Democratic Candidates drinking the Republican Kool Aid

[darkwing_duck1]

I can only shake my head in sorrow at the shameless election year pandering that some Democrats have now started to engage in.

http://us.lrd.yahoo.com/_ylc=X3oDMT...hoo.com/s/ap/20100916/ap_on_bi_ge/us_tax_cuts

The simple truth is that the US can NOT afford tax cuts. Not for the rich. Not for the poor. Not for business, nor for individuals.

The World Bank back in July did an analysis of the US balance of payments over the next 30-50 years. The ONLY way for the US to make good on it's financial obligations is to RAISE taxes. A LOT, and KEEP them there. According to WB figures, the total Federal level of taxation needs to double from it's current level. And the increase needs to start NOW.

We must find the policitcal courage to reject the Republican Big Lie: cut taxes, cut spending, and everything will be fine.

I am ashamed of our Democrats for falling for this out of desperation to keep their seats.

 

[Marten]

That's the problem with democracy, people don't want what they really need.

 

[C.E. Evans]

Politics and common sense don't necessarily go hand-in-hand, IMO.

 

[Robert Maxwell]

People want a government that does everything but they don't want to pay for it. This is not new.

 

[ShamelessMcBundy]

To quote David Cross: The US has a rich, proud tradition of voting against its own best interests.


It's an election year and the economy is still shit. YOU try to sell a tax hike to John Q. Public.

 

[Guartho]

Honestly, we probably need to do the "worst" of both worlds, cut spending and raise taxes. Sorry gang, but that's what fiscal responsibility actually looks like.

 

[Robert Maxwell]

Honestly, we probably need to do the "worst" of both worlds, cut spending and raise taxes. Sorry gang, but that's what fiscal responsibility actually looks like.

Yup, but people won't go for it. The mere mention of raising taxes on the top 2% sends conservatives (many of whom are poor) into apoplectic fits.

We need to jack up taxes, drastically cut back our military adventurism abroad, and restructure and consolidate a good number of domestic departments.

I think it's possible to make our government function better while spending less money, but we have to be willing to take a hard look at everything we're spending the money on right now. We have way too many sacred cows to effect real change.

 

[gturner]

Doubling tax rates won't double government revenue, it will probably cut it in half. Massive tax hikes for the rich was Herbert Hoover's solution to a revenue shortfall, and that was a major factor in causing the Great Depression. When everyone is out of work there isn't much coming in from payroll taxes.

The relation between tax rates and government revenue is described by the Laffer Curve, which was discussed in 13th century Advice to Kings literature in Persia. If tax rates are too high economic activity slows, farmers quit producing, merchants close up shop, and there isn't any revenue coming in to pay the king's soldiers. Thus a wise king maximizes revenues by keeping tax rates low.

Making tax rates onerous usually results in violent overthrow of an unpopular government, as people get fed up with living in poverty to fund exorbitant government salaries (now running about twice the average of the private sector).

 

[darkwing_duck1]

^However we do it, the Federal government MUST double it's take of the annual GDP in order to remain solvent and meet it's obligations, particularly SS, Medicare, and the new Health Care plan.

 

[gturner]

Sorry, but it simply can't be done in this universe. Doubling the take of GDP takes money from the people, who are already struggling with unemployment, home foreclosure, and are neck deep in their own personal debts. Poverty rates are the highest they've been in about 50 years.

Increased taxation makes that much worse. For example, a doubling a tax rates would wipe out most discretionary consumer spending, because the money they used to have left over after rent and bills would all be sucked up by the government. Vastly reduced consumer spending means nobody buying iPads, laptops, video games, furniture, appliances, cars, or houses. That causes the economy to shrink dramatically, leaving even less revenue for the government, even at the higher tax rates.

After GW Bush cut taxes, government revenues increased, as did the percentage of government revenues coming from the rich. Letting his tax cuts expire should, therefore, cause government revenues to decrease, along with a decrease in the percentage of revenue being paid by the rich.

Which brings us back to the Laffer curve, which shows that there is a maximum amount of revenue the government can obtain and that the maximum doesn't not come with maximum taxation.

Simply put, at 0% tax rates economic activity is maximum but government revenues are zero. At 100% tax rates economic activity is zero, and thus government revenues are again zero. But somewhere in between those two rates the government does indeed get revenue, meaning the graph is a curve, zero at both ends with a peak somewhere in between. Real world economic data suggests that we're at or past the rate at which the peak is maximum, and that increased taxation will cause a decrease in revenue. This also means that government revenues cannot be increased without further growth in the economy, and that growth won't happen if we drastically increase tax rates from here on out.

Many liberals like to view the government as a benign parent, with the citizens as the family. Up until recently, as the family got wealthier the parent took on a little more debt, that debt had been in proportion to economic expansion. But now we have an unprecedented spending spree, and the current problem is akin to a parent who has developed a profound drug and gambling problem. The parent wants the rest of the family to take on two jobs, then give him the money so he can pay off his bookie. But we can't find one job, much less two, because nobody is hiring. Nobody is hiring because they're afraid the parent will rob the cash register and blow the money at the track or at the drug-dealer's house. Unless the parent stops the spending binge, the family is going to implode, losing their house and all their possessions.

 

[ShamelessMcBundy]

Honestly, we probably need to do the "worst" of both worlds, cut spending and raise taxes. Sorry gang, but that's what fiscal responsibility actually looks like.

Yup, but people won't go for it. The mere mention of raising taxes on the top 2% sends conservatives (many of whom are poor) into apoplectic fits.

We need to jack up taxes, drastically cut back our military adventurism abroad, and restructure and consolidate a good number of domestic departments.

I think it's possible to make our government function better while spending less money, but we have to be willing to take a hard look at everything we're spending the money on right now. We have way too many sacred cows to effect real change.

I was about to write some sort of counter to his post, but yours is much more eloquent than what i can do. You sir, are a gentleman and a scholar.

 

[darkwing_duck1]

Sorry, but it simply can't be done in this universe.

Then the US is doomed either to default or to hyperinflation. Either we pay our way, don't pay at all, or ruin what value the dollar has left. Those are our ONLY choices.

Doubling the take of GDP takes money from the people, who are already struggling with unemployment, home foreclosure, and are neck deep in their own personal debts. Poverty rates are the highest they've been in about 50 years.

Which has nothing to do with tax levels per se and everything to do with the fact that we have allowed the investor class to act like the pigs that they are and have an unlimited stay at the trough of national resources.

The GDP per capita in the US in 2009 (measured in value-adjusted "international dollars") was ~$46,000 per person [ http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita ]. The best estimate I was able to find for actual US income per capita was ~$39,000[ http://bber.unm.edu/econ/us-pci.htm ]

That, however, masks the true horror of income inequality in the US.

The income gap between the richest and poorest Americans grew last year to its largest margin ever, a stark divide as Democrats and Republicans spar over whether to extend Bush-era tax cuts for the wealthy.
The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent made by the bottom 20 percent of earners, those who fell below the poverty line, according to the new figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.


At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, the data show. Families at the $50,000 median level slipped lower.


Three states — New York, Connecticut and Texas — and the District of Columbia had the largest gaps between rich and poor. Big gaps were also evident in large cities such as New York, Miami, Los Angeles, Boston and Atlanta, home to both highly paid financial and high-tech jobs as well as clusters of poorer immigrant and minority residents.


Alaska, Utah, Wyoming, Idaho and Hawaii had the smallest income gaps.


"Income inequality is rising, and if we took into account tax data, it would be even more," said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. "More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy."


Lower-skilled adults ages 18 to 34 had the largest jumps in poverty last year as employers kept or hired older workers for the dwindling jobs available. The declining economic fortunes have caused many unemployed young Americans to double-up in housing with parents, friends and loved ones, with potential problems for the labor market if they don't get needed training for future jobs, he said.


Homeownership declined for the third year in a row, to 65.9 percent, after hitting a peak of 67.3 percent in 2006. Residents in crowded housing held steady at 1 percent, the highest since 2004, a sign that people continued to "double up" to save money.



Average commute times edged lower to 25.1 minutes, the lowest since 2006, as fewer people headed to the office in the morning. The share of people who carpooled also declined, from 10.7 percent to 10 percent, while commuters who took public transportation were unchanged at 5 percent.



The number of U.S. households receiving food stamps surged by 2 million last year to 11.7 million, the highest level on record, meaning that 1 in 10 families was receiving the government aid. In all, 46 states and the District of Columbia had increases in food stamps, with the largest jumps in Nevada, Arizona, Florida and Wisconsin.



Other findings:
_The foreign-born population edged higher to 38.5 million, or 12.5 percent, following a dip in the previous year, due mostly to increases in naturalized citizens. The share of U.S. residents speaking a language other than English at home also rose, from 19.7 percent to 20 percent, mostly in California, New Mexico and Texas.
_The poorest poor hit record highs. Twenty-eight states had increases in the share of people below $10,977 in income, half the poverty line for a family of four. The highest shares were in the District of Columbia, Mississippi, Kentucky, Arkansas and South Carolina. Nationally, the poorest poor rose to 6.3 percent.



http://news.yahoo.com/s/ap/20100928/ap_on_bi_ge/us_census_recession_s_impact

The gory details. These figures are from 2006, but things certainly have gotten worse, not better, since then: (agaion note that that these income figures are for a FAMIILY, not individuals)

The difference between the median and the mean figures for income ($43,200 as compared to $70,700) reflects the concentration of income in the hands of the top income-earners. If the distribution of income above the median were similar to the distribution below the median (as in a normal or bell curve), then one would expect the mean and median calculations to be roughly equal. However, while the median figure indicates that half of US families have a before-tax income of less than $43,200, the large earnings by a relatively small section at the very top are enough to pull up the mean substantially.

...

Even with this decline, the top bracket still earns substantially more now than it did in 1998, while the same cannot be said for those at the bottom income levels. The bottom 20 percent of the population saw their mean income go from $8,200 in 1995, to $9,200 in 1998, to $10,700 in 2001, up to only $10,800 by 2004.
The stagnation of incomes for most Americans comes with a decline in real wages. The report notes that the absence of any income growth is largely due to a decline in median wages of 6.2 percent from 2001 to 2004. The Economic Policy Institute recently reported that between 2003 and 2005, only wage earners in the 95th percentile and higher saw any gains in real pay. If family income has not declined in the same way as real wages, this is due to an increase in hours worked to counterbalance falling pay.


The income figures by themselves, however, do not adequately measure the real dynamics of the past period. A closer look at the data on family net worth, which measures total assets against total liabilities, is more revealing. Net worth is in many ways a more accurate measure of the financial stability of US families, since it takes into account such things as debt burdens and increased expenditures.


Here we find a much different story. The median family net worth for the entire population rose by only 1.5 percent from 2001 to 2004. This small rise, however, itself masks the different experiences of the rich and poor. The median net worth, measured in 2004 dollars for families in the lowest quintile by income (the 20 percent of US families with the lowest income), went from $7,400 in 1995, to $6,800 in 1998, to $8,400 in 2001, to $7,500 in 2004. Families in the second quintile saw median net worth go from $41,300, to $38,400, to $39,600, to $34,300.


That is, median family net worth generally stagnated or declined for the bottom 40 percent of the population throughout the period. The drop in the second quintile in particular is astonishing—over 17 percent from 1995 to 2004, and over 13 percent from 2001 to 2004.


For a substantial section of the population, median net worth is negative; that is, their debts outweigh their assets. The mean net worth for the bottom 25 percent of the population as measured by net worth (rather than income, as in the figures above) in 2004 was -$1,400, down from $0 in 2001, and closer to the figure of -$2,100 in 1998.


On the other hand, median family net worth for the top 10 percent rose steadily throughout the period, from $436,900 in 1995, to $524,400 in 1998, to $887,900 in 2001, to $924,100 in 2004. The mean net worth for this group was substantially higher, rising from $1.3 million in 1995, to $1.8 million in 1998, to $2.4 million in 2001, to $2.5 million in 2004. For both mean and median figures, the top 10 percent of US families saw a growth of over 100 percent in family net worth since 1995.
Here we have an interesting disjuncture. Both median and mean net worth for the top 10 percent of the population rose from 2001 to 2004, while mean pre-tax income fell. In other words, the richest 10 percent are earning less income on average, but their overall wealth is actually increasing. What explains this dynamic? It is, at least in part, a consequence of the sharp cut in taxes for the very wealthy, legislated in 2001. In spite of a decline in pre-tax income for some sections of the rich, they were able to increase their wealth because they took more of their income home than ever before.
The Federal Reserve report does not give after-tax income figures in this report. However, Internal Revenue Service data from last year showed that after-tax incomes for the top 1 percent of the population rose 8.5 percent from 2002 to 2003, while the after-tax income for the bottom 50 percent declined by 1.1 percent over the same period.


http://wsws.org/articles/2006/mar2006/ineq-m02.shtml

The data from the above article comes from Federal Reserve and IRS reports.

Increased taxation makes that much worse. For example, a doubling a tax rates would wipe out most discretionary consumer spending, because the money they used to have left over after rent and bills would all be sucked up by the government. Vastly reduced consumer spending means nobody buying iPads, laptops, video games, furniture, appliances, cars, or houses. That causes the economy to shrink dramatically, leaving even less revenue for the government, even at the higher tax rates.

What other option is there? The US MUST have the money to repay its $120 TRILLION in debt, or it defaults or hyperinflates.

After GW Bush cut taxes, government revenues increased, as did the percentage of government revenues coming from the rich. Letting his tax cuts expire should, therefore, cause government revenues to decrease, along with a decrease in the percentage of revenue being paid by the rich.

The money must be either printed or taxed. Is the former your pick?

Which brings us back to the Laffer curve, which shows that there is a maximum amount of revenue the government can obtain and that the maximum doesn't not come with maximum taxation.

European nations have significantly higher rates of taxation and their economies are in much better shape than ours. Even the situation of those "on the dole" is better than ours, because of the extensive social safety net.

Simply put, at 0% tax rates economic activity is maximum but government revenues are zero. At 100% tax rates economic activity is zero, and thus government revenues are again zero. But somewhere in between those two rates the government does indeed get revenue, meaning the graph is a curve, zero at both ends with a peak somewhere in between. Real world economic data suggests that we're at or past the rate at which the peak is maximum, and that increased taxation will cause a decrease in revenue. This also means that government revenues cannot be increased without further growth in the economy, and that growth won't happen if we drastically increase tax rates from here on out.

See above.

Many liberals like to view the government as a benign parent, with the citizens as the family. Up until recently, as the family got wealthier the parent took on a little more debt, that debt had been in proportion to economic expansion. But now we have an unprecedented spending spree, and the current problem is akin to a parent who has developed a profound drug and gambling problem. The parent wants the rest of the family to take on two jobs, then give him the money so he can pay off his bookie. But we can't find one job, much less two, because nobody is hiring. Nobody is hiring because they're afraid the parent will rob the cash register and blow the money at the track or at the drug-dealer's house. Unless the parent stops the spending binge, the family is going to implode, losing their house and all their possessions.

Sounds like you already have your preferred solution: bankruptcy or hyperinflation.

Get this straight: THERE ARE NOT ENOUGH CUTS THAT CAN BE MADE IN THE BUDGET TO MAKE UP THE DIFFERENCE.

Yes, I did all cap that because you (and everyone else need to hear it loud and clear.

We cannot gut SS/Medicare. It is the only source of income and health care for massive numbers of retirees and disabled. Repealing Obamacare might put a dent in it, but not a big enough one, given the size of the accumulated debt to the two previously existing "trust funds".

 

[darkwing_duck1]

I split this off because the prev post was so long. This article gives some basic facts on what is spent in the annual budget for what:

The United States will spend $1.4 trillion more than it takes in this year. Democrats and Republicans alike agree this is a problem. Democratic President Barack Obama's bipartisan deficit commission began meeting last week to figure out what the country needs to do to balance its budget. Obama said Tuesday "everything has to be on the table," including tax hikes.


But Republicans on the Indiana campaign trail said the answer is simple: cut, cut, cut.


At a recent debate, all five Republican U.S. Senate candidates said the U.S. must cut spending to balance its budget. Each rejected the idea of raising additional revenue through higher taxes.
But can the United States simply cut its way to a balanced budget? It depends on what Americans are willing to give up.


About 61 percent of the $3.51 trillion 2009 federal budget is considered "mandatory" spending -- entitlement programs or payments that are automatically funded every year. Mandatory spending includes Social Security, Medicare, Medicaid, interest on the national debt and veterans services. Together, these programs cost about $2.14 trillion.


The remaining 39 percent of the budget is considered discretionary -- that is, spending Congress must approve every year for it to continue. Of the $1.37 trillion in discretionary spending, $782 billion, or 57 percent, is spent on national defense, leaving $588 billion to pay for everything else government does, including education, transportation, national parks, the National Aeronautics and Space Administration, federal courts, foreign affairs and government operations.


Eliminating all discretionary spending -- which would include the $15.2 billion in much-maligned budget earmarks but also would take out all defense spending, an industry that employs some 61,000 Indiana workers -- would almost balance the federal budget for one year.


http://www.nwitimes.com/news/local/lake/article_ad3356f7-21b8-527a-a497-dcb897cc6516.html

 

[Guartho]

Honestly, we probably need to do the "worst" of both worlds, cut spending and raise taxes. Sorry gang, but that's what fiscal responsibility actually looks like.

Yup, but people won't go for it. The mere mention of raising taxes on the top 2% sends conservatives (many of whom are poor) into apoplectic fits.

We need to jack up taxes, drastically cut back our military adventurism abroad, and restructure and consolidate a good number of domestic departments.

I think it's possible to make our government function better while spending less money, but we have to be willing to take a hard look at everything we're spending the money on right now. We have way too many sacred cows to effect real change.

I was about to write some sort of counter to his post, but yours is much more eloquent than what i can do. You sir, are a gentleman and a scholar.

Eh? He's not really countering my post. He agrees, but says it's unlikely to happen which I also agree with.

 

[ShamelessMcBundy]

It's still eloquent, shut up.

 

[STR]

Meh. Classic modern political story in the US: Democrats lack a spine, Republicans lack a brain, and the loonies on the fringes keep spouting non-sense like returning to the gold standard, as if there was enough gold on the entire planet to support the modern economy.

Personally, I'm not particularly scared either way. The budget isn't so out of whack that I see "hyperinflation" as even a remote possibility. 5-7% a year? Maybe. However, even that will #### with the people living paycheck to paycheck, which might cause enough anger to prompt the structural changes needed. As for me, and really anyone educated about finance, no matter what the inflation rate is, the internet and electronic exchanges makes it really easy to park your money someplace safe. Even with a flat paycheck, parking everything you don't spend on day-to-days overseas can net you 20-30% over someone who keeps it in a domestic savings acct.

Every great crisis is a great opportunity. Hell, I made a ####-ton since 2008. Well, a ####-ton in college student terms. Enough to pay off my loans and then some.

 

[gturner]

Sorry, but it simply can't be done in this universe.

Then the US is doomed either to default or to hyperinflation. Either we pay our way, don't pay at all, or ruin what value the dollar has left. Those are our ONLY choices.

Exactly. We can't pay our way through taxation because significantly (or even slightly) increasing the tax rates will decrease government revenue, making the problem worse.

Option 2 is to default on our debts, which is horrifyingly bad.

Option 3 is to let hyper-inflation eat up the value of the debt, which is horrifyingly bad.

Option 4 is to slash out of control government spending. So far only two groups of people haven't been hurt by the economic downturn, government employees and senior citizens, whose incomes continue to rise.

Doubling the take of GDP takes money from the people, who are already struggling with unemployment, home foreclosure, and are neck deep in their own personal debts. Poverty rates are the highest they've been in about 50 years.

Which has nothing to do with tax levels per se and everything to do with the fact that we have allowed the investor class to act like the pigs that they are and have an unlimited stay at the trough of national resources.

Indeed. Every time we turn around the government is wanting to give another trillion dollar bailout package to the ultra-rich Wallstreet folks. A trillion here and a trillion there and pretty soon you're looking at a meltdown due to unsustainable debt loads.

European nations have significantly higher rates of taxation and their economies are in much better shape than ours. Even the situation of those "on the dole" is better than ours, because of the extensive social safety net.

Not really. Our current unemployment rate is normal for Europe, and their economic performance is why the term "Eurosclerosis" was coined. Further, Spain and Greece are near default, Sweden just voted in a right-wing government for the first time since prior to WW-I, on the issue that the social safety net is obsolete and unsustainable, and Germany refused to go along with Obama's massive bailout programs, which still payed elite European banks fifty or a hundred billion dollars in US taxpayer money.

Many liberals like to view the government as a benign parent, with the citizens as the family. Up until recently, as the family got wealthier the parent took on a little more debt, that debt had been in proportion to economic expansion. But now we have an unprecedented spending spree, and the current problem is akin to a parent who has developed a profound drug and gambling problem. The parent wants the rest of the family to take on two jobs, then give him the money so he can pay off his bookie. But we can't find one job, much less two, because nobody is hiring. Nobody is hiring because they're afraid the parent will rob the cash register and blow the money at the track or at the drug-dealer's house. Unless the parent stops the spending binge, the family is going to implode, losing their house and all their possessions.

Sounds like you already have your preferred solution: bankruptcy or hyperinflation.

It's not a solution, it's an inevitability - if we don't cut spending.

Get this straight: THERE ARE NOT ENOUGH CUTS THAT CAN BE MADE IN THE BUDGET TO MAKE UP THE DIFFERENCE.

Yes, I did all cap that because you (and everyone else need to hear it loud and clear.

We cannot gut SS/Medicare. It is the only source of income and health care for massive numbers of retirees and disabled. Repealing Obamacare might put a dent in it, but not a big enough one, given the size of the accumulated debt to the two previously existing "trust funds".

But we were paying SS/Medicare benefits long, long before the debt exploded with trillion dollar annual deficits. So we can keep part of those, but lots and lots of other programs are going to have to be cut, either by choice or by having the currency collapse because we refused to make a choice.

As one irate former drunken sailor said, denouncing the comparisons of government spending to a drunken sailor, "I would quit drinking when I ran out of money."

 

[BolianAuthor]

I suggest that Darkwing Duck run for President, and declare loud and proud how he will raise taxes as much as he can to us all, and not back down from it... I'm sure that then the truly great thinkers of men among us will flock en masse to the polls to rush him into office.

 

[Guartho]

We can't pay our way through taxation because significantly (or even slightly) increasing the tax rates will decrease government revenue, making the problem worse.

This is all predicated on the assumption that we are on the "too-high" side of the optimal point on the Laffer curve. Upon what facts do you base this assumption? Upon what facts do you base the complimentary assumption that we are not in fact on the "too-low" side of the optimal point on the Laffer curve?

 

[gturner]

I base it on the fact that government revenues increased after Bush's tax cut, which indicates that the two rates mark a line sloping downward, to the right of the peak of the curve. There are other, earlier data points that would indicate a similar location for the peak.