Comes now the following editorial, from the Weekly Standard no less, cautioning the new GOP majority to go easy on those spending cuts– don’t focus on the deficit and debt!– and instead focus on what I believe boils down to tax cuts.
Query: What is the difference between tax-and-spend, and tax cut-and spend?
I regard this as an early effort to walk back the debt hawkery, lest it threaten tax cuts and increased defense spending. I took particular note of the call to arms to reduce non-defense spending to pre-TARP levels, thus locking in the HUGE increase established by the previous Republican Congress and President Bush.
I therefore think that the new GOP majority will have only slightly more interest than the last GOP majority in deficit and debt reduction– which is to say slightly more than none.
And Dad – it didn’t say how far BACK pre-TARP! :~)
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p>To just me – tax and spend should have its order reversed to Spend and Tax. Programs, appropriate roles for government, desired subsidy for entitlements, etc. are decided upon and then tax revenue is raised to support that target. It’s not unlike the way that property tax is assessed after a Town Meeting. And like a town meeting, impacts upon individuals and unintended consequences immediately spawn set asides and corrections – senior citizen circuit breaker, exempt for blind and veterans, etc. Except there are problems with them too – a blind millionaire gets the exemption, a senior benefitting from a billion dollar annuity has no earned income and qualifies for the credit, etc. Questions like – is there another way to do this? – don’t get asked as the assumption is that government is better, smarter, and doggone it, people like them. The overall emphasis is on the desirabiltiy, not the cost, of the program or benefit.
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p>Tax Cut and Spend often goes too far in the other direction. Tax cuts do often generate additional income and jobs, but they are not a panacea. Leaving money in the private sector for spending and economic activity enhances the size and robustness of that sector. But overattention to symbolic details like snail darters distracts from the improving overall effectiveness of NECESSARY government. It’s like the guy at town meeting where everybody groans when they see him heading for the mike to ask his annual questions about why the town managers office isn’t re-using paper clips. The overall emphasis leans towards the penny-wise, pound-foolish approach to programs and benefits – my own favorite example is here.
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p>Obviously, I am among the latter but I hope I am not obsessive over government. Government is necessary, there are appropriate responsibilites, there is appropriate taxation. But that does NOT mean subsidizing waste and inefficiency ‘for the children’ because it’s ‘only a cup of coffee’. Do we NEED two different Consumer Affairs divisons in MA, soon to be supplemented with a Federal one? Should we EXPAND an entitlement when we cannot pay for those included now? And so on.
Let us hope that there are many in the new majority who share this sensibility.
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p>But. My general impression of Republican deficit hawkery is that it goes into hibernation the moment that Republicans assume control of the Congress.
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p>Thus: they complain about the cost of this or that “social” spending item, and then pass it. Maybe they cut a pariah program or two: look out NPR and NEA!– but the biggies are either approved, or even massively expanded (Here I’m thinking of Medicare Part D), and then lard up the defense with unnecessary weapon programs designed to counter a Soviet invasion of Western Europe. Then, they’ll make their political play demanding a tax cut of some kind, and will probably get it.
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p>Net result, spending up, revenues down: deficit and increased debt.
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p>The problem is that federal debt that is run up buying tax cuts and new fighter planes poses the same risk of future inflation (and hyperinflation) as debt run up to pay for Obamacare, Social Security, Medicaid, etc. That problem notwithstanding, I fully expect the GOP determination to reduce deficit spending (and debt) to evaporate faster than a drop of water on a hot skillet after the polls close.
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p>If tax cuts stimulate re-investment and growth by “leaving money in the private sector” then expanding government debt dissipates the effect in any event, because too much of that money left in the private sector buys T-bills.
They are HUGE smaller government advocates, and not just social programs. They really are libertarian in outlook, and want to streamline government on a philosophical as well as operational basis. And they are far from NATO apologists.
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p>Why SHOULDN’T we audit the Fed?
After all, they’re getting over half of all discretionary spending. Who’s heading up that push? None other than Reps Frank (MA), Paul (TX), and Wyden (OR).
If so, there may be something good produced in the next two years, as was the 1996 Welfare Reform. But I regard the editorial I linked to be an effort to make them Republicans first, and TEA Party second.
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p>Of course, since 2008 its primary mission may have become its secondary mission: all the fuss about TARP notwithstanding, it is likely the fed’s actions, none of which had anything to do with inflation, that ensured that today we have a functioning financial system.
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p>I am QUITE un-thrilled with the notion of putting the Fed under Congressional oversight, because that would ipso facto erode its primary mission. I am suspicious of the TEA Party activists BECAUSE of their suspicion of the fed; I don’t want to see a 21st century economy with a 19th century financial system.
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p> In particular, the infatuation with the gold standard strikes me as craziness. Had we been on the gold standard in October 2008, there would have been no injection of liquidity into the system. TARP would have been revealed as an aspirin offered after the fever killed the patient. And there would have been only two options, really: outright nationalization of the financial sector, in its entirety, or unemployment of sufficient magnitude and duration to threaten civil order. Currency stability achieved at the cost of price stability, and the ability to react to crises is a bad tradeoff in my book.
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p>I recognize that putting such power beyond the reach of political accountability presents what can charitably be called a dilemma for what is supposed to be be a representative democracy, but I am short of theories on how to fix the “democracy” problem without making the central bank’s mission an impossible one.
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The central planning model which de-emphasizes the system and emphasizes the man at the controls. The advantage of linking the currency to gold (as it has been for the last 3000 years except since 1971) is the automaticity of the money supply equalling the size of the economy. A Fed Chairman however hard he tries to approximate the action of gold will always under or overshoot.
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p>If the dollar was linked to gold we never would have got close to the situation of 2008.
The supply of gold increases at the rate of maybe 2% a year, as it has for several thousand years. We expect an economy that grows faster than that. You may have noticed that growth in this range has the electorate in a bit of a snit.
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p>So, that means that as the economy grows and the supply of gold doesn’t, the price of everything else other than gold must decline. It is inherently deflationary.
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p>Another significant problem is that the various merits of the gold standard– I’m not saying there aren’t any– are diluted: just as the government can adopt the gold standard, it can un-adopt it later, which diminishes much of the certainty that provides the anticipated salutory effects. Which is exactly what has happened, repeatedly, before.
You are right that many of the proponents of linking to gold would do more harm than good, such as those who want to get rid of paper money. I have always wondered how people who claim to be for liberty and freedom can propose a totalitarian clamp-down on this area.
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p>But in truth the gold standard never meant you only get to use gold. There were many places in the world which had never seen a gold piece but still denominated their barter in terms of gold. Those who want a system with only gold as currency are using backwards 19th century thinking that was never part of classical economics. If the US Treasury didn’t issue paper currency then private banks would pick up the job, in fact this is what happened. We are better off with the US government doing it even just as a matter of convenience.
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p>I would be happy to hear about a system that maintained monetary stability and didn’t use gold. But it can’t hurt to consider the positive effects of re-linking the dollar. Right now you have introduced into the economy the added uncertainty of how your contract will be fulfilled if the dollar has swung in one direction or another between the time you made the contract and when you deliver the goods. If you have lent or saved, you could be payed back in dollars worth less, in the case of inflation. This has led to needless arbitrage and a new layer of financial instruments that don’t need to be there, and a class of currency traders who profit more from the rise and fall of the price of pork bellies due to currency swings than the pig farmer makes raising the pigs.
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p>Doesn’t that relate to other things you have read about the collapse in manufacturing employment, the rise in inequality, and so on? I hear again and again how this or that statistic has shown us going downhill since 1970. It hurts to know what would make people’s lives better and never see it happen.
Sure, it’s got some industrial uses, but it’s demand is purely because it’s pretty. It doesn’t have value because it does things, it has value because it is. In fact, according to the U.S. Geological Survey, 84 percent of the gold produced in 2006 was used for jewelry and the arts.
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p>As a result, it too is subject to the same swings plus the swing of fashion… the supply is relatively constant, but the demand is artificial. Admittedly, gold has been fashionable as jewelry for 1000s of years, so I doubt it will go out of style anytime soon.
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p>The ‘needless arbitrage’ isn’t needless at all — it puts a price on risk, and allows the farmer to buy insurance from swings in the supply and demand of money, just as he can buy insurance from weather or fire. If we were on the gold standard those same swings would exist, and the options traders would still be providing the valuable service of pricing risk.
“it’s demand is purely because it’s pretty.”
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p>I thought the demand for gold was due to its relative rarity. I mean, glass is pretty, but the ease with which it can be made makes it useless as a standard.
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p>The problem with pegging a currency to gold is that it does not allow for an accurate valuation of a currency as it changes over time. Thus a system will find other ways to use the valuation — a black market, currency trading, etc.
Demand is because it’s pretty. Gold’s high price is because it’s pretty and supply is rarity. Glass’ low prices is because it’s supply is plentiful, despite it’s prettiness.
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p>Demand is uncorrelated with supply*. Price is a function of both.
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p> * This isn’t always true. Sometimes the perception of a shortage of supply results in a short-term surge in demand; think bread when a nor’easter is coming. However, the surge in demand is almost always followed by a weakening in short term demand due to the increased stocks.
Gold has potential value as a currency because it somewhat rare, but not too rare, and is in demand. Why there is demand is irrelevant. I suppose that it helps that it doesn’t spoil or corrode; otherwise we could go on the cherry pie standard.
The value of currency (paper and coin money) is virtually zero. Sure, some coins could be melted down, but the demand is solely because of it’s value in acquiring other things.
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p>Gold is different. It has a much higher industrial value than paper money, and it has demand due to it’s beauty. The former isn’t likely to change substantially, but could as new discoveries in material science find cheaper materials which accomplish the same goals in manufacturing and electronics. Gold’s demand because it’s pretty is also relevant, because that demand could change too, as fashion fluctuates.
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p>What makes paper money elegant is that there is only one source of demand. Gold has two others, and those two others have nothing to do with GDP or unemployment or any other economic factors. Those exogenous demands add additional uncertainty and fluctuation, especially given that the vast majority of new gold extraction is used for jewelry. “Why” isn’t irrelevant at all.
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p>P.S. It’s possible to use a gold standard not because of how rare it is, but because there is relatively little influx of new gold (1-2% a year). We couldn’t go on the cherry pie standard because it’s fairly easy to create lots more cherry pies. The issue isn’t the current supply, but how easy it is to create new supply.
I didn’t mean to drag this discussion off track. My position is that gold performed as a good monetary unit for thousands of years, if something else performs better then use that.
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p>The affection for the Fed Chairman from the Democratic Party is puzzling to me. I think it is based on the fact that periodically the Chairman comes out against tax cuts, and also a general preference for a centralizing bureaucrat. Both of these things are alien to the traditional Democratic Party.
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p>William Jennings Bryan wanted to get rid of the gold standard because he wanted to help out the farmers who were getting screwed by other governmental mistakes. The gold standard revealed the government’s screwups and embarrassments, that’s probably why they got rid of it.
To add to your point, 19th century financial systems were woefully unstable with some really long depressions and with all too frequent bank crises.
about Republican deficit hawkery. They were never that concerned about how much was being spent, only that it was being spent on things they disapproved of. Once they get control of the purse strings, as recent Republican controlled national governments have shown, the floodgates open on spending they agree with, and nary a thought is given to deficits, in fact, that’s when the “deficits don’t matter” line appears. This is not to say that there aren’t Republicans, or Democrats, for that matter, who want a government that spends wisely, efficiently, and honestly, just that their general party persona won’t live that way.
Another third is that Democrats don’t care about how much is spent, as long as it is spent on their special interests. The last third is that, together, the parties are doing great things for the parties and their respective special interests, while ignoring the commonweal.
on both sides of the aisle. As long as their interests are being addressed, other concerns get shoved in the back of the closet. Good talking to you.
…a strong majority of people favor social spending programs, they also favor tax cuts and less government, until they need more government if they want to eat safe food and breath clean air.
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p>Until we as a society can resolve this mega political cognitive dissonance, my tag line is the best answer to you general question.
Did you know Goldwater ran in 1964 in opposition to the Kennedy tax cuts? He complained that the cuts were adding to the deficit. I just read this the other day. That fact has far more to do with his defeat than the daisy TV ad.
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p>http://www.polyconomics.com/me…
I pursued a similar line of questioning here. I was asking questions about Blue Dogs there as well as Republicans.
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p>It seems clear to me that the promise of tax cuts is attractive politically. It convinces the electorate. Accountants make up a small part of the electorate. The arithmetic doesn’t have to work. Its political popularity is not the mystery.
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p>The mystery to me is what the Right is really proposing on a policy basis. The budget cuts they claim to be able to make — since, I don’t know, Reagan — just don’t add up to match the tax cuts they advocate. Laffer has been soundly refuted: lowering taxes really does decrease government revenue. So I’m left wondering: what do the intellectually honest folk on the Right believe?
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p>Krugman has been making the case that such questions are fruitless. I’d really prefer not to believe that. Possibly their intellectuals are all followers of Leo Strauss and believe in the noble lie idea from Plato’s Republic.
We have two tax cut questions in November.
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p>One is to repeal a newly enacted tax on alcohol. Creating a new tax on a retail industry in a recession is questionable at best, and may actually be counterproductive as we risk losing the wholesale tax because of decreased sales with customers going to NH. Will the extra revenue of the sales tax offset the excise tax loss?
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p>Three is to lower the sales tax to the level aready pledged away – our legally lowest rate – to put a hold on excess bonding, especially important now that the state’s entire transportation infrastructure has been moved off budget and into unaccountable bond funding.
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p>These are both pocketbook issues with widespread taxpayer appeal. Not corporate welfare, but Main St. help for average people. I believe that these cuts will benefit the economy more than more government programs.
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p>Also – an articles you might enjoy – ‘Dazed and Confused’ about Krugman (can’t find on NRO, but it’s the current cover story).
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p>Why should we talk in hypotheticals about the liquor tax? This tax was enacted over a year ago. We should have actual data about whether the wholesale tax revenue went up or down, and whether the overall taxes on liquor went up or down. We should be able to analyze the sales impact of this tax. A story I saw said the DOR estimated that liquor sales were down 1%, a number they attributed to the recession.
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p>Lowering the sales tax to 3% will, according to opponents, remove $2.5 billion from the state’s revenues. Can you outline the $2.5 billion you think is not doing that much for the state? That’s a pretty hefty chunk — about 10%. Do you know any private businesses that cut all their prices by 10% in this recession? Is that a plan you’d advocate to a business — “cut your prices by 10% and you’ll make up the difference in new customers!”.
Example – some local furniture stores are making such discounts in ads. Get a free TV, free financing, factory cost, etc. They are doing this because they have too much inventory, and their business markup is greater than that 10 percent, so they can ‘afford’ the cut to be able to pay invoices. They are also competing with ‘Going out of business’ sales by smaller stores, and have cut accordingly. Did you know there’s a chain in Maine called Chapter 11 Furniture?
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p>All to make up on volume what they’ve lost in customer numbers.
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p>You see this in many other non-essential sectors as well (let’s face it, nobody is going to die without a new wing chair). And in the absence of repeat OLD customers, well, yeah – I would advocate price cuts above operating expenses in order to stay in business.
I have yet to see a business permanently reduce prices by 10%.
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p>In that case the price cuts would have to be accompanied by permanent spending cuts, such as in the level of service or quality. For example, using your furniture store, what if they reduced prices by 10%, but laid off sales clerks or delivery people. Or stopped all advertising? Would this strategy make business sense? Keep in mind, this is a permanent change.
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p>Would it make sense for a restaurant to cut prices by 10% but get rid of their chef in lieu of a cheaper one? Or maybe switch to lower quality ingredients? Or put down paper tablecloths and plastic utensils?
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p>It seems that this would bring on a downward spiral. In fact, I have been told by more than one restaurateur that cutting this is a suicidal path, that when faced with declining sales the trick is to make things better, not worse.
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p>I will agree with Seascraper’s point — the “Laffer Curve” is not a straight line. There is an optimal point (maybe even more than one) balancing economic growth with revenues. I just don’t think that our economy is suffering from too many taxes right now. I don’t think that people have stopped buying because the sales tax is 6.25% instead of 3%. I think that people have stopped buying because they are laid off, because they are afraid of being laid off, because their hours are cut back, or because they are spending more of their money on their mortgage than they had been in the past.
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p>I also think that if the sales tax was reduced to 3%, although the economy would improve because people would have more to spend, it wouldn’t improve all that much because we are not in a bubble, and a lot of the tax savings would flow outward, out of state, and not much would come in because most people don’t primarily consider sales tax when they think about shopping – they think convenience (i.e. location), selection, and price.
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p>I’m not opposed to dropping the sales tax back to 5%. I think that the increase was a better solution than cutting a billion out of the state budget when people are relying on the government for basic services.
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p>And gee, it seems to me that businesses frequently raise prices temporarily. Remember when the price of gas went up, a lot of businesses added “fuel surcharges”. Sometimes they went away, but sometimes they became permanent because the business realized that the market could handle the price increase. That sounds a lot like what the state has done with its recent sales tax increase.
The right thing to do is grow the economy, and then as more people are paying their own way, let the social services disappear and the workers get hired on the private side.
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p>The problem is new government never goes away. Make any attempt to cut it even in the best of times and the workers are out there writing protest poems on the street in their own blood.
The first thing I thought is my first “big” purchase after college– a VCR– which cost me nearly $400. After many years, it finally died and last year I replaced it with a nicer one (with stereo!) that cost $30. It isn’t just that a VCR is obsolete: I almost crucified my son when he broke our DVD player, remembering how pricey the thing was when we got it, and then felt sheepish when I replaced it for $50.
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p>Note that for these products, price cuts were accompanied by spending cuts (obviously, it costs less to make a VCR than it did in 1987) and improved quality (stereo!).
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p>Only in government is “cost” linked directly, in a zero-sum manner, with “quality.” That is because there is no government to compete with the government’s provision of services.
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p>The government cuts costs all the time due to lower cost materials like electronics. The caveat, though, is that most of what government does involves labor. The fact of the matter is that in our modern economy, the cost of materials goes down but the costs of labor goes up. Furthermore, the government’s product also relies heavily on insurance and energy, two sectors for which prices have outpaced inflation.
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p>How many people were paid to shovel Faneuil Hall this past winter? How many were paid 100 years ago, when “buttons” were used as patronage and manpower was used to shovel? Technology lowers the cost — it’s shoveled out faster, for less (inflation adjusted) dollars now than it was 100 years ago.
Paying for a tax cut is no different than enacting a sweeping health care reform that is going to cost a huge amount of money without simultaneously enacting a big tax hike to pay for it.
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p>The same willful blindness fuels the Laffer Curve, and the notion that universal insurance won’t cost anything.
Those who truly understood the Laffer curve never claimed that cutting taxes all the time is the thing to do. It is simply a relation that shows what tax rate yields the maximum revenue. Don’t forget that it was drawn at a time when the top tax rate was 70%.
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p>At some point of course the sales tax could start to depress the economy where it yields less revenue with each point it goes up. But the combined effects of all the taxes in our economy, both state and federal, could easily put us in a situation where we are doing much more government than we can support and it is weighing down the private economy which underlies the whole thing.
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p>The Bush Tax Cuts have different rates on different activities all jumbled together. This means that those who are in favor of keeping them all might be keeping some supply-side tax cuts (such as investment tax cuts) and some demand-side tax cuts (such as income tax rate cuts).
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p>I look at many Republican candidates who don’t understand what they are talking about but still could do the right thing for their own confused reasons. There may be a baby in there with all the bathwater.
In fact, the Laffer curve shows nothing of the sort. It is a pretty line drawn between two extremes, with no substance in the middle.
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p>The worst part of it is that the logic that was attempted to justify it fails. The relationship between supply and demand (in this case for money supply) most commonly cited in backing into the Laffer curve falls apart when a government (like the feds) can run a deficit.
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p>The Laffer curve was a great example of using garbage “analysis” to attempt to “prove” an initial bias. That’s why the economic policy based on it failed miserably and was almost immediately reversed.
That’s the kind of thinking that leads Democrats to periodically propose a 100% tax on millionaires to balance the budget.
Actually, it’s the kind of thinking that leads a Republican presidential candidate to promise to slash everybody’s taxes and simultaneously raise government revenues, to win the election and actually put those cuts into effect, to see that the government revenues actually decline (shocking!), and to push through a significant tax increase a year after the cuts.
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p>The Republicans have busted the budget each time they’ve held office since the Nixon years. Take a long hard look at the increase in debt as a percentage of GDP and tell me again about Republicans, tax cuts, the Laffer curve, and all that (negative numbers are good, positive bad):
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p>Jimmy Carter: —3.3%
Ronald Reagan: 11.3%, 9.3%
George H. W. Bush: 15%
Bill Clinton: —0.7%, —9.0%
George W. Bush: 7.1%, 20.0%
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p>Please note that the ones with the negative signs are the Democrats, and the ones who worsened the situation are the recent “conservative” Republicans.
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p>Look at that last number again: the increase in debt as a percentage of GDP under George W. Bush was a whopping twenty percent: the highest since WWII. The only other president who came close was his father, George H. W. Bush, at fifteen percent.
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p>The Laffer curve is the kind of (magical) thinking that leads to massive tax cuts while simultaneously initiating illegal wars.
I didn’t realize you had no idea what you were talking about in your first reply, but as usual discussing with you amounts to less than nothing.
What do you claim I got wrong?
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p>It was, after all, Ronald Reagan who introduced the Laffer curve to America, objecting to Jimmy Carter’s small (by today’s standard, set by Ronald Reagan, George H. W. Bush, and George W. Bush) deficit. It was the same Ronald Reagan who slashed personal taxes in 1981. It was the same Ronald Reagan who raised taxes a year later in 1982 when the skyrocketing federal deficit demonstrated the fallacy of the Laffer curve.
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p>Is “increase in debt as percentage of GDP” a bad measure?
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p>Or do you instead object to any form of quantitative measure?
If you have a tax rate of 0%, it collects 0 revenue. If you have a tax rate of 100%, it collects 0 revenue because total confiscation kills all economic production.
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p>All the Laffer curve says is that reducing a high tax rate can result in higher revenue.
I think everybody is willing stipulate that 0% tax collects 0 revenue and that 100% tax collects 0 revenue.
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p>The point is that there are an infinite number of curves that join those two endpoints, the “Laffer” curve being just one.
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p>Here is another:
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p>Who is to say which is more accurate?
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p>Here is an effort to look at real data:
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p>The point is that there is no evidence that the particular shape known as the “Laffer curve” has any relationship to what actually happens, and a great deal of evidence (namely, the history of tax policy since Ronald Reagan) that the Laffer curve does not describe reality.
I said before that some tax cuts are good and some are not. But your congressman only gets to vote up or down on the bunch.
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p>In the 70s workers were forced into paying higher rates through inflation and bracket creep. Money flooded into government programs, but people didn’t see an improvement in services, or in their lives.
When you say stupid stuff like that you disqualify yourself from the discussion.
That’s the kind of thinking that leads Democrats to periodically propose a 100% tax on millionaires to balance the budget.
I never claimed that the Laffer Curve is false. That is a deliberate over-simplification useful for political activists on the left; they need a bumper sticker to counter the Club for Growth deliberate over-simplification on the right, hawking a tax cut for whatever ails ya’.
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p>Good thing that the adversarial nature of political campaigns flushes reality out of these two fudges. Oh wait. No it doesn’t.
Based on the experience of every other developed country in the world.
We don’t need to look around the world for analogies, we can look right here in Massachusetts!
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p>Guess what? Massachusetts increased access to healthcare, and it cost a lot of money! Otherwise, we wouldn’t be talking about raising income taxes, sales tax, liquor tax, and the gas tax, because of the savings generated by expanded coverage. But, alas, t
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p>I supported the health care reform, but the Orszag “bend the curve” schtick was patently “Look, over there!” distraction. I was primarily impressed with the guy’s ability to say it with a straight face.
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p>But, as it turns out, health insurance for more people costs more than health insurance for fewer people. I have noted the same phenomenon when buying dinner.
The idea is that with universal coverage, expensive procedures will be less frequent because of preventative measures earlier in that person’s life. Lower incidences of costly medical procedures because proper treatment will preclude that affliction in the first place, or because more frequent and accessible medical advice will nip the problem in the bud, so to speak.
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p>If this is true, you clearly won’t see savings right out of the gate — we’re not yet in steady state; those increased proper treatments now won’t save until years down the road.
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p>Note that I wrote “if”… I don’t know if it would really lower costs, even in the long term. For example, when people die of smoking, it’s costly. But, if they never smoked, they’d die of something else, later in life… and what would that cost?
And the idea is that if marginal tax rates are too high, they operate as a disincentive to produce, and if that disincentive is reduced by a reduction of marginal tax rates, there will be more production, and the lower tax on the larger pie will result in a net increase in tax revenue.
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p>The other idea is that there is pie in the sky when you die.
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p>It still seems to me that buying health insurance for 100 people is going to cost more than buying health insurance for 80 people. Unless you reduce what the 80 get to spread over 100 people. Which, if I recall, we were exceedingly careful not to do.
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p>So, I am still going to have the plan I have. Because I live in Massachusetts, land of Harvard medical School, that insurance is very expensive. Also, tax revenue is going to be consumed by Commonwealth Care and other subsidized insurance, and administration, and so taxes must go up as well. Thus, Romneycare has been successful by some measures, but has cost an arm and a leg.
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p>The theory you have above is the great assumption that gets glossed over in these “all the industrialized world” arguments. We aren’t the rest of the world, we’re us. Our lifestyle is sedentary. We eat yummy dead cows, and not so yummy frozen crap from Stouffers. Oh, and bacon. Some of us smoke, a lot of us drink, and some of us drink a lot. Having health insurance isn’t going to change this.
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p>What having health insurance will change is that more of us will go to the doctor once in awhile. But, since there aren’t 20% more doctors than there were yesterday, those visits will cost more.
And Uncle Milton’s ‘starve the beast’ was a massive failure. In one of his last interviews with a U of C publication he admitted that his greatest failure was encouraging spending on the right, he failed to recognize that tax cuts would become permanent and popular, while spending cuts could never be politically feasible. He finally admitted that what looked good on paper could never work. It is fitting the last President to balance a budget was a Democrat.
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p>Also it was poor salesmanship on the part of the left to claim health care reform would cost nothing, that was us surrendering the ground on taxes to the right and to populist anti-tax concerns. For me, it would have been far more inspiring to appeal to our greater instincts of community and shared sacrifice. We were taxed to death to win the World Wars and no one would argue it was un-patriotic to raise those rates. Similarly no one questioned spending tax dollars on rebuilding Europe, an interstate highway system, on sending a man to the Moon, and on creating great public universities that were the envy of the world. To really get substantial change we need to be willing to fight those battles again and actually win them. Otherwise the country will end up like California.
Health care reform/Medicaid expansion is paid for through $500 billion in rate/service cuts (yes, with a b) to the Medicare program but also by several very large “tax hikes”:
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p>$210 Billion: An increase in the Medicare payroll tax on high-income employees (individuals making more than $200,000, couples more than $250,000 together).
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p>$32 Billion: A new tax on insurers offering certain high-cost medical plans (Cadillac plans, which also should result in higher wages as employers spend less on health care and therefore higher income tax revenues.
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p>$17 Billion: New “penalties” (taxes) for failing to comply with the individual mandate. Very low-income (those who do not need to file a federal tax return) are exempt.
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p>$52 Billion: New “penalties” (taxes) for employers if they don’t provide coverage.
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p>$107 Billion: New “fees” (taxes) on drug companies, medical device makers and insurers.
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p>$29 Billion: Elimination of some tax breaks (new taxes) for health savings accounts
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p>”Obamacare” is paid for (the CBO estimates it will reduce the deficit over the long run) and was acoompanied by many simultaneous “big” tax hikes.
Well, I think there are, in fact, populists on the Left who might think that we needed some kind of health reform no matter how steep the cost because that’s the moral thing to do. Similarly and in parallel, there are folks on the Right who might argue that lowering taxes — regardless of the fiscal consequences — is the moral thing to do and should be done on those grounds alone. Perhaps, I’m misreading him, but I think Demolisher could be said to hold that view.
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p>Like my liberal brethren here, I disagree on your assessment of healthcare reform. In fact, one of the reasons liberal wonks support it is precisely for its ability to rein in costs.
But ability? When the cosnquences of that reining is known?
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p>All this ‘preventative care’ that will enable less spending on disese – how do you enforce medical mandate? Even taxing the bejeezus out of ‘sin’ may not work; in fact, it hasn’t. Obesity has gone very much out of control since the advent of HMO’s for example.
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p>Actually, I always thought HMO’s are stupid. For the healthy, it’s like having a lawyer on retainer when all you’re gonna do is write your will.
At Baseline Scenario:
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Do you want austerity, high taxes, or are you just making a point about hypocritical Republicans? If Johnson thinks the answer for us is fiscal austerity, then he is wisely ignored.
What the Republican Party and the American right needs is a David Cameron, someone willing to transcend polarization and partisanship in an Obama-esque manner while clearly governing from the center-right. Real austerity means cutting everything which for that nation includes massive cuts to social security, massive cuts to defense spending, privatization of certain government services (like the post) and targeted incentives to spur smart investment in infrastructure, green jobs, and families, all relying on local governance and small businesses and organizations. Its a center-right view that mistrusts big business as much as it mistrusts big government. And it takes rational positions on social issues and the environment, and its actually far more concerned about scaling back War on Terror civil liberty abuses that occurred under Labour.
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p>There are no leaders of that caliber on the right with the exception of Mitch Daniels who is already alienating social conservatives and John Huntsmen who is now an Obama administration official. Everyone else has to drink the Kool-Aid to participate, and the Tea Party will be like the Jim Jones church, big and prosperous for awhile, but in the end everyone will be dead. Similar to the GOPs long term political fortune. This hodge podge coalition of Paultards and Buchannite paleocons and libertarians, anti-immigration stalwarts, social conservatives, country club Republicans, and neo-cons shall not last. Opposition has united them, real power will undo them.
America has a David Cameron. His name is Barack Obama. What America does not have is a leftist party that would be recognizable as such in any other industrialized democracy. However, much of what you speak about is on his agenda.
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p>What we do not have is a space for the American center-right, that I’d embody as Lincoln Chaffee or Tim Cahill. Such a person is generally squeezed out of politics (Charlie Crist, Lisa Murkowski) between the right and the left-center spectrum, or gets out while they can (Christie Whitman, Jim Jeffords). That’s not due to a lack of leaders, but a lack of followers — there’s no support base in the US among business or voters for a center-right, apparently. I imagine it’ll return as most things in politics are cyclical, but it may be a bit of a road to get there.
I think a true leftist party can’t be successful in this country. Traditional leftist values are very alien to the American idea since we never had the extent of class stratification or polarization as Europe did, since our aristocracy was always meritocratic, at least as it was popularly conceived. We could all pick ourselves up by our bootstraps and go from nobodies to Rockerfellers if we just worked hard enough. I am not saying that myth is factual or realistic, it certainly isn’t, but it is one that has always been inherit to our country’s conception of itself. We are a nation of nobodies who had no access to the feudal land based economy of Europe and came here with anti-aristocratic values. Arguably our most left-wing President, FDR, still played to the Jeffersonian-Jacksonian ideals that were the hallmark of his party. Our workers demanded entry into the bourgeois, not a workers paradise, and leftists from Debs to LaFollette still cloaked their philosophy in Jeffersonian imagery. Even today our worst off workers, coal miners and Wal-Mart employees, are more eager to drink the tea of the Tea Party than embrace class revolution. And to change those middle class aspirations would be to require a complete rewiring of America’s DNA and mythology. Rather than do that, I think we should embrace the myth and use it to advance social justice, as American leftists from FDR to MLK to Obama have done.
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p>We might, we just might, see a viable Green party in the future, that embraces environmentalism and libertarian-socialist ideas that appeal to the growing movement in both wings for local governance. That plays into a historical grassroots narrative of American history, but a true leftism seems to be viable in industrial Europe and post-colonial Latin America and Africa, but it has never, and I doubt it will, take hold here.
I just disagree with that… if the Conservatives had presented a Growth agenda rather than an Austerity agenda they would have been elected outright, instead of going into a weak partnership with the Lib Dems.
🙂
Most austerity programs which come from the right are just envy.
Just to throw some data at the issue. National debt as percent of GDP from 1940 to February, 2009.
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precisely because we are just suffered a contraction.
If GDP contracts and spending stays constant, you’ll see a steep rise in debt because GDP is in the denominator.
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p>I might add that the position for serious conservatives to refute is the neo-Keynsian position. That position argues that we need to keep long-term debt under control. That includes reining in healthcare costs and keeping tax receipts roughly in proportion to expenditures. That position also includes the argument that the best response to a recession like the one we’re having is to supplement the contraction of demand by government spending. Not doing that risks pushing up the structural unemployment rate so that it becomes permanently higher and otherwise damaging the productive resources in the economy. It also risks problems like the one Japan has experienced so profoundly. The response is meant to be short-term and large.
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p>Refuting stupid positions like “Deficits don’t matter” is, of course, much easier.
If it was only a couple of years of data, then yeah maybe you’re right. But there are no little isolated data points here. It’s 70 years of data. A long downward trend, as we worked off the WWII debt, through multiple presidents, both Democratic and Republican.Then steep increases with Reagan and then again with Bush 2.
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p>The data show that the debt problem that the regressives spout so much about they themselves mostly cause. To the point of the diary, taxcut and spend is worse than tax and spend.
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p>Clinton left a budget surplus and sharply declining national debt. They blew it on tax cuts for the rich and a $3 Trillion dollar war in Iraq.
I just saw this. Not dodging it will try to reply this wknd. Thanks for asking my opinion.