If Credit Downgrade Happens, Will Republicans Accept Tax Increases?

By Justin Gardner | Related entries in Republicans, Taxes

This just in from Jake Tapper…

A government official tells ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of US debt from its current AAA value.

Officials reasons given will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited.

Anybody think the Tea Partiers will go for any type of tax increases if there is a downgrade?

No, neither do I.

Welcome to our brave new world…where completely avoidable economic problems become unavoidable.

Just remember this next election.


This entry was posted on Friday, August 5th, 2011 and is filed under Republicans, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

88 Responses to “If Credit Downgrade Happens, Will Republicans Accept Tax Increases?”

  1. mw Says:

    “If Credit Downgrade Happens, Will Tea Party Republicans Accept Tax Increases?”

    I corrected your title to make it consistent with your text. The answer:

    No, no more that if a credit downgrade happens, liberal Democrats will accept entitlement cuts. The good news, is that neither the tea party nor liberals are needed to take needed action on the deficit, as we just saw with the debt ceiling compromise vote. Liberal Democrats voted against it. Tea Party Republicans voted against it. It passed overwhelmingly.

    You could not find a better example of a bipartisan compromise deal than the debt ceiling vote. Moreover, to the extent that “Centrist” actually means anything in concrete policy terms, it is a purely centrist piece of legislation. The extremes of both parties voted against it. It required a bipartisan coalition of more moderate, centrist, practical Democrats and Republicans to pass this legislation. It is the model that future deficit reduction legislation will follow. You don’t need liberal votes, you don’t need tea party votes.

    By the end of the year we will have more bipartisan centrist compromise deficit reduction legislation. It will include entitlement cuts, defense cuts, and revenue increases. And you will hate it and the process needed to get it just as much as you hated the debt ceiling legislation.

    The fact that your or I do not particularly like the debt ceiling compromise or how it was arrived at does not change what it is – and it is, in fact, a picture perfect example of a bipartisan centrist compromise. If you don’t like it, you may just not like bipartisan centrist compromises as much as you think you do.

  2. mw Says:

    Justin, when you release my comment from moderation, could you please fix the blockquote? thanks.

  3. Obama loses our AAA credit rating « Don Surber Says:

    [...] Vox Popoli, The Raw Story, Wonkette, FT Alphaville, Politics, Gretawire, The Lonely Conservative, Donklephant, Capital Tonight, The Right Scoop and [...]

  4. gerryf Says:

    Forget “if”

    Now, before we hear from the far right panic attack that we need to cut more taxes, regulation, and slash spending until we’re back in the stone age, I have a serious question.

    Is this the same Standard & Poor’s that adjusted the way it graded all those mortgage backed securities because it suited them and Wall Street at the time?

    Ah, thought so.

    And is this the same Standard & Poor’s that went ahead and downgraded the US credit rating after being alerted to a $2 trillion (that’s with a “t”) error?

    Ah, thought so.

    Given how S&P betrayed investors’ trust in their pursuit of higher revenues and market shares, shouldn’t credit rating agencies be held accountable when they inflate ratings or fail to conduct reasonable due diligence?

    Ah, thought so.

    OK, let the wailing and gnashing of teeth begin.

  5. kranky kritter Says:

    We deserve it. Let’s not waste time pretending we don’t. After the sad spectacle of the last 6 weeks or so, the inadequacy of the outcome, plus our absymal deficit and debt, we deserve it. Let’s skip the denial part. S + P isn’t the only ratings agency that has taken this action, so shooting the messenger just doesn’t work.

    The United States credit rating has been downgraded because in the span of 11 years we have gone from a balanced budget to spending about $1.72 for every dollar we collect. The 2010 budget estimate figures show that we collected about 2.2 trillion dollars, and we spent 3.7. That’s the problem, and the cause of this downgrade. The rest is static.

    The soundbites in the immediate aftermath of the downgrade announcement should make it crystal clear to all Americans that the folks in congress are uncommitted to working together to address the issue. Or unable. The only thing either side seems eager to do is blame the other side for being unable to do the right thing. The debt council negotiations are certain to be a fiasco. I wish there was a way to bet money on it.

    I’m convinced that the best way past this is for Americans to join together and sign our own pledges for the election of 2012. We should all promise to vote for every single non-incumbent congressional candidate (senate or house) that seems reasonable and promises to work outside the confines of partisan ideology to close the gap between government spending and government revenue by every means necessary.

    Nothing will straighten up our alleged leaders better than an extremely loud shot across their bow. We need 60-70-80% turnover in the house and the ouster of most senators running for re-election. This institution needs an enema.

  6. kranky kritter Says:

    ..and I’m moderated FITYMkks;afpcv]cv

  7. gerryf Says:

    …it’s nutty. I think the moderation and captcha algorithm are the incestuous offspring of some twisted computer rookit infection. It’s ruined donklephant. Hardly ever come here anymore.

  8. WHQ Says:

    It won’t matter much, because there’s so little (relatively speaking) opportunity for investment with major economies going into the sh1tter all over the world. Demand for bonds will remain high, despite S&P’s dubious proclamations. And we’re sure as hell not going to raise interest rates voluntarily when the economy is so slack. I don’t know what tax increases have to do with it, really. Not that I’m against more progressive taxes, mind you. I just don’t see this downgrade as changing anyone’s mind about taxes, or that it should. (There are far better reasons than this anyway.)

  9. Solomon Kleinsmith Says:

    That is against their religious belief that the earth is the center of the universe, I mean taxes are the spawn of satan.

  10. Geeze Says:

    Obama and the democrats pass obamacare, despite a nation opposed.
    Obama and the democrats raise the budget by over a trillion a year from when it was under Bush.
    Stimulus is gone. Banks are bailed out and Chrysler and GM have repayed.
    So now our budget is 3.6 trillion not 2.4 trillion as it was under bush.

    And NOW the left wants to raise taxes. Not only no but hell no. Obama should resign.

    They have created this catastrophe. THEY own this economy. This fiscal mess. They own it. Its theirs and you want to raise taxes? Are you Nuking futs?

    Resign OBAMA! You even have Europe on the verge of collapse over your fiscal policies.

    Their aint enough money to pay off a 1.3 trillion dollar deficit.

  11. Geeze Says:

    This is getting serious guys and gals. This is no longer about politics. This is about a Cloward and Piven president, community organizer, who thinks that if he just overloads the system the opposition will capitulate.

    Well I got news for you. This is more then filling the restrooms at an airport. This is more then protesting in front of a business. This is more then getting the government to give you a few million dollars to improve your neighborhood.

    This president with his cloward and piven team of abettors, create a crisis strategy that has the entire world on the verge of economic collapse.

    STOP DEFENDING THIS Incapable moron……..run him out of office…..We need you people to realize what hes doing. We need you for once to stop playing politics and run this guy out of office. To put pressure on your congresman and senator and get this under control or

    were all going down…..hard. I mean Im talking complete and utter economic collapse and a tax increase on the rich aint gonna solve what ails this economy now folks….It just aint.

  12. kranky kritter Says:

    Actually the stimulus ISN’T gone. About 1/6 has yet to be spent from what I have heard.

  13. mw Says:

    Not to mention the fact that we are nowhere near a balanced budget, which is to say that we continue to “stimulate” the global economy each and every year. In 2011 our government will spend $3.82 trillion against against 2.17 trillion in revenues or about $1.65 trillion of additional global deficit “stimulus”. Of course at this stage of our addiction, it doesn’t feel that good anymore. Really it’s just a maintenance dose. Like any good addict – there is only one answer to make sure we still feel good – bigger doses administered more frequently. Absolutely no reason we can’t just keep doing that indefinitely. C’mon – lets get that needle back in the arm! No pain… no pain.

  14. ChloeM Says:

    This make my head hurt a lot. I’m sick of it I think every-time I open a television and my computer all I see was this problem. But that’s not the issue here.

  15. Mike A. Says:

    Geeze…appropriate name

  16. gerryf Says:

    Geeze, I agree Mike. The guy must get his news from AOL chain letters and Fox News bulletin boards.

    I love the fear mongering from the resident righties….what, you got 98 percent of what you wanted, but we still need to scare the crap out of people with scary prognositications.

    What none of these fear mongers is willing to admit is what really matters for debt sustainability is the real interest rate, since what matters is keeping real debt, not nominal debt, from growing.

    The US government can lock in 30-year bonds at a real interest rate of 1.25%. That means that a trillion dollars in extra debt would mean $12.5 billion a year in additional real interest payments. The CBO estimates potential real GDP in 2021 at about $18 trillion in 2005 dollars, or around $19 trillion in 2011 dollars.

    Put these together, and they say that an extra trillion in borrowing adds something like 0.07% of GDP in future debt service costs.

    I am NOT saying that the debt is not important. What I am saying is that we are cutting off our noses to spite our faces by panicking over a problem easily handled in the long term while we have a potential h-bomb of an economic depression staring us in the face thanks to the absurd austerity ranting that passes for “reasonable” arguments on the right.

    Meanwhile, the markets are still going to punish us severaly tomorrow because we have a bunch of right wing alarmists running the financial markets.

  17. gerryf Says:

    ahh moderated again. must have spoken the truth too loudly

  18. Tully Says:

    News flash: We were going to be downgraded with or without the sideshow of the debt ceiling circus. Unless and until we get our entitlement spending under control, it’s gonna get worse. We have promised more than we can pay for, and it’s obvious. Europe is in the same boat, only farther along.

    Some of us have been pointing out the mathematical inevitability of this for many years. All the recent spending binge of the last four years has done is hasten the arrival of the inevitable.

    Washington worked for decades to create this situation. Well, we’ve run out of other people’s money. As has Europe.

  19. WHQ Says:

    That’s the problem, and the cause of this downgrade. The rest is static.

    If congress had raised the debt ceiling in pro forma fashion as it historically has, there would have been no downgrade. It’s not the debt, per se, that caused this. It was the threat of (voluntary) default.

    The worst result, other than voluntary default, that could come out of this is the (voluntary) tanking of our economy that many around the world fear, which is something that will plunge us further into debt than would well targeted spending, rather than automatic deficits arising from economically reduced revenue and increased welfare spending that we’re likely going to see.

    Interest rates are low, lots of people need work and there’s lots of work that needs doing. But we’ll just let the roof leak, which will cost us more in the long run than fixing the roof.

  20. WHQ Says:

    en moderato!

  21. gerryf Says:

    nah, just kidding….you just wonder what word kicks off the old moderation queue sometimes…

    For example, you cannot type AOL on the Huffington Post without getting kicked in the queue. Here? I never know. Douche gets past, but who knows with this algorithm

  22. gerryf Says:

    Ahh, there’s go Wall Street, punishing the country for an insignificant action by a S&P…down 190 a half hour after the bell….

  23. Geeze Says:

    That is absolutely true MW. Its an addiction that at one time was affordable. But as the addiction grows it becomes more and more unaffordable and our desperation becomes more and more pronounced.

    Today the desperation is evident. Bush started two wars….I WAS OPPOSED TO BOTH….even Afghanistan. When we went in I said we will be their 10 years from now……well 10 years later and a trillion plus buks later…….

    But I digress…..in the end its about enablers. As long as we have people willing to enable us……we will indulge. As long as someone will keep lending us money to shoot up……were going to shoot up.

    Poverty is a drug. Spending is an additcion. They are both hand in hand.

    Both parties indulge in their use and both parties are pimps. But this time the real culprit is not libertarian Tea Party members who are saying……NO WERE NOT GOING TO GIVE YOU ANY MORE MONEY FOR YOUR DRUGS…….

    No this time the culprit is the pimps and the prostitutes demanding more and more of their drug………MORE……

    Time for tough love. No one that I know is advocating ending social security, medicare, Welfare, food stamps. We are just advocating PAYING for what we indulge in…..but the problem now is that the deficit is so high that even doubling the taxes on the rich and restoring the old capital gains tax and closing all loop holes and raising the tax on corporations will net us around 1 more trillion dollars.

    We are still 400-700 billion short of a balanced budget, not to mention if you doubled the taxes on the rich, raised the capital gains tax and closed all loopholes and raised taxes on corporations the economic disaster that ensued would create world wide anarchy and poverty of unprecedented proportions.

    The Democrats have to know this. They are not stupid. I can only conclude that they either want this to happen or they are playing chicken with politics because CLOWARD AND PIVEN ALWAYS WORKS…..

  24. WHQ Says:

    nah, just kidding…

    I’m not. I’m en moderato! (It seemed like you were replying to me, gerryf. Maybe not.)

  25. gerryf Says:

    WHQ, no, wasn’t directing anything at you.

    ….not to mention if you doubled the taxes on the rich, raised the capital gains tax and closed all loopholes and raised taxes on corporations the economic disaster that ensued would create world wide anarchy and poverty of unprecedented proportions.

    Geeze, care to back that up in any way with some realistic data,study, et?

    Just as tax cuts do not create jobs (See, I don’t know, the last 35 years), tax increases do not destroy them, wreck economic doomsday, or do anything except cause Grover Norquist bad dreams.

    A reasonable tax policy allows government to pay for the services it renders. We have been victimized for the last 35 years with the idea that government is bad and taxes are bad.

    Nonsense. The majority of people are willing to pay for the services the government provides. It’s when crazy people cut taxes, cut taxes, cut taxes that we get into trouble.

    If you end the two wars and allow the Bush Tax cuts to expire we would instantly close the gap between spending and revenues to a manageable level.

    Then, close the loopholes.

    Then create a real stimulus package (not that 800 billion stimulus that was 1/3 tax cuts and as a result useless) and the economy gets moving again, tax revenues rise, we watch our spending and suddenly the federal deficit is in the black again like it was under Clinton.

    Then we create a long term deficit reduction plan, as opposed to this panic-induced tea partiers running around with their heads cut off. Such a plan includes careful spending reductions, modest taxes, budget reform.

    Voila. Everyone us happy and grandmothers across the nation don’t have to eat catfood.

    It’s not hard. It just takes practical people (right wing and left wing fanatics not allowed) with a little long term vision.

  26. Geeze Says:

    Thats pretty easy gerryf.

    The CBO states that the loss of revenue from the Bush tax cuts and the change in capital gains tax amounted to 3.7 trillion over 10 years, or 370 billion per year.

    Obama’s own 2012 budget has a breakdown in estimated tax revenue by category. Income tax estimated is 890 billion for 2012. The rich pay roughly 720 of this 890 billion.

    These are Obama’s own numbers found at Whitehouse.gov.

    Doubling the taxes on the rich would net you 720 billion. Add to that the lost revenue of 370 billion that you could recover by eliminating the tax breaks that all categories got and the add back of the capital gains tax you are now at 990 billion in added revenue.

    Taxes from Corporations amount to 220 billion dollars revenue. Double that…which is not going to happen, but double it and you got 220 more billion.

    990 plus 220 billion is 1.2 trillion…..still far short of the 1.6 trillion to 1.7 trillion that is estimated to be the 2012 shortfall. Cut Defense by 200 billion and your still 200-400 billion short of balancing the budget.

    These numbers can be found, broken down in Obama’s own 2012 submitted budget for FY 2012.

    We are NOT going to double the riches tax. We are NOT going to double the taxes that corporations pay. So if you add 10 percent to the corporate tax rate and 10 percent to the rich you would net 22 billion and 72 billion and return the captial gains tax you would net another 33 billion.

    giving you a grand total of 127 billion in new revenue……WAY short of 1.5-1.7 trillion estimated shortfall in 2012.

    In short……the left can trot out all kinds of charts and hide the decline analysis but the real basic numbers are there….glaring at us to see.

    Raising taxes in the midst of economic slump will only further erode revenue. Creating jobs will create revenue and close the budget gap…but your not going to create jobs by raising taxes.

    So raising taxes in lean, austere economic times is simply a way to further erode revenue and increase the deficit gap….not narrow it.

  27. Geeze Says:

    But its time to stop debating this. Spouting Idealogical nonsense that neither side agrees with.

    You say raising taxes will solve the problem.

    FINE…raise them. All you want. To whatever you want. Im not rich. They would affect me IN NO WAY as far as paying income tax.

    I have simply been pointing out the raw numbers….DOUBLING TAXES on the rich and corporations is NOT going to get you anywhere near a balanced budget which tells me we are well in over our heads….

    and a more realistic approach of 10 percent increase on the RICH and corporations which I believe would cause the left to go into orgasm would only produce…..

    About 127 billion in added theoretical income.

    1.6 trillion minus .127 leaves us about 1.45 trillion short of balancing any budget.

    From what I can tell the left is so obsessed with making the rich and corporations pay that they fail to really see that we are so far in debt now that their is no way we can milk them for enough money to get us back out.

  28. gerryf Says:

    That’s not what I asked. What I asked is where is the worldwide anarchy and poverty of unprecedented proportions.

    Nowhere do I advocate doubling the taxes on corporations or on the rich. I Heck doubling GEs taxes of 0 still nets 0. Taxing the “income” of a rich man who makes all of his income from capital gains doesn’t raise much, either.

    Nor do I say that the middle class and poor should not share in a tax increase.

    I am not looking for class warfare. I am looking for a common sense, methodical way out of this mess. That means avoiding the hyperbole about worldwide anarchy and poverty of unprecedented proportions.

  29. kranky kritter Says:

    Poverty is a drug? WTF?

    Geeze your data doesn’t support your initial contention. You’ve demonstrated that the proposed changes would not completely cover the deficit. Not what you contended. What you claimed is that it would cause disaster, anarchy, and untold poverty.

    The last Bush tax cut lowered revenue and didn’t stimulate the economy. Jobs WERE NOT created. And you’ve already acknowledged that restoring the old rates would boost revenue in the math part. Even though you later made the opposite claim. You’re not even internally consistent.

    So all that’s left is your contention that restoring the old rates would cost jobs. Which jobs? The ones that weren’t created in the first place? There is PLENTY of capital out there in the market just dying to find sound investments. I have ZERO worry that doing something like raising the top income tax a few points is going to lead to a shortage of investment capital to finance economic growth.

  30. Tully Says:

    There, you’ve all been unmoderated. Happy now? Whiners.

    GLOBAL markets continue to agree with us pessimists. Y’all ideologues can continue to wave your stale talking points about. They are as believable as the rantings of fundie creationists trying to explain away that fossil trilobite they’re being whacked in the head with.

    S&P downgraded us for the same reason Moody’s and Fitch are thinking of doing so. Because there is as yet no credible evidence that the US Government as a whole is willing to decisively control its runaway spending, and its obvious to anyone who can actually do the math and understands basic economics that the money isn’t there to support the current trend.

    Unless and until Congress actually comes up with a credible budget path, the beatings will continue. That means bringing the spending path back down from the 24+% of GDP that the Dems bloated it to in the last few years, and getting revenues back up towards that historical norm of 18+% of GDP.

    Robust growth would solve a lot of the problem. In fact, if GDP growth exceeds debt growth the problem is by definition getting smaller. That’s not gonna happen anytime soon, especially under an admin that is setting new records for regulatory strangulation of the economy.

  31. gerryf Says:

    Good God, someone has kidnapped KK and replaced him with a liberal clone….

    But on a more serious note, Tully, while it is true S&P downgraded the US for political reasons, it did not do so because because “there is as yet no credible evidence the US Government is willing to control its runaway spending”

    They are interested in the US getting its house in order, but they not only specifically cite the unwillingness to raise taxes, they even point a big fat finger at the GOP

    “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.”

    Now, I stand by my original premise that this downgrade is so much nonsense, but it sure is interesting that the hardly left leaning S&P is willing to call on the GOP for its intransigence.

  32. kranky kritter Says:

    I don’t read the GOP’s statement as coming down on either side of the debate about what method is preferred for bridging the gap between revenue and spending. Although I do think the explicit mention of revenue hikes was directed at the hardcore no new taxes club.

    And sorry to disappoint your new view of me so soon (LOL), but I’d support something an awful lot like this, as a package deal:

    • Raise the retirement age 2 years.
    • Means test social security and medicare.
    • Restore the 38% top rate from 2000.
    • Close most corporate tax loopholes while lowering the overall rate in a way that gives say half the additional revenue back in lower rates and puts the rest toward deficit reduction.
    • Trim the military budget.
    • Level fund most agencies in the discretionary part of the budget.

  33. kranky kritter Says:

    Free Kranky Mandela!

  34. kranky kritter Says:

    Oops, when I get freed, GOP should be S+P.

  35. Geeze Says:

    1. Democrats fear monger and scare poor with “If you dont vote for us the GOP will cut your welfare and you will die”. FACT. Today their scare tactic is that the GOP will make old people homeless and eating dog food if you dare to vote for the GOP.

    POVERTY…its a drug that the democrats feed their people to keep them fearful of voting for anyone but a democrat. It is in fact their drug of choice.

    2. I simply pointed out that IF<<<IF<<<<IF you DOUBLE the taxes on the rich and corporations and cut all the loopholes you would end up with world wide anarchy because…..follow along here……..if you did that the economy would collapse and the USA is the driver of the world economy. Collapsing economies around the globe would lead to anarchy.

    Dont believe it just look at Greece and Spain and now England and they are not collapsing….they have simply said we have to cut entitlements to pay our bills.

  36. Geeze Says:

    KK.

    The left loves to trot out the CBO estimate that the Bush tax cuts have cost us 3.7 trillion in lost revenue.

    Fine.

    We have since 2000 added 9 trillion to the deficit. 9 minus 3.7 trillion does not a balanced budget make.

    So the left believes that the only means necessary for balancing the budget IS raising taxes. I then pointed out that doing so even to the point of doubling them WILL NOT balance the existing budget. Oh wait we have NO existing budget.

    You said the last Bush tax cut lowered revenue. That is a lie as well.

    From the beloved Liberal Wikipedia:

    Overall real GDP grew at an average annual rate of 2.5%. Between 2001 and 2005, GDP growth was clocked at 2.8%. The number of jobs created grew by 6.5% on average. The growth in average salaries was 1.2%. Growth in consumer spending was 72% faster than growth in income. Investment in residential real-estate soared, growing 26% faster than average.[11][63]

    By either of these standards, 2007 bests 2000. In 2007, tax receipts (in 2005 dollars) totaled $2.414 trillion, whereas 2000 tax receipts (in 2005 dollars) only totaled $2.310 trillion. Additionally, in 2007 taxes were only 18.5% of GDP, but in 2000 they were 20.6%. In other words, the best year after the Bush tax cuts was better than the best year before them.

    The debate will never stop that we actually lost 3.7 trillion dollars in lost revenue but I will concede that we did. But even conceding that we had an additional 3.7 trillion dollars does not alter one mind blowing fact.

    9 trillion minus 3.7 trillion leaves us with a deficit of still 5.3 trillion dollars and right now their aint really enough tax revenue to solve this. I simply pointed out DOUBLING all these taxes would not solve this gap. I was not advocating for doing so.

  37. WHQ Says:

    Geeze, who is it you’re arguing with? Has anyone said anyting about erasing our debt entirely? If so, over what number of years, and for what purpose? I don’t even think anyone has suggested that balancing our budget (no more deficits year to year, as opposed to debt) is a near-term goal. Any attempt to do either in the next couple of years would cripple our economy regardless of whether or not it included your taxation-doubling hypotheticals. The best we can do is to slowly reduce deficits and allow our economy to outpace our debt, assuming that reducing our debt-to-GDP ratio should be our priority in the first place.

  38. WHQ Says:

    en moderato – shocking!

  39. kranky kritter Says:

    Geez, I’m quite familiar with the budget numbers, was looking at the same ones just last night. {Oh BTW, in case you have, don’t mistake me for a liberal, I’m not.] It’s always hard to say in such circumstances what might have happened. So many variables. The only really plausible thing you can do is look at the numbers from the era before the change and project those forward, and then compare that to what actually happened. Not perfect, but the only viable method.

    In the nineties, government revenue grew steadily. Beginning in 2000 it went down 3 straight years, and didn’t recover to the 2000 baseline until 2005. [At which point maybe YOU would say that revenues had now officially “grown” due to the tax cuts compared to 2000. I would not.} revenues then grew for 2 years, dipped slightly the following year, and then cratered.

    Any dishonest debater can use semantics to make a bogus argument about whether government revenues had “grown” in the wake of the Bush tax cuts. After all, total receipts were higher in 2005-2007 than they were in 2000. But the fact is that if revenues had continued on the pre-tax course, revenues would have been substantially higher. The real underlying debate is whether revenues benefitted from the tax cuts. And the numbers strongly indicate that they didn’t.

    How proud are you of your semantic point, really?

  40. Tillyosu Says:

    The only really plausible thing you can do is look at the numbers from the era before the change and project those forward, and then compare that to what actually happened. Not perfect, but the only viable method.

    KK, I would say that this method of calculation is less than “not perfect.” The only way it makes sense is if we assume that everything else besides marginal rates remains static which, of course, is not the case. Think hard now, what else happened during the Bush administration that could have affected tax revenues?

    That’s right, we had a major terrorist attack and an economic recession. In fact, if you look at total income tax receipts (which you can do here), you’ll see that they closely mirror periods of economic growth and decline. Your argument assumes that economic growth under Clinton, which was fueled by the advent of the internet and which we now know was largely a speculative bubble, would continue indefinitely. I would say that’s a pretty absurd assumption.

    So the question now is, what has a greater effect on income tax revenues – marginal rates or economic growth? The historical record shows that revenues tend to hover around 18% of GDP regardless of what marginal rates are. However, actual receipts have increased tenfold since 1965 when the top marginal rate was 91%, and 1990 when the top marginal rate was 28%. Now why do you think that is?

    Now, if total revenue is more influenced by economic growth than by marginal rates, it seems to me that the best way to increase tax revenues is to grow the economy. Which leads to my final question – do you believe that higher taxes, or lower taxes, are more conducive to economic growth?

  41. Tillyosu Says:

    The debate will never stop that we actually lost 3.7 trillion dollars in lost revenue but I will concede that we did.

    I’m not sure this is correct Geeze. I think this figure comes from a Treasury report that estimates lost revenue if the tax cuts are extended for another ten years.

    The only report I’ve seen is from Citizens for Tax Justice which claimed that the tax cuts cost $2.1 trillion ($2.5 with interest) over ten years. However, that report assumes no feedback effects from the tax cuts at all, which almost certainly isn’t the case. But even then, the tax cuts that went to the rich – the ones that the left wants to end – only amounted to $674 billion over ten years. That’s about $67 billion a year, or 1.9% of 2010 spending.

  42. kranky kritter Says:

    Which leads to my final question – do you believe that higher taxes, or lower taxes, are more conducive to economic growth?

    You’ve changed the subject here. We were talking about government revenue. That’s your pattern. If you can’t obscure the answer to a discussion where conservative policies might look incorrect, you change the subject.

    I’m still waiting for you to share your more detailed explanation of your belief that subsistence level income tax exemptions make sense. You do that, and then we can talk about the relationship between taxes and economic growth, along with the variable we we discussing, gov’t revenue.

  43. WHQ Says:

    do you believe that higher taxes, or lower taxes, are more conducive to economic growth?

    I’d ask the same about (net) spending.

  44. Geeze Says:

    Many of the tax reductions in EGTRRA were designed to be phased in over a period of up to 9 years. Many of these slow phase-ins were accelerated by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), which removed the waiting periods for many of EGTRRA’s changes.

    Essentially by 2004 when the full force of the tax breaks came to fruition as you so aptly point out the following year of 2005 saw a banner year.

    The problem with averaging over 2001-2008 is that in most of 2001 the tax cuts were non existent and still used the Clinton era tax code. A recession started sometime during the end of 2001 and continued thru most of 2002 in which only partial tax cuts were in effect.

    In 2003 the government accelerated those tax cuts and the results were to bring us out of recession and put us on a path towards growth. Averaging 2 bad years into the mix dropped the numbers significantly and as with anything can be spun anyway you want. But to claim that the Bush tax cuts did not work as intended can be made about any piece of legislation ever passed by our government.

    There are always unintended consequences. But no matter the Bush tax cuts. they are not the reason we are 14 trillion in debt. It is because we have a government on both sides of the isle that continues to kick the can down the road, year after year after year because……….? God only knows.

  45. Tillyosu Says:

    In fact, Berkeley economist Alan Aurbach has estimated that the feedback effects of the tax cuts were around 40%, meaning that 40% of the costs to the treasury are recouped through economic activity. Using this figure, the tax cuts for the top 1% amounted to only $404 billion over ten years, or $40 billion a year.

  46. WHQ Says:

    Just apply that 40% figure to the top 1%. Simple! But…

    August 22, 2009
    Alan Auerbach and Bill Gale on the Stimulus

    Research has shown that lower-income, liquidity-constrained households have a higher tendency to consume after getting tax cuts than higher income households, but the authors don’t detail how the program could have been pointed more in their direction.

  47. Tillyosu Says:

    I didn’t change the subject KK. I simply demonstrated why your argument was wrong, and then challenged your belief that the best way to raise revenues would be to raise marginal rates. Obviously, you could not answer my question.

    By the way, I LOVE how you accuse me of changing the subject…and then promptly change the subject. FYI, I have no objection to a subsistence level exemption in a flat tax regime, though I don’t see how that’s relevant here.

  48. WHQ Says:

    Since 1990, here are tax receipts as a percentage of GDP both from individual income taxes and total receipts.

    1990 8.1 18.0
    1991 7.9 17.8
    1992 7.6 17.5
    1993 7.7 17.5
    1994 7.8 18.0
    1995 8.0 18.4
    1996 8.5 18.8
    1997 9.0 19.2
    1998 9.6 19.9
    1999 9.6 19.8
    2000 10.2 20.6
    2001 9.7 19.5
    2002 8.1 17.6
    2003 7.2 16.2
    2004 6.9 16.1
    2005 7.5 17.3
    2006 7.9 18.2
    2007 8.4 18.5
    2008 8.0 17.5
    2009 6.5 14.9
    2010 6.2 14.9

  49. kranky kritter Says:

    No,Til, you changed the subject from gov’t revenues to economic growth. You didn’t demonstrate that I was wrong about anything.

    As to my other comment, you are well aware that I was following up on a recent conversation in which you avoided going into any detail.

    @WHQ Aww, SNAP! @ss fact checked. Mischief managed. This will surely lead to til’s disappearance from the thread. No. not really. I’m sure he has some more ready excuses for why the data we’ve cited has kicked his ass all over the page.

    Maybe I can earn another liberal partisan douche merit badge to go with the collection of conservative partisan douche merit badges Gerry has given me. I need to start a fantasy politics trophy room.

    Which reminds me, surely you are stoked about the Phillies and Eagles? I see the Red Sox and Phillies on a collision course. I gvie you guys the edge, that starting pitching is off the hook. Gotta play the games though. In football, I like our chances. Again. We’re praying Haynesworth will keep drinking the koolaid.

  50. Tillyosu Says:

    Jesus KK did you even read my comment? I was saying that tax revenues are more a function of economic growth than of marginal rates and that the best way to raise revenues is to grow the economy. Now, if you are unwilling or unable to answer my question (whether higher taxes or lower taxes are more conducive to economic growth), then just say so.

    As to WHQ’s data…I’m not sure what point he was trying to make.

  51. kranky kritter Says:

    Jesus KK did you even read my comment? . . .As to WHQ’s data…I’m not sure what point he was trying to make.

    One might ask whether you’ve read your own comments:

    The historical record shows that revenues tend to hover around 18% of GDP regardless of what marginal rates are.

    WHQ’s data shows that the historical record plunged from 20% to 16% at the precise moment of the marginal rate cuts. Oh, wait. That was all Osama Bin Laden’s fault.

  52. kranky kritter Says:

    my question (whether higher taxes or lower taxes are more conducive to economic growth), then just say so.

    Right. As you say, your question is about economic growth. We were talking about revenue.

    I was saying that tax revenues are more a function of economic growth than of marginal rates and that the best way to raise revenues is to grow the economy.

    You’ve framed it as an either/or. We should use only the way you allege to be best way and eschew the other way. But to repeat for the 3rd or 4th time, backed by data, the data in fact suggests that the tax cuts did in this case adversely effect revenue. they also indicate that taxes are taking a historically low fraction of GDP.

    I was utterly upfront in acknowledging that the connection is imperfect due to the number of variables. But what I called suggestive, you had to dismiss as utterly irrelevant. Further, you can’t seem to acknowledge the absence of evidence that these tax cuts had any beneficial effect. And I predict that you’ll ignore that point. Where’s your data supporting any enduring beneficial effect?

  53. WHQ Says:

    The first figure by year is even more pertinent, given that it is individual income taxes collected as percentage of GDP. A peak of 10.2 at the end of Clinton’s term down to 6.2 in 2010.

    As far as the point that total revenues hovered around 18% from 1965 to 1990 regardless of marginal rates, you’d have tease out where those rates kicked in and how income was distributed across the population before you could say anything about how to interpret the data and try to apply it to current circumstances. Income has become increasingly concentrated in the hands of a smaller and smaller percentage of earners over the last 35 or so years. That means that more of the total income would be subject to the higher marginal rates than in the past. Add to that my quote from Alan Auerbach and Bill Gale on the propensity to spend tax cuts at different income levels. See where that takes you.

  54. Tillyosu Says:

    WHQ’s data shows that the historical record plunged from 20% to 16% at the precise moment of the marginal rate cuts. Oh, wait. That was all Osama Bin Laden’s fault.

    Indeed revenues declined from 2000 to 2003 (the point at which the Bush tax cuts were fully implemented) and then increased steadily until the 2008 recession.

    Now, can you explain why revenues increased in that period despite the fact that marginal rates stayed the same? Also, can you please explain why revenues were higher (as a share of GDP) in 1990, when the top marginal rate was 28%, than they were in most of the 2000′s, when the top marginal rate was a full 25% higher? Also, I would challenge WHQ to post the revenues in 1965 when the rate was 91%, or 1970 when the rate was 70%. Shouldn’t those numbers be much, much higher?

    KK I’m not surprised that you refuse to answer my initial question. I will consider your silence on that point a tacit concession.

  55. kranky kritter Says:

    I am happy to answer your question, btw.

    I am delighted to agree with your rather tautological point that taxes tend to have a taxing effect on the economy/economic growth. If there were hardly any taxes as all, the economy would probably flourish, while the government would shrivel along with most of its services. With all that extra money in their pockets, could most everyday folks afford to pay for their own healthcare at market rates along with having even half of whatever they’ve been promised for SS and medicare? To say nothing of a host of other government services. Unlikely for anyone with income near or below the median.

    Now it’s somewhat petty of me to drag the discussion down that road of partisan talking points about the value of what government provides. But it’s a valid part of the discussion, and growth club folks always dismiss it.

    I really am fine with acknowledging that it’s true that taxes can in some or even many cases have a harmful effect on economic growth. And sometimes even on revenue concurrently, subject to the laffer curve. And that means that ideally and in general, one would try to only raise taxes when growth was so fast that it was having harmful effects, there were bubbles, and so on.

    Let’s connect the rest of the dots, though. Here’s the thing. The “why” behind the idea of avoiding tax increases harmful to economic growth basically says this:

    higher taxes divert to the government needed capital that would otherwise become investment dollars (or high-end consumption but let’s skip that). These investment dollars finance creative, sometimes risky, but ultimately economically beneficial new ventures. These new ventures create tomorrow’s jobs.

    And that’s what we need, jobs. It’s the only thing everyone seems to agree about. We’re poised to see a 15 month debate over who is more in favor of jobs. And sadly, we’re all going to get sucked into the false pretense that jobs are created by policy and politicians instead of by creativity and . . .wait for it . . . risk-taking.

    But in today’s environment, where is the shortage of capital, of investment dollars? Interest rates are extraordinarily low. You can’t even pace inflation with a savings account or a bond or a money market fund. There’s no capital shortage. There’s an extreme excess of capital, in the hands of all the folks who have done very well. And it’s all very risk averse. in that environment, it’s hard to make a plausible argument that an upward tweak in the top bracket is going to kill job creation. There’s almost no job creation to kill. What little exists is related directly to enterprises that can increase profits by adding labor. Investment capital is piling up, looking desperately for somewhere to go.

    What we need is creativity and balls. Instead we’re beset by rigid outdated ideology and fear.

  56. WHQ Says:

    This one just disappeared. Trying again.

    1965 7.1
    1966 7.3
    1967 7.6
    1968 7.9
    1969 9.2
    1970 8.9
    1971 8.0
    1972 8.1
    1973 7.9
    1974 8.3
    1975 7.8
    1976 7.6
    TQ 8.4
    1977 8.0
    1978 8.2
    1979 8.7
    1980 9.0
    1981 9.4
    1982 9.2
    1983 8.4
    1984 7.8
    1985 8.1
    1986 7.9
    1987 8.4
    1988 8.0
    1989 8.3
    1990 8.1
    1991 7.9
    1992 7.6
    1993 7.7
    1994 7.8
    1995 8.0
    1996 8.5
    1997 9.0
    1998 9.6
    1999 9.6
    2000 10.2
    2001 9.7
    2002 8.1
    2003 7.2
    2004 6.9
    2005 7.5
    2006 7.9
    2007 8.4
    2008 8.0
    2009 6.5
    2010 6.2
    2011 estimate 6.3

    These are the same numbers for individual income tax revenues as percentage of GDP going back to 1965. I’d add to my previous statement about teasing out income distribution across the population of tax payers the various other elements of the tax code that have changed over the years as well as various enforcement decisions on collection and audits. What these numbers alone tell you is pretty much jack squat without ceteris paribus.

    And, KK, I’m sure you’d agree that without any taxation, and therefore no government, the economy wouldn’t flourish. There would be anarchy a la Somalia, not exactly a capitalist paradise. I suppose there’s a curve sort of like the Laffer Curve out there, at least in theory, that would yield the optimal tax rate for economic growth as opposed to tax revenue. I don’t think the peak would be at zero, though it would probably be at a lower rate than the peak on the Laffer Curve. Then again, economic growth can come in many flavors, some of which might be less desirable for most people than lesser growth with better distribution or basic services. I mean, slavery would probably be great for growth, if growth were the only thing you were after. But I’m sort of repeating some of what you’ve already said, not in so many words.

  57. Tillyosu Says:

    Investment capital is piling up, looking desperately for somewhere to go.

    Ok, assuming this is true, what makes you think that a few dozen bureaucrats in government are better suited to make those investment decisions than millions of investors with their own capital at stake? I mean, the implication of your argument is that government should confiscate the money and spend it because it’s willing to take on risks that no other investor would.

  58. kranky kritter Says:

    What makes you think that a few dozen bureaucrats in government are better suited to make those investments?

    What makes you think that I think that? The way I see it, there’s plenty of excess capital to finance all the risky but potentially profitable investments that need all of those wealthy private investors of yours who are so much smarter than the government.

    First, the additional revenue would go directly towards bridging the deficit. Remember the deficit the GOP has been panicking about? Or is that no longer a consideration?

    And second, I don’t see any reason why that money needs to go towards trying to pick winners among a set of risky “investments.” It could go directly towards say infrastructure repairs that no one disagrees are needed, and so wouldn’t even be a partisan issue. Maybe we could update our electrical grid, creating jobs that no one disagrees need to be done. Jobs for people who would spend virtually all of their wages, sending all that dough right back into the economy.

    Now, bear in mind that I am right there at the front of the line of people agreeing that lots of that allegedly shovel-ready dough ended up getting wasted on stuff that NOT everyone agreed needed to be done. But I don’t agree that it has to happen that way every time. I bet we could earmark all that money directly for something as narrow as fixing old bridges and find a way to spend every penny usefully.

    That sort of program could even be a vehicle for establishing a new aesthetic for utility and stinginess over aesthetics. I’d be VERY fine with, say, the GOP agreeing to earmark dough for public works project only if everyone agreed on revisions to requirements and regulations that reduced costs by 10 or 20% I won’t go into the weeds of what sorts of changes those might be, but I feel almost certain they’re there.

  59. WHQ Says:

    I got rid of the numbers that preceded the following because I think it was throwing me into the spam bucket, so look them up yourselves.

    These are the same numbers for individual income tax revenues as percentage of GDP going back to 1965. I’d add to my previous statement about teasing out income distribution across the population of tax payers the various other elements of the tax code that have changed over the years as well as various enforcement decisions on collection and audits. What these numbers alone tell you is pretty much jack squat without ceteris paribus.

    And, KK, I’m sure you’d agree that without any taxation, and therefore no government, the economy wouldn’t flourish. There would be anarchy a la Somalia, not exactly a capitalist paradise. I suppose there’s a curve sort of like the Laffer Curve out there, at least in theory, that would yield the optimal tax rate for economic growth as opposed to tax revenue. I don’t think the peak would be at zero, though it would probably be at a lower rate than the peak on the Laffer Curve. Then again, economic growth can come in many flavors, some of which might be less desirable for most people than lesser growth with better distribution or basic services. I mean, slavery would probably be great for growth, if growth were the only thing you were after. But I’m sort of repeating some of what you’ve already said, not in so many words.

  60. WHQ Says:

    I can’t seem to comment at all. Not even moderation, just gone.

  61. WHQ Says:

    Some things are public goods for good reasons. We elect people democratically to decide how those things get provided. It’s what government does. It’s the very reason for government. Public infrastructure is in the sweet spot, regardless of “bureaucrats” or whatever else gets one in a froth over the injustices of taxation and government actually deciding things. Try to go out and earn the money that gets taxed without government and see how that goes. Somalia doesn’t enforce immigration very well, so it should be easy to get in and do your thing.

  62. Geeze Says:

    KK…you wrote………..it’s hard to make a plausible argument that an upward tweak in the top bracket is going to kill job creation. There’s almost no job creation to kill.

    Agreed. And the points of my contention has NEVER been that raising taxes is a bad thing….I simply pointed out that doubling them is NOT ENOUGH to pay these deficits……….so and here is my main thrust….if raising them for the sake of raising them is going to do almost nothing for the deficit and…….could possibly stifle job creation even farther…….then why raise them at all?

    So if DOUBLING them wont work…..then why are we all hung up on debating raising them 3.6 percent on the rich????

    Its nothing but a distraction for both sides. The tea party types understand what other people dont, and that is there aint enough money to pay for all this and the 3.6 percent point of contention is nothing but a rallying cry for the progressives.

    So both sides will continue to point out graphs, charts, wikipedia articles and anything they can find that justifies their argument no matter which side of the debate they fall on but in the end……

    The reality is that raising taxes will not fix what ails us.

  63. WHQ Says:

    This is a repeat of a comment I made earlier, which seems to have renewed relevance:

    Geeze, who is it you’re arguing with? Has anyone said anyting about erasing our debt entirely? If so, over what number of years, and for what purpose? I don’t even think anyone has suggested that balancing our budget (no more deficits year to year, as opposed to debt) is a near-term goal. Any attempt to do either in the next couple of years would cripple our economy regardless of whether or not it included your taxation-doubling hypotheticals. The best we can do is to slowly reduce deficits and allow our economy to outpace our debt, assuming that reducing our debt-to-GDP ratio should be our priority in the first place.

  64. WHQ Says:

    Geeze, please see my comment from August 9th, 2011 at 8:46 am. I’d be curious to read your response. Thanks.

  65. WHQ Says:

    I tried to re-post it with an introduction, just so it wouldn’t get booted as a duplicate, but, as usual, I was moderated.

  66. Larry Says:

    We have been sold down the river and nothing short of changes in the fundamental way our system works will change that. Term limits, tossing out lobbyists, no pay or benefits once you leave the job, balanced budget requirement, small non-political committee sitting between congress and the white house who get to line item veto everything not specifically related to the main intent of the bill…and on and on.

    Has to be revamped because it can’t be sustained.

  67. kranky kritter Says:

    @Geez You said:

    Its nothing but a distraction for both sides. The tea party types understand what other people don’t, and that is there aint enough money to pay for all this and the 3.6 percent point of contention is nothing but a rallying cry for the progressives.

    Not buying it. It’s quite clearly part of bridging the gap between revenues and expenditures. And a substantial part, as the bipartisan debt commission agreed. Which is exactly what “tea party types” FAIL to understand.

    It’s preposterous to describe this simple arithmetic as “nothing but” a rallying cry for progressives.

    The reality is that raising taxes will not fix what ails us.

    The reality is that no one has claimed this. The contention is that rasing some taxes will be a part of bridging the gap between revenues and expenditures. Is that too subtle for you? Really?

    What the debt commission proposed was to bridge the gap with 3 or 4 dollars of spending cuts for every dollar of tax increases. What we are talking about is using tax hikes as 20 to 25% of the solution. Follow?

  68. Tillyosu Says:

    @KK

    Now, bear in mind that I am right there at the front of the line of people agreeing that lots of that allegedly shovel-ready dough ended up getting wasted on stuff that NOT everyone agreed needed to be done. But I don’t agree that it has to happen that way every time.

    Then what in the world would make you believe that handing the federal government a second trillion dollar check would have a different result? “Okay, okay, we screwed up the first time, but I swear this time we’re going to get it right.” Bull. The bottom line is that the federal government is, by it’s nature, inefficient and corrupt when it’s handed a slush fund like that and entrusted to “stimulate” the economy – which is why that money should have been left in the hands of individual taxpayers and investors. The “yea but it could have been different” argument just doesn’t cut it for me.

    @WHQ

    Thanks for posting those numbers. Now, would you care to explain to me why the revenue number is smaller in 1965, when the top marginal rate was 90%, than it is in 1990, when the top marginal rate was 28%?

  69. kranky kritter Says:

    The bottom line is that the federal government is, by it’s nature, inefficient and corrupt when it’s handed a slush fund like that and entrusted to “stimulate” the economy – which is why that money should have been left in the hands of individual taxpayers and investors….

    Bull. How do crumbling bridges get fixed and other public goods provided by private investors? You haven’t even touched addressing the issue of whether there’s any sort of capital shortage. And that underlies and justifies your entire argument. What if wealthy investors are sitting on their wealth while furiously looking for safe havens? If that’s so then any gov’t job that repairs something that needs to be fixed anyway is a double win. We do a fix we need anyway, like the already closed-for-a-year bridge in my town. It’s shut off a major crosstown route and made the center into an even bigger bottleneck.) And, AND a bunch of middle class workers get jobs and put almost all of that money right back into the economy.

    The size and haste of the stimulus program certainly contributed to pork and waste and inefficiency, and I won’t defend it against charges of wastefulness. That doesn’t mean that there are no useful things that need doing across the country. For example, I notice how you avoided the possibility of upgrading our nation’s old patchwork electrical grid.

    I’m not even advocating another major stimulus. I just threw out a plausible use. That extra trillion figure you came up with? It could go directly toward reducing the deficit and I’d be fine with that. we collect an extra trillion, we borrow a trillion less.

  70. Michael Johnson Says:

    kranky kritter
    “we collect an extra trillion, we borrow a trillion less.”
    Does it really matter? The US can print all the money they want…

  71. WHQ Says:

    Now, would you care to explain to me why the revenue number is smaller in 1965, when the top marginal rate was 90%, than it is in 1990, when the top marginal rate was 28%?

    I’d add to my previous statement about teasing out income distribution across the population of tax payers the various other elements of the tax code that have changed over the years as well as various enforcement decisions on collection and audits. What these numbers alone tell you is pretty much jack squat without ceteris paribus.

  72. WHQ Says:

    Here’s a partial explanation:

    http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1967-2003.svg

  73. WHQ Says:

    Not making any particular point other than that this is an interesting graph, if a weird one. (BTW, in 1965 the 70% rate went into effect.)

    http://www.datapointed.net/visualizations/money/historical-us-income-tax-brackets/

  74. WHQ Says:

    Here’s where the 28% rate kicked in in 1990. In 1965, the 70% rate didn’t apply until you got to $100k. And those dollars are not adjusted for inflation.

    Married Joint Married Separate Single Head of Household

    28.0% $32,450 – 28.0% $16,225 – 28.0% $19,450 – 28.0% $26,050

  75. Tillyosu Says:

    You haven’t even touched addressing the issue of whether there’s any sort of capital shortage.

    Umm, that’s because you haven’t even established it. But let’s assume there is a capital surplus. What do you think those investors do with that money? They certainly don’t bury it in coffee cans in their back yards. They put it in the bank (not likely), which lends it out to other investors. Or they buy bonds, or gold, or stocks. Anywhere they put it, it’s likely to grow. In other words, it creates more capital available for riskier investments.

    But you argue that that surplus should be confiscated and put into national infrastructure projects that create no direct profit, but that are needed for the good of all overall. Fair enough. I’m not against the government spending money on national infrastructure. But don’t you think it’s a shame that, given the money our government collects, we don’t have a top notch infrastructure already? I mean, isn’t this one of the primary functions of government? And they’ve already failed. So our answer is to give them more money. Fool me once…

    I think that the stimulus money should have been block granted to the states, with the condition that it be spent on infrastructure only (i.e. not servicing union pensions, etc.) That way governors and state legislatures (those officials closer to the actual voters) would have been accountable for how it was spent. In fact, and I admit I digress, I think that the highest proportion of taxes should be sent to your state and municipality, not the federal government. I’m not at all against government sponsored health care, etc., so long as it is administered by the governments closest to the voters.

    Anyway, I get your point about infrastructure. And I agree. But my point remains – that’s what they asked the money for in the first place. And they didn’t spend it properly.

  76. Tillyosu Says:

    @WHQ

    I get your point, and it’s a valid one. I’ll have to look at it further before I respond.

  77. WHQ Says:

    I think that the stimulus money should have been block granted to the states, with the condition that it be spent on infrastructure only (i.e. not servicing union pensions, etc.)

    That would have been a fine way to have allocated the stimulus monies (assuming the states didn’t severely blow it on impractical infrastucture that didn’t serve a real purpose – bridges to nowhere – so cliche to write that at this point). It probably wouldn’t have gotten through congress, but if it could have, I think it would have been way better than what we ended up with.

  78. kranky kritter Says:

    Umm, that’s because you haven’t even established it. But let’s assume there is a capital surplus.

    No let’s NOT assume it. Let’s look at an extended period of extremely low interest rates, and KNOW there’s plenty of capital available.

    But don’t you think it’s a shame that, given the money our government collects, we don’t have a top notch infrastructure already? I mean, isn’t this one of the primary functions of government? And they’ve already failed.

    Proof by declaration. Awesome. Meanwhile, with revenue down to below 15% of GDP, you continue to deny that increasing revenue is needed to help bridge the deficit gap.

    Look, you can’t put me in the position of defending any such government failures because I won’t do it. I’ve said many times at length that congress needs to be replaced. Starving the government isn’t going to get potholes filled, and bridges rebuilt.

    I am for the most part fine with block grants to states, at least in theory, with the caveat that WHQ suggested. As well as the additional caveat that the government not use the block grants to temporarily sustain state government. The problem there is that state governments have many of the same short-sightedtedness and inefficiency as the feds.

  79. Tillyosu Says:

    No let’s NOT assume it. Let’s look at an extended period of extremely low interest rates, and KNOW there’s plenty of capital available.

    I’m not sure where you’re getting this. Could you point to some reference that there is an excess of investment capital? Or that low interest rates leads to an excess of investment capital? Everything I’ve read suggests the opposite.

    Proof by declaration. Awesome.

    Isn’t that precisely what you just did above? Also, are you asserting that we do have a top notch infrastructure? If so, doesn’t that negate your entire argument?

    Meanwhile, with revenue down to below 15% of GDP, you continue to deny that increasing revenue is needed to help bridge the deficit gap.

    Yes, but marginal rates have been the same since 2003, and revenues as a share of GDP only dropped to that level when the recession hit. So it seems to me that the cause of the drop is not marginal rates, but another factor like…ohhh, say, the recession itself? Anyway, as I’ve already demonstrated, raising marginal rates won’t have much of an effect on revenues.

  80. kranky kritter Says:

    I’m not sure where you’re getting this. Could you point to some reference that there is an excess of investment capital? Or that low interest rates leads to an excess of investment capital?

    Let me get this straight. The prime rate is almost zero. I Can get a 15-yr mortgage for less than 4%. Savings accounts are paying less than 1%. And you are claiming, with a straight face no less, that this is NOT evidence that there is plenty of available capital for investment?

    OK, then. Let’s simply agree to disagree.

    Anyway, as I’ve already demonstrated, raising marginal rates won’t have much of an effect on revenues.

    I must have missed the part where anyone else agreed with you, either about your contention, or that you’d “demonstrated” proof of it. Oh wait, you said “much of an effect.” So in other words, you acknowledge that they could have a real and positive effect on revenue, but suggest that’s not of any significance in bridging the gap between revenues and expenditure.

    Your work here is done, Til. We’re just repeating ourselves.Why not migrate to the Buffet thread and deconstruct everything he said, in the service of low taxes for the wealthy, the alleged job creators.

  81. WHQ Says:

    So it seems to me that the cause of the drop is not marginal rates, but another factor like…ohhh, say, the recession itself?

    You’re right about that. Marginal rates haven’t changed, so they cannot be the cause of the drop in revenue, which is due to the recession. BUT…

    Anyway, as I’ve already demonstrated, raising marginal rates won’t have much of an effect on revenues.

    This is not true. One of the things that has happened is that many, many people lost their jobs and that most of the economic growth that has occurred of late has been in the form of corporate profits, which flow to investors as dividends and capital gains. Over an even longer term, income has become more concentrated in fewer hands, meaning that marginal rates could affect revenue more than ever. If coupled with treating capital gains and dividends (more) like wage income, revenue could be increased significantly.

    I’d go with Warren Buffet’s recent suggestions as referenced in a recent post here.

  82. WHQ Says:

    Here’s a question for you Tilly – how does recession cause a drop in revenue as a percentage of GDP, as opposed to a drop in absolute dollars?

  83. Tillyosu Says:

    Here’s a question for you Tilly – how does recession cause a drop in revenue as a percentage of GDP, as opposed to a drop in absolute dollars?

    I couldn’t say exactly. But what I can say, and did say, is that the recession is a more likely explanation than marginal rates since the drop in revenue coincided with the recession, not with a drop in marginal rates.

  84. WHQ Says:

    But what I can say, and did say, is that the recession is a more likely explanation than marginal rates since the drop in revenue coincided with the recession, not with a drop in marginal rates.

    Yes, but I’ve already agreed to that. The reason for the change in revenue as a percentage of GDP is a change in the composition and distribution of our national income, and that change lends itself to increasing revenue by changing how we tax different types and levels of income.

    The question of whether or not a non-existent change in marginal rates caused the change in revenue (obviously not, that change being non-existent) is a separate one from the question of whether or not a change in marginal (and other) rates will increase revenue going forward.

  85. Tillyosu Says:

    The reason for the change in revenue as a percentage of GDP is a change in the composition and distribution of our national income, and that change lends itself to increasing revenue by changing how we tax different types and levels of income.

    You’re actually right, though not in the way that you think. Since the start of the recession the share of the national income held by the top 1% has decreased. In other words, income has shifted downward to taxpayers with lower marginal rates. Now, are you suggesting we raise the marginal rates of those individuals?

  86. kranky kritter Says:

    I know I sure am. Until that share held by the wealthiest starts coming back in line with historicals, I’m very untroubled.

    The share of the national income held by the wealthiest has gone down? Cry me a fu(king river. That happened for a very obvious reason. The wealthiest have way more of their wealth invested in the market, and in real estate, and so on. Booh-fricken-hoo.

  87. Tillyosu Says:

    Obviously, KK, you missed the point of that comment. But my more important question is…why? Why do you care what some other guy is making? How does that affect you?

    Think of it this way: let’s say there is a nation with 10 men. Each man makes $10 a year. So the national income is $100 per year. But next year one of the men figures out a way to turn his $10 into $110. So now, the national income is $200, but one man has a 50% share of it. Tell me, are the other 9 men any worse off?

  88. kranky kritter Says:

    Think of it this way: We have a giant deficit. If we increase taxes on the rich a little bit, that will help close the deficit a little bit. Will I be better off? Yes.

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