Time to kill the Bush tax cuts [Archive]

airborne18

Oct11-10, 12:31 AM

We are now past the point where the Bush tax cuts are providing any benefit to the economy, and in fact we need the tax revenue and the cuts are a drag on the economy.

I know everyone says that we need them as a stimulus and it would be foolish to take money out of the job creators hands.

The issue is that we are not seeing job growth. Blame whatever, the fact is that we have a shortfall in payroll taxes at both the state and federal level, and we have less overall tax revenue.

So what benefit is there to the economy or the rest of the taxpayers by leaving the tax cuts in place? well a larger deficit. Hmm. isn't this what the tea party is campaigning to control, the deficit.

And the democrats want to kill the tax cuts. So it sounds like everyone agrees. Yippee.

The economic basis for killing them is that it will force small business owners to spend the money so they can consume it rather than paying taxes on it. Is it a stretch? Not really. Not at this point where we still are not seeing job growth and very little GDP growth.

Large companies are not hiring because they have no confidence. And these so called small businesses who drive the economy benefit from the tax cuts, but are not using the money to grow the economy. So if they are not playing their part then take the money back.

We used the carrot long enough, now lets use a stick and see what happens. The economy cannot get much worst, so lets at least control the tax revenue and see if it sparks something.

Al68

Oct11-10, 05:12 AM

talk2glenn

Oct11-10, 02:39 PM

Large companies are not hiring because they have no confidence. And these so called small businesses who drive the economy benefit from the tax cuts, but are not using the money to grow the economy. So if they are not playing their part then take the money back.

We used the carrot long enough, now lets use a stick and see what happens. The economy cannot get much worst, so lets at least control the tax revenue and see if it sparks something.

Every tax cut, by definition, no matter how small or where targeted, reduces the number of transactions at the margin. Before the tax increase, there were some transactions which were barely profitable. After the tax change, these transactions are now unprofitable, so they will not occur. This is not debatable, and is different from the Laffer effect; it is probably true that we are nowhere near the Laffer optimal, and a tax hike will increase government short- and long-run revenue.

The effect is reduced output in the economy. This can be offset by increased public sector output, but in this case, you are talking about increasing taxes to reduce the public debt; there will be no offset. The effect will be a real reduction in economic growth due to lost trades.

Even if it is true that the effect of a closing government revenue gap will inspire investor confidence, it is not the case that this investment will produce economic growth, or that it will come at all. Investors respond to a demand for goods and services that is greater than supply. Right now, consumer prices are flat, and there is a real risk of deflation (the price level is supported only by public policy). The implication is that consumer demand is still less than producer supply, even after the 2 year recessionary period and reduction in output. A tax increase would further reduce that demand.

Even if you had more confidence in the fiscal sustainability of the American economy, why would you invest in increased production when demand, which is already probably below the market (unsubsidized) output level, would respond to the tax hike by falling further?

Sorry, wouldn't work the way you describe. We've gotten ourselves in a real mess, but tax hikes aren't the solution.

airborne18

Oct11-10, 04:24 PM

Every tax cut, by definition, no matter how small or where targeted, reduces the number of transactions at the margin. Before the tax increase, there were some transactions which were barely profitable. After the tax change, these transactions are now unprofitable, so they will not occur. This is not debatable, and is different from the Laffer effect; it is probably true that we are nowhere near the Laffer optimal, and a tax hike will increase government short- and long-run revenue.

The effect is reduced output in the economy. This can be offset by increased public sector output, but in this case, you are talking about increasing taxes to reduce the public debt; there will be no offset. The effect will be a real reduction in economic growth due to lost trades.

Even if it is true that the effect of a closing government revenue gap will inspire investor confidence, it is not the case that this investment will produce economic growth, or that it will come at all. Investors respond to a demand for goods and services that is greater than supply. Right now, consumer prices are flat, and there is a real risk of deflation (the price level is supported only by public policy). The implication is that consumer demand is still less than producer supply, even after the 2 year recessionary period and reduction in output. A tax increase would further reduce that demand.

Even if you had more confidence in the fiscal sustainability of the American economy, why would you invest in increased production when demand, which is already probably below the market (unsubsidized) output level, would respond to the tax hike by falling further?

Sorry, wouldn't work the way you describe. We've gotten ourselves in a real mess, but tax hikes aren't the solution.

I am not talking about corporate taxes. And I agree that typically it does not work this way, but it sortof does.

Our economy has expanded post ww2 due to the population boom, along with it the demand. We have not done enough with immigration to replace the aging bubble.

Consumer prices are flat, but commodity prices are not, and energy prices will increase.
Forget demand. Our economy has deflated and this is a long term trend, and we are not going to follow the curve on this recession.

The problem is that we are trying to force this recession to follow the curves, and that has failed miserably.

Until unemployment improves, and I mean the 15+ million and not the fantasy number, this economy will not improve. We have not even seen the bottom in the housing market yet.

I am not talking about debt reduction. We need the tax cut money to cover the shortfall from the lower social security and medicare receipts.

Look at the numbers. it has nothing to do with spending, that is a completely different issue, we need to replace lost revenue.

It is purely a revenue issue at this point. A dire one. If we do not address this shortfall in social security and medicare revenue we are screwed. This was not expected for another 5 - 8 years. and we are facing it now.

Forget all the politics.. honestly if the tea party were really concerned they would call for means-testing social security.. but they are not really out for any issue, they are just against stuff.

Ivan Seeking

Oct11-10, 04:25 PM

talk2glenn

Oct11-10, 05:33 PM

I am not talking about corporate taxes. And I agree that typically it does not work this way, but it sortof does.

Neither am I. The type of tax is irrelevant; the effect of tax increases is higher transaction costs, which makes (by simple definition) some transactions at the margin unprofitable. They no longer take place, and gross production declines.

I am not talking about debt reduction. We need the tax cut money to cover the shortfall from the lower social security and medicare receipts.

That is debt reduction - additional revenue to cover mandatory expenses.

Regardless, I don't disagree with the principle - unfunded government mandates are a serious problem which have to be addressed at some point. I disagree with the idea that raising taxes now is a "good idea"; any benefit gained from the reduction in deficits is more than offset by the cost of reduced consumption. There is no more room for quantitative easing. If the government pushes demand in a negative direction, the Reserve Board will be largely powerless to pull it back, and recession could result.

This will increase Medicaid and Unemployment payouts automatically and probably prompt additional waves of stimulus spending, undoing anything gained from the initial tax hike.

Greenspan disagrees.

If this is true, then Greenspan is wrong. But that shouldn't surprise anyone; Greenspan has been desperately trying to sell the idea that his tenureship at the Fed was not an unmitigated disaster. In reality, he allowed the Board to be hopelessly politicized.

He kept monetary policy too loose for too long, which fueled the credit bubble, and tightened it too quickly and too violently in response to rising energy prices, which shocked the credit market into instant defib. They did everything wrong.

But I don't think Greenspan actually disagrees with the principles. He will acknowledge the reduction in output that will follow a tax increase. He probably just thinks that confidence benefit will outweigh the production costs. I disagree, and I think a simple look at prices suggests my position is more tenable. If investor and producer confidence is the goal, the government has a simple and free means to that end, without any change in fiscal policy:

Freeze spending and regulatory levels. Promise no new taxes, new spending, or new regulations for some arbitrary period (say, 2 years - one Congress) and say you'll use that time to review existing programs, taxes, and outlays for efficacy. That will give at least some short term reprieve to the legal uncertainty plaguing the American economy.

CRGreathouse

Oct11-10, 05:45 PM

talk2glenn

Oct11-10, 06:00 PM

(emphasis added)

Really? I take it you're not a member of the Pigou Club, then.

Errr...the Pigouists take this concept to its logical conclusion? How might I not be a member?

They advocate the use of targeted taxes to dissuade undesirable market activity, ie gasoline taxes to discourage the consumption of gasoline. This concept works because of the effect of a tax is to eliminate transactions at the margin. Raise a targeted tax high enough (above the Laffer optimum), and the additional tax will have a negative effect on revenue - for every dollar in revenue it raises, it will lose more than a dollar from consumer substitution effect. See cigarettes.

They will also argue that these taxes are useful for correcting for negative externalities associated with specific economic activities, like using sugar taxes to pay for public treatments of diabetes (this being more fair that using general revenues, and market correcting by making sugar consumers pay for the social costs sugar imposes), but now we risk being pulled off topic.

Gokul43201

Oct11-10, 06:15 PM

The effect is reduced output in the economy. This can be offset by increased public sector output, but in this case, you are talking about increasing taxes to reduce the public debt; there will be no offset. How about this: raise only specific low impact taxes, and suffer a small multiplier of X1 to the GDP loss while raising revenue by R1. Find a mode of public sector spending with GDP multiplier X2 that is large compared to X1. Invest a fraction f<1 of the revenue R1, into chosen form of spending such that the effective multiplier is positive, i.e., f*X2 > X1.

You get a beneficial effect on GDP as well as on debt - win, win (both on paper and in a 30 sec TV ad, if crafted cleverly).

The assumption here that f exists is supported by the (2009?) CBO report on multipliers, and the further assumption that there exist certain kinds of tax within the above subset that lie of the correct side of the Laffer maximum is from my gut (but I can't imagine many would disagree with it).

CAC1001

Oct11-10, 06:57 PM

How about this: raise only specific low impact taxes, and suffer a small multiplier of X1 to the GDP loss while raising revenue by R1. Find a mode of public sector spending with GDP multiplier X2 that is large compared to X1. Invest a fraction f<1 of the revenue R1, into chosen form of spending such that the effective multiplier is positive, i.e., f*X2 > X1.

You get a beneficial effect on GDP as well as on debt - win, win (both on paper and in a 30 sec TV ad, if crafted cleverly).

The assumption here that f exists is supported by the (2009?) CBO report on multipliers, and the further assumption that there exist certain kinds of tax within the above subset that lie of the correct side of the Laffer maximum is from my gut (but I can't imagine many would disagree with it).

So I am assuming if reading your post correctly that you are saying find a tax that when raised, the negative affect on GDP is more minimal, then use the revenue in a form of spending that will have a greater positive on the economy than the negative that the tax used to raise the revenue created? Thus still a net positive.

Thing is, would that be able to work in practice as smoothly as it seems to on paper? This is also making the assumption that bureaucrats will be able to spend the money more efficiently than consumers.

IMO, I would say leave the taxes where they are for two reasons:

1) Letting them expire would only bring in a miniscule amount of revenue compared to what is needed

2) I do not believe the current government is intent on reducing spending anytime soon

Government needs to work at ways to reduce, or at least cap, spending if they want to be raising taxes to reduce the deficit and debt.

Edit: According to Keith Hennessey, former senior White House economic advisor to President Bush, the Bush tax cuts were actually intended to be made permanent: http://keithhennessey.com/2010/08/23/response-to-pk/

CRGreathouse

Oct11-10, 07:12 PM

They advocate the use of targeted taxes to dissuade undesirable market activity, ie gasoline taxes to discourage the consumption of gasoline. This concept works because of the effect of a tax is to eliminate transactions at the margin. Raise a targeted tax high enough (above the Laffer optimum), and the additional tax will have a negative effect on revenue - for every dollar in revenue it raises, it will lose more than a dollar from consumer substitution effect. See cigarettes.

They will also argue that these taxes are useful for correcting for negative externalities associated with specific economic activities, like using sugar taxes to pay for public treatments of diabetes (this being more fair that using general revenues, and market correcting by making sugar consumers pay for the social costs sugar imposes), but now we risk being pulled off topic.

Right... I don't need a lesson. :cool:

(What you say is, of course, correct -- at least on the positive side. I can't speak to your normative conclusions.)

Errr...the Pigouists take this concept to its logical conclusion? How might I not be a member?

I'm not sure if you're saying that you favor or disfavor Pigovian taxes...?

airborne18

Oct11-10, 08:16 PM

Neither am I. The type of tax is irrelevant; the effect of tax increases is higher transaction costs, which makes (by simple definition) some transactions at the margin unprofitable. They no longer take place, and gross production declines.

That is debt reduction - additional revenue to cover mandatory expenses.

Regardless, I don't disagree with the principle - unfunded government mandates are a serious problem which have to be addressed at some point. I disagree with the idea that raising taxes now is a "good idea"; any benefit gained from the reduction in deficits is more than offset by the cost of reduced consumption. There is no more room for quantitative easing. If the government pushes demand in a negative direction, the Reserve Board will be largely powerless to pull it back, and recession could result.

This will increase Medicaid and Unemployment payouts automatically and probably prompt additional waves of stimulus spending, undoing anything gained from the initial tax hike.

If this is true, then Greenspan is wrong. But that shouldn't surprise anyone; Greenspan has been desperately trying to sell the idea that his tenureship at the Fed was not an unmitigated disaster. In reality, he allowed the Board to be hopelessly politicized.

He kept monetary policy too loose for too long, which fueled the credit bubble, and tightened it too quickly and too violently in response to rising energy prices, which shocked the credit market into instant defib. They did everything wrong.

But I don't think Greenspan actually disagrees with the principles. He will acknowledge the reduction in output that will follow a tax increase. He probably just thinks that confidence benefit will outweigh the production costs. I disagree, and I think a simple look at prices suggests my position is more tenable. If investor and producer confidence is the goal, the government has a simple and free means to that end, without any change in fiscal policy:

Freeze spending and regulatory levels. Promise no new taxes, new spending, or new regulations for some arbitrary period (say, 2 years - one Congress) and say you'll use that time to review existing programs, taxes, and outlays for efficacy. That will give at least some short term reprieve to the legal uncertainty plaguing the American economy.

The problem is that politics really clouds the issues with revenue and spending.

You have to look at things on a global level and at a macro level. Taxes will not impact production, not any worse than the alternative. A good part of our consumption is not domestic goods.

We can't touch social security and medicare, the real problem. Your reference to medicaid and unemployment are misplaced. They are both state programs. Medicid is funded by both the state and federal. Unemployment is not. Though the federal government is footing some extended program.

But you bring up a great point. The federal shortfall is only a small part of the revenue problem. The states face the issue even worse. So the federal government does not bail out the states.. The states will have to raise taxes, or start defaulting on debt. You don't want to live in a state that defaults on debt.

And if we don't raise revenue at the federal level, the dollar will continue to dive. And of course our interest on debt will increase.. which is a large part of the budget.

The issue will not be solved until employment improves, and there is no sign of that miracle. companies have made long term productivity gains.

One way or another the demand curve keep contracting, so we might as well start controlling the debt side of things. Through taxes, higher debt rates, and a declining dollar. Oh and inflation.

And we need to bail out the states, or the revenue issue will just mushroom across the board.

CAC1001

Oct11-10, 08:24 PM

Those states that have been driven into financial problems by the public unions need to be held accountable, or any money given to them will only go to continuing and making their problem worse.

airborne18

Oct11-10, 08:38 PM

Those states that have been driven into financial problems by the public unions need to be held accountable, or any money given to them will only go to continuing and making their problem worse.

It is not the unions fault. It is the taxpayers in the state for allowing it. The problem is that bankruptcy will not change it, the pensions win by federal law. but this of course is not what the tea party is after either. Things that they can impact, they are not. They could take alot of power at the state level and change these things, but they are going for the big public splash to raise money even though they will not win most of the races.

That is what burns me about the tea party in my state.

And the issue at the state level is revenue. The unemployment funds in most states are tapped out. And again the unemployment means less revenue. Add to that the property tax shortfalls and the overall lower tax revenue makes for one big mess at every level.

OmCheeto

Oct11-10, 08:49 PM

Ivan Seeking

Oct11-10, 10:01 PM

If this is true, then Greenspan is wrong. But that shouldn't surprise anyone; Greenspan has been desperately trying to sell the idea that his tenureship at the Fed was not an unmitigated disaster. In reality, he allowed the Board to be hopelessly politicized.

If this is true? Did you read it. As for the rest, nonsense. Congress hung on his every word with bated breath. He was the wizard.

He kept monetary policy too loose for too long, which fueled the credit bubble, and tightened it too quickly and too violently in response to rising energy prices, which shocked the credit market into instant defib. They did everything wrong.

What you mean to say is that he clung to his religion of libertarianism, aka Reaganomics, and it nearly destroyed the global economy.

Sometimes you have to step back from the chalk board and look at the results of your efforts. We've had thirty years at the board. Time for a change. The guiding princples of Reaganomics have been a failure. The proof lies in the debt-to-gdp ratio.

CAC1001

Oct11-10, 11:23 PM

What you mean to say is that he clung to his religion of libertarianism, aka Reaganomics, and it nearly destroyed the global economy.

No he didn't. In fact, libertarianism would have called for him to have raised interest rates after the Dot Com bubble (actually raised them all the way back in the mid-90s to prevent the Dot Com bubble as well; that is what the ultra libertarians like Peter Schiff (who hate the Fed) are always ranting about).

Also remember, the Fed has a very tough job, as they are a price controller, whose job it is to maintain low inflation and full employment (along with other things too!). The decisions in this are extremely complex and there is no guarantee they will get them right everytime. For example, generally, one of the worst things you can do is to raise interest rates in a recession, because it hurts the economy. The Fed tends to be queasy about raising interest rates because Congress will crack down on them for this as well, because of the economic effect. When the Fed raised interest rates under Paul Volcker in the early 1980s, it was the political support from Ronald Reagan that allowed them to raise them as high as they did for as long as they did to bring down the inflation, as Congress didn't like it.

After the 2000 Dot Com bubble bursting, according to all the Greenspan critics (like Schiff), his not raising interest rates then is what sent America into the real-estate bubble (or contributed a lot to it anyhow). But, the Dot Com bubble bust also sent the economy into a recession (albeit a minor one). Suppose the Fed had instead raised interest rates to stave off another bubble, but as a result then sank the economy from what would have been a minor recession into a pretty sharp recession? How would Congress have reacted? What if Greenspan said, "We fear if we don't do this, another bubble, worse than the Dot Com bubble could spring up." Would anyone have believed him? Most of the people who said the economy was in a bubble were laughed at and scoffed at as looney-toons until it actually happened. What if Congress had demanded the Fed lower interest rates?

If Greenspan had sank the economy into a recession, I could imagine people saying, "The early 2000s recession was a result of Greenspan's idiocy. He raised interest rates out of some ridiculous, unfounded fear that if not, the economy would have gone into an even bigger bubble, one that could have been catostrophic. And he did this out of adherence to that ridiculous libertarian orthodoxy he reveres, the Peter Schiff-Ron Paul loons, who are always claiming the economy is going to collapse."

Being Fed Chairman isn't easy.

Also, the Fed doesn't adhere to "Reaganomics;" "Reaganomics" would be from the government itself through fiscal and regulatory policy.

Sometimes you have to step back from the chalk board and look at the results of your efforts. We've had thirty years at the board. Time for a change. The guiding princples of Reaganomics have been a failure. The proof lies in the debt-to-gdp ratio.

I'd say the debt-to-GDP ratio is because of ignoring Reaganomics. Reaganomics calls for low taxes and fiscal conservatism. When we followed that during the 1990s, we had a surplus. We did not follow it during the 2000s, with two wars and big government conservatism.

airborne18

Oct12-10, 12:53 AM

No he didn't. In fact, libertarianism would have called for him to have raised interest rates after the Dot Com bubble (actually raised them all the way back in the mid-90s to prevent the Dot Com bubble as well; that is what the ultra libertarians like Peter Schiff (who hate the Fed) are always ranting about).

Also remember, the Fed has a very tough job, as they are a price controller, whose job it is to maintain low inflation and full employment (along with other things too!). The decisions in this are extremely complex and there is no guarantee they will get them right everytime. For example, generally, one of the worst things you can do is to raise interest rates in a recession, because it hurts the economy. The Fed tends to be queasy about raising interest rates because Congress will crack down on them for this as well, because of the economic effect. When the Fed raised interest rates under Paul Volcker in the early 1980s, it was the political support from Ronald Reagan that allowed them to raise them as high as they did for as long as they did to bring down the inflation, as Congress didn't like it.

After the 2000 Dot Com bubble bursting, according to all the Greenspan critics (like Schiff), his not raising interest rates then is what sent America into the real-estate bubble (or contributed a lot to it anyhow). But, the Dot Com bubble bust also sent the economy into a recession (albeit a minor one). Suppose the Fed had instead raised interest rates to stave off another bubble, but as a result then sank the economy from what would have been a minor recession into a pretty sharp recession? How would Congress have reacted? What if Greenspan said, "We fear if we don't do this, another bubble, worse than the Dot Com bubble could spring up." Would anyone have believed him? Most of the people who said the economy was in a bubble were laughed at and scoffed at as looney-toons until it actually happened. What if Congress had demanded the Fed lower interest rates?

If Greenspan had sank the economy into a recession, I could imagine people saying, "The early 2000s recession was a result of Greenspan's idiocy. He raised interest rates out of some ridiculous, unfounded fear that if not, the economy would have gone into an even bigger bubble, one that could have been catostrophic. And he did this out of adherence to that ridiculous libertarian orthodoxy he reveres, the Peter Schiff-Ron Paul loons, who are always claiming the economy is going to collapse."

Being Fed Chairman isn't easy.

Also, the Fed doesn't adhere to "Reaganomics;" "Reaganomics" would be from the government itself through fiscal and regulatory policy.

I'd say the debt-to-GDP ratio is because of ignoring Reaganomics. Reaganomics calls for low taxes and fiscal conservatism. When we followed that during the 1990s, we had a surplus. We did not follow it during the 2000s, with two wars and big government conservatism.

First, Reagan spent a ton of money. Though it was a good part on defense, which is productive to the economy.

The other issue is that we never forced the big players to take a hit during 9/11. We should have let it unwind, but instead we pumped money into the economy and left interest rates low. How long can you keep interest rates this low, really.

Real Estate was intentionally boosted to rebuild the economy after 9/11. At some point the fed should have put on the brakes, but they did not. And the problem is fixing itself.

Al68

Oct12-10, 11:03 AM

Government needs to work at ways to reduce, or at least cap, spending if they want to be raising taxes to reduce the deficit and debt.If they were willing to just limit the annual spending increases to inflation, taxes could be cut significantly and still get a surplus.What you mean to say is that he clung to his religion of libertarianism, aka Reaganomics, and it nearly destroyed the global economy.Utter nonsense. Another lie getting repeated incessantly following the old adage that if a lie gets repeated enough, it will be believed by many.

Gokul43201

Oct12-10, 11:33 AM

Utter nonsense. Another lie getting repeated incessantly following the old adage that if a lie gets repeated enough, it will be believed by many.It's okay to say that something is nonsense. It's definitely not okay to go about attributing intentions to other people's posts. Please keep posts about the content.

G037H3

Oct12-10, 11:47 AM

Reaganomics set up the US for the 90's tech boom

not exactly a failure in my book

as for taxes, raise capital gains and keep income taxes low

Al68

Oct12-10, 05:20 PM

It's okay to say that something is nonsense. It's definitely not okay to go about attributing intentions to other people's posts. Please keep posts about the content.It's not? Even if the intentions or motives are of people who hold a position generally? I only wish that were specified in the forum rules. That would preclude every single post by certain forum members.

Of course, it is ad hominem and not a valid argument itself, but I just couldn't resist pointing out my observation.

That claim (that "the religion of libertarianism, aka Reaganomics" nearly destroyed the global economy) has been utterly refuted many times in other threads only to keep appearing again and again by the same posters, with absolutely no substantiation of the claim, and after it has been refuted multiple times. It's a vicious cycle.

And the intention is obvious: convince others of a (verifiable) lie while avoiding the impossible burden of substantiating it. The tactic actually works very well historically.

Gokul43201

Oct12-10, 06:43 PM

mugaliens

Oct12-10, 11:40 PM

That claim ... has been utterly refuted many times in other threads

Claims of these natures can never be refuted, much less "utterly" as they're largely based on belief in the midst of very complex multivariate issues, complex enough to beyond analysis.

talk2glenn

Oct12-10, 11:58 PM

I'm not sure if you're saying that you favor or disfavor Pigovian taxes...?

Agnostic. The principle is sound, but it's a policy debate. I prefer to discuss the consequences and alternatives, but usually it's not objectively clear what's better or worse.

We can't touch social security and medicare, the real problem. Your reference to medicaid and unemployment are misplaced. They are both state programs. Medicid is funded by both the state and federal. Unemployment is not. Though the federal government is footing some extended program.

The source of the tax doesn't matter, and Unemployment Insurance is heavily subsidized by the federal government, particularly during periods of above average unemployment. Over half the funding for Medicaid comes from direct federal funding.

One way or another the demand curve keep contracting, so we might as well start controlling the debt side of things. Through taxes, higher debt rates, and a declining dollar. Oh and inflation.

These statements are contradictory. Demand contraction is incompatible with price inflation, generally speaking. There was one famous period exception in modern economic history, and it was a disaster.

What you mean to say is that he clung to his religion of libertarianism, aka Reaganomics, and it nearly destroyed the global economy.

Sigh....this is what I mean. Hopeless politicization of economic policy has reduced the ability of the Reserve Board to conduct sound fiscal policy. There was no way the Board could have handled things better when we can't separate politics from economics. Greenspan can be held responsible to the effect that the buck stops with the Chairman, but given the climate of things in Washington, its no surprise the Board acted in the manner it did.

The guiding princples of Reaganomics have been a failure.

Which guiding principles are those?

The real estate bubble was caused by many things. The connection to "reaganomics" is tenuous at best. Indeed, Reagan was famously a bubble buster. He waged a war on prices in the White House and at the Fed.

Propping up favored industries (rightly or wrongly) has long been a Democrats' game (with the notable exception of defense), and the establishment of housing as a favored industry goes back to Roosevelt, and Carter.

airborne18

Oct13-10, 11:48 AM

Agnostic. The principle is sound, but it's a policy debate. I prefer to discuss the consequences and alternatives, but usually it's not objectively clear what's better or worse.

The source of the tax doesn't matter, and Unemployment Insurance is heavily subsidized by the federal government, particularly during periods of above average unemployment. Over half the funding for Medicaid comes from direct federal funding.

.

The source does matter, and that is the point that is missed by those who want to keep tax cuts in place. You can cut all you want, but there is a shortfall at every level of government. If the money for unemployment runs out at the state level, and it does not get picked up by the Federal government then the states will have to borrow.

You can shift the cost anywhere you want, but it will still have to be paid. It is a zero sum game to a certain point. Right now local schools are reeling from property tax deficits. The state and federal government will have to pump money into the problem.

It is all about revenue at this point. There is not going to be a magical recovery. We have expected this for a long time, and now it is here.

These statements are contradictory. Demand contraction is incompatible with price inflation, generally speaking. There was one famous period exception in modern economic history, and it was a disaster.

.

In theory they contradict, but that is why economics is not a science, and I had this discussion before here. There comes when suppliers have to adjust pricing to maintain the margins to stay in a market. We enjoy economies of scale due to cheap imports and huge consumer demand.

But even walmart has stopped chasing demand with price cuts, they are now adjusting for contracting demand, so they are adjusting pricing and supply to maintain the profit margin.

You can see it in the PC industry and durable goods. Last year everyone cut to chase demand, and now that has reversed.

The auto industry is finally catching up with this. This past spring and summer they tried deep discounts and they never did catch up with the contracting demand, so I think we are in for a long ride with this.

Sigh....this is what I mean. Hopeless politicization of economic policy has reduced the ability of the Reserve Board to conduct sound fiscal policy. There was no way the Board could have handled things better when we can't separate politics from economics. Greenspan can be held responsible to the effect that the buck stops with the Chairman, but given the climate of things in Washington, its no surprise the Board acted in the manner it did.

Which guiding principles are those?

The real estate bubble was caused by many things. The connection to "reaganomics" is tenuous at best. Indeed, Reagan was famously a bubble buster. He waged a war on prices in the White House and at the Fed.

Propping up favored industries (rightly or wrongly) has long been a Democrats' game (with the notable exception of defense), and the establishment of housing as a favored industry goes back to Roosevelt, and Carter.[/QUOTE]

Ivan Seeking

Oct13-10, 01:54 PM

The real estate bubble was caused by many things. The connection to "reaganomics" is tenuous at best. Indeed, Reagan was famously a bubble buster. He waged a war on prices in the White House and at the Fed

The housing bubble was created by a credit bubble, that in turn was the result of too little regulation. There is nothing tenuous about that or that deregulation was a core principle of Reaganomics. The lesson from this disaster is that free markets are self regulating, but we can't afford to live with the corrections.

"It was inevitable" is nothing but an excuse made for a failed philosophy. It wasn't inevitable, it was preventable, and the people who devised the many credit schemes that helped to create this mess are the first to say so.

mheslep

Oct13-10, 01:59 PM

IvanS: On Greenspan, did you read the sourced NYT article?

“I’m in favor of tax cuts, but not with borrowed money,” Mr. Greenspan, 84, said Friday in a telephone interview. “Our choices right now are not between good and better; they’re between bad and worse

To say "Greenspan disagrees" in response to a claim by others that tax increases will depress growth is a drive-by, superficial look at Greenspan's views leading to a misleading conclusion. Greenspan clearly does agree with that specific argument per the actual interview that kicked off the latest 'Greenspan said' series of news articles:
http://www.bloomberg.com/news/2010-07-16/greenspan-says-congress-should-let-bush-era-tax-cuts-expire-transcript-.html
WOODRUFF: So to those interests who say but wait a minute, if you let these taxes go my taxes go up, it is going to depress growth?

GREENSPAN: Yes, it probably will, but I think we have no choice in doing that, because we have to recognize there are no solutions which are optimum. These are choices between bad and worse.
The 'worse' for Greenspan, as is clear in the interview, is to continue with deficits on this scale. So as an economist does Greenspan favour tax increases over spending cuts? NO. He simply believes the required spending cuts are politically unfeasible:
GREENSPAN: Taxes go up. The problem is, unless we start to come to grips with this long-term outlook, we are going to have major problems. I think we misunderstand the momentum of this deficit going forward.
[...]The notion that we are somehow going to bring it in far more sharply is just utterly, politically unrealistic.Well he may be right (see e.g. France w/ a million people on the streets protesting a a 2 year increase in retirement age (http://online.wsj.com/article/SB20001424052748703440004575547453471939086.html)) , but then we don't need to go to an economist to tell us what's politically feasible.

Gokul43201

Oct13-10, 02:08 PM

The housing bubble was created by ...You are responding to the wrong person. There's a missing quote tag in the previous post that needs fixing, or a section that could be deleted.

mheslep

Oct13-10, 02:19 PM

Demand contraction is incompatible with price inflation, generally speaking. This is as incorrectly predicted by classical Phillips, which has been known to be wrong for ~40 years. Classical theory:
http://www.econlib.org/library/Enc/art/lfHendersonCEE2_figure_036.jpg
There was one famous period exception in modern economic history, and it was a disaster.
One? Hardly. Reality:
http://econ161.berkeley.edu/multimedia/animated_gifs/PCurve.GIF

airborne18

Oct13-10, 02:23 PM

IvanS: On Greenspan, did you read the sourced NYT article?

To say "Greenspan disagrees" in response to a claim by others that tax increases will depress growth is a drive-by, superficial look at Greenspan's views leading to a misleading conclusion. Greenspan clearly does agree with that specific argument per the actual interview that kicked off the latest 'Greenspan said' series of news articles:
http://www.bloomberg.com/news/2010-07-16/greenspan-says-congress-should-let-bush-era-tax-cuts-expire-transcript-.html

The 'worse' for Greenspan, as is clear in the interview, is to continue with deficits on this scale. So as an economist does Greenspan favour tax increases over spending cuts? NO. He simply believes the required spending cuts are politically unfeasible:
Well he may be right (see e.g. France w/ a million people on the streets protesting a a 2 year increase in retirement age), but then we don't need to go to an economist to tell us what's politically feasible.

I don't see where the tax cuts are helping the economy. The problem is revenue and jobs. Construction will not improve until the real estate market improves, which is when we have employment.

The tax cuts are not propping up each little boom in the housing market, it is the fed massively propping up mbs.

Meanwhile local governments are even hurting from the deadbeats who owe property tax. And the revenue picture just gets worst the higher in government you look.

Consumer spending means nothing when there are no jobs and the housing market is in shambles ( still ). They should just let it hit bottom so we can actually start to recover.

airborne18

Oct13-10, 02:25 PM

talk2glenn

Oct13-10, 02:26 PM

The housing bubble was created by a credit bubble, that in turn was the result of too little regulation.

This is demonstrably and theoretically false. The credit bubble followed the housing bubble, not the other way around. Consumers respond to rising prices in the short-run by borrowing against future earnings to subsidize current consumption, on the assumption that rising prices will devalue their future debts. This fuels an expansion in the credit markets. This is rational behavior, but note the order: prices go up, and debt follows.

The question, then, is why the dramatic rise in housing prices. Again, the suggestion that it was a case of "too little regulation" is apparently absurd. Financial services is the most heavily regulated industry in the country. The vast majority of the home loan market was government sponsored before 2008, and has now been outright nationalized. Federal lending rules required banks to issue a certain portion of new loans to classically high risk borrowers.

Housing has long been a government favored industry. Through combinations of subsidies and warrants, the federal government created a high risk mortgage market that, in the history of private property, never before existed, and still largely doesn't exist outside the US. We can observe the same trend happening in the student loan market and tuition prices, again due to government intervention, as an aside.

Clearly, the housing bubble (but not all bubbles, to be sure) was a failure of policy, not the market.

talk2glenn

Oct13-10, 02:40 PM

This is as incorrectly predicted by classical Phillips, which has been known to be wrong for ~40 years. Classical theory:
http://www.econlib.org/library/Enc/art/lfHendersonCEE2_figure_036.jpg
One? Hardly. Reality:
http://econ161.berkeley.edu/multimedia/animated_gifs/PCurve.GIF

The Phillips curve isn't "wrong" - it is, as you yourself showed, an extremely accurate predictor of price behavior over consumption behavior, everything else being equal. If anything, its guilty of simplicity, but simplicity is useful for providing introductory explanations. The models get more complicated as you dig deeper.

What you're referring to in the second graph is an example of everything else being deliberately made inequal. Given the predictions made by the models, policy makers intervene in the markets to push things in directions considered more desirable.

Policy makers have long recognized the dichotomy between unemployment and inflation. Specifically, at the monetary policy level, lower unemployment must be "bought", and it is paid for with higher inflation. This is the Phillips curve.

However, the curve itself is not static. It moves, in response to market expectations. Movement to the left reduces the employment cost (the same rate of unemployment corresponds to a lower rate of inflation), and movement to the right raises the cost.

The period exception I was referring to was the so-called "stagflation", and it was a unique, one-time event (so far, at least) in recorded economic history, which is why it changed so much of the existing theory.

mheslep

Oct13-10, 03:27 PM

The Phillips curve isn't "wrong" - it is, as you yourself showed, an extremely accurate predictor of price behavior over consumption behavior, everything else being equal. That flys in the face of the data reference. Classical Phillips accurately predicts very little correctly _as the data clearly shows_. If anything, its guilty of simplicity, but simplicity is useful for providing introductory explanations.That's a direct contradiction of your first sentence.

What you're referring to in the second graph is an example of everything else being deliberately made inequal.The 2nd graph is simply inflation and employment data over time, showing unemployment and inflation over time.

Given the predictions made by the models, policy makers intervene in the markets to push things in directions considered more desirable.

Policy makers have long recognized the dichotomy between unemployment and inflation. Source? I think you meant to say dependency and/or connection, not dichotomy, and the 'policy makers' don't 'recognize' inflation as a means of driving unemployment any more.

The period exception I was referring to was the so-called "stagflation", and it was a unique, one-time event (so far, at least) in recorded economic history, which is why it changed so much of the existing theory.The stagflation of the mid 70's which simply the most striking counter Phillips example. But also shown above are several periods where inflation increased but so did unemployment, or the converse was true (decreasing inflation and unemployment), both of which are contrary to classical Phillips. Look, I've provided respectable economic references and you are directly contradicting them with assertion. Let's see some references.

talk2glenn

Oct13-10, 07:13 PM

That flys in the face of the data reference. Classical Phillips accurately predicts very little correctly _as the data clearly shows_. That's a direct contradiction of your first sentence.

No curve will capture every possible data point. They are always estimates. The estimate is useful to the extent that it captures the trends in the data.

The 2nd graph is simply inflation and employment data over time, showing unemployment and inflation over time.

The black line was actual data. The red line was estimated positions for the Phillips curves. Note that they move. The data set doesn't invalidate the principle; it demonstrates that rapid changes in macroeconomic conditions can affect the curves positioning.

Source? I think you meant to say dependency and/or connection, not dichotomy, and the 'policy makers' don't 'recognize' inflation as a means of driving unemployment any more

Of course they do. This is one of the most elementary rules of monetary policymaking - short term changes in unemployment away from equilibrium will result in higher inflation, and vice versa.

http://en.wikipedia.org/wiki/Phillips_curve#The_Phillips_curve_today

However, this long-run "neutrality" of monetary policy does allow for short run fluctuations and the ability of the monetary authority to temporarily decrease unemployment by increasing permanent inflation, and vice versa.

The stagflation of the mid 70's which simply the most striking counter Phillips example. But also shown above are several periods where inflation increased but so did unemployment, or the converse was true (decreasing inflation and unemployment), both of which are contrary to classical Phillips. Look, I've provided respectable economic references and you are directly contradicting them with assertion. Let's see some references.

The stagflation of the 70's is not a counter-example to the Phillips curve. It is generally believed today that the market "priced in" expectations about future high inflation and high unemployment. This moved the Phillips curve up and to the right. The result was higher permanent inflation rates for the same level of employment.

Today, the Phillips curve is modified from its original form to "price in" expectations about inflation and employment rates. When those expectations change, the curve changes. The original curve responded only to actual employment and inflation rate changes.

Al68

Oct13-10, 09:08 PM

The housing bubble was created by a credit bubble, that in turn was the result of too little regulation. There is nothing tenuous about that or that deregulation was a core principle of Reaganomics. The lesson from this disaster is that free markets are self regulating, but we can't afford to live with the corrections.You mean the housing and credit bubbles caused by government via Fannie Mae and Freddie Mac? Not only did that have nothing whatsoever to do with a free market, Fannie and Freddie were creating artificial demand for toxic mortgages, insisting on buying them, and was the end buyer of 80% of all home mortgages in the U.S.

Too little regulation? Government was the primary player. Free market? The private banks that declined to participate in Fannie and Freddie's scheme and instead stuck to free market mortgage standards did just fine. They may have lost out on a little extra profit, but while the banks that sold to Fannie and Freddie were in trouble begging for a bailout, the ones that didn't (like mine) were and are still financially healthy.

Did you even have a straight face when you typed the words "free market" in your post?

OmCheeto

Oct13-10, 09:15 PM

Consumer spending means nothing when there are no jobs and the housing market is in shambles ( still ). They should just let it hit bottom so we can actually start to recover.

Consumer spending does mean something.

No jobs?
Here's a graph I put together the other day (http://www.physicsforums.com/showthread.php?p=2925631#post2925631):
http://home.europa.com/~garry/govtvspvtemploymentinSeptember2000thru2010.jpg
Government vs Private employment in the months of September from 2000 through 2010, in millions.
Show me the point on the graph where there are no jobs.....

The housing market went through a correction.
There was a bubble, and it popped.
There is no shambles.
There are those that played the game and lost and are going to whine about it for awhile, and there are those that didn't play the game and are going home tonight to a comfortable house, and are going to have some leftover chicken before they go to bed because they are somewhat hypoglycemic and need to be up early in the morning.

:smile:

Hit bottom?

http://t2.gstatic.com/images?q=tbn:ANd9GcT2E5KGMVxfQ2qTefPLrdlMR1zGYJ9PK-5nuUbDAGt4FrFu_AE&t=1&usg=__Z8Cd8pXMVZORV19YFux_Eu7da-4=

Insert cute metaphorical proverb......

Al68

Oct13-10, 09:24 PM

I only wish that were specified in the forum rules.It is.Guidelines on Language and Attitude:
Foul or hostile language will not be tolerated on Physics Forums. This includes profanity, obscenity, or obvious indecent language; direct personal attacks or insults; snide remarks or phrases that appear to be an attempt to "put down" another member; and other indirect attacks on a member's character or motives.I see what you're saying now, but my ad hominem attack was on the motives of people who have that position in general, primarily national politicians, not Ivan specifically.

It seems that PF moderators do not interpret that rule to prohibit general ad hominem attacks, as evidenced by their routine use. Many lengthy posts are composed entirely of them. Maybe a moderator could clarify?

Gokul43201

Oct13-10, 09:58 PM

Again, the suggestion that it was a case of "too little regulation" is apparently absurd. Financial services is the most heavily regulated industry in the country.Do you believe the derivatives market was also over-regulated? And would you say it played little/no role in the financial collapse?

airborne18

Oct13-10, 10:48 PM

Consumer spending does mean something.

No jobs?
Here's a graph I put together the other day (http://www.physicsforums.com/showthread.php?p=2925631#post2925631):
http://home.europa.com/~garry/govtvspvtemploymentinSeptember2000thru2010.jpg
Government vs Private employment in the months of September from 2000 through 2010, in millions.
Show me the point on the graph where there are no jobs.....

The housing market went through a correction.
There was a bubble, and it popped.
There is no shambles.
There are those that played the game and lost and are going to whine about it for awhile, and there are those that didn't play the game and are going home tonight to a comfortable house, and are going to have some leftover chicken before they go to bed because they are somewhat hypoglycemic and need to be up early in the morning.

:smile:

Hit bottom?

http://t2.gstatic.com/images?q=tbn:ANd9GcT2E5KGMVxfQ2qTefPLrdlMR1zGYJ9PK-5nuUbDAGt4FrFu_AE&t=1&usg=__Z8Cd8pXMVZORV19YFux_Eu7da-4=

Insert cute metaphorical proverb......

So what is the point of this graph? This graph does not provide any information, and it is not scaled properly. You actually do a disservice to your point with it. There should be job growth during booms, which we did have, and this graph does not reflect it very well.

But the obvious issue is that you do not account for the population or workforce.

And the foreclosure rate does not indicate that this correction is past, so we are going through a correction.

CAC1001

Oct14-10, 03:38 AM

Do you believe the derivatives market was also over-regulated? And would you say it played little/no role in the financial collapse?

I am by no means any expert on the financial crisis, but I have noticed that one could fill an entire shelf with books on the subject and still wouldn't have a full understanding of the subject.

But from what I have been able to glean, the financial crisis was/is a very complex thing whose causes began long ago, and which was caused by a great many different variables. Arguments such as, "The free-market caused it!" or "The government caused it!" or the Democrats' favorite line: "Bush did it," I think are over-simplifying what is a very complex topic.

One thing I've noticed with the hard Left is they will emphasize how complex our economic problems are right now, and that there are no simple solutions to them. However, when it comes to the cause of this very complex problem, their default answer is "Bush did it" or "Reagan did it" or "the free market did it." No acknowledgement that just as there are no simple solutions, the cause itself cannot be boiled down into a simple soundbite answer either.

IMO, I think both ends of the spectrum are correct to a degree. In some areas, there did seem to be too little government. In other areas, too much government.

For example, you had the Community Reinvestment Act and Fannie Mae and Freddie Mac, which certainly played a role in the crisis. However, you also had, as pointed out in the quote above (I believe), a fairly unregulated derivatives market.

There was the element of greedy mortgage lenders, greedy mortgage borrowers, and also the Federal Reserve itself messed up as well it seems with too easy a monetary policy.

The rating agencies also failed spectacularly, giving AAA ratings to the securities that were really junk, thus investors and institutions all bought them.

There was a complete misunderstanding of risk analysis which makes one wonder if regulation would have even worked. I mean Wall Street itself didn't realize the risk it was taking on. If Wall Street itself couldn't recognize the risk, how could underpaid government regulators? And with the recent porn scandal of the SEC, we could probably say the SEC failed to a degree as well. Wired magazine ran an article a few years back in which they point out that a 2002 Senate study showed that the SEC is only able to review about 40% of the information it gets from the regulations. Enron hadn't been reviewed in ten years, according to the article. If that's the case, then how would more regulation have helped?

Everyone thought the system had advanced enough to spread risk out to an enormous degree, and allocate capital very accurately (and to a degree this was true, as the risk was spread amongst the national mortgage market, which had never collapsed before).

A big problem was that while spreading the risk amongst the national mortgage market, they were using mortgages that were ultimately junk. They were not creating securities made up of sound mortgages from around the nation, which really would have been secure (as a few mortgages here and there could fail, and a bubble in real-estate could form in certain areas here and there occassionally, but securities made up of mortgages from around the nation should be secure); instead, they were using mortgages that were far more junk than sound, but they didn't realize it.

Due to bad monetary policy and bad government policy, a housing bubble developed, and then when it burst, all things went haywire.

To blame this crisis solely on "excessive government" or "too little regulation" is oversimplifying the issue.

For example, look at the 2000 legislation signed by Bill Clinton, the Financial Services Modernization Act, that removed the decades-long barrier between investment banks and commercial banks. Some say removing this barrier helped cause the crisis. Others point out that Europe never had such a barrier and they didn't have such a crisis, and also that without it, it would have been illegal for institutions like Bank of America when it bought Merill-Lynch and Countrywide Financial.

Some big questions I have noticed about fixing the financial system are these:

1) Regulation: As shown above, if the SEC can't keep track of information from current regulations, how will more regulations help?

One thing I have read is that the securities created these days by the financial industry are so complex and sophisticated, that by the time regulators wrap their heads around one security, a multitude of new ones have been created. Some say we should then stop this ultra-speedy innovation with a law or something. Opponents say this would severely hamstring our financial industry and economy overall, as constant innovation is required in the financial industry. OTOH, do we continue to let such innovation occur until the next crisis?

2) Big financial institutions: Some say we should break them up, so they are not too big to fail anymore. Opponents say that this would make them too small to service the needs of American corporations and businesses however, and make American businesses dependent on foreign financial firms.

So what is the answer then? Break them up? Regulate them heavily? If we subject them to heavy regulation as a result of being too big to fail, they will bring in armies of lobbyists to make sure the regulations are written to benefit them, and hurt the smaller banks and financial institutions. How do we prevent that?

Is there a way to break them up where they are no longer too big to fail, but still large enough to service the needs of American business?

OmCheeto

Oct14-10, 08:53 AM

So what is the point of this graph?
You said there were no jobs:

Consumer spending means nothing when there are no jobs......
The graph indicates that there are jobs. That's its only point.
This graph does not provide any information,
It provides me with the information that roughly 1 in 3 Americans has been employed over the last 10 years.

and it is not scaled properly.
Would you like me to render it in a log scale? It would be even flatter.

You actually do a disservice to your point with it. There should be job growth during booms, which we did have, and this graph does not reflect it very well.

That's why I made the second graph. But as I pointed out, although it visually went up and down quite a bit more, the numbers didn't impress me much. You can see it at the other thread (http://www.physicsforums.com/showthread.php?p=2925631#post2925631). I'll try not to re-post my tired old boring graphs.

And the only disservice I think I've done was to include the Rove cartoon. It was a bit of a cheap shot. But when I read your comment "let it hit bottom", I happened to look up at the TV, and there was Karl Rove. Somehow I made some peculiar connection, as in, "how low can you get".

It probably doesn't make any sense.

airborne18

Oct14-10, 10:55 AM

You said there were no jobs:

The graph indicates that there are jobs. That's its only point.

It provides me with the information that roughly 1 in 3 Americans has been employed over the last 10 years.

Would you like me to render it in a log scale? It would be even flatter.

That's why I made the second graph. But as I pointed out, although it visually went up and down quite a bit more, the numbers didn't impress me much. You can see it at the other thread (http://www.physicsforums.com/showthread.php?p=2925631#post2925631). I'll try not to re-post my tired old boring graphs.

And the only disservice I think I've done was to include the Rove cartoon. It was a bit of a cheap shot. But when I read your comment "let it hit bottom", I happened to look up at the TV, and there was Karl Rove. Somehow I made some peculiar connection, as in, "how low can you get".

It probably doesn't make any sense.

You other graph I actually like. This one just is not very useful. But I don't follow employment numbers that way. Though Okay my wife has a job, and you do so yeah there are jobs.

I didn't even look at the rove cartoon.

And no consumer spending is does not matter. Durable goods orders do, but consumer spending is meaningless to our economy. Consumer spending has impacted China in a large way. But not ours.

Contrary to the talking head economists on TV, consumer spending will not dig us out of any recession. Years ago when we actually manufactured things it could, but not anymore.

DrClapeyron

Oct14-10, 11:16 AM

The extremely wealthy people in the US will find a way to beat the taxes, i.e. tax loop hole. You'll find people like Gates and Buffet putting their money into charitable trust. In the name of hospitality and humanity they will find a way to avoid taxes. Why not increase certain capital gains taxes on such trusts and lower income taxes? The wealthy do not make their money through income, they make it through capital gains.

mheslep

Oct14-10, 01:38 PM

...The wealthy do not make their money through income, they make it through capital gains.You mean wages, not income.

RonE

Oct14-10, 02:23 PM

As a US citizen, I have yet to see someone adequately explain WHY I should be taxed even more.

In the last two years my taxes will have increased 21%. My income, due to the economy, has not increased a dime. My bills, the necessities, phone, cable modems needed for work, water, electric, fuel have also increased.

Allowing these "cuts" to expire advocates I pay even more taxes. Businesses and the wealthy, in the end historically will not pay any tax increase anyone tries to pawn off as a corporate tax. They pass it on in the form of fired workers, less benefits, higher prices for goods and services but in the end... the business owners and chair people will not take a hit on their income/earnings/wages, whatever.

Each time the minimum wages goes up... the price of goods and services go up. It is simple math. You do not need complex charts, graphs, arguments, debates, whatever to explain it.

If you require a person or a corporation to pay more (for whatever reason) the price of goods and services must go up or the collected profits will go down. These "tax cuts" are not tax cuts they are a tax increase. Currently my tax rate is "x." The the law that has these rates in place is allowed to expire taxes will go up, which... is a tax hike or increase.

It always interests me the number of people who advocate that I pay more and more taxes are (and this is a very wide brush here but this is from my personal experiences, blogs, forums, and information I see out there/read/watch/listen to) the ones that will not pay the brunt of it. Funny how that works.

One of Nancy Pelosi's favorite tag lines is "The evil rich." They don't pay their fair share. She is a huge or was a huge advocate of not extending the "tax cuts" for the wealthy.

How many of you in 2007 were worth 40 million? That is what she was worth at that time. How many of you thinks she is poorer this year?

Now, how many of you believe that she will "pay her fair share?" The good thing about this law that will probably expire is that we will see next to immediate effects of it. In 2012 when the 2011 taxes are filed. I half suspect that they will try their level best to formulate some law that will nail those evil rich to the wall and try and capture their voting base back. The true believers of social injustice and the wealthy not paying enough. And yet still... not one person has given me a single reason that would want me to pay more taxes and make life even more of a struggle. Not one.

BTW, did you know you can donate to reduce the deficit?

How much do you think Pelosi, Frank, Geithner, Obama, Liberman (sp), Bush, Cheney, etc, so on and so forth... have donated to that cause? Not one.

https://pay.gov/paygov/

If you truly believe that I should pay more taxes by letting the tax cuts expire. Go there and donate the same amount my federal incomes taxes will increase next year, which is projected to be an additional 6,000 +/- 500.00

Gokul43201

Oct14-10, 02:39 PM

In the last two years my taxes will have increased 21%. My income, due to the economy, has not increased a dime.That's unexpected. Were there some changes in the tax code that came into effect two years ago, or is this due to a move (from anywhere to Massachusetts, for example) or some other significant change in finances?

RonE

Oct14-10, 02:58 PM

That's unexpected. Were there some changes in the tax code that came into effect two years ago, or is this due to a move (from anywhere to Massachusetts, for example) or some other significant change in finances?

No, I've lived in the same state for close to 18 years. Most of it is due to the tax code changes coming on line. A few dollars are lost with local tax increases...

Point is though, with the increases previously, the cost of living increases water, phone, electricity, these tax laws set to expire at the end of the year will hit hard. Now add on top of what will expire all the "new" taxes like the ones that come along with the HCRA... there is absolutely no good reason to allow these tax "cuts" to expire and force me to pay even more. Comes a point where you cut your losses and shore up what you have. Keep in mind, they have also had meetings already to shore up Union Pensions with trying to figure out how to seize private 401k's. So not just my taxes but my savings is at risk too. Still. No one has explained why I should pay more. Not one good reason.

from

http://www.cagw.org/reports/pig-book/2010/

$29,992,000 by Senate Appropriations Committee Ranking Member Thad Cochran (R-Miss.) for 27 projects, including: $4,000,000 for the Jamie Whitten Delta States Research Center, Stoneville; $1,500,000 for Berryman Institute, Jack Berryman Institute, Utah and Mississippi Agriculture and Forestry Experiment Station; $1,002,000 for Mississippi Valley State University, curriculum development; $939,000 for the Agricultural Wildlife Conservation Center; and $231,000 for e-commerce research, because no one knows how to go online.

$15,614,000 by Senate appropriator Robert Byrd (D-W.Va.) for 12 projects, including: $2,000,000 for the Appalachian Fruit Laboratory, Kearneysville; $1,500,000 for the Dunloup Creek Watershed project; $500,000 for agriculture waste utilization research; and $400,000 for a computer vision engineer in Kearneysville.

$12,500,000 by Senate Agriculture Appropriations Subcommittee Ranking Member Sam Brownback (R-Kan.) for 13 projects, including: $2,750,000 for polymer research; $1,000,000 for wheat genetic research; $1,000,000 for a phosphorous reduction cooperative agreement through the Kansas Livestock Foundation; and $250,000 for workforce development and out-migration through the Kansas Farm Bureau Foundation (KFBF). In addition to the appropriation, KFBF has also applied for a $7 million stimulus grant for rural broadband deployment. To add insult to injury, the Kansas Farm Bureau, which is conveniently located at the same address as the foundation, had a fund balance of $98 million at the end of 2007.

$12,423,000 by Senate Agriculture Subcommittee Chairman Herb Kohl (D-Wis.) for 11 projects, including: $4,000,000 for the Dairy Forage Agricultural Research Center, Prairie du Sac; $2,500,000 for the Dairy Forage Research Center, Marshfield; $950,000 for nutrition enhancement research; and $400,000 for the Institute for Sustainable Agriculture. One of the institute’s projects is promoting “Slow Food.” As an answer to fast food, “Slow Food” has been, according to the institute’s website, “expanding over the past decade from dealing with issues of quality in cooking to include environmental and sustainable agriculture, social justice, and food sovereignty, among others.” It is not clear how Americans can eat social justice.

Just the tip of the iceberg so to speak. All this waste and pork... and I should pay more? Why?

mheslep

Oct14-10, 03:16 PM

No, I've lived in the same state for close to 18 years. Most of it is due to the tax code changes coming on line. A few dollars are lost with local tax increases...
Welcome to PF RonE. Could you be more specific? So you mean federal income taxes have already increased? Or what?

RonE

Oct14-10, 03:34 PM

OmCheeto

Oct16-10, 10:49 AM

Just the tip of the iceberg so to speak. All this waste and pork... and I should pay more? Why?

Then don't. Just move to Somalia and don't pay any taxes.

If it was true, what they say about taxes, then the best opportunities would be in the places with the least taxes... like Somalia. But it's not true, is it? Is it? It's not true. The best opportunities to create great wealth, in this country — and in the world — are in high-tax places.

Every industrialized democracy... every single one... is a high-tax, high-regulation, high-government society. And that is because these two things are inextricably intertwined. I am not here because I am a do-gooder. I don't want to pay more tax for fun. I want to pay more tax because it will create more prosperity for you and me.

(ref) (http://www.nwprogressive.org/weblog/2010/10/debate-over-i-1098-at-uw-tacoma-lives.html)

turbo

Oct16-10, 10:59 AM

lisab

Oct16-10, 11:11 AM

One of Nancy Pelosi's favorite tag lines is "The evil rich."

Do you have a link showing Speaker Pelosi has ever used that term?

I googled:

"the evil rich" pelosi

and just got a bunch of right-wing blogs :rolleyes:.

Gokul43201

Oct16-10, 12:36 PM

The tax brackets across the board increased in 2008 and 2009 and 2010. Just the standard in your face income tax. Did your state raise their tax rates? I don't see anything in the Fed Income Tax brackets - only the tiny adjustments for inflation. For instance, see the tables below for single filers:

http://i54.tinypic.com/ei11eq.png

http://i54.tinypic.com/k4aslk.png

http://i55.tinypic.com/2qbglf7.png

I can't think of any recent changes to the Federal Tax code since ... 2003 maybe? And I can't recall any legislation that raised income taxes in over a decade now. If anything, you should have seen tax credits from ARRA and rebates from the Bush Stimulus Act.

OmCheeto

Oct16-10, 12:41 PM

Do you have a link showing Speaker Pelosi has ever used that term?

I googled:

"the evil rich" pelosi

and just got a bunch of right-wing blogs :rolleyes:.

Yah, I couldn't find a reference either.

And everyone knows that it's the poor that are evil.

When was the last time a rich person came onto your back porch and stole 2 ladders and your deep cycle battery?

My porch light is no longer solar powered. :cry:

But thank god crackheads are too ignorant to know a $250 solar panel is worth more than the $5 he got for the 7 year old, almost dead anyways battery core. A pity we can't tax stupid.

Add to that a 40+ year old 5 1/2 hp outboard motor that I just discovered missing.......
Oh well, at least my back yard is getting cleaned up.
Thank you! Crackheads!

CRGreathouse

Oct16-10, 03:14 PM

But thank god crackheads are too ignorant to know a $250 solar panel is worth more than the $5 he got for the 7 year old, almost dead anyways battery core. A pity we can't tax stupid.

It's called the lottery.

CRGreathouse

Oct16-10, 03:17 PM

Do you have a link showing Speaker Pelosi has ever used that term?

I haven't heard it, myself. A search for
"evil rich" site:pelosi.house.gov
came up empty, and likewise with
"evil rich" site:speaker.gov/newsroom/speeches

I encourage anyone doing similar searches to omit the article as I have done.

CRGreathouse

Oct16-10, 03:22 PM

For instance, if the top marginal income tax rate is low, a business-owner can and will take profits in the form of income. If the marginal rate is higher, and he doesn't want to pay more taxes, he doesn't take the profits as income and instead plows them back into the business, building its value.

That's possible. It's also possible that, facing high taxes, business owners close up shop rather than pay the taxes. This happened to my brother's employer, a small business then employing about a half-dozen or dozen workers. (No worries, my brother got a different job.)

Ivan Seeking

Oct16-10, 03:26 PM

That's possible. It's also possible that, facing high taxes, business owners close up shop rather than pay the taxes. This happened to my brother's employer, a small business then employing about a half-dozen or dozen workers. (No worries, my brother got a different job.)

Given that his competition bears the same tax burden, obviously your brother's employer had other problems. The market should adjust for any increased cost of production or services.

It often strikes me that the right seems to have no faith in the market.

CRGreathouse

Oct16-10, 03:33 PM

Given that his competition bears the same tax burden, obviously your brother's employer had other problems.

Absolutely it had other issues. [Buy me a beer and you can hear the whole story...!] But so do many small businesses. When taxes increase, certeris paribus, the worst-off businesses will fail; stronger ones will merely cut costs (reducing profits, overhead, and excess jobs). In fact the two can be combined: when costs to businesses increase (e.g., due to a tax increase), businesses cut their own costs (layoffs, reduced hours and profits, consolidation, etc.); if these reductions reduce profits (or, for that matter, jobs) below 0, the business closes.

It often strikes me that the right seems to have no faith in the market.

Quite possible. What did you have in mind?

Ivan Seeking

Oct16-10, 03:46 PM

Absolutely it had other issues. [Buy me a beer and you can hear the whole story...!] But so do many small businesses. When taxes increase, certeris paribus, the worst-off businesses will fail; stronger ones will merely cut costs (reducing profits, overhead, and excess jobs). In fact the two can be combined: when costs to businesses increase (e.g., due to a tax increase), businesses cut their own costs (layoffs, reduced hours and profits, consolidation, etc.); if these reductions reduce profits (or, for that matter, jobs) below 0, the business closes.

You left out the most important option: Raise the price of their services or goods.

Quite possible. What did you have in mind?

You seemingly did this just now. But I have noticed this much of late. Tea partiers esp who bend my ear will defend the free market, but show no faith in it. One guy was recently telling me how no one in Oregon can get health insurance for their kids because of Obama care. Even if this were true, which I seriously doubt, the market will adjust. When I asked why he had no faith in the market, he fell silent.

CRGreathouse

Oct16-10, 04:03 PM

You left out the most important option: Raise the price of their services or goods.

Yes, absolutely. (Actually, I was thinking of the percentage of the tax that they are forced to take on in order to keep prices at a competitive level, which is based on competitor's prices and ultimately the price elasticity of demand. But that was a shortcut I shouldn't have used here, at least not without spelling it out.)

You seemingly did this just now.

I question both assumptions: that I'm (a representative of) "the right", and that I have no faith in the market.

One guy was recently telling me how no one in Oregon can get health insurance for their kids because of Obama care. Even if this were true, which I seriously doubt, the market will adjust. When I asked why he had no faith in the market, he fell silent.

I guess that could be taken as "many in Oregon can't afford healthcare now". I don't know if that's true. Personally, I'll soon learn whether I need to drop my coverage as a result of the price increases. (My company will announce the new cost schedule next week, I think.) Fortunately I'll be fine either way: I'm in excellent health.

Since this "one guy" wasn't particularly specific, at least in your telling, I can't say whether the claim was that private insurers were refusing to cover more people, or simply that the costs were rising enough that many couldn't afford it. I've heard cases of the former, but I assume it's extremely rare.

mheslep

Oct16-10, 04:06 PM

Something frequently lost on the rabidly anti-tax crowd. For instance, if the top marginal income tax rate is low, a business-owner can and will take profits in the form of income. If the marginal rate is higher, and he doesn't want to pay more taxes, he doesn't take the profits as income and instead plows them back into the business, building its value. That has a far better influence on job creation than simple profit-taking.Following that logic the US should immediately raise its taxes to 100% and the employment problem will vanish, the economy will boom. :grumpy:

mheslep

Oct16-10, 04:09 PM

Did your state raise their tax rates? I don't see anything in the Fed Income Tax brackets - only the tiny adjustments for inflation. For instance, see the tables below for single filers:
Nice - are those tables from your personal tax software or the net?

mheslep

Oct16-10, 04:12 PM

I haven't heard it, myself. A search for
"evil rich" site:pelosi.house.gov
came up empty, and likewise with
"evil rich" site:speaker.gov/newsroom/speeches

I encourage anyone doing similar searches to omit the article as I have done.Such a phrase would never make it into a prepared speech. If she said it then its mostly likely in a Q&A session - off the cuff.

turbo

Oct16-10, 04:13 PM

Following that logic the US should immediately raise its taxes to 100% and the employment problem will vanish, the economy will boom. :grumpy:What a wonderful argument. The top marginal rate on income the lowest it has been in decades. You can look it up. Our economy was booming during periods when the marginal rate was hanging around 90% (within my life-time).

Al68

Oct16-10, 04:32 PM

Something frequently lost on the rabidly anti-tax crowd. For instance, if the top marginal income tax rate is low, a business-owner can and will take profits in the form of income. If the marginal rate is higher, and he doesn't want to pay more taxes, he doesn't take the profits as income and instead plows them back into the business, building its value. That has a far better influence on job creation than simple profit-taking.That's certainly true if the capital gains tax is significantly lower than the income tax marginal rate. But even if not, the business owner will either spend the income on goods or services, or invest it in other companies by buying stock or mutual funds.

Al68

Oct16-10, 04:37 PM

You left out the most important option: Raise the price of their services or goods.Gee, you mean consumers assume the tax burden???Tea partiers esp who bend my ear will defend the free market, but show no faith in it. One guy was recently telling me how no one in Oregon can get health insurance for their kids because of Obama care. Even if this were true, which I seriously doubt, the market will adjust. When I asked why he had no faith in the market, he fell silent.Probably because you used a bait and switch. He, like I, probably has much faith in a free market, but not much faith in a government regulated market.

CRGreathouse

Oct16-10, 05:19 PM

Such a phrase would never make it into a prepared speech. If she said it then its mostly likely in a Q&A session - off the cuff.

Have you heard her use the phrase?

CRGreathouse

Oct16-10, 05:23 PM

What a wonderful argument.

Are you actually accepting mheslep's 'slippery-slope' argument?

Assuming the answer is no (and the post was thus a rhetorical flourish), at what point does it no longer apply? I'm accustomed to using this line of questioning on purported proofs of (otherwise) unsolved mathematical conjectures; I hope you won't be bothered by its use here. (That is: this is an honest question, I'm not trying to provoke you.)

turbo

Oct16-10, 05:26 PM

Have you heard her use the phrase?Nobody has heard her use that phrase. You can count on it. It would have been on the news (actual news, not pretend-news) and all over the blogosphere with attribution. Whether or not one agrees with Pelosi's positions, it is beyond ridiculous to believe that she would be stupid enough to utter such a phrase. Politicians are not wired that way.

CRGreathouse

Oct16-10, 05:31 PM

Gee, you mean consumers assume the tax burden?

This wasn't directed at me, but for those following: essentially every tax is shouldered partially by the consumer and partially by the producer. Taxes on goods that have relatively elastic demands* are shouldered mainly by the producer, while goods with relatively inelastic demands** pass most of the costs on to the consumer.

Of course there are also deadweight losses (consumers who won't buy the product at the higher price, and thus provide neither tax for the government nor revenue for the company, but also no longer benefit from the product) -- but that's neither here nor there.

* For example, there are easy substitutes: orange juice can be replaced by apple juice and grape juice, and to a lesser extent lemonade and Sprite.
** For example, patented medication and goods where switching to substitutes is costly, e.g. crude oil.

CRGreathouse

Oct16-10, 05:32 PM

Nobody has heard her use that phrase. You can count on it. It would have been on the news (actual news, not pretend-news) and all over the blogosphere with attribution. Whether or not one agrees with Pelosi's positions, it is beyond ridiculous to believe that she would be stupid enough to utter such a phrase. Politicians are not wired that way.

I don't think anyone here has heard her say that, thus my (suggestive) question.

Incidentally, I disagree with your last sentence -- little though that has to do with the present situation. I've heard lots of stupid things from politicians.

Gokul43201

Oct16-10, 05:37 PM

Following that logic the US should immediately raise its taxes to 100% and the employment problem will vanish, the economy will boom. :grumpy:I'd like to point out that this goes both ways. How many arguments have we heard about cutting taxes to save the economy, without the tiniest mention of how much to cut, and why that much? I've seen dozens of protest signs, forum posts, opinion pieces, etc. demanding lower taxes and spending and I wish I could respond with: you got it buddy, let's set both at ZERO starting today, and see how that works out :grumpy:

Nice - are those tables from your personal tax software or the net?The net - it was among the top hits in a Google search for Federal tax brackets: http://www.moneychimp.com/features/tax_brackets.htm

mheslep

Oct16-10, 05:39 PM

Have you heard her use the phrase?Nope

mheslep

Oct16-10, 05:49 PM

I'd like to point out that this goes both ways.In the short term at least I'd disagree. On the sole issue of jobs, turbo1's topic, I'd say taxes and jobs go only one way, at least in the short term. Revenue to run the government is also required for other reasons, and telling T-bill holders their Tbills are going to default would eventually cause other problems. BTW, there's a study on how much government is actually optimal for max jobs: 14% of GDP.

OmCheeto

Oct16-10, 05:50 PM

Gee, you mean consumers assume the tax burden???Probably because you used a bait and switch. He, like I, probably has much faith in a free market, but not much faith in a government regulated market.

Perhaps it's the fact that I'm too much of an engineer at heart to agree with you.

Whenever something was prone to "running away" as in "It's going to freakin' explode!", we'd put a governor on it.

But that was the steam driven section, the electrical section simply had regulators.

But I'm being flippant as usual. The over $250k tax cuts should be allowed to expire this coming new year. The remaining tax cuts can go bye-bye after Barry* leaves office.

I'd prefer a more "governed" increase in taxes, say a 1% per year increase, to allow the economy. investors, and last but not least, me, to adjust.

I'm tempted to say; "I mean really!", but I know I've used that line before, and I feel like John Stossel when I use too many "Give me a break" type lines,..... But then again..... I mean really, didn't we go from $2.00/gal gas to about $4.5/gal gas in a period of about, well, it seemed to me anyways, like 6 months?
Did we die?
Did we survive?
Was that not like a tax?
How was it different from a tax?
How did we benefit from that hike?
Did we learn anything from that hike?

lame ***, trying to keep down with the 20 year olds lingo preemptively deleted.

*Dumb *** kid got suckered into making a promise he should have never made.
hmmmm..... Maybe he can switch parties while in office, and claim he's Bush Sr.?
"Read my lips!"

CRGreathouse

Oct16-10, 05:53 PM

I'd like to point out that this goes both ways. How many arguments have we heard about cutting taxes to save the economy, without the tiniest mention of how much to cut, and why that much? I've seen dozens of protest signs, forum posts, opinion pieces, etc. demanding lower taxes and spending and I wish I could respond with: you got it buddy, let's set both at ZERO starting today, and see how that works out :grumpy:

Next time you should say that, then report back what's said. It's evident (to me) that the issue in both cases is marginal cost (amount of tax plus deadweight loss) vs. marginal benefit, but I'd be curious to see how people on 'both sides of the fence' think about this one.

CAC1001

Oct16-10, 06:35 PM

If it was true, what they say about taxes, then the best opportunities would be in the places with the least taxes... like Somalia. But it's not true, is it? Is it? It's not true. The best opportunities to create great wealth, in this country — and in the world — are in high-tax places.

IMO, this is a rather silly statement. The best opportunities are always in the places with the least taxes and regulations, provided you're in a developed, Westernized nation. You are going to find far more opportunity in the United States than you will France, and within the United States, you'll find a far more business-friendly climate in Texas than in California.

What his statement should say is that "Within industrialized nations with an established market economy..." or something like that.

Places like Somalia have no functioning government or institutions necessary for a market economy to develop.

There is no established financial or banking system (you cannot create businesses without a financial system in place).
No education system.
No educated workforce.
No established legal system.
No framework of laws.
No way to protect the rights of the citizens.
No way to keep what government may form accountable.
No infrastructure (roads, bridges, transportation, electrical, plumbing, heating, ventilation, etc...)

And so forth. Third World nations tend to lack all of this stuff.

For example, take bankruptcy law. This is very important. America has some of the most lenient bankruptcy laws in the world. Bankruptcy law is needed because without it, no one in their right mind will risk starting a business, because should they go bankrupt, they end up in jail. And hence the kicker that they cannot get out of jail until they pay off their debts, but they can't pay off their debts if they're in jail.

That one variable in itself is a crucial aspect of a nation being able to develop a market economy.

Every industrialized democracy... every single one... is a high-tax, high-regulation, high-government society. And that is because these two things are inextricably intertwined.

No they aren't. The United States is not a high tax, high-regulation (hasn't been for awhile), high-government society, not like Europe (and what government programs we do have are struggling financially).

Nor is Switzerland. Most Westernized nations have higher taxes and higher regulations because they adhere to a model whereby they have very generous public services. They usually have a VAT tax, high fuel taxes, somewhat higher income taxes (not always though), and so forth, and thus much more generous welfare programs, "free" healthcare, "free" college, etc...in France, I believe that it was only recently one could start a home-based business, and usually the laws on hiring and firing people, especially young people, are much more strict (resulting in chronically-higher unemployment), companies must adhere to very generous maternity leave rules and so forth, usually the retirement age is far lower than in America.

No market economy needs to adhere to that model to be successful.

I am not here because I am a do-gooder. I don't want to pay more tax for fun. I want to pay more tax because it will create more prosperity for you and me.

IMO, all paying more taxes will do is incentivize the government to spend more and put the country into a worse situation financially. The only time taxes are going to "create more prosperity" is if they are used to pay for/develop certain institutions or infrastructure the nation is lacking that will ultimately help economic growth. For example: the interstate highway system, certain roads and/or bridges to connect cities and areas so that trade and commerce can occur, a public library system, good public schools system, etc...a certain level of taxes is needed to develop all this stuff in a nation, and then to maintain it.

But there's a limit to just how much taxation should be levied. Not everyone wants the European model, cradle-to-grave style social welfare state.

The most successful areas within Westernized democracies are those that adhere to a fairly lower tax, light and efficient regulatory framework, limited government model.

Of course there are exceptions. California can have higher taxes and more regulations than say Kentucky, but California will still be the more economically successful state. But there is a point to where you regulate and tax too much, and you really damper economic growth (also keep in mind that part of the reason California became so economically successful is because it used to be a very business-friendly state, now however, many businesses are fleeing).

Within Europe, the most successful economies are Germany and the United Kingdom (and Switzerland, though it isn't part of the EU). Germany and the UK may have more more taxes and regulations and government than say America, but in comparison to other Euro nations like France and Italy, they are pretty good.

Modern Westernized democracies with market economies are all "high-tax, high-regulation, big-government" societies to perhaps a person from the 1800s, but to a modern person, certain ones have a lot more taxes and regulations than others.

CAC1001

Oct16-10, 06:40 PM

You left out the most important option: Raise the price of their services or goods.

Raising prices in a bad economic environment is only something a government-run corporation will do. If a private business does that, they are asking to get killed. Businesses slash prices in bad economic times. Some industries are so competitive that prices get slashed to the point where it gets difficult for businesses to survive.

Remember at the height of the recession, how you could go to the mall and buy things for 50% off.

Higher taxes in this sense can actually help big businesses, like Wal-Mart, because those big global corporations can absorb the higher costs (the same applies with higher regulations). Smaller companies usually either have to fire people, reduce their goods and services being offered, reduce pay, benefits, etc...or perhaps try raising prices and increasing the quality of service, but that is risky.

Either way, all of this helps their big business competitors if it helps drive the smaller companies out of business.

CAC1001

Oct16-10, 06:46 PM

What a wonderful argument. The top marginal rate on income the lowest it has been in decades. You can look it up. Our economy was booming during periods when the marginal rate was hanging around 90% (within my life-time).

When the marginal rate was around 90% though, very few people or businesses earned enough to fall into that bracket. The modern equivalent would be if we levied a 90% top marginal bracket on people making $30 million a year in income, and up.

Also, the UK tried a 90% top bracket under Labour party pre-Thatcher, and their economy didn't do too well.

Having said all this, I do think that if the top marginal rates were allowed to expire, at least on ordinary income, that it may not be disastrous in the way some are making out, because as you have pointed out, a person making say $300K a year, the entire $300K is not taxed at the top bracket. Only a portion of it gets taxed at the top bracket. One has to average all of the portions of the income taxed at the various brackets together to get the actual income tax rate for such a person.

However, I also don't think allowing the top rates to expire will bring in much revenue or that the government would be responsible in spending it.

CAC1001

Oct16-10, 06:50 PM

But then again..... I mean really, didn't we go from $2.00/gal gas to about $4.5/gal gas in a period of about, well, it seemed to me anyways, like 6 months?
Did we die?
Did we survive?
Was that not like a tax?
How was it different from a tax?
How did we benefit from that hike?
Did we learn anything from that hike?

That was the straw the broke the camel's back regarding the American automotive industry. Although did it go as high as $4.50? I thought it was more like $3-something...?

Office_Shredder

Oct16-10, 07:30 PM

That was the straw the broke the camel's back regarding the American automotive industry. Although did it go as high as $4.50? I thought it was more like $3-something...?

Depends on where you were but it definitely was over 4 bucks a gallon
http://www.eia.doe.gov/petroleum/data_publications/wrgp/mogas_home_page.html

June 2008 the average price was 4.10 a gallon

airborne18

Oct16-10, 08:49 PM

The tax brackets across the board increased in 2008 and 2009 and 2010. Just the standard in your face income tax. This does not include all the other taxes that went up they take out of my check. On top of that... looking at my current phone bill...the federal excise, federal uni and federal subscriber line taxes all went up... again. Is it much dollar wise on those three? No about a total of 7.00 for all three monthly. But, when you add that the income, the federal taxes on everything else, cable (cable modem cant work without it), SSI, Medicare, etc so on and so forth.... All taxes increased these last two years. At least the ones I have to pay, which I imagine most people do who live an average life the under 250,000.00 crowd.

But still... the point really is, why? Why should I pay more taxes when the feral government wastes, hands out, and refuses to stop spending? Why should I pay more and more taxes cutting my ability to provide for my family when more and more are not paying any.

All this stimulus money, bailing out corporations, and pork galore... and I am to pay more? Why?

BTW... just the FIT, the difference between what I made two years ago to one I just got recently. Just in this tax alone... 10.2% increase. I pulled my check stub from the last two years. There is a 3.00 difference for the same month two year ago. (This is due to the fact I dropped dental coverage.)

I wish more people would calculate their tax burden from the bottom up. The federal marginal rate is just one part of the cookie.

People always throw out percentages about various income brackets paying more than their fair share versus another bracket. While a family of 3 making under 50,000 has a small federal income tax liability, they also never max out on their fica contributions. And they also do have the same level of tax shelters that higher income brackets enjoy.

And on the state and local level they have no tax breaks and have even a bigger burden.

Now that there are a large number of people stuck with negative equity in their real estate, and cannot move, local jurisdictions will bump up real estate taxes to cover the shortfalls in their revenue.

CRGreathouse

Oct16-10, 09:49 PM

airborne18

Oct16-10, 10:12 PM

FICA is an interesting case, though, because it gives benefits -- that is, under the usual definition, it's not a tax (just an obligatory bad investment). With a true tax, paying more doesn't result in any direct benefits to the taxpayer. Probably the best way to compare its cost as a part of a tax burden is to count the contributions less the price of an equivalent annuity.

Does anyone know of such a comparison? I'd be interested to see it.

Social Security and Medicare are taxes. The unemployment you can probably say is a mandatory insurance.

Anything mandated is a tax. And it is for the common good and not a payment for a future service. That is what government is all about. You can receive social security benefits if you have not worked. Though they closed the windows a few years ago, it is still possible.

You can do the comparison, I took a finance course where they did it. But the issue illustrated is that social security is not a defined benefit plan. Even though it was sold that way decades ago, it is not.

They do keep an accounting of the trust fund, but that is misleading. Years ago congress eliminated the boundary under the correct assertion that no matter what was in the trust fund the tax payers would have to fund the benefits.

Why this distinction matters is that the trust fund only exists on imaginary paper. If it were a real defined benefit plan and independent government fund ( like some agencies are ), they could actually invest the money for a return. This keeps coming up every so often in the political realm. But it is just another account in the treasury and it is used to loan money from agency x to agency y at a very low interest rate.

Al68

Oct16-10, 11:50 PM

Anything mandated is a tax. And it is for the common good and not a payment for a future service. That is what government is all about.That's not what the U.S. government was chartered to be "all about". Not even a little.

Legitimate government (to a libertarian) is "all about" protecting liberty, not taking it away. Legitimate taxation is for "services rendered", like defending liberty from foreign invaders and criminals.

airborne18

Oct16-10, 11:56 PM

That's not what the U.S. government was chartered to be "all about". Not even a little.

Legitimate government (to a libertarian) is "all about" protecting liberty, not taking it away.

We are a representative democracy with a constitution that grants the power to create laws to the Congress. Which means it is defined constantly. So it is all about whatever Congress passes, the President signs, and if the Supreme court upholds it.

That is what it is all about. 100 years ago we had different laws than today. It is an evolution.

You have to take the good with the bad.

A charter has not figured into since the articles of confederation, which was the lack of any federal government, or at least not one that does anything.

airborne18

Oct17-10, 12:01 AM

Call me crazy, but given the fact that I have spent my life protecting and defending the Constitution, I tend to be a stickler for what it means. And what I have given up the better part of my life for.

100 years ago it was Okay for our government to let disabled vets starve to death. Luckily we have a system that evolves to correct such things. No matter how inconvenient or distasteful it might be to others who don't feel it is the responsibility of our government to do so.

Al68

Oct17-10, 12:09 AM

We are a representative democracy with a constitution that grants the power to create laws to the Congress.Congress does not have general lawmaking power according to the constitution. It has specific enumerated powers delegated to it.A charter has not figured into since the articles of confederation, which was the lack of any federal government, or at least not one that does anything.The constitution is the federal government's charter.

airborne18

Oct17-10, 12:26 AM

Congress does not have general lawmaking power according to the constitution. It has specific enumerated powers delegated to it.The constitution is the federal government's charter.

Yes Congress does. There are specific duties that lie with Congress and no other branch, and there are specific power prohibited. But they have wide powers to pass pretty much any law. Whether the Supreme Court rules it unconstitutional is another matter.

If the president and congress agree, it is pretty much a done deal. Unless the court throws it out.

airborne18

Oct17-10, 12:29 AM

airborne18

Oct17-10, 12:44 AM

Al68

Oct17-10, 12:45 AM

Yes Congress does. There are specific duties that lie with Congress and no other branch, and there are specific power prohibited. But they have wide powers to pass pretty much any law. Whether the Supreme Court rules it unconstitutional is another matter.No, it's the same matter. Congress does not have the legitimate power to pass unconstitutional laws to begin with. That's why the Supreme Court would throw it out. Congress has the powers listed in the constitution, no more, no less.

And every congressman takes an oath of office not to violate the constitution. And every Senator. And the President. The Supreme Court isn't alone in its obligation to prevent unconstitutional laws from passing.The US Constitution is not a charter. There is a major difference, and that is why the US Consititution is uniqueTry looking up the word charter in the dictionary. "Constitution" is even listed as a synonym. The purpose of the U.S. constitution is to serve as the federal government's charter.

More importantly is the concept that the constitution is the source of the legitimate power of the federal government. And its legitimate power is limited in scope.

Al68

Oct17-10, 12:48 AM

Also, while we are at it. You have to take the Constitution in its totality and not piecework. Each amendment is binding. So once congress and the states agree on an amendment, it is a done deal. Even the Supreme court has no say in it at that point.So the tenth amendment which says that all powers not delegated to the federal government by the constitution are reserved to the respective states or to the people is a "done deal"? I agree! That's exactly what I've been saying.

airborne18

Oct17-10, 01:02 AM

No, it's the same matter. Congress does not have the legitimate power to pass unconstitutional laws to begin with. That's why the Supreme Court would throw it out. Congress has the powers listed in the constitution, no more, no less.

And every congressman takes an oath of office not to violate the constitution. And every Senator. And the President. The Supreme Court isn't alone in its obligation to prevent unconstitutional laws from passing.Try looking up the word charter in the dictionary. "Constitution" is even listed as a synonym. The purpose of the U.S. constitution is to serve as the federal government's charter.

More importantly is the concept that the constitution is the source of the legitimate power of the federal government. And its legitimate power is limited in scope.

Congress can pass any law they like.

The supreme court's job is to deem laws unconstitutional.

And if congress amends the constitution, they can grant themselves more power than originally stated.

I know the oath rather well. I took it.

And amending the constitution is part of their job as well.

See you really cannot surgically pick out the parts you like and don't like.

And the US Constitution is not a charter. Typically when you talk about corporate constitutions the term charter is relevant, but not specifically with the US Constitution. Now the Articles of Confederation is more of a charter ( and treaty ).

The Constitutional Congress had a charter. All of the Colonial Congresses were formed by charter. But the US Constitution is not a charter, and it is specifically not a charter.

It is why the debates about the Federalist papers are meaningless, and the intent of the framers of the Constitution. Because they specifically designed it to be a fluid framework.

All that matters is what we have today, after taking all the amendments in their totality.

airborne18

Oct17-10, 01:11 AM

So the tenth amendment which says that all powers not delegated to the federal government by the constitution are reserved to the respective states or to the people is a "done deal"? I agree! That's exactly what I've been saying.

Well it is the point of the most drama, that is for sure. But the issue still remains that any amendment can expand the powers of the federal government, and deny specific state's rights. Plus the never ending fight over states rights vs federal laws.

The state's rights compromise was poorly designed in the first place, and it did not solve the issues of the day. Though it was needed for passage of the Constitution.

CAC1001

Oct17-10, 01:30 AM

100 years ago it was Okay for our government to let disabled vets starve to death. Luckily we have a system that evolves to correct such things. No matter how inconvenient or distasteful it might be to others who don't feel it is the responsibility of our government to do so.

From what I've seen, only the most hardcore super libertarian types (the kind who want to get rid of pretty much every federal agency in existence) think that.

Even as right-wing (in terms of belief in limited government) a guy as the late great economist Milton Friedman, said that a society has to take care of the people who truly can not take care of themselves, such as the elderly and the mentally and physically disabled.

IMO there's a difference between sound social safety nets and an outright social welfare state.

Al68

Oct17-10, 01:38 AM

Congress can pass any law they like.

The supreme court's job is to deem laws unconstitutional.Nonsense. And too obvious to argue about. Have you ever read the constitution?And if congress amends the constitution, they can grant themselves more power than originally stated.No, they can't. The most congress can do is recommend amendments to the states. Then the states decide whether to grant congress more power or not.I know the oath rather well. I took it.And that's why you think it's just fine for congress to pass any law they like, constitutional or not?See you really cannot surgically pick out the parts you like and don't like.I am one of the very few on this forum that considers it important what the constitution says (in its entirety) instead of what I would like it to say.And the US Constitution is not a charter. Typically when you talk about corporate constitutions the term charter is relevant, but not specifically with the US Constitution. Now the Articles of Confederation is more of a charter ( and treaty ).

The Constitutional Congress had a charter. All of the Colonial Congresses were formed by charter. But the US Constitution is not a charter, and it is specifically not a charter.Nonsense, I already addressed this. It's a charter by definition and obviously so to anyone who has ever read it and knows what the word charter means.

airborne18

Oct17-10, 01:51 AM

Nonsense. And too obvious to argue about. Have you ever read the constitution?No, they can't. The most congress can do is recommend amendments to the states. Then the states decide whether to grant congress more power or not.And that's why you think it's just fine for congress to pass any law they like, constitutional or not?I am one of the very few on this forum that considers it important what the constitution says (in its entirety) instead of what I would like it to say.Nonsense, I already addressed this. It's a charter by definition and obviously so to anyone who has ever read it and knows what the word charter means.

I am not arguing. And you already said that you don't believe in the Constitution. So not sure what point you are trying to make.

And no it is not a charter. Simple as that. I know the group that makes that argument because it is the key to their premise. But it is wrong. The US Constitution is not a charter. And that angle has been shot down in court.

Congress has to pass any amendment. Another key point. Which I know does not fit into that same group's agenda. The states simply do not pass amendments. Congress has to originate it, pass it with a that 2/3rds. And then the states have to ratify it. States cannot Amend the Constitution without congress. that is what you imply, and it is wrong.

Al68

Oct17-10, 02:09 AM

I am not arguing. And you already said that you don't believe in the Constitution.Absolute lie. You are the one saying that it's fine for congress to pass any law it likes despite the many times the constitution says "congress shall pass no law......" while I am ardently against the constitutional violations you advocate.And no it is not a charter. Simple as that. I know the group that makes that argument because it is the key to their premise. But it is wrong. The US Constitution is not a charter. And that angle has been shot down in court.Take it up with Webster. I have no more patience with inane nonsense as this.Congress has to pass any amendment.False. Try reading the constitution.The states simply do not pass amendments. Congress has to originate it, pass it with a that 2/3rds.False again. Try reading the constitution.States cannot Amend the Constitution without congress.False again. Why don't you read the constitution before posting any more idiotic nonsense?

It seems pretty obvious that you will be absolutely shocked by what you would read.

I'll even help: http://www.usconstitution.net/const.html

airborne18

Oct17-10, 11:11 AM

Absolute lie. You are the one saying that it's fine for congress to pass any law it likes despite the many times the constitution says "congress shall pass no law......" while I am ardently against the constitutional violations you advocate.Take it up with Webster. I have no more patience with inane nonsense as this.False. Try reading the constitution.False again. Try reading the constitution.False again. Why don't you read the constitution before posting any more idiotic nonsense?

It seems pretty obvious that you will be absolutely shocked by what you would read.

I'll even help: http://www.usconstitution.net/const.html

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

And you are the one who said our current government is not "as intended", so you are not a true believer.

You can insult as much as you want. It does not change the fact that congress can pass whatever they want. And it is up to the supreme court to rule it unconstitutional. And Senators and Reprentatives are not traitors to the Constitution by passing any bill they want.

And you are fine contributor to these forums. well done.

mheslep

Oct17-10, 05:21 PM

But they have wide powers to pass pretty much any law. What authority grants Congress to "pass pretty much any law."? Say, abolish the state governments? Or, arrest me because Congress doesn't like the way I look? Could you point to that authority in the constitution?

Al68

Oct17-10, 09:42 PM

And you are the one who said our current government is not "as intended", so you are not a true believer.I've been defending it against you advocating that it be violated willy-nilly, even to the extreme extent of saying that congress can pass any law it wants. It doesn't get any more anti-constitution than that.

I would even go so far as to say no one else who posts on this forum will agree with you. No one. And no politician would ever speak of such an anti-constitution position even if they did believe it.You can insult as much as you want. It does not change the fact that congress can pass whatever they want.So that's why the constitution goes through so much trouble to list what congress can and can't do: because they can do anything they want?

The phrase "Congress shall make no law respecting an establishment of religion" really means congress can pass any law they want?

Are you seriously this confused? Are you playing some kind of bizarre game with this thread? :confused: And it is up to the supreme court to rule it unconstitutional.Why would the Supreme Court rule a law unconstitutional if congress had the authority to pass it according to the constitution? And Senators and Reprentatives are not traitors to the Constitution by passing any bill they want. If the bill is unconstitutional, they are, obviously. What else would "traitors to the constitution" mean?

Gokul43201

Oct17-10, 10:18 PM

Al68

Oct17-10, 11:02 PM

I think the point being made here is that it is not within Congress' power to determine the Constitutionality of a bill/law; that is entirely the Supreme Court's job. Congress can try to makes its best guess of whether a law is Constitutional, and one hopes, would try to be honest to that guess, but that's about all one can expect.It's certainly within congress' power, and their duty, to not pass a bill they determine is unconstitutional. And it's the President's duty to veto any law he determines to be unconstitutional, as even Obama has threatened to do for that very stated reason. (confiscating AIG employee bonuses ex post facto via a "special" tax law).

Of course the Supreme Court might overturn a law passed by congress because they disagree about its constitutionality, but that's a different issue entirely. I think this is coming down to a matter of semantics. Are people allowed to steal? Sure! As long as they are ready to do the time when caught and convicted.Now that's a good analogy. Except Congressmen never have to do the time.

mheslep

Oct18-10, 12:34 PM

I think this is coming down to a matter of semantics. Are people allowed to steal? Sure! As long as they are ready to do the time when caught and convicted.On a lark, I'll certainly go along with that analogy for the US Congress.

But I'm not willing to tally the matter completely to semantics. I see more and more the view (as per up thread) essentially saying the federal government can do whatever it chooses to do, via some or another rationale like the government evolves the the ability to do so. When I see this view espoused by elected leadership, I find it more crackpot and invidious than anything accredited the Tea Party by its naysayers. Rep Pete Stark, D. California since 1973:
http://www.youtube.com/watch?v=W1-eBz8hyoE#t=2m45s

airborne18

Oct18-10, 02:38 PM

On a lark, I'll certainly go along with that analogy for the US Congress.

But I'm not willing to tally the matter completely to semantics. I see more and more the view (as per up thread) essentially saying the federal government can do whatever it chooses to do, via some or another rationale like the government evolves the the ability to do so. When I see this view espoused by elected leadership, I find it more crackpot and invidious than anything accredited the Tea Party by its naysayers. Rep Pete Stark, D. California since 1973:
http://www.youtube.com/watch?v=W1-eBz8hyoE#t=2m45s

I agree it is not a matter of semantics and it goes to the heart of the issue. It is like the tea party and people from outside of my state telling us who will represent my state's best interest. It is my Senator and Delaware's Senator and nobody else's business.

And I am personally tired of the traitor term being thrown around. A local Tea party radio host called me a traitor because I asked a simple question about a tea party position.. It is vulgar and I am tired of hearing it. And the irony is that the people throwing it around have done the least to serve the US Constitution.

Yes Congress is independent of the other two branches and has the power to pass pretty much any law they want, and in the few cases it gets shot down, they can push to amend the constitution.

And the Supreme Court has the final say on what is and is not Constitutional.

It is just the like the far left does not thing Congress had the power to pass the Patriot Act, which seems to trample the bill of rights, but Congress did it.

Just because a high paid talk show host, who is profiting from whole thing, comes up with some notion of what powers Congress should be does not make it so. No matter how many tri-cornered hats people buy, our Constitution today has evolved alot since the 18th century.

I wish we back to when people did not have the specific right to vote for Senators.

drankin

Oct18-10, 02:51 PM

Does anyone know if this will apply to the 2010 tax season? If so, I haven't budgeted for it. I imagine it will apply to 2011 if it expires but I don't know for sure.

mheslep

Oct18-10, 03:00 PM

No matter how many tri-cornered hats people buy, our Constitution today has evolved alot since the 18th century.
No matter how many times people say the constitution has 'evolved' doesn't make it so. There are another dozen or so amendments since the 18th century. If you want to change it further amend it further.

talk2glenn

Oct18-10, 03:09 PM

Does anyone know if this will apply to the 2010 tax season? If so, I haven't budgeted for it. I imagine it will apply to 2011 if it expires but I don't know for sure.

The expiration will apply to the 2011 tax year. I wouldn't panic; when the new Congress is seated, they will almost certainly retroactively close the loophole for most of us. Whether it's everyone or most depends on the extent of the Republican gains.

And Senators and Reprentatives are not traitors to the Constitution by passing any bill they want.

Google the "oath of office". The language is a little hyperbolic, but technically, Congressmen are bound by oath to "faithfully execute" their powers and to "support and defend" the Constitution. It is not the Supreme Courts job to decide whether or not a law is unconstitutional; the power of judicial review is not found anywhere in the founding document. Technically, a law cannot be unconstitutional - the only valid laws in the United States are those which pass constitutional muster. This is why judicial review is an implied power; the court is deciding ex post facto that Congress erred when it affirmed unconstitutional statutory language, but because it was unconstitutional, it was never law in the first place.

Congress has to pass any amendment.

Someone slept through high school civics. Google "constitutional convention". Technically, though it has never been attempted, the procedure is in place for the States to amend the constitution or even dissolve the federal government, independent from the Congress or any other federal agent. All of this was very carefully and deliberately designed to protect us from an overreaching federal bureaucracy.

mheslep

Oct18-10, 03:48 PM

CAC1001

Oct18-10, 05:18 PM

Google the "oath of office". The language is a little hyperbolic, but technically, Congressmen are bound by oath to "faithfully execute" their powers and to "support and defend" the Constitution. It is not the Supreme Courts job to decide whether or not a law is unconstitutional; the power of judicial review is not found anywhere in the founding document.

Just a bit confused here, but even though the Constitution doesn't specifically mention the SCOTUS, isn't it still the job of the SCOTUS to make sure that laws passed by the government keep in line with the Constitution? My understanding was that this had been the purpose of courts for many years when the Constitution was written, and thus they didn't feel it was necessary to literally mention the SCOTUS in that sense, that it was implied, because without a SCOTUS, what is the purpose of a constitution? There's no check on the government, so the government could just twist the constitution to justify whatever legislation they want. So it was implied that with a constitution, there'd be a supreme court.

Gokul43201

Oct18-10, 05:23 PM

Rep Pete Stark, D. California since 1973:
http://www.youtube.com/watch?v=W1-eBz8hyoE#t=2m45sStark looks (judging only from that clip) like he's going senile. If he's always been this way, that definitely reeks of crackpot. But seeing that he's close to 80 yrs old, I'm going with the senile theory for now.

As for the question raised by the person in that town hall meeting, the exact same question can be raised in the context of the fire service or the national defense. Honestly, I can't say I understand how any of these things are constitutional, but then I'm not very well informed in the law.

Gokul43201

Oct18-10, 05:50 PM

It is not the Supreme Courts job to decide whether or not a law is unconstitutional; the power of judicial review is not found anywhere in the founding document. Technically, a law cannot be unconstitutional - the only valid laws in the United States are those which pass constitutional muster. This is why judicial review is an implied power; the court is deciding ex post facto that Congress erred when it affirmed unconstitutional statutory language, but because it was unconstitutional, it was never law in the first place.Making sure I understand. Correct me if I have this wrong.

When it is said that the SC has overturned a law passed by Congress, this is not to be taken literally. The SC does not have a power to actually overturn anything; it only has the job of expressing its opinion on whether something is constitutional or not. It is then up to the Executive and Legislature to respond accordingly, and the traditional response is for them to agree with the SC's decision and make the necessary changes to the law and its execution. But if they colluded to defy the Court nonetheless, there is nothing the SC can do.

Do I have that right? That would be a non-negligible revision of my knowledge - I guess I've pictured the SC as the thing that Hamilton would have liked it to be.

talk2glenn

Oct18-10, 07:22 PM

Just a bit confused here, but even though the Constitution doesn't specifically mention the SCOTUS, isn't it still the job of the SCOTUS to make sure that laws passed by the government keep in line with the Constitution? My understanding was that this had been the purpose of courts for many years when the Constitution was written, and thus they didn't feel it was necessary to literally mention the SCOTUS in that sense, that it was implied, because without a SCOTUS, what is the purpose of a constitution? There's no check on the government, so the government could just twist the constitution to justify whatever legislation they want. So it was implied that with a constitution, there'd be a supreme court.

The Supreme Court is the only court specifically mentioned in the Constitution. The rest of the Judicial branch is left to the Congress to create and organize (subject to the framework established in the bill of rights - trial by jury, etc), though the lower courts are placed explicitly below the high court in authority, with the high court hearing appeals "as to law and fact". The power of judicial review is inferred from the appeals to law statement, but not explicitly granted.

When it is said that the SC has overturned a law passed by Congress, this is not to be taken literally. The SC does not have a power to actually overturn anything; it only has the job of expressing its opinion on whether something is constitutional or not. It is then up to the Executive and Legislature to respond accordingly, and the traditional response is for them to agree with the SC's decision and make the necessary changes to the law and its execution. But if they colluded to defy the Court nonetheless, there is nothing the SC can do.

Do you mean, could Congress and/or the President simply ignore the direction of the Supreme Court? Technically, yes they could, and it has in fact happened at least once in American history. This is an important check on the power of the court - ultimately Congress controls the purse and the Executive controls the bureacracy.

Without the weight of public opinion, the directives of the Court are pretty hollow. Today, though, it is hard to imagine a case where ignoring a court order would be publicly tolerated.

But yes, in principle the Court just interprets and adjudicates law, it doesn't write it or enforce it, and it cannot force the Executive or Congress to write or enforce differently (there are some modern exceptions, of debtable consequence). In the original judicial review case, Justice Marshall wrote that acts of congress (note the language - he didn't call them laws) that conflicted with the constitution were not law, and the courts were obligated to ignore them when deciding cases.

CRGreathouse

Oct18-10, 07:54 PM

Anything mandated is a tax.

No, actually. Fees and fines are, by definition, not taxes. Generally, the distinction is that if you get something directly from it, it's a fee not a tax. The price you pay for the right to drive is not a tax.

I don't like FICA, but that doesn't make it a tax either.

The unemployment you can probably say is a mandatory insurance.

I don't know how that works. Are your benefits tied to your payments? Then I'd agree. If not, then it's just a tax.

You can do the comparison, I took a finance course where they did it. But the issue illustrated is that social security is not a defined benefit plan. Even though it was sold that way decades ago, it is not.

I completely agree -- that was the point of my post.

I'd prefer to look at a comparison someone else did. I have no background with finance, and economics is a poor substitute. In a pinch I might, but with something this large and wide-ranging I have to imagine there's something out there already.

Al68

Oct19-10, 12:06 AM

Just because a high paid talk show host, who is profiting from whole thing, comes up with some notion of what powers Congress should be does not make it so.I wonder how anyone could come up with the notion that congress has limited, specific powers instead of the power to pass any law it wants? Oh, wait....

Maybe they actually read the constitution, which unambiguously says exactly that: http://www.usconstitution.net/const.html

SSmills

Oct21-10, 09:55 PM

FINALLY. The Bush tax cut never provided any boost to the economy at all. Then we got involved in two wars and and incresed spending on all fronts. No wonder the debt is so high. We need to end the cuts because they are not stimulating the economy only sending out spiraling to bankruptcy.

Al68

Oct21-10, 11:20 PM

Just a bit confused here, but even though the Constitution doesn't specifically mention the SCOTUS, isn't it still the job of the SCOTUS to make sure that laws passed by the government keep in line with the Constitution?Yes, but that's not their job exclusively. The first barrier to unconstitutional (federal) laws lies with congress. The second barrier is the Senate. The third barrier is the President.

The Supreme Court is the last barrier, but it's problematic to wait for that, since any law they rule is unconstitutional (invalid from conception) has already been enforced. The constitution has already been violated. People have been forced to stand trial for an action that was not actually a crime, just mistakenly considered to be a crime by government. People spending years in jail for an action that government was forbidden to prohibit or restrict.

How can a congressman vote for a law, have it ruled unconstitutional by SCOTUS, and not at least resign? SCOTUS just declared them to be violators of the constitution for God's sake. How is that not a much bigger deal than it's treated? Their actions result in ruined lives, reduced legitimacy of government, reduced freedom of an entire nation, and they treat it like they just got a speeding ticket.