Wednesday, November 10, 2010
The Deficit Commission Co-Chair's report:
People are going to have a field day with it. More taxes on the middle class through higher gas taxes and elimination of the mortgage deduction, but lower marginal rates for the high earners (from 36% or 39% down to 23%). And gems like this:
Current measures of inflation overestimate increases in cost of living by failing to account for "substitution bias"
You can keep inflation very low by constantly substituting an inferior good for whatever you used to consume.
And this laugh line:
Set goal of 3% annual productivity grown in the public sector.
Why not mandate that the private sector do that as well?
If you go through the 50-page PowerPoint-like pdf (available here
), it comes off as a fully Republican document.
UPDATE: There can be a case made for increasing gasoline taxes and eliminating the mortgage deduction, but not if all it does is lower the top rate on income taxes.
Also, between 1917 and today, the lowest top marginal rate was 24%, in 1929. If the commission co-chair recommendation of 23% is enacted, that would be the lowest rate in the history of the modern income tax
, except for the first 4 years it was in place (1913, 1914, 1915, 1916).
Make fun of it all you want, but it's a possible implementation of what needs to be done.
It's harsh stuff. Water in the face. But I think that even the administration understands the looming danger. Especially with QE2. We can't borrow the deficit anymore, so we've now started printing it. I don't think that Obama wants to preside over the complete disintegration of the U.S. economy. At least I hope he doesn't want to.
So yes, it does sound like a Republican document. Perhaps that is the intent. Whatever bills come out of these recommendations are going to have to originate in a Republican House, so why submit recommendations that they are likely to ignore.
Everything in there could pass the Republican House. Getting Republican legislation through the Senate is really the wild card at this point. They have to draw some Democratic votes. Will the Democrats form a monolithic block against Republican legislation, or are enough Democrats going to tack right?
As far as Obama's signature, the only thing that is going to matter to him for the next two years is getting reelected. He is going to do whatever best furthers that goal. If the Republicans are going to volunteer to slaughter the sacred cows, Obama may just do that so that he can later claim that it was the Republicans that caused all the hardship.
Hell. It might work.
The Commission may be taking Finley Peter Dunne's Mr. Dooley's observation that the Supreme Court follows the "illiction" returns to heart. But that's not leadership, that's lemming-like. And we all thought that Bart was the dumb Simpson; Alan takes stupidity to new heights.
Anonymous wrote, Make fun of it all you want, but it's a possible implementation of what needs to be done.
Total bullsh*t. If the goal is lowering deficits and debt, why are they proposing to cut income taxes?
The problem with the economy is that the rich have plundered it. No amount of cutting their taxes and raising everyone else's or cutting holes in the social safety net will fix that.
8:03, demonstrate how the deficit is hurting the economy.
the problem with the economy is that it keeps bleeding jobs. how long are republicans (and teabaggers) going to continue support outsourcing?
from dean baker:
We did not get here because of government deficits, contrary to what Mr. Bowles seemed to suggest at the co-chairs’ press conference today. We got here because of the bursting of an $8 trillion housing bubble. This bubble was fueled by the reckless and possibly unlawful practices of the Wall Street banks, like Morgan Stanley, the bank on whose board Mr. Bowles sits.
This is important background—because the economy’s current problem has nothing, zero, nada to do with deficits. Its problem is a lack of demand. If there were more demand, more people would be employed. The government is the only force capable of creating demand right now, since the housing bubble wealth that had been fueling the economy has largely disappeared. This means that if our commission co-chairs had ever bothered to look at the current deficit in the context of the economic crisis, they would be complaining that the deficit is too small rather than too large.
why isn't obama making the same argument as dean baker?
quiddity! finally hit your income tax link. thom hartmann is alway arguing that during our post war, economic golden age, the top marginal tax rates were up in the 90s. i've been meaning to look up that table.
according to repugs, that's not supposed to be possible. we cannot have a booming economy if taxes are too high. but if you examine the past, history refutes rightwing dogma.
The demand problem won't be alleviated until people feel solvent. For years, people had felt solvent, because they saw the value of their house go up and up again. If you have a $200,000 mortgage on your house, but it is worth $400,000 on the market, then you feel more confident and are more willing to be looser with money and debt. When the situation is reversed, and you have a $200,000 mortgage on a house worth less than that, you start deferring new purchases in order to bring down debt. Like maybe paying down a credit card bill or putting away some money if you don't have debt instead of replacing the carpeting or buying a new TV.
Even more importantly, during the housing bubble, many people considered their house to be their retirement investment and purchased a larger house for the simple reason of planning for a better retirement. Now that that has been wiped out, they realize that they have no retirement nest egg, and they can't shift their savings into a new retirement instrument because they are stuck with a mortgage on a house they cannot sell without taking a loss, which they cannot pay.
Americans didn't have the gut feeling that they were overextended in debt before the crash, but they do now. That's at the heart of the demand problem, and that's why QE2 won't work. Find a way to help reduce peoples' debt loads, and then and only then will they reopen their wallets. Until then, trying to increase demand is just trying to solve the wrong problem.
anon, you already discredited yourself by claiming the deficit was hurting the economy.
What a puzzling statement. The higher the deficit, the better the economy? You really believe that?
The higher the deficit, the better the economy? You really believe that?
You're conflating two different things: Deficits as an indicator of the health of the economy, given that recessions lead to lower tax receipts, and deficits as a policy tool to improve the economy