Poll: 68% of Millionaires Support Raising Taxes

By Justin Gardner | Related entries in Money, Polls, Taxes

After Warren Buffett spoke out about taxing the rich more, the rich were polled and overwhelmingly agreed with the billionaire.

Here’s more from Wall Street Journal:

A new survey from Spectrem Group found that 68% of millionaires (those with investments of $1 million or more) support raising taxes on those with $1 million or more in income. Fully 61% of those with net worths of $5 million or more support the tax on million-plus earners. [...]

Explains George Walper of Spectrem: “What this tells us is that there are a number of wealthy folks who said: ‘Gee, we need to increase taxes to stimulate the economy. No one likes to be taxed more, but the reality is maybe it has to be done.’ ”

Walper added that he was also surprised at the positive reactions to Buffett’s political agenda. “I thought that among this group there would be a feeling of ‘why doesn’t he keep his nose out of it?’”

Pretty astonishing, right?

And I think it’s also important to note what people said who favored more taxes and what people said who didn’t.

First the pro-Buffett crowd…

“When you have someone who made four and a half billion pay fifteen percent, and because it’s a hedge fund, I have a problem with that.”

“Quite frankly if Warren Buffett gets taxed an extra fifty thousand dollars or your typical investor of two hundred and fifty [thousand] or larger has to pay an extra thousand dollars in tax; It’s not gonna change his lifestyle. Whatever he or she was gonna buy, he or she is gonna buy.”

“I think theoretically it would be good for this country and put some more money in the coffers, personally it wouldn’t be good for my family so I’m kind of at conflict between self interest and what might be good for the country.”

Now the anti-Buffett crowd…

“I think some of that spirit of America is lost when you start penalizing so to speak, the folks who have more.”

“I think there should be a voluntary check box on the tax form that says, if you would like to send in more please do.”

“For myself, if there were an increase in taxes, I’m probably gonna button up some spending.”

By the way…how priceless is the first anti-Buffett quote?

Yeah, our American spirit will really be diminished if the rich start paying taxes on investments and dividends that Reagan proposed. Sure.


This entry was posted on Thursday, October 27th, 2011 and is filed under Money, Polls, 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.

44 Responses to “Poll: 68% of Millionaires Support Raising Taxes”

  1. Tully Says:

    Heh. Original survey not available for verification/examination, link in referenced WSJ blog post does not lead to the pollster’s site, and the pollster’s site doesn’t seem to have the survey available nor even mentioned anywhere. Making the claims at this time so much unverifiable hogswallop. Not that I find them totally impossible … once you consider the carefully-framed context.

    I note that those with a million or more in ASSETS are not by a very long shot the same as those with a million in annual INCOME. Conflating the two as being “the rich” is considerably less than impressive. Even after the real estate crash a million in assets could be a retiree with a smallish paid-off house in a Santa Barbara suburb and a decent IRA and 401(k), enough to provide a modest lower-middle-cass income. Hey, a million isn’t what it used to be. There’s a big conflationary BS factor there in calling that retiree “rich” as in being on a par with someone with a million a year in income.

    There’s ALWAYS support from people to tax those who have/make more than they do — it’s called class envy and I believe it’s as old as the race. And I have no doubt that people who are money-savvy enough to have a million or more in assets are also smart enough to know that balancing the budget can’t be done by spending cuts alone, not now that we’ve dug the debt hole another $5T deeper in just three years. But I bet they also know that if you don’t get spending under control more taxation won’t make a damn bit of difference.

  2. cranky critter Says:

    What is swallop?

    Envy is a weird thing. I was reading the other day about a phenomenon called “last place aversion” or something like that. It turns out that by income level, the group most opposed to raising the minimum wage is the group making just above minimum wage.

  3. Tully Says:

    Hogswallop (Brit. slang): hog’s wallop = a variant of codswallop. Nonsense; rubbish.

    I bet you were reading this month’s SCIENTIFIC AMERICAN, which has a short squib on the Kuziemko/Norton study. Of course they’re the most opposed — they know THEIR jobs are the ones most threatened when the inevitable marginal effects of moving the min wage from below them to above them manifest. The guy making 10x min wage doesn’t have to sweat it.

    And (the last place aversion effect) they also don’t want people less well off than them to improve to be their equals, or for them to be at the relative bottom because others improved, even though no one is actually worse off. This is the root of the last place aversion. Everyone wants someone else to be below them on the ladder. No one wants to be on the bottom, and they’d rather be objectively worse off but still superior to others than to be objectively better off but in last place.

    Very relevant concept today.

  4. Rob Says:

    Having not been in this situation (yet :-), I don’t fully understand. When did the IRS require people to take deductions? It would be interesting to see how many of these “millionaires” are taking every deduction they can get. If they’re taking them all, well…

    So raising the rate won’t mean much if they’ll just take more deductions and have less taxable income. So, give me a break. If someone really wants to pay more taxes, what’s really stopping them? And if they (hi Warren…) have to be FORCED to do it…well, then they should just shut their mouths and stop whining about how over-privileged and under-taxed they are…And they should also remember that more often than not a tax “meant” for the rich will hurt the middle class.

    Oh, and one more thing…Anyone who believes they should give the government more money is showing a lack of imagination. I’m sure, if they really looked hard, they could find a charity that is really helping people (instead of spending billions in senseless wars to kill them…) and their money would be put a much better use. Giving the government more money just means greater waste and less fiscal responsibility.

  5. Mike A. Says:

    Yea the study showed, that by giving a group of financially tiered people money, with which they were required to distribute either up or down in the financial ladder, everyone on the ladder gave their money to the lower tier..those who needed it more than they did, with the exception of the second lowest group. They preferred to give their money upward to the group that was already in a better financial position. The way the study was setup, if the second lowest group gave their money down to the lowest group, they would switch positions thus making the second lowest group the lowest group…..as Tully said, nobody wants to be on the bottom.

  6. irisclara Says:

    Here you go Mr. British slang. A survey showing wealthy households support a tax on wealthy households. I don’t know if this is the poll referenced in the WSJ blog but it was easy to find.

    http://www.quinnipiac.edu/x1284.xml?ReleaseID=1668&What=tax%20increase&strArea=2;&strTime=6

  7. Mike A. Says:

    The interesting part of this study was that the second lowest tiered group had full knowledge that they were giving their money to a more affluent group and at the expense of the lowest group.

  8. Tully Says:

    It’s not the poll referenced in the post, irisclara. And it doesn’t say what you seem to think it says. The one you link is a NY in-state poll referencing a specific already-existing “temporary” NY state tax that is set to expire at the end of the year.

    Rob, there’s a major limit on trying to deduct your way down. It’s called the Alternative Minimum Tax, and you start to bump into it around the $75K/yr household income level. That figure keeps creeping down because the AMT is not indexed to inflation. (How many people know that the AMT also applies to corporations?)

    You don’t hear much about the AMT in the tax-hike debates, but the fact is that we already have a flat tax “floor” for the top quartile, the 28% AMT. That “floor” will keep creeping down sans indexing.

  9. Rob Says:

    Hi Tully,

    Maybe deducting one’s way around taxes is potentially thwarted by the AMT, but I got the impression that Warren Buffet found a way around it because (and this is purely a guess on my part!!) most of his income was from long-term capital gains. Which I believe (I may be wrong here!) are taxed at a different rate and are not subject to the AMT.

    At any rate, I guess my main point was: If someone really wants to pay more tax, I doubt the IRS would force them to pay less, so what’s really stopping them?. And the whole notion of: “I should pay more tax, so change the laws so that I’m forced to do it” seems silly to me.

  10. Tully Says:

    Yep, long-term capital gains and dividends are taxed at a different rate for most of us, but the top rate for them under the AMT is 25% (and we do assume that Buffett is paying at the top rate) just a few points under the regular AMT rate and considerably higher than the 15% rate that applies at the lower end of the income scale, which will go up automatically to 20% in 2013. (That 25% is the effective AMT caapital-gains rate — I am NOT going to go into the convoluted calculations involved.) Short-term capital gains are taxed as regular income.

    And the whole notion of: “I should pay more tax, so change the laws so that I’m forced to do it” seems silly to me.

    Yep. You want to pay more, go right ahead. As long as you pay what you must you can voluntarily pay as much MORE as you want. Just be sure to label it a donation so you don’t waste the IRS resources getting it straightened out. They much prefer you send those donations seperately to:

    Attn Dept G
    Bureau of the Public Debt
    P. O. Box 2188
    Parkersburg, WV 26106-2188

    It makes their record-keeping so much easier that way. Voluntarily paying extra is so popular that last fiscal year the Treasury collected three whole million dollars in voluntary donations!

  11. khaki Says:

    @ Tully and others: “Yep. You want to pay more, go right ahead. As long as you pay what you must you can voluntarily pay as much MORE as you want.”

    This is not a serious comment; it is mockery. It is the equivalent of “If you love it so much why don’t you marry it??” Okay, we got the raspberry in the face. Thanks. Now, can we also have a serious conversation about ways to reduce the deficit? I mean actual serious sober tax policy and budget reform conversations that will balance the books.

  12. Rob Says:

    Hi khaki,

    I’m sure a serious discussion about reducing the deficit would be a good idea, it would just not be appropriate for this article. This article is specifically about a study that seems to say that more than a third of the millionaires who took part in it are in favor of the government raising their taxes.

    For myself, it was certainly not my intention to “blow a raspberry” in anyone’s face. But I do have issues with people who say they should pay more taxes, and who could do it now, but who are also saying that they would need to be forced to do it. That just seems disingenuous to me.

  13. Tully Says:

    Heh. What Rob said.

    Yes, it is a serious comment, and yes, it is also mockery. Serious mockery of hypocrisy.

  14. Jim S Says:

    And yet you never seem to criticize hypocrisy from the other side of the argument. Like those who still believe in Laffer and think trickle-down works.

  15. Tillyosu Says:

    What Tully said. That was a nice little sleight of hand there Justin. This poll is utterly meaningless unless we know the percentage of people with incomes over $1 million – who want taxes raised on taxpayers with incomes over $1 million.

    But it got me thinking about the numbers. In 2009, there were 2,886,200 households with assets over $1 million, of which 236,883 had income over $1 million. Let’s assume for the sake of argument that those numbers are roughly the same today. So, another way to look at this poll is – even though policy X would only affect 8% of respondents, 32% of respondents opposed it.

  16. Tully Says:

    Tillyosu: note that the stats you use exclude primary residence from net worth in determining which households have $1M or more in assets. The survey referenced may or may not exclude that. We don’t know because we cannot access the actual survey. If you include primary residence I’m pretty sure that number of households with $1M+ assets goes up drastically despite the real estate crash.

    Since Justin chose to use Buffett as his straw man foundation, it’s also good of you to include a link debunking Buffett’s original claim, even if it does come from that horribly partisan and biased news source, ABC. [/sarc]

    I’m equally pleased that link contains a shot at the “carried interest” loophole, which is something we could eliminate and raise some serious bucks thereby without anyone other than hedge fund managers (and the people they donate to) objecting. I suspect current stats since the recession have whittled down the numbers of those “carried interest” trough-wallowers a good bit, but it’s still worthwhile.

  17. Tillyosu Says:

    I tend to agree with you about the carried interest loophole. Although I’m also sympathetic to the argument that we should be wary of creating tax policies for specific industries. My understanding of carried interest is that the fund manager doesn’t actually receive his or her interest, so they instead borrow against it as a source of income. I don’t think you’d find much resistance to taxing that as ordinary income.

    Somewhat unrelated, but if you’re interested, Richard Epstein gave a terrific interview to PBS this week regarding income inequality, taxes, redistribution, etc. I’d watch the whole thing.

  18. Tully Says:

    “Carried interest” is the portion of the hedge fund profits that the fund manager receives as profit-sharing. It tends to be the bulk of their compensation. It’s taxed as long-term investment profits because it’s investment-derived, but IMHO there’s a solid case for treating much of it as ordinary compensation/income. Certainly worth a much closer look, anyway. Especially when the pay is derived from short-term investemtns, which everyone else has to treat as ordinary income at regular rates.

    For someone whose own money is at stake in a fund, it makes sense, at least in proportion to how much of their take-out is generated by their own capital. But for fund managers without their own capital completely at stake, it’s a gimme tax break I don’t see any justification for. They get treated on taxation as if their own money was at risk when getting their profit share, which is fair game for criticism when they aren’t at risk of the downside losses, just at risk for losing their employment if they underperform … just like everyone else.

  19. mdgeorge Says:

    Look, the reason that “why don’t you just pay more taxes” is not a good solution is that if _I_ pay more taxes, it only raises a small amount of revenue, whereas if _everyone_ in my bracket pays more taxes it raises a lot more revenue.

    It’s a suboptimal nash equilibrium. The way you solve it isn’t by expecting individuals from deviating from optimal strategies, it’s by changing the game.

    How would strategic disarmament work if russia told us “fine, you want less nuclear weapons in the world? Nothing’s stopping you from destroying yours”

  20. Tully Says:

    Solution to what, George? The government has plenty of revenue, but also a very serious spending problem. Pray tell how giving the government more money will solve their spending problem. Isn’t that like giving more booze to alkies to solve their drinking problems?

    And Nash equilibrium? GMAFB. This isn’t a “prisoner’s dillema” deal. I don’t think you understand what a Nash equilibrium is. In a Nash solution, utility is maximized for the players. Making everyone pay more is not maximizing utility for the players. It’s maximizing dis-utility for the players (taxpayers).

    And you’re seriously comparing tax issues to freaking nuclear weaponry? Really? Clue time: One of these things is not like the other.

  21. khaki Says:

    @ Tully: “The government has plenty of revenue, but also a very serious spending problem. ”

    While I agree, I never hear any serious and viable spending cut proposals from those who complain the most. Cutting discretionary spending won’t do it. How about tackling the two biggies. Defense: sacred cow. Medicare: Tea party tells the Federal government to “keep your hands off my Medicare”. Priceless. What else? IMO, people who complain seem to want a free lunch. We can have all the wars, and all the Medicaid drug benefits and all the nice roads, but we have to pay for it. Why isn’t a plausible “solution” to have all these nice thing be the expectation those who benefit the most (proportional to their means) from all the structure and protection that the U.S. has to offer (you know the infrastructure by which all those means are delivered and protected) by asking them to pay the same proportional amount of their income as everybody else, without the conversation devolving into, “If you want to pay more taxes, go ahead! Who’s stopping you!? … “

  22. cranky critter Says:

    Ok, here’s a serious spending proposal: restore the next budget to whatever its predicted baseline would have been according to 2006 projections.

  23. Shane Says:

    @khaki and @CC,

    Are you guys channeling Ron Paul up in here?

    http://www.politico.com/news/stories/1011/66114.html

    Cut Defense spending – check.
    Roll back budget to 2006 – check.
    Block-grant Medicaid back to states (and out of mandatory spending) -check.

  24. khaki Says:

    Shane, we owe a debt to Mr. Paul for advancing the conversation. What I like about him is that he proposes alternatives to the ratchet effect that our polarized political system has produced. However, people fear blind ideology for a reason. I for one want my food and medicine inspected. I’m sure that cough medicine companies that poison people won’t last long, but that’s not much comfort to the first few customers. Other than that, he makes a lot of sense, and I would otherwise vote for him.

  25. cranky critter Says:

    I was unaware of Paul’s position. Doesn’t change my opinion, either about Paul or about the need to reduce overspending.

  26. mdgeorge Says:

    Tully,

    I do understand what a nash equilibrium is – it’s a stable global strategy: each player optimizes their own utility. However, for the game in question (lets fund the government), the players (warren buffett) are arguing that their optimal strategy (not voluntarily paying more taxes) is not a globally optimal strategy (it doesn’t fund the government). He’s arguing that we should change the rules to make the nash more socially optimal, whereas you’re arguing that he should just deviate from a personally optimal strategy. Expecting players to voluntarily play against themselves undermines one of the key arguments in favor of free market economics.

    Taxes are like nuclear weaponry in the abstract: they’re both games where the private optimum was not a good global optimum. I agree that it was probably a bad analogy.

    As to your other points, I think most can agree that there is a _deficit_ problem, but deciding how much of that is a revenue problem and how much of that is a spending problem is very much a question of taste (and partisanship, of course). Clearly you (along with house republicans) think it is entirely a spending problem. I (along with President Obama) think it is both.

  27. mdgeorge Says:

    As an aside, situations like this (where everyone privately optimizing their utility does not lead to a global optimum) are exactly the situations where government has a role. This applies to things like pollution, health care, the social safety net, anti-trust and disaggregation of power, systemically dangerous (too big to fail) institutions, food safety, etc.

  28. Tully Says:

    Thank you for confirming you don’t really know what a Nash equilibrium is, George, as in where and how the concept applies, or why it’s being improperly deployed by you in this context. Here, I’ll give you a hint: The “game in question” is NOT “Let’s figure out how to supply the crackheads with all the crack they demand.” Nice try at BS framing, though.

    And BTW, when spending consistently grows faster than GDP, it’s definitely a spending problem. As in, mathematically unsustainable regardless of tax structure. SOme of us demand that the spending habit be controlled before we throw all of our resources into paying the crackhead’s debts.

    Khaki, all you’re offering is a variant of the “fair share” argument, a milder re-shuffling of Elizabeth Warren’s recent “eat the rich” rant. Which is meaningless until you define what a “fair share” is. And is wrong on the facts from the start in any case.

    There seems to be this persistent meme that the upper levels of income don’t pay for any of those things you mention with their income taxes, or that they somehow pay less proportionally than the other 90%. Yet the upper-income households aleady pay for a FAR larger share than the majority do. The top 10% of households (those with household AGI > $112K/yr) already pay 70% of ALL federal income taxes collected.

    The idea that somehow “the rich” aren’t already the ones paying most of the tax tab already is downright delusionary. They do. Their taxes already subsidize the benefits that everyone gets from roads and such, far above and beyond in both their numbers and the proportion paid. The related idea that somehow our problem is that our tax code isn’t “progressive” enough is likewise BS. It’s about the most effectively progressive there is — among putatively free countries, anyway.

    FACT: Among OECD nations our top decile by income pays a larger proportion of the overall national tax bill than the top decile of any other OECD nation. [America, 45.1%. OECD average, 31.6%, nearest trailers Italy 42.2% Ireland 39.1%] In America that top decile not only pays the largest share of the overall tax burden, they also pay at the highest ratio relative to their share of national income. [America, 1.35. OECD average, 1.11. Nearest trailers, Australia 1.29, Nethelands 1.28]

    Interestingly, countries with top personal income tax rates that are higher than ours, such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. [1.07, 1.10, 1.00] Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation’s income. So, what was that about “proportion,” again?

    What do those other nations do differently? Instead of trying to lay the whole tax burden on “the rich,” they just tax the holy hell out of everybody. And it’s still not enough to feed their spending habits, as the current Euro-troubles illustrate. That’s where we are headed if we don’t get our spending under control. What can’t go on forever, won’t.

    As for entitlement spending, I’ve heard all these years how people have paid in forever and just want to get theirs back. Uh huh. I sympathize, having been subject to the self-employment tax for a couple of decades now. But …

    Both SS & MCR are already means-tested to some degree. If you would like us to have a steeper means curve on them, fine by me! (I’ve gotten called a far right winger for suggesting exactly that, which caused me to shake my head in wonderment.) Currently Warren Buffett gets a monthly SS check, and only has to pay income taxes on 85% on it. Given his assets and resources, I’d be fine with him having to pay a 100% special rate on 100% of his SS, i.e., taking it back away from him unless/until he slips down the income/asset ladder to where he actually has some remote semblance of needing that $2500/month top-end check. I think doing that for high-income high-asset people would be a hell of a lot more fair than raising the retirement age to balance the books. Don’t you?

    Much the same with MCR. Why shouldn’t Buffett pay 100% of his Medicare premium, rather than having it subsidized by Joe Bob and Mary WageEarner? Even with means testing, the top MCR premium today is $239/month with an annual deductible for all Medicare programs combined of about $1600. Surely Warren can afford to his full share to be in the MCR insurance pool, and a bigger deductible is not going to break him.

  29. khaki Says:

    Interesting article from Turbo Tax to support some of your claim, Tully:

    http://blog.turbotax.intuit.com/2010/03/03/how-is-americas-income-tax-burden-weighted/

    Also interesting graph here: http://www.taxfoundation.org/taxdata/show/24955.html

    It’s important to note that the 1% who pay 95% of federal taxes own 40% of the wealth (according to NPR).

    I will concede that our addiction to spending is far and away our biggest problem. And the addiction has afflicted both parties equally, please concede back. So short of electing the unelectable Ron Paul, where do we go for leadership on this? The Republicans? Um, burn we once, shame on you…me… uh… (pause, look confused) …you’re not gonna burn me again!

  30. mdgeorge Says:

    Tully: I didn’t understand your snarky little hint or how it applied to my (mis)use of the concept of Nash equilibrium. I know the definition very well from my own field, but I was only assuming that it was used the same way in economics: to understand the global behavior of a system composed of individuals separately maximising their self-interest.

    Would you please explain how I am misusing the concept? I’m genuinely curious.

  31. mdgeorge Says:

    Tully: can you cite your tax numbers? I’m particularly curious if “income” includes capital gains, dividends, and other sources of income that are highly skewed to “the rich”. I don’t think the data that khaki supplies applies either, because it only talks about income tax.

  32. mdgeorge Says:

    One more question for Tully: your point about the AMT is interesting, but I’m not sure how to square it with other things I’ve heard, such as the fact that some number of large corporations (such as Exxon/Mobile) pay zero tax, and that IIRC Buffet estimated his tax burden to be 15%. Are these falsehoods, or is the AMT just a strawman because wealthy individuals and corporations can find ways around it?

  33. khaki Says:

    mdgeorge, primarily Tully objects to your assumption that the “game” is to “fund the government”. Your use of the Nash Equilibrium is correct. And, IMO, your assumption is, too. Tully can look up the informal definition on Wikipedia and see that you are using it properly.

    Tully, a follow up question, referring to this graph from 2009:

    http://www.taxfoundation.org/taxdata/show/24955.html

    From 1997 to 2007, the share of the total “tax burden” of the top 1% increased from around 25% (of overall taxes collected) to above 40%, while the bottom 95%’s share of the total tax burden decreased from above 55% to below 40%. Tully, what variable changed to drive this? Did the tax code get revised during that time? Obviously the fact that the top 1%’s share of the overall tax burden has increased so dramatically in last decade is due to the fact that their incomes have increased dramatically. It seems as if you are trying to make us feel sorry for the super rich for having their overall tax burden increase because they’re taking home more money. At some point, if the trend continues they’ll be paying 99.9% of the tax burden, because their income will be even more colossally huge compared to everyone else’s.

  34. mdgeorge Says:

    ah, thanks khaki. I chose the “paying your taxes” game because I was trying to explain why the strawman “buffett should just pay more taxes” is not a valid argument.

  35. Joel Says:

    mdgeorge said “such as the fact that some number of large corporations (such as Exxon/Mobile) pay zero tax”

    This just isn’t the case, and according to a Price Waterhouse Study, U.S. corporations paid an average effective tax rate of 27.7 percent from 2006 to 2009.

    The high taxes assessed to corporations isn’t really paid by them either; they are effectively passed on to the consumer in the form of higher prices.

    It really isn’t a revenue problem, it is a spending problem.

  36. khaki Says:

    @ Joel: “It really isn’t a revenue problem, it is a spending problem.”

    This is true if we agree that some of the things we’re spending money on are things we can live without. If we can’t figure out what to cut, then it is a revenue problem. I’m not advocating, I’m just saying… There’s no free lunch.

  37. cranky critter Says:

    We can figure out where to cut. Or at least where to start.

    The last Bush budget and first Obama budget included two giant things that were supposed to be one-time expenditures: TARP and the stimulus. And yet the budget baseline remained at the new level even after these things were gone. How come?

    Neither TARP nor the stimulus were supposed to establish a new baseline. If the budget had grown at the rate of previous years, we’d be at around 3 trillion or 3.1 trillion, give or take. But we’re at 3.8 trillion. We could start by taking every dept that’s grown by more than 3% annually. You, look at their 2006 budget, and give them a 2-3% increase 6 times, and that’s their 2012 budget. Period.

  38. khaki Says:

    Serioulsy, TARP and stimulus have become “base-line”? If so, wow. The ratchet effect is stronger than I thought.

    As flawed as it is, I have some hope that the super committee will at least bring some teeth to the deficit reduction conversation – that is if they don’t simply extend their own deadlines ad infinitum.

  39. mdgeorge Says:

    @cc: I more or less agree, with the caveat that I still believe we’re in an economic crisis, and so I still support temporary stimulative spending. I’m not sure how much of the “new baseline” is in fact continuing stimulus (e.g. unemployment insurance, food stamps, ongoing construction, energy investments). I don’t think it’s a terrible idea to run large deficits when unemployment is at 9% (as long as those deficits are spent moderately wisely)…I think it was a much worse idea to run large deficits during the bush era when things weren’t terrible.

    You can argue that the stimulus hasn’t been effective. In my mind that isn’t a good reason to assume that all stimulus is ineffective – I still think there is good reason right now to run a large deficit.

  40. [email protected] Says:

    A big problem is now arising, when those who consider their earnings as great and enough to pay the rising taxes are comfortable the common subjects who earn less that wil experience trouble, the economy will seem unfair for them, something should be done to implement such issues which involve the entire public.

  41. cranky critter Says:

    Well, there are only choices and consequences mdg. I’ll agree that deficit spending is, in the abstract, defensible. It may help sometimes. But there are real world consequences for overspending at the rate we’ve been overspending since 2007.

    Very few folks understand the current scope, and how much MORE difficult repayment will be due to this expanded scope. In recent history, we’d collect 19 and spend 21, or collect 10 and spend $10.50. With economic growth, the accumulated debt remained very manageable. But for several years, we spent 5 for every 3 collected, give or take. Right now we’re collecting about 3 and spending about 4. The hole gets much bigger much faster. Just look at the last 10 years of receipts and outlays. Look at how quickly the national debt has grown in the last 5 years. It’s grossly unsustainable to overspend at that rate for more than 3-5 years. Interest payments begin to eat up too much revenue.

    So, while it may be true that deficit spending is a somewhat viable strategy to stimulate the economy, it doesn’t speak to the actual ability of the government to undertake that spending. When we borrow, we have to pay back, with interest. The more debt accumulates, the greater the share of next year’s revenue that must go to debt interest payments before even getting around to the new year’s obligations.

    You really CAN rob Peter to pay Paul, if you have to. And that’s what we have been doing. But once Peter is tapped out, you’re SOL unless you can find another sucker.There’s a ton of debt in the world right now, and we’re running out of suckers.

  42. cranky critter Says:

    ^(^(^(^^(^)^RRR&UYREUYUOPRE$%^&

  43. mdgeorge Says:

    now I know why cc keeps ending up in the moderation heap :)

  44. Tully Says:

    Yes, TARP is part of the new baseline, that move from 20%GDP spending to 25%. That new baseline is why the Dems in the Senate don’t want to pass a budget. The new baseline suits them fine, and now they can claim that any reduction from it is drastic cuts that will lead to Apocalypse, even though we got by for over two centruies without spending that much outside of one world war.

    “Stimulus” spending without any accompanying consumer demand is pushing on a rope. Or if you prefer, trying to reinfalte a popped soap bubble. And right now the demand is not there. All “stimulus” spending does right now is drive down the dollar and set the stage for current and future inflation.

    Nash equilibrium is inappropriate because it is being used in the utterly wrong context. I don’t need to look it up, I did plenty of academic research in the field when I was still teaching college kids basic econ. We are not discussing game theory. We are discussing massive failure of our nation’s fiscal policy. We are not discussing the optimal strategies for individual players for maximizing government revenue. Note that the latter is NOT synonymous with the best policy for the country, or for individuals.

    The bottom line remains that DC has amply demonstrated over many decades that it will not check spending in response to pretty much anything. I maintain that unless and until it DOES check spending, giving the gov’t more money is EXACTLY like giving crackheads more crack. It does nothing but to boost the “burn rate.” And sooner or later you run out of crack.

    The figures I used are from the OECD, the IRS and the NBER. They include all income and taxes paid by all deciles. BTW, income inequality grew the most in the Clinton years during the dot.com boom, started falling in the Bush years, and fell even farther with the recession. For the same reasons that “progressive” taxation is a bad combination with deficit spending, namely, returns are much more volatile at the top end than in the other deciles. The more we depend on “the rich” to pay the bulk of taxes, the higher their ratio of taxes paid to overall income share of the economy, the more volatile our tax revenue will be in response to changes in economic conditions. This is axiomatic, and is part of why the Euro-nations tax the hell out of everyone. It reduces the volatility of their revenue streams. It’s also where the money is, something our pols hate to admit. We cannot get out of our money hole by eating the rich. If we confiscated ALL of the wealth of America’s billionaires, not just their income but their entire wealth, it wouldn’t cover THIS year’s deficit.

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