Thursday, July 14, 2011
Where he's at:Nate Silver of the New York Times looks at polling data on the budget issue: One framework that President Obama has offered, which would reduce the debt by a reported $2 trillion, contains a mix of about 17 percent tax increases to 83 percent spending cuts. Another framework, which would aim for twice the debt reduction, has been variously reported as offering a 20-to-80 or 25-to-75 mix.
With the important caveat that the accounting on both the spending and tax sides can get tricky, this seems like an awfully good deal for Republicans. Much to the chagrin of many Democrats, the mix of spending cuts and tax increases that Mr. Obama is offering is quite close to, or perhaps even a little to the right of, what the average Republican voter wants, let alone the average American.
posted by Quiddity at 7/14/2011 09:05:00 AM
22 comments
It is true Medicare and Social Security are going to "blow up" later this decade.
It does piss me off that I've been overpaying my FICA taxes since 1986 and they're still going to cut my SSI $1000/yr.
Incomes taxes to GDP are at historical lows:
http://research.stlouisfed.org/fred2/graph/?g=15G
making all of this sheer insanity. We're literally paying for the wars by cutting social security and medicare.
Gotta get out of this crazy place. With Obama as my friend who needs enemies.
To clarify, not that SSI is "blowing up" per se, but as the baby boom hits retirement age it is going to need to have hundreds of billions of dollars of its trust fund paid back by the general fund each year, money the GF doesn't have due to the insanely low tax rates.
We've got 3 choices here -- raise income taxes, cut social security somehow, or borrow.
The first is the responsible thing, but we are a nation of idiots who don't want to pay for government.
Few countries have their fiscal act together. Very few.
Your article is very good fit to be read because it adds new value to me
Actually, the responsible thing is to raise Social Security payroll taxes so that income equals outgo. It's supposed to be a pay-as-you-go system, so make it a freaking pay-as-you-go system.
The refusal to do so is an admission that Social Security is really a welfare program, not an old-age insurance plan.
An idiot wrote @7/15/2011 5:14 PM:
Actually, the responsible thing is to raise Social Security payroll taxes so that income equals outgo. It's supposed to be a pay-as-you-go system, so make it a freaking pay-as-you-go system.
That's only if you ignore the taxes prepaid into the Trust Fund. I.e., only if you're an a$$hole.
Troy wrote, It is true Medicare and Social Security are going to "blow up" later this decade.
In a "unified budget" sense, SS outflow does increase, but I think peaks at 1.5% GDP. Nothing to sneeze at, but Medicare and health care spending in general are what're really going to explode unless something is done.
Since we veered off into a SS discussion, everyone should realize that the vast majority of the $14T debt is owed to the SS fund. We working baby boomers have been paying a surplus over "pay as you go" and "investing" the money in T-Bills. Now as we get old, the money must be payed back. That is how SS is solvent for the next 30+ years. It is not a rip off or a pyramid scheme. The money was saved; now the rich must accept a tax increase and pay it back.
> the rich must accept a tax increase and pay it back
Of course they must. How could they not? It's not like they control the government or anything.
"Andy" said: "Your article is very good fit to be read because it adds new value to me"
*******
Have seen a couple of overly generic responses to posts here lately. Looks like the spambots have gotten pretty good at getting around bloggers version of Captcha. Either that or someone is spamming the good ol' fashioned way.
Ah, a baby boomer who loves Social Security.
Here's what actually happened.
Over the course of your working life, you paid the Social Security benefits of the previous generation. Just like your parents did. Their generation was having lots of children -- you guys -- the new investors required for a Ponzi scheme to work.
But your generation embraced birth control and abortion, and the population growth nearly flatlined. We are now just barely at replacement levels. This is the death-knell for any Ponzi scheme. Ponzi schemes require a growing pool of new investors to pay off the early investors.
But rather than face the inevitable then, the government came up with an ingenous scheme to extend the Social Security Ponzi scheme just one more generation -- to get your generation through their retirement, at the expense of collapsing the system once your generation was gone. They sold the scheme as the Social Security Trust Fund.
Under the scheme, you paid extra money into the "trust fund." That money was exchanged for T-Bills, given to the treasury, and spent on you. It was used to pay for government spending and programs that benefited your generation, like bridges, roads, welfare and other entitlements, PBS, and all the things that government spends money on. That money *was* the Clinton-era budget "surplus." Things sure were booming then, weren't they! This represents real national wealth that was taken in then, spent then, benefited your generation then, and is now gone. Now you know where all that money came from.
Now that you are near retirement, Social Security has to redeem those T-Bills in order to pay for your Social Security checks. When it does, you will receive the full value of the Trust Fund payments a second time, in the form of Social Security checks. But the wealth that was collected from you is no longer available. It was spent and used up as it was collected, so the funds necessary to pay for your institutional double-dipping needs to come from the current generation of workers.
So it worked out pretty nicely for you. You got a big government during your working years, and your kids are left with the bill when you are ready to retire.
Things aren't nearly as nice for the current working generation.
They have to pay Social Security taxes also. But those Social Security taxes are now not enough to pay your generations benefits, which means that their income taxes have to make up the difference. Over their working lives, they have to pay back the $14 trillion in bonds piled up by their parents generation, which is going to drag down the economy no matter how it is collected. Collect it from the middle class and poor, make the middle class poor and the poor destitute. Collect it from the "rich", a code-word for employers, and you drive the middle class and poor into permanent unemployment. That's where we are today. Two terrible choices.
At any rate, when today's workers reach retirement, the trust fund will be just running out. They will have been paying twice for their entire working lives, once through their payroll taxes, and once again through taxes on them or their employer, to repay the bonds. At that point, Social Security will be actually insolvent. It will have nowhere near enough income to pay benefits. It will have to either slash benefits, massively raise payroll taxes on the next generation -- your grandchildren, or continue using money from the general fund to pay the shortfall in the absence of bonds.
Your generation got double benefits.
Your children get double payments, and an insolvent system when it comes time to retire.
The system is absolutely a ripoff. Had Social Security remained a pay-as-you-go system, it would not be a ripoff. The "Trust Fund" made it a ripoff, and the ripoff victims are your children. It doesn't look like a ripoff to you because you are the beneficiary of the scam.
Bill wrote, the vast majority of the $14T debt is owed to the SS fund
Not true. A quick google search tells me it's roughly $2.5T.
@7/16/2011 7:43 AM blithered,
This represents real national wealth that was taken in then, spent then, benefited your generation then, and is now gone.
Nope. It really depends on whether the proceeds were invested, and whether they were invested wisely.
It's not like income can be put into some magic vault labeled "WEALTH!" and saved for later decades. You can either consume it or invest it.
But those Social Security taxes are now not enough to pay your generations benefits, which means that their income taxes have to make up the difference.
Not necessarily; not all income taxes fall on wages. If we were to fully tax economic rents, there'd be more than enough left over to completely get rid of tax on labor.
Collect it from the "rich", a code-word for employers...
LOL. Most of the truly rich are parasitic rent collectors. (Unfortunately much of the income tax comes from the upper middle and lower upper classes, who might collect some rents but not nearly as much as the filthy rich.)
At that point, Social Security will be actually insolvent. It will have nowhere near enough income to pay benefits.
Actually it will have enough to pay 75%.
Collect it from the "rich", a code-word for employers...
LOL. Most of the truly rich are parasitic rent collectors.
Looking at the first few entries in the forbes 400, a google search yields:
#1 Bill Gates, Microsoft, 89000 employees
#2 Warren Buffett, Birkshire Hathaway, 260519 employees
#3 Larry Ellison, Oracle, 108429 employees
#4, 7, 8, 9 A bunch of Waltons, Walmart, 1400000 U.S. employees.
#5 & 6 Charles and David Koch, Koch Industries, 70000 employees
#10 Michael Bloomberg, Bloomberg LP, 13000 employees
#11 & 12 Larry Page and Sergey Brin, Google, 24400 employees
#13 Sheldon Adelson, Sands Las Vegas, 12230 employees
#14 George Soros, Soros Fund Management. Interestingly, I can't find an employee count for Soros Fund Management.
#15 Michael Dell, Dell Computers, 103300 employees
#16 Steve Ballmer, Microsoft.
#17 Paul Allen, former Microsoft, all over the board, hard to come up with an employee count.
#18 Jeff Bezos, Amazon.com, 33700 employees
And it goes on and on. So, it seems that, contrary to your assertion, the super-rich really do hire and pay a lot of employees. I don't know what to make of your rent comment. I never said they didn't collect rent. I said they were employers. Plus, you can't really collect massive amounts of tax from them because they don't really have billions of dollars in cash and income -- they have large amounts of equity in the companies they built. Their entire income is dwarfed by the income taxes their employees pay. Sure, you could confiscate and burn off the top couple of hundred companies in America, but demonize and drive any of those companies out of business to spite one successful businessman, and tens to hundreds of thousands of employees would pay the price, and the government would lose the tax revenue from all those employees, and have to pay unemployment and welfare. So how does attacking the "super rich" help generate more tax revenue for the government?
Could it be that the millions of employees listed contributed to the creation of their employers?
Why not just play Robin Hood - steal from the rich and give to the poor. With all of the unemployed out there, you'd have lots of volunteers.
anonymous wrote,
I don't know what to make of your rent comment.
probably because you don't understand the economics of rent.
I never said they didn't collect rent. I said they were employers.
So? Doesn't mean those people wouldn't be employed at similar jobs, with similar pay, if the rents were taxed away.
Plus, you can't really collect massive amounts of tax from them because they don't really have billions of dollars in cash and income -- they have large amounts of equity in the companies they built.
Apparently you don't understand the underlying economics very well. Much/most of the equity in many of those companies is rent. If the rents had been taxed to begin with, that "equity" wouldn't be there.
Microsoft is an excellent example: enforcement of government-granted monopoly rights (referred to by the unwitting as "intellectual property rights") allowed them to collect monopoly rents arising from network effects.
How do you propose to tax away economic rent?
> So? Doesn't mean those people wouldn't
> be employed at similar jobs, with
> similar pay, if the rents were taxed away.
You mean if the profits were taxed away and the company either went out of business or was financially weakened and had to shed employees to survive?
This is something you want to do?
People who lose their jobs these days are not able to easily become "employed at similar jobs, with similar pay." It's called long-term unemployment, and there's a lot if it about.
You sound as if you expect jobs to grow out of the ground like flowers. They don't. Jobs don't just rush in from somewhere to fill a job vacuum. They have to be created, one at a time, by businessmen who are making enough profit to hire more help.
Take away their profit ...
One of the most fundamental rules of real-world economics is that if you tax something, you get less of it. If you tax job providers, you get less jobs. If you tax successful, high-paying companies, you get fewer stable, high-paying jobs.
Also, why single out copyright? Copyright is available to everyone, it doesn't constrain a natural resource, and it has failed to provide Microsoft with a monopoly. I am posting this from a Linux machine with no Microsoft products on it. Are you saying that profits earned through copyrights are illegitimate? That would be a pretty extreme position.
By the way, is anyone using "rent" here other than as a disdainful synonym for profit?
Because that's what it sounds like.
"By the way, is anyone using "rent" here other than as a disdainful synonym for profit?"
http://en.wikipedia.org/wiki/Economic_rent
"One of the most fundamental rules of real-world economics is that if you tax something, you get less of it. If you tax job providers, you get less jobs. If you tax successful, high-paying companies, you get fewer stable, high-paying jobs."
Yes, so if we tax rents we get less rent, a win for everyone.
Rent is what corrupts any economic system, socialist, communist, or capitalist.
One of the best ways to tax rents is to lax the rental value of land. That's an immense suck from the actual productive economy.
Another tax source is the profits on energy, via severance taxes. Alaska and Norway do this, Norway does it so well that they are the richest nation on the planet.
If you want to tax energy, go ahead. Energy production is one of the lowest hanging fruits when it comes to wealth production. Oil wells are quite "shovel-ready", and the benefits of cheap energy readily flow through the economy. Palin struck an excellent deal in Alaska. The oil companies were happy and productive. The state itself is solvent, and the oil industry created a lot of jobs. Everyone won.
But don't think you can simultaneously milk the energy sector and shut it down. Energy severance taxes could provide a lot of government income, but that would require that the government actively promote oil exploration and drilling, and at the moment they are trying to pinch it off. That strategy would have to come under a different President, because this one is in the pocket of the global warming industry.
I did read the wikipedia article. What I don't understand is your obsession with it, why you think it is such a bad thing, and why you think it the source of economic problems.
I mean, people have to work to afford the money to buy a piece of expensive real estate, so how is it illegitimate to profit from the value of something you paid for?
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