2007 American.