Hostages, Or, An English Lesson
The Democrats, led by President Obama, have been going on the passive-aggressive offensive, repeatedly accusing the Republicans of holding the American people "hostage" to get "tax cuts* for millionaires."
The problem is that "hostage" directly and necessarily implies that if the hostage-takers don't get what they want -- that "tax cut" -- that they will not release, or will kill, the hostages.
But everyone, including and especially Obama and his Democratic colleagues, knows the Republicans would not have let the middle class taxes go up. The Republicans got their way -- keeping all tax rates level -- only because, even in the minority, they had enough Democrats to give them the votes to do it. If the Republicans did not have enough votes to do it, then they would have voted with the Democrats to keep the tax rates level only for people making under $250,000.
There was no hostage here. There was only a majority of elected representatives getting the bill passed as they wanted it (no tax rate increases) instead of as the minority wanted it (a tax increase on higher income earners).
In other words, Obama and the Democrats -- as usual -- are damned liars.
It's also funny to see the attacks from the left on this, accusing Obama and the Democrats of giving in. They had no choice: they lost. We have this thing called a "Congress" where a "majority" can pass legislation. Now maybe the Democrats shouldn't have voted for it, but then it would have been the Democrats who would be "holding the American people hostage."
Paul Krugman said yesterday the Democrats should do precisely this: make all tax rates go up if the Democrats can't get what they want. Krugman and his fellow leftists are the only ones who want to "hold the American people hostage." Of course, Krugman also bemoaned the supposed increase in the deficit due to keeping the taxes level, even though when the Democrats increased the deficit by more than a trillion dollars he said deficits don't matter, and he keeps repeating that the Democrats haven't incresased spending very much in the last few years, so it's not like Krugman can be trusted, either.
(* Of course, it's not really tax cuts; rather, it's avoiding a tax increase, but we already went over that lie.)
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"It is the common fate of the indolent to see their rights become a prey to the active. The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt."
When did Krugman say deficits don't matter?
Anyway, the lesson to come away from this is they are all 'damned liars' both on the right and the left. Obama said he would let taxes go up after 250 000$ and Republicans said they would seriously address the deficit issue.
Bad decisions on both sides are not a reason to avoid the obvious - the US needs to get its financial house in order quickly if the plan is to keep borrowing money without seriously raising interest rates while simultaneously pretending inflation won't happen.
What if the US can no longer borrow money so easily? What if the golden credit rating is adjusted? What happens if states start to default? These things seemed impossible a few years ago, but now are looking more like real possibilities.
Back when the economy was first beginning to show signs of tanking in 2008 I emailed you "From an outsider's perspective it seems the worst economic shape you guys have been in since the late 80s, when another Rep was running the show." You were more optimistic saying it looked to be only a regular contraction and may not turn into a recession at all. Apparently we were actually both optimistic in retrospect.
You also said this in the same email, "By my account, tax cuts have done their job quite well. They helped boost the economy in 2003, and have prevented us from being in much worse shape now than we would be if taxes were still as high as they were when Bush took office."
Do you still believe this? I would assume yes. But will you still if borrowing costs change or if the fed runs out of tricks and inflation rears its ugly head in a serious way? Time will tell I suppose.
http://www.economist.com/node/17677736
When did Krugman say deficits don't matter?
Last week. And many other times. He has said many times we should increase deficit spending right now, and has dismissed the problems of the high deficit because of its relative percent of GDP.
Anyway, the lesson to come away from this is they are all 'damned liars' both on the right and the left.
Not on this issue, no.
Obama said he would let taxes go up after 250 000$
He said he'd try. Perhaps that was a lie, I don't know. But saying that the Republicans were holding tax rates for everyone else, let alone the American people themselves, "hostage" was absolutely a lie, because it implies the Republicans were not going to let those tax rates continue unless they got what they want, and that's a clear and unambiguous lie.
... and Republicans said they would seriously address the deficit issue.
And they likely will. Considering they are a minority in both Houses of Congress, it's disingenuous to accuse them of being "damned liars" because they haven't yet dealt with the deficit. They do not control the agenda. Scores of the Republicans haven't even been sworn in yet. Wait until January 4th before you try to convince people the Republicans haven't done enough, at least.
Honestly, you're being extraordinarily silly.
the US needs to get its financial house in order quickly if the plan is to keep borrowing money without seriously raising interest rates while simultaneously pretending inflation won't happen.
Yes, exactly: we need to drastically cut spending. Obviously.
Back when the economy was first beginning to show signs of tanking in 2008 I emailed you "From an outsider's perspective it seems the worst economic shape you guys have been in since the late 80s, when another Rep was running the show." You were more optimistic saying it looked to be only a regular contraction and may not turn into a recession at all. Apparently we were actually both optimistic in retrospect.
No. Actually, I think this recession hasn't been too bad. It's not the recession that worried me then, or now. It's the long-term prospects of the massive debt (and the deficit that creates it) that bothers me. Further, I think I have plenty of space to argue that the recession wouldn't have been so bad if Obama and the Democrats hadn't engaged in the fruitless stimulus nonsense.
You also said this in the same email, "By my account, tax cuts have done their job quite well. They helped boost the economy in 2003, and have prevented us from being in much worse shape now than we would be if taxes were still as high as they were when Bush took office."
Exactly right.
But will you still if borrowing costs change or if the fed runs out of tricks and inflation rears its ugly head in a serious way?
That question falsely assumes that tax cuts lead to borrowing. They do not, and definitionally cannot. It is simply a truism that borrowing is caused by spending, and not a decrease in revenue.
But saying that the Republicans were holding tax rates for everyone else, let alone the American people themselves, "hostage" was absolutely a lie, because it implies the Republicans were not going to let those tax rates continue unless they got what they want, and that's a clear and unambiguous lie.
I think the hostage talking point came about from the Repubs saying they would not vote on anything until the tax issue was resolved. In any case it's just political talk and the more it went on with Obama talking about hostages being injured etc. the more ridiculous the analogy became.
Further, I think I have plenty of space to argue that the recession wouldn't have been so bad if Obama and the Democrats hadn't engaged in the fruitless stimulus nonsense.
Plenty of blame to go around.
That question falsely assumes that tax cuts lead to borrowing. They do not, and definitionally cannot. It is simply a truism that borrowing is caused by spending, and not a decrease in revenue.
If you lower taxes without adjusting spending (as Bush did) you are not really cutting taxes, you are instead creating two types of tax collateral damage: inflation and larger long term debt. In this current instance no one has any serious interest in cutting spending (the deficit commission proved this), so in order for people to pay less tax it is necessary to increase the deficit. And as I said this will inevitably cost more in tax dollars later and increase inflation currently.
You probably don't like David Stockman any more, but he's making a lot of sense to me lately - the US should seriously look at raising taxes AND cutting spending asap. How else can you address the deficit?
Another guy who made some good points the other day - and being liberal I don't tend to share many of his philosophical ideas and find him generally unhinged - I can't find much to fault in his argument:
http://www.youtube.com/watch?v=kZXtBEJzhbI
I think the hostage talking point came about from the Repubs saying they would not vote on anything until the tax issue was resolved.
That makes it no less clear or more ambiguously a lie.
In any case it's just political talk
I do not excuse lies just because it's "political." In fact, I hold "political talk" to an even higher standard, because it affects, for better and worse, the rest of our discourse moreso than most other talk. Indeed, the politicians like to attack talk radio and cable news programs for lowering our discourse, but the overwhelming majority of it is just following the lead of dishonest politicians like Chuck Schumer who use the exact same divisive rhetoric on a daily basis.
I am not offended by his calling Republicans "hostage-takers." I've been called worse. What offends me is that Obama was implying something that is completely false: that extending existing tax rates for "average Americans" would be killed if Republicans could not get what they want, when the well-understood fact is that Republicans would absolutely vote to continue those tax rates no matter what. He's standing the facts on their head. He's lying.
... and the more it went on with Obama talking about hostages being injured etc. the more ridiculous the analogy became.
I don't listen to many "talking heads" so I don't know if this has come up elsewhere, but frankly, apart from the complete dishonesty of the analogy, I found his words downright frightening in that he said "we don't negotiate with hostage-takers, unless someone can get hurt" (or something along those lines), which potential REAL hostage-takers could take as a signal that they could get what they want if they threaten to harm someone.
If you lower taxes without adjusting spending (as Bush did) you are not really cutting taxes
That's an obviously false assertion.
I know what your point is -- that it's exchanging a tax cut now for a tax increase later -- but it's simply not true that taxes in the future WILL go up to compensate for the deficit spending. It's likely, but not a certainty, for many reasons (economic growth such as we saw in the 90s, for example). But most importantly, even if taxes WILL go up in the future, if the high deficits and debt force us to cut spending when nothing else has seemed to work, then it's MORE than worth it.
Also note the fact that NO ONE is talking about lowering income tax rates. We're talking about keeping them level, or increasing them. Those are the only two choices on the table. It is a lie for the Democrats to say otherwise (and they well know this).
In this current instance no one has any serious interest in cutting spending
Obviously false.
(the deficit commission proved this)
It proved the OPPOSITE of your assertion. Many moderates and most conservatives are backing the overwhelming majority of the deficit commission proposal. Indeed, it might have actually passed the commission if it had been MORE fiscally responsible, by dealing with "Obamacare," which unfortunately meant Paul Ryan couldn't vote for it. But even then, Ryan -- with the full backing of the chairs of the commission -- is putting the bulk of the commission's proposal into his proposals as the House Budget Committee chairman.
To say they have no interest in cutting spending when the chair of the House Budget Committee is backing it, except wanting to cut even MORE spending, you're just spouting nonsense.
the US should seriously look at raising taxes AND cutting spending asap. How else can you address the deficit?
The deficit has to be dealt with by cutting taxes and by increasing revenue, but increasing taxes will have a negative effect on economic growth, which will -- if you're lucky -- keep tax revenues level. You probably know about Hauser's Law, and the only big deviations we see from Hauser's Law is that effective tax rates decrease during major recessions like this one, and increase during major booms like in the 90s. Otherwise, no matter what you do to the tax rates, we'll get about 18-19% across the board.
I am not saying there's some magic tax rate. I am saying that increasing taxes during a recession -- which is precisely what the Democrats want to do -- will hurt economic growth. If your taxes are at 25% and go down to 15%, you're going to spend a lot more money. If your taxes are at 5% and go to 15%, you're going to spend a lot less money. It's not about the rate being at 15%, it's about whether it was going up, or down, and how much. That is what I am most concerned with, right now, during a recession (or at least, still dealing with its effects).
We need to keep tax rates level -- except maybe cut capital gains rates, I'd be open to considering it -- and cut spending, and do what you can to reduce regulations on businesses that grow the economy and actually produce the revenue we need to actually make a dent in the deficit and debt.
This is the ONLY WAY. If we don't do this, our economy will not survive, period.
(I also think we should abolish the income tax and move to a FairTax, which is a very streamlined, flat, universal, point-of-sale sales tax, with monthly "prebate" to everyone to cover the taxes on "essentials," rather than filing for deductions later. This will not only free up hundreds of billions, if not trillions, of dollars that currently go into our tax system, and bring in just as much revenue, and be far more "progressive" than the current tax system, and not give incentives to the "wrong" kinds of economic activity, but it will also be a much more FREE system, since we no longer will have to report the details of our income to the government. And on top of all that, if we do need more revenue, we all share in any increases, and the rich still end up paying much more than everyone else. It's straightforward and would be a huge part of getting us in the right direction on solving our deficit problems. Oh, and it also means government will be much more loathe to try to prevent people from engaging in economic activity, since it means revenue to them.)
Another guy who made some good points the other day - and being liberal I don't tend to share many of his philosophical ideas and find him generally unhinged - I can't find much to fault in his argument:
Exactly. Schiff is just plagiarizing what I'm saying. ;-)
Good points, I think you are right and I am in agreement.
"But most importantly, even if taxes WILL go up in the future, if the high deficits and debt force us to cut spending when nothing else has seemed to work, then it's MORE than worth it."
If I was a betting man I'd say you will get your wish here. The problem is at what cost - lowering the US rating would be apocalyptic and interest could spiral out of control.
The issue with growing the economy in the foreseeable future is the lack of demand and I don't see how that can be addressed. People keep saying 'Rich people make jobs' etc. which would be handy if true, but it's not. Only market demand creates jobs and with credit cards tapped for the middle class and so many people out of work I don't see the ability to increase that demand in a sustainable way. Deficit and spending are a bit of a catch 22 right now.
Trade deficit is one of the big issues to resolve but the sad thing was watching Obama off searching for new markets with unemployment at home hovering at estimates as high as 20%. Now, even if he got some trade agreements what would that really mean? "American" products made by Chinese workers would get an uptick. There doesn't seem to be any ideas on either side on how to address that structural issue. Well, outside of the Dems simply spending to keep the unemployed afloat indefinitely (And banks loving it).
Oh and I think Fairtax is about as likely to happen as returning to the gold standard. It's a good idea though.
If I was a betting man I'd say you will get your wish here. The problem is at what cost - lowering the US rating would be apocalyptic and interest could spiral out of control.
Perhaps, but the alternatives are all worse, except for government actually cutting spending on its own, which it's refused to do.
The issue with growing the economy in the foreseeable future is the lack of demand and I don't see how that can be addressed.
Let the economy work, instead of interfering with it.
People keep saying 'Rich people make jobs' etc. which would be handy if true, but it's not.
Of course it is true.
Only market demand creates jobs
But market demand doesn't create capital ... it gets capital from rich people. Of course you can't just manufacture a useful job out of thin air, but you need capital to make it happen.
... and with credit cards tapped for the middle class and so many people out of work I don't see the ability to increase that demand in a sustainable way.
We're already seeing demand increase, though slowly. Let the economy work it out.
Deficit and spending are a bit of a catch 22 right now.
They're really not.
Trade deficit is one of the big issues to resolve but the sad thing was watching Obama off searching for new markets with unemployment at home hovering at estimates as high as 20%.
Pet peeve: that is not true, unless you use "underemployed" to mean "unemployed." I do not, and I don't think it's reasonable to do so. (That said, the federal government does include underemployed in one of its "unemployment" figures, so not saying YOU are unreasonable, but that the government is. Of course, they have their reasons for doing so, but the bottom line is that many of those 20% have jobs with income.)
As to your main point, again, we need to just let the economy work. Let's start by not burdening overseas American companies with high tax rates making them uncompetitive in those markets, and ease up on any other restrictions short of sacrificing our domestic safety and security, including disallowing our own markets from being externally manipulated.
Yes, the answer is lower taxes and less regulation. It's not the quick fix, but then, nothing is, and it's the right, lasting, healthy, fix.
Well, outside of the Dems simply spending to keep the unemployed afloat indefinitely (And banks loving it).
And even Larry Summers says this only lengthens the time that people stay unemployed.
Oh and I think Fairtax is about as likely to happen as returning to the gold standard.
Nope. It gets more momentum every year from key political figures and economists. It's not going to happen this year or next, but this decade? It's a possibility.
"Only market demand creates jobs
But market demand doesn't create capital ... it gets capital from rich people. Of course you can't just manufacture a useful job out of thin air, but you need capital to make it happen."
This idea of rich people opening their wallets and capital flowing would be my pet peeve, let me explain.
Ignoring for a moment how banks have become free to invent money out of thin air let's look at the basics of how banks traditionally operate. Taking in money from everyone, poor middle class and rich they give out a small amount of interest in return. Then they lend this money out at much higher rates and take home the difference. Money is money, they're happy to get it from anyone that will give it, the wider the group the better.
Similarly in my business we have a wide and diverse range of investors, the majority of whom are middle class. Regardless of their income bracket they all invest for more or less the same reason - to grow their wealth. This idea that you need rich people to raise capital is bizarre to me, who wouldn't want to grow their savings? The higher income brackets may invest more, but this is not a rule.
Personally I think crowd sourcing investment online is something that will probably take off in the future and in that style of raising capital income bracket becomes increasingly irrelevant.
Rich or middle class a savvy investor will look for the best place to put their money. I believe a strong middle class is the bedrock of any economy, I'll take that any day over trickle down.
"This idea of rich people opening their wallets and capital flowing would be my pet peeve, let me explain."
Feel free to explain, but realize this is the only way we get sustainable capital: from private citizens spending their money, either individually, in small groups, or through corporations.
"Regardless of their income bracket they all invest for more or less the same reason - to grow their wealth. This idea that you need rich people to raise capital is bizarre to me, who wouldn't want to grow their savings?"
You misinterpreted me. I only meant:
"The higher income brackets may invest more, but this is not a rule."
Shrug. They've always invested more, and always will. Feel free to not call it a rule, but it's true anyway.
"Personally I think crowd sourcing investment online is something that will probably take off in the future and in that style of raising capital income bracket becomes increasingly irrelevant."
You're wrong. The higher income brackets will still invest more.
"Rich or middle class a savvy investor will look for the best place to put their money. I believe a strong middle class is the bedrock of any economy, I'll take that any day over trickle down."
No, you wouldn't. What is pejoratively and inaccurately called "trickle down" is really simply the fact that rich people invest more money, and that this money improves the economy for everyone. You absolutely would not prefer any system to that one ...
"Shrug. They've always invested more, and always will. Feel free to not call it a rule, but it's true anyway."
I meant in my business. Overall, agreed.
"Feel free to explain, but realize this is the only way we get sustainable capital: from private citizens spending their money, either individually, in small groups, or through corporations."
And in large groups.
"No, you wouldn't. What is pejoratively and inaccurately called "trickle down" is really simply the fact that rich people invest more money, and that this money improves the economy for everyone. You absolutely would not prefer any system to that one ..."
I mean my preference of a strong middle class able to invest and buy rather than a concentration of wealth investment / buying power in a much smaller group.
My last point would be that it becomes easier and less risky the more capital you have to engage in various types of 'investment' that do not create any real economic activity. I mean in the form of different styles of volume trading etc.
This is why wall street can do so well currently with tepid economic growth, curtailing demand and lack of business investment.
I mean my preference of a strong middle class able to invest and buy rather than a concentration of wealth investment / buying power in a much smaller group.
But that is orthogonal to "trickle down" economics. Now, let's note up front that almost no one actually supports a system where the rich pay less in taxes than the rest of us: they will always pay more. So "trickle down" in practice always means not letting the rich off the hook, but simply not overburdening them much MORE than everyone else, so that they can invest and so on.
This is not opposed to a strong middle class at all, and in fact, works best when accompanied by a strong middle class. So to say you prefer a strong middle class to "trickle down" makes no real sense to me, since they are not in any way opposed.
it becomes easier and less risky the more capital you have to engage in various types of 'investment' that do not create any real economic activity. I mean in the form of different styles of volume trading etc. This is why wall street can do so well currently with tepid economic growth, curtailing demand and lack of business investment.
But that's happening mostly because of the uncertainty, and fear, about the government's policies. Businesspeople would much rather take risks, because the rewards are much greater that way; but in our current environment, where the risks increased and potential rewards decreased due to Democratic policies, yes, we see less of the kind of investment that most helps the economy.