If they actually had the authority to pick and choose which creditors they'd pay, the debt ceiling nonsense would be a non-issue. Just pay the bondholders and anybody who doesn't reside in John Boehner's district. You'd have a vote on a clean ceiling increase on the floor as soon as the first Social Security or farm subsidy checks didn't make it.
Oh, you mean they wanted a bunch of magic flexibility added to the system so that Obama could prioritize payments the way they want them? Screw that. Pass a law.
Yes, i am saying the government went and said everyone who doesn't have insurance has to get it or pay a fine and those with insurance who lose it because the laws add on made it to expensive or for whatever reason has to do the same.
"Having to buy insurance" is not analogous to "suddenly being paid less than market wage AND having to buy insurance."
I have also said that if you want to raise their wages, then fucking raise them instead of sneaking subsidies in to bypass the intent and spirit of the law.
All the law said was that they weren't to be on the federal health plan any more. It didn't specify what to do with the money they saved in the process. In private industry, most, if not all of that money will eventually end up being used to pay wages, so it makes perfect sense to do the same thing in this case. It's a pretty reasonable interpretation of the Republican claim a they want to mirror the private market experience.
I never said don't address the issue of lost pay...
So you're coming out against the Republican position, which says "We explicitly don't want to address the pay issue and are making it illegal to do so"?
As you mentioned, labor is a market force and if congress and the staffers do not like the deal being handed to them by law, they are free to seek employment elsewhere. Plenty of qualified people will be more than happy to replace them and be within the confines of law.
Supply curves slope up, demand curves slope down. Shift your demand curve left and you'll have fewer people in the same market. You don't get the same thing at the new lower price.
This isn't a major tragedy--lots of these staffers have serious careers ahead of them and are already taking a big pay cut to work with Congress to get on the corruption gravy train. Cut their wages too far and they'll leave, and Congress will simply have to adjust their pay back to return to equilibrium or accept the fact that they won't be able to hire from the same labor pool. That's why this is a stupid law. Not a criminally evil one, just an economically illiterate illogical mess. Par for the course.
What amazes me is that the Republican leadership are sociopathic enough to use their own staffs' wages as a tool for political grandstanding. Normally politicians only screw people they don't meet every day. This is a new one.
The republican specifically said, if we cannot stop it, they want it enforced as passed into law. If the law was going to force the citizens to do something, congress and the people behind it should be forced to do the same.
"The same thing" everybody else is experiencing? Are you saying that the government went to your employer and said, "Cancel everybody's health insurance, and don't raise their wages to compensate?" That's bizarre. I don't think that happened anywhere else.
Look, the simple fact is that markets set wages. If your labor is worth $X per year, you either get $X in cash or $A in cash plus $B in something else, but $A + $B has to equal $X. The idea that you can dump the $B in healthcare and leave $A alone is just silly. Markets don't work that way. They'll figure that out if they get their way and try to run that experiment.
But today we do not have a rapidly expanding population/workforce and half the developed world does not need rebuilding.
Rebuilding the developed world isn't really a good recipe for success. The correct way to look at it marcoeconomically is, "our trading partners were in ruins." There's a common myth that having Europe sitting as a smoking pile of wreckage was good for us. Most economists would disagree.
As a further black mark, the "normal" GPD growth rate has been moved down a few notches due to over regulation. ..The mis/over management and socialism of Argentina resulted in just a sightly lower normal gdp growth rate.
Yep. Overregulation. That's the ticket. It's not like it could be much more complex than that.
Just to be clear, the debt obligation could have been met. without raising the debt ceiling, it is that sort of misinformation that really bothers me (not directed at you, I mean the media reporting and rhetoric from both sides).
That's a very optimistic way of looking at it. The logistical and legal issues with the Treasury picking and choosing which of our creditors gets paid are enormous. But that's only if you consider "debt" to be bonds and not other obligations like payments owed to contractors and employees. And even that assumes that the payment schedule is such that cashflows can always be managed so that an unimportant payment earlier on doesn't leave you unable to make a more important payment later in the month. And even more importantly, what do the credit markets think of that kind of insane behavior? An abrupt drop in the value of US government debt could trigger a major financial crisis.
I like your 2014 senerio, I would support the president's and the senates rights to do that, if they believed it was that important. These are the rules they govern under.
I suspect that you're a rare bird. For me, the highest principle isn't whatever piddling issue Congress is fighting over today, or even the damage that would be done by a default. The issue for me is that if you start bargaining this way, you abdicate government to whoever is most willing to inflict damage on the country without flinching. The scary question is, what if they don't "believe it was that important"? What if they just know that you are too sane to risk letting them go through with it, so now they can extract whatever they want? What if Obama said he'd tank the military if we didn't send some pork back to his old neighborhood? Rewarding that kind of behavior just encourages more of it, and the final equilibrium is that policy will be made by the craziest and most reckless. It's the proverbial "negotiating with terrorists" problem.
As for the shutdown, I'm a little more sympathetic. At least the continuing resolution is *peripherally* related to broader government funding questions. A shutdown is a good way to make government spending "real" by doing away with it and seeing who screams. But the debt ceiling game was seriously poking at the doomsday button, and only dangerous idealogues and idiots do that. Those aren't the types of people who should be given the keys to the kingdom.
Some people believe the Congress did push a major unilateral policy change, in ACA, that is what this debate was about this week.
I'm not sure what you mean by "unilateral" given that the ACA was passed by the majority of both houses, signed by the President and then survived its first Supreme Court review. That's pretty much how the constitution lays out our democratic process. And that's after the party campaigning for it gained the White House and a majority in both houses. You may not have liked it, but it was hardly a hijacking by a fringe minority. I realize that people do crazy things when they feel like their voices aren't being heard, but the GOP had plenty of time to shape the ACA (or any health care bill in the 15+ years since they killed the previous reform effort with promises to come up with a better solution), and sometimes when you're in the minority, you don't get your way. Threatening to let it all burn is not an adult response to that situation.
I want our government to do a better job with it, and I was glad to see a healthy debate, and get a more clear picture or where are elected representatives stand on the issue of fiscal responsibility.
I really don't consider threatening to create an artificial financial crisis "healthy debate" over policy. Maybe there are people who genuinely believe that a mild, mostly private semi-public health insurance system is the worst thing since Hitler or slavery or whatever. I'm fine with having serious policy discussions with those people. But they have to put the gun down first.
1) That the Treasury has the power to pick and choose who gets paid.
2) That the payments are made all at the same time so we don't have cashflow issues for different payment dates.
3) That telling people other than bondholders, "Yes, we agreed to pay you, but we're not going to," is something other than a default and that the credit markets would see this as A-OK.
I don't think that any of these things are true, and even if some are, it seems pretty unlikely that all of them are true.
Since the US is so outrageously in debt and has no way to reduce it without selling the rest of the government assets, there's going to be plenty more opportunities for a global financial catastrophy.
Our debt to GDP ratio has been higher in the past and we brought it back in line without a major crisis. Japan has gone substantially higher without any signs of collapse. These issues can be handled by thinking long term and making long term adjustments.
When the last raising of the ceiling led to a credit rating downgrade...
Correction. Threatening not to raise the debt ceiling lead to a credit rating downgrade. Explicitly saying in public that you're thinking about not honoring your financial obligations does that.
They do have the power to spend (or not) money, under the Constitution, which is what they did offer.
The ACA was already funded by law, though. It didn't need appropriations in this budget, so they weren't witholding their votes from appropriations for the ACA. The shutdown was over other budgeting for the year's discretionary spending. They had the power to stop this year's discretionary spending, but they would need new legislation to defund the ACA, which they couldn't pass without more support. So they used their power to cause problems elsewhere by defunding whatever they could as a threat to extort everybody else into going with their agenda. They also escalated matters by not raising the debt ceiling and threatening default--something they may or may not have the authority to do, but which also amounts to just threatening chaos because they don't have the votes to pass the laws they want.
Imagine the following:
1) It's 2014. Obama is in the White House, but the 2014 elections were a major defeat for the Democrats.
2) Republicans control every seat in the House. 100% of them.
3) Republicans have 66 seats in the Senate.
The Democrats clearly don't have any business pushing major unilateral policy changes, and they certainly couldn't pass any legislation on their own. Suddenly, Obama announces that unless we implement a full single payer health care system, he will veto ALL military spending and allow our military to collapse. The Senate Democratic minority agrees to support him to prevent the veto override.
It's legal. It's constitutional. Should the Republicans give him some policy concessions to prevent disaster? What precedent does it set, and who should get the blame if the Republicans don't negotiate and Obama follows through? Do Republicans deserve all of the blame? Half? I'd argue that all of the blame would be on Obama and those 34 senators who touched off an artificial crisis in order to extort policy concessions.
onsider. Say we tax someone $100. That money originally would have paid say someone's salary, and they would have worked and created wealth. We would have had $110 at the end of the day.
OK, so person A transfers some money to person B and $10 in wealth is created. Person B now has $100 and we are all better off.
But - we taxed them. So now we, the Government, hold $100. That $10 of wealth creation has been forestalled. What do we now do with this $100? we spend it - but not on something which creates wealth. We spend it on providing possibly unnecessary and certainly inefficient Government services, like the patent office.
OK, so now we take money from person A and *give* it to person C who produces absolutely nothing useful in return. The $100 is gone forever! Oh wait, no. Person C now has $100 which he could then use to hire person B to do that same great thing. Or something else equally wealth creating. So it's not the $100 that's the issue.
Well, normally your goal should be to get a legislative majority and pass some legislation that repeals the legislation you don't like. Since that hasn't happened, it shouldn't really be all that surprising that the Tea Party types have been unable to get laws repealed, temper tantrums and parliamentary games notwithstanding. If you're in a small enough minority that you can't pass a law the normal way, your only option is to threaten to do something dangerous to force the controlling majority to capitulate. Since that seems to be the way we're going these days, I just thought I'd check in and see how much damage you're willing to threaten to the rest of us to give in to your demands.
If we're all willing to go the, "Do it my way or I'll start breaking shit and ruin it for everybody" direction, there are a lot of fascinating and newsworthy options on the table.
It doesn't work that way. Not every type of spending can be frictionlessly moved around in time. If you skipped your kid's piano lessons for a couple of weeks, you probably aren't going to double up on them next week just to make up for it. And now the piano teacher has less spending money than she had planned for those two weeks. The bottom line is that there was commerce that would otherwise have happend that didn't happen, and while spending may increase to make up for it somewhat, there was some frictional cost. In a big economy, that stuff adds up.
Yeah, how great would it be if we could get medical spending down to 10% of our national income?
Oh wait, you were thinking that 10% is a high number that we should all be outraged about? Fail.
Depends. How much are you willing to subvert the normal democratic process, and how much collateral damage are you willing to do to have your preferences enacted. I'm pretty sure that there are some militia groups you'd be interested in, depending on how little you care about things like "elections" and "voting."
"I know it wasn't good that he threatened to blow up the building unless we paid him, but your refusal to pay him not to blow up the building was also a major part of the impasse. Let's admit that there's blame on both sides, so maybe the next time he comes in with a bomb, we can resolve this peacefully."
That would be hilarious. How much you want to be that according to all of the pundits on both sides of the aisle, it would be "different" when Obama takes a hostage than when the Republicans did it?
And when they don't, which is most of the time, then it isn't a profit center. My view is that if the US cut away non-profit center spending, it'd be returning a lot of tax money. For example, none of the big three spending items are profit centers - Social Security, Medicare/Medicaid, and military spending. Cutting those away would put the US budget into the black right there.
I think people are conflating two different issues in this conversation. The first is whether certain programs should exist. The second is whether they should be paid for by deficit spending. The program doesn't need to be "profit center" for deficit spending to make sense. Let's say you have $1B in military spending that you're going to spend one way or the other. It's not making "profit" in that it doesn't really return anything measurably useful to society at the margin. The question is whether we take that $1B in taxes now, or if we pay $(1 + interest)B in taxes in the future. If your nominal interest rate is lower than nominal GDP growth, it's not crazy to push that spending off into the future when it will be easier to pay for as a percentage of GDP.
Given that we were able to borrow at *negative* real rates and we were discussing how bad it was to borrow, I'm really thinking that what people mean to say is, "It's bad that this program exists." Because borrowing money at negative real rates when you have expenses is an awesome business decision. I always ask, "What would Goldman Sachs do if it ran the government?" Bringing the deficit to $0 would not be high on its list.
I'd suggest starting by reversing the law. It's that bad. We could fix it for the next few decades, but there are so many problems (such as the incentive for part time employment, the individual mandate, the incentives to increase health care costs by restricting supply and increasing demand, and the political bribes that were necessary to pass this law) or we could start over and fix actual health care problems.
My one and only reason for supporting the law is the creation of exchanges that may start to pry us away from employer based health insurance. I don't think that we can do much in the way of meaningful reform until "consumers choose their insurance provider" becomes the norm. If somebody had offered a bill that killed employer health insurance and created an exchange and also launched cruise missiles at Chinese warships, I'd probably think a little bit before deciding it was a bad idea.
The ACA has specific language in it that requires congress to get insurance via that same mechanism people who are not covered have to. You can argue what you thing is right or wrong all day long but that does not get around the fact that the law as passed and still sits on the books only allow subsidies for congress if their income qualifies for one like the rest of the subjects.
Right, it was a poison pill put in by the Republicans because they thought the exchanges woud be too horrible to imagine. The Dems said "OK, fine," thinking that the exchagnes are no big deal, but not realizing that dumping health insurance is actually a massive effective wage cut for their employees. Normally, if you dump a huge benefit like that, you have to make up for it with some cash that people can use to purchase the benefit on their own.
The wrangling was to make sure that it remained a permanent pay cut, which is absurdly stupid for a lot of reasons. The first reason is that it doens't demonstrate what the Republicans wanted to demonstrate: that the exchanges are a painful fate worse than death. Having your wages massively cut is painful, but that doesn't really tell us anything about the exchanges.
How would we know if there were simply enough investment, and real economic growth on a sustained basis wouldn't benefit much from additional investment?
Unless you're in a 1990's style bubble, you should see returns drop.
Admittedly I am again choosing an outlier here, but look at Apple. They have $150 BN of cash, how can they POSSIBLY use that productively just to develop the next smartphone or tablet? They can't and they aren't.
People refer to it as "cash" but it's not cash. It's a big ass hedge fund. As of last year, they had $90B in "long term marketable securities". The fact that they can't invest that money productively in their own super-optimized operation doesn't mean they aren't investing it productively elsewhere. In fact, the very fact that Apple can get *better* yields investing broadly in other stocks than it can by investing more in its own absurdly profitable operations is an indicator that current returns are very good (or that it has bad incentives to do weird things due to broken tax policies).
If returns to capital were crap and labor was really where it's at, the top 1% would not be seeing such rapid income growth, and the top 0.1% wouldn't be shooting ahead as quickly as they were. We'd see a much flatter income distribution. What we actually see is that the income brackets that get most of their income from capital are growing the fastest. That was briefly not true during the crash, but they recovered rapidly while labor continued to stagnate.
There's a lot of money looking for a safe place to earn a good yield instead of chasing productive new investment. For the past few years, anybody with the capital to risk and the patience to wait for the return to normal has done very well in riskier investment. The fact that people can't park their money somewhere safe and earn a good rate of return isn't a symptom of too much investment overall, just too much investment in safe assets.
1) We're in a recession due to low aggregate demand. You're right that supply side policies won't really do anything for us here. Taxes are hardly a concern if you have no customers. But this is also an unusual case.
2) Ideally, tax policy should have some long term continuity, especially taxes on capital because capital is tied up for long periods of time.
3) Measuring returns to capital from the height of a bubble doesn't really tell you all that much. If we did that analysis four years ago, your best conclusion would be that investment in general is a terrible idea and that we should all smoke 'em if we've got 'em.
Believe me, I'm much more on your side on this than not--I'm very skeptical of the notion that the ideal world for economic growth is one in which we have a capital owning royalty class who never pays taxes because it's all made from tax free capital gains, tax free dividends, and tax free inheritance to keep the dynasty going. We tried that.
I'm learning toward the idea that we should keep capital and income taxes separate, but make capital gains taxes more progressive, probably through a generous exemption. It's great for the economy to have Bill Gates investing his wealth, but he'd do that almost without regard to the capital gains rate. What we need is a way to encourage the average middle class worker to invest more. The long term return to capital is much better than the long term return to labor, so it's in the average worker's best interest to accumulate capital wherever possible.
But in any case, please please PLEASE let's dump the corporate income tax. It's everything that's bad about taxes with hardly any of the benefit.
I go back and forth on capital gains. In theory, low capital gains rates encourage investment over consumption, which is good for long run growth. In practice, I don't see a lot of empirical support for the notion. There's surely a breaking point on both sides, but the top capital gains tax has been much higher in the past without any obvious ill effects. The low capital gains rate does encourage entrepeneurs to take bigger risks starting businesses--I'm doing that right now and the capital gains rate was a consideration. But that's a pretty small portion of "investment" overall.
Of course, if we dump the corporate tax and turn it into an income tax, you get the progressiveness of the income tax system. That should have good side effects. For example, Granny's modest retirement portfolio gets taxed at Granny's rate for her modest fixed income instead of having taxes taken out at whatever rates the coporations in her portfolio were paying.
It seems to me that the big win is that our corporations can stop wasting resources cooking the books and finding loopholes. The overhead to that behavior is tremendous, and it benefits nobody except the accountants and attorneys who do the financial engineering. Basically, we're paying a bunch of valuable, educated people to waste time telling companies to do things that would otherwise not be in their best interests. Major shot in our own foot.
CORPORATION, n. An ingenious device for obtaining individual profit without individual responsibility.
That being said, I'm all for dumping taxes on corporations and appropriately ratcheting up income and captal gains rates to compensate. Corporations are enough of a legal contrivance that they can reshape themselves in ridiculous ways to avoid just about any tax we lay on them. We're just giving them massive incentves to waste resources doing stupid things, and we're not getting much in the way of revenue out of it.
GDP counts far more than business profits. It also includes your wages. Business profits are increasing their share of GDP, though. The problem isn't that there's no competition among the robot makers, though. The primary problem is that as other poor countries join the global market, the supply of human workers has skyrocketed. Unless you have a skill that distinguishes you from one of the millions of new workers that are available to employers, you're going to be stuck accepting the market price for that glutted market. The markets are functioning just as you'd expect.
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If they actually had the authority to pick and choose which creditors they'd pay, the debt ceiling nonsense would be a non-issue. Just pay the bondholders and anybody who doesn't reside in John Boehner's district. You'd have a vote on a clean ceiling increase on the floor as soon as the first Social Security or farm subsidy checks didn't make it.
Oh, you mean they wanted a bunch of magic flexibility added to the system so that Obama could prioritize payments the way they want them? Screw that. Pass a law.
"Having to buy insurance" is not analogous to "suddenly being paid less than market wage AND having to buy insurance."
All the law said was that they weren't to be on the federal health plan any more. It didn't specify what to do with the money they saved in the process. In private industry, most, if not all of that money will eventually end up being used to pay wages, so it makes perfect sense to do the same thing in this case. It's a pretty reasonable interpretation of the Republican claim a they want to mirror the private market experience.
So you're coming out against the Republican position, which says "We explicitly don't want to address the pay issue and are making it illegal to do so"?
Supply curves slope up, demand curves slope down. Shift your demand curve left and you'll have fewer people in the same market. You don't get the same thing at the new lower price.
This isn't a major tragedy--lots of these staffers have serious careers ahead of them and are already taking a big pay cut to work with Congress to get on the corruption gravy train. Cut their wages too far and they'll leave, and Congress will simply have to adjust their pay back to return to equilibrium or accept the fact that they won't be able to hire from the same labor pool. That's why this is a stupid law. Not a criminally evil one, just an economically illiterate illogical mess. Par for the course.
What amazes me is that the Republican leadership are sociopathic enough to use their own staffs' wages as a tool for political grandstanding. Normally politicians only screw people they don't meet every day. This is a new one.
"The same thing" everybody else is experiencing? Are you saying that the government went to your employer and said, "Cancel everybody's health insurance, and don't raise their wages to compensate?" That's bizarre. I don't think that happened anywhere else.
Look, the simple fact is that markets set wages. If your labor is worth $X per year, you either get $X in cash or $A in cash plus $B in something else, but $A + $B has to equal $X. The idea that you can dump the $B in healthcare and leave $A alone is just silly. Markets don't work that way. They'll figure that out if they get their way and try to run that experiment.
Rebuilding the developed world isn't really a good recipe for success. The correct way to look at it marcoeconomically is, "our trading partners were in ruins." There's a common myth that having Europe sitting as a smoking pile of wreckage was good for us. Most economists would disagree.
Yep. Overregulation. That's the ticket. It's not like it could be much more complex than that.
That's a very optimistic way of looking at it. The logistical and legal issues with the Treasury picking and choosing which of our creditors gets paid are enormous. But that's only if you consider "debt" to be bonds and not other obligations like payments owed to contractors and employees. And even that assumes that the payment schedule is such that cashflows can always be managed so that an unimportant payment earlier on doesn't leave you unable to make a more important payment later in the month. And even more importantly, what do the credit markets think of that kind of insane behavior? An abrupt drop in the value of US government debt could trigger a major financial crisis.
I suspect that you're a rare bird. For me, the highest principle isn't whatever piddling issue Congress is fighting over today, or even the damage that would be done by a default. The issue for me is that if you start bargaining this way, you abdicate government to whoever is most willing to inflict damage on the country without flinching. The scary question is, what if they don't "believe it was that important"? What if they just know that you are too sane to risk letting them go through with it, so now they can extract whatever they want? What if Obama said he'd tank the military if we didn't send some pork back to his old neighborhood? Rewarding that kind of behavior just encourages more of it, and the final equilibrium is that policy will be made by the craziest and most reckless. It's the proverbial "negotiating with terrorists" problem.
As for the shutdown, I'm a little more sympathetic. At least the continuing resolution is *peripherally* related to broader government funding questions. A shutdown is a good way to make government spending "real" by doing away with it and seeing who screams. But the debt ceiling game was seriously poking at the doomsday button, and only dangerous idealogues and idiots do that. Those aren't the types of people who should be given the keys to the kingdom.
I'm not sure what you mean by "unilateral" given that the ACA was passed by the majority of both houses, signed by the President and then survived its first Supreme Court review. That's pretty much how the constitution lays out our democratic process. And that's after the party campaigning for it gained the White House and a majority in both houses. You may not have liked it, but it was hardly a hijacking by a fringe minority. I realize that people do crazy things when they feel like their voices aren't being heard, but the GOP had plenty of time to shape the ACA (or any health care bill in the 15+ years since they killed the previous reform effort with promises to come up with a better solution), and sometimes when you're in the minority, you don't get your way. Threatening to let it all burn is not an adult response to that situation.
I really don't consider threatening to create an artificial financial crisis "healthy debate" over policy. Maybe there are people who genuinely believe that a mild, mostly private semi-public health insurance system is the worst thing since Hitler or slavery or whatever. I'm fine with having serious policy discussions with those people. But they have to put the gun down first.
You seem to think three things:
1) That the Treasury has the power to pick and choose who gets paid.
2) That the payments are made all at the same time so we don't have cashflow issues for different payment dates.
3) That telling people other than bondholders, "Yes, we agreed to pay you, but we're not going to," is something other than a default and that the credit markets would see this as A-OK.
I don't think that any of these things are true, and even if some are, it seems pretty unlikely that all of them are true.
Our debt to GDP ratio has been higher in the past and we brought it back in line without a major crisis. Japan has gone substantially higher without any signs of collapse. These issues can be handled by thinking long term and making long term adjustments.
Correction. Threatening not to raise the debt ceiling lead to a credit rating downgrade. Explicitly saying in public that you're thinking about not honoring your financial obligations does that.
The ACA was already funded by law, though. It didn't need appropriations in this budget, so they weren't witholding their votes from appropriations for the ACA. The shutdown was over other budgeting for the year's discretionary spending. They had the power to stop this year's discretionary spending, but they would need new legislation to defund the ACA, which they couldn't pass without more support. So they used their power to cause problems elsewhere by defunding whatever they could as a threat to extort everybody else into going with their agenda. They also escalated matters by not raising the debt ceiling and threatening default--something they may or may not have the authority to do, but which also amounts to just threatening chaos because they don't have the votes to pass the laws they want.
Imagine the following:
1) It's 2014. Obama is in the White House, but the 2014 elections were a major defeat for the Democrats.
2) Republicans control every seat in the House. 100% of them.
3) Republicans have 66 seats in the Senate.
The Democrats clearly don't have any business pushing major unilateral policy changes, and they certainly couldn't pass any legislation on their own. Suddenly, Obama announces that unless we implement a full single payer health care system, he will veto ALL military spending and allow our military to collapse. The Senate Democratic minority agrees to support him to prevent the veto override.
It's legal. It's constitutional. Should the Republicans give him some policy concessions to prevent disaster? What precedent does it set, and who should get the blame if the Republicans don't negotiate and Obama follows through? Do Republicans deserve all of the blame? Half? I'd argue that all of the blame would be on Obama and those 34 senators who touched off an artificial crisis in order to extort policy concessions.
OK, so person A transfers some money to person B and $10 in wealth is created. Person B now has $100 and we are all better off.
OK, so now we take money from person A and *give* it to person C who produces absolutely nothing useful in return. The $100 is gone forever! Oh wait, no. Person C now has $100 which he could then use to hire person B to do that same great thing. Or something else equally wealth creating. So it's not the $100 that's the issue.
Well, normally your goal should be to get a legislative majority and pass some legislation that repeals the legislation you don't like. Since that hasn't happened, it shouldn't really be all that surprising that the Tea Party types have been unable to get laws repealed, temper tantrums and parliamentary games notwithstanding. If you're in a small enough minority that you can't pass a law the normal way, your only option is to threaten to do something dangerous to force the controlling majority to capitulate. Since that seems to be the way we're going these days, I just thought I'd check in and see how much damage you're willing to threaten to the rest of us to give in to your demands.
If we're all willing to go the, "Do it my way or I'll start breaking shit and ruin it for everybody" direction, there are a lot of fascinating and newsworthy options on the table.
It doesn't work that way. Not every type of spending can be frictionlessly moved around in time. If you skipped your kid's piano lessons for a couple of weeks, you probably aren't going to double up on them next week just to make up for it. And now the piano teacher has less spending money than she had planned for those two weeks. The bottom line is that there was commerce that would otherwise have happend that didn't happen, and while spending may increase to make up for it somewhat, there was some frictional cost. In a big economy, that stuff adds up.
Yeah, how great would it be if we could get medical spending down to 10% of our national income? Oh wait, you were thinking that 10% is a high number that we should all be outraged about? Fail.
Depends. How much are you willing to subvert the normal democratic process, and how much collateral damage are you willing to do to have your preferences enacted. I'm pretty sure that there are some militia groups you'd be interested in, depending on how little you care about things like "elections" and "voting."
"I know it wasn't good that he threatened to blow up the building unless we paid him, but your refusal to pay him not to blow up the building was also a major part of the impasse. Let's admit that there's blame on both sides, so maybe the next time he comes in with a bomb, we can resolve this peacefully."
That would be hilarious. How much you want to be that according to all of the pundits on both sides of the aisle, it would be "different" when Obama takes a hostage than when the Republicans did it?
I think people are conflating two different issues in this conversation. The first is whether certain programs should exist. The second is whether they should be paid for by deficit spending. The program doesn't need to be "profit center" for deficit spending to make sense. Let's say you have $1B in military spending that you're going to spend one way or the other. It's not making "profit" in that it doesn't really return anything measurably useful to society at the margin. The question is whether we take that $1B in taxes now, or if we pay $(1 + interest)B in taxes in the future. If your nominal interest rate is lower than nominal GDP growth, it's not crazy to push that spending off into the future when it will be easier to pay for as a percentage of GDP.
Given that we were able to borrow at *negative* real rates and we were discussing how bad it was to borrow, I'm really thinking that what people mean to say is, "It's bad that this program exists." Because borrowing money at negative real rates when you have expenses is an awesome business decision. I always ask, "What would Goldman Sachs do if it ran the government?" Bringing the deficit to $0 would not be high on its list.
My one and only reason for supporting the law is the creation of exchanges that may start to pry us away from employer based health insurance. I don't think that we can do much in the way of meaningful reform until "consumers choose their insurance provider" becomes the norm. If somebody had offered a bill that killed employer health insurance and created an exchange and also launched cruise missiles at Chinese warships, I'd probably think a little bit before deciding it was a bad idea.
What? The cost of your health insurance went up? When has that happened in the past before the ACA? Never, right? String them up, I say!!
Right, it was a poison pill put in by the Republicans because they thought the exchanges woud be too horrible to imagine. The Dems said "OK, fine," thinking that the exchagnes are no big deal, but not realizing that dumping health insurance is actually a massive effective wage cut for their employees. Normally, if you dump a huge benefit like that, you have to make up for it with some cash that people can use to purchase the benefit on their own.
The wrangling was to make sure that it remained a permanent pay cut, which is absurdly stupid for a lot of reasons. The first reason is that it doens't demonstrate what the Republicans wanted to demonstrate: that the exchanges are a painful fate worse than death. Having your wages massively cut is painful, but that doesn't really tell us anything about the exchanges.
Unless you're in a 1990's style bubble, you should see returns drop.
People refer to it as "cash" but it's not cash. It's a big ass hedge fund. As of last year, they had $90B in "long term marketable securities". The fact that they can't invest that money productively in their own super-optimized operation doesn't mean they aren't investing it productively elsewhere. In fact, the very fact that Apple can get *better* yields investing broadly in other stocks than it can by investing more in its own absurdly profitable operations is an indicator that current returns are very good (or that it has bad incentives to do weird things due to broken tax policies).
If returns to capital were crap and labor was really where it's at, the top 1% would not be seeing such rapid income growth, and the top 0.1% wouldn't be shooting ahead as quickly as they were. We'd see a much flatter income distribution. What we actually see is that the income brackets that get most of their income from capital are growing the fastest. That was briefly not true during the crash, but they recovered rapidly while labor continued to stagnate.
There's a lot of money looking for a safe place to earn a good yield instead of chasing productive new investment. For the past few years, anybody with the capital to risk and the patience to wait for the return to normal has done very well in riskier investment. The fact that people can't park their money somewhere safe and earn a good rate of return isn't a symptom of too much investment overall, just too much investment in safe assets.
A few points to consider:
1) We're in a recession due to low aggregate demand. You're right that supply side policies won't really do anything for us here. Taxes are hardly a concern if you have no customers. But this is also an unusual case.
2) Ideally, tax policy should have some long term continuity, especially taxes on capital because capital is tied up for long periods of time.
3) Measuring returns to capital from the height of a bubble doesn't really tell you all that much. If we did that analysis four years ago, your best conclusion would be that investment in general is a terrible idea and that we should all smoke 'em if we've got 'em.
Believe me, I'm much more on your side on this than not--I'm very skeptical of the notion that the ideal world for economic growth is one in which we have a capital owning royalty class who never pays taxes because it's all made from tax free capital gains, tax free dividends, and tax free inheritance to keep the dynasty going. We tried that.
I'm learning toward the idea that we should keep capital and income taxes separate, but make capital gains taxes more progressive, probably through a generous exemption. It's great for the economy to have Bill Gates investing his wealth, but he'd do that almost without regard to the capital gains rate. What we need is a way to encourage the average middle class worker to invest more. The long term return to capital is much better than the long term return to labor, so it's in the average worker's best interest to accumulate capital wherever possible.
But in any case, please please PLEASE let's dump the corporate income tax. It's everything that's bad about taxes with hardly any of the benefit.
I go back and forth on capital gains. In theory, low capital gains rates encourage investment over consumption, which is good for long run growth. In practice, I don't see a lot of empirical support for the notion. There's surely a breaking point on both sides, but the top capital gains tax has been much higher in the past without any obvious ill effects. The low capital gains rate does encourage entrepeneurs to take bigger risks starting businesses--I'm doing that right now and the capital gains rate was a consideration. But that's a pretty small portion of "investment" overall.
Of course, if we dump the corporate tax and turn it into an income tax, you get the progressiveness of the income tax system. That should have good side effects. For example, Granny's modest retirement portfolio gets taxed at Granny's rate for her modest fixed income instead of having taxes taken out at whatever rates the coporations in her portfolio were paying.
It seems to me that the big win is that our corporations can stop wasting resources cooking the books and finding loopholes. The overhead to that behavior is tremendous, and it benefits nobody except the accountants and attorneys who do the financial engineering. Basically, we're paying a bunch of valuable, educated people to waste time telling companies to do things that would otherwise not be in their best interests. Major shot in our own foot.
That being said, I'm all for dumping taxes on corporations and appropriately ratcheting up income and captal gains rates to compensate. Corporations are enough of a legal contrivance that they can reshape themselves in ridiculous ways to avoid just about any tax we lay on them. We're just giving them massive incentves to waste resources doing stupid things, and we're not getting much in the way of revenue out of it.
GDP counts far more than business profits. It also includes your wages. Business profits are increasing their share of GDP, though. The problem isn't that there's no competition among the robot makers, though. The primary problem is that as other poor countries join the global market, the supply of human workers has skyrocketed. Unless you have a skill that distinguishes you from one of the millions of new workers that are available to employers, you're going to be stuck accepting the market price for that glutted market. The markets are functioning just as you'd expect.