9-9-9: The Most Massively Regressive Redistribution of Taxes Ever Seriously Considered
Herman Cain’s 9-9-9 tax plan is Classic Republican agenda.
Stephen Gordon says these graphs make him grateful that Canada is not the US:
This is what a balance-sheet recession looks like, and it’s not pretty, Worthwhile Canadian Initiative: I had never heard the expression “balance-sheet recession” before this recent episode, and it’s time I got around a comparison of the household balance sheets of the US and Canada. Of all my “Canada is not the US” posts, this is the one that makes me most grateful.
The quarterly data goes back to 1990, and it’s good to put the last few years in context. I’ve scaled all the series by price (the consumption spending deflator) and population. Here is the net worth series:
There’s been talk of a Japan-like ‘lost decade’ in the US; that seems optimistic. US real per capita net worth is back to what it was back in 1999.
The US problem is on the assets side:
The effect of the recent recession on assets in Canada is similar to that of the demise of the dot-com boom.
Aggregate household liabilities have also fallen in the US, but as can be seen in the net worth data, not by enough:
Few will be surprised to learn that the collapse of US house prices had an important effect on US asset holdings:
Although the fall in US housing assets was more dramatic, other assets lost value as well:
And lastly (although if someone can think of another interesting graph, I may add it), here is real per capita housing equity:
The US data go back to 1952, so I was able to check the last time the real, per capita value of US housing equity was at its current level. Even after looking at all of these graphs, the answer astonished me: 1978. Nineteen seventy-freaking-eight.
“In fact, right now any discussion of government involvement in the economy — even to build vital infrastructure — is impossible because it is a cardinal tenet of the new conservatism that such involvement is always and forever bad. Meanwhile, across the globe, the world’s fastest-growing economy, China, has managed to use government involvement to create growth and jobs for three decades. From Singapore to South Korea to Germany to Canada, evidence abounds that some strategic actions by the government can act as catalysts for free-market growth.”
This is why I don’t have respect for “the new conservatism.”
“The more relevant question is whether the Ryan Plan will promote the more efficient allocation of health care. You can dredge up a theoretical argument that it would. In free market fantasy land, remember, employers and individuals will shop around for the most efficient health care plans, so insurers have an incentive to make their plans more efficient. The crux of the argument is that since insurers face a competitive market, they will work hard to make their plans as efficient as possible, which means they should do a better job than Medicare, which doesn’t face competition. I’m sure this argument has been advanced a hundred times by Heritage, AEI, and so on.
The problem with that argument is that it’s completely false in practice. If that market worked, then we would have a functioning health insurance market for people under 65 (where there is no Medicare);*** but if we had that, then we would not be talking about health care today.”
(Via The Baseline Scenario.)
Legend has it that Bob Montgomery, a left-leaning economist at the University of Texas at Austin in the 1950s, was once asked if he believed in private property.
“I certainly do,” he said. “I believe in it so much I think everyone in the state of Texas should have some.”
It’s such an ecumenical line that President George W. Bush used it to good effect in a 2004 speech. The basic idea begs for extension: If capitalists are so great, shouldn’t everybody be one?
The term “shared capitalism” is a catchall for a variety of arrangements that businesses can make to share profits with a large number of employees, whether through stock ownership or incentive pay based on company performance.
“Thus we see that Republicans want their cake and eat it too. They want to use higher [CBO] revenue projections resulting almost entirely from expiration of the Bush tax cuts to prevent any discussion of tax increases to reduce the deficit, while implying that this revenue rise comes solely from faster economic growth. As Sen. Kyl put it, “So revenues are down, but it is due to the recession that we have. We have not cut tax rates in the last few years – since 2006 – for example.”
According to the CBO, ending all of the tax cuts and allowing scheduled tax increases now in law to take effect would raise revenues by $5.6 trillion between 2012 and 2021, including debt service. That would go a long way toward solving our debt problem. In fact, the Center on Budget and Policy Priorities says that this action, by itself, would be sufficient to stabilize the national debt and prevent it from rising as a share of GDP.”
Half-truths are whole lies.
[UPDATE: Forgot to add the previous paragraph that follows.] In other words, and completely contrary to what GOP leaders are saying, two major financial market participants are warning that there will be a Wall Street-related price to pay if the debt ceiling is not raised as needed.
The best indication of all that the market has already started reacting negatively is the current trading of credit default swaps on U.S. debt. As of late May, the number of CDS contracts — essentially insurance policies on the possibility of a default — had risen by 82 percent. Equally as important, the cost of a CDS — the best indication of how much riskier U.S. debt has become — rose by more than 35 percent from April to May. Last week I spoke to a number of people who calculate such things for a living, and they said this change means that the interest rate the U.S. government has to pay has already increased by as much as 40 basis points compared with what it otherwise would be. This means higher federal borrowing costs and deficits, and overall higher interest rates on everything from car loans to mortgages to credit cards.
Grade school social studies class: Congress has the Power of the Purse.
“The Republican strategy seems to be to ram their Medicare abolition plan into law within the next two months – Treasury says the ‘drop-dead’ date for raising the debt limit is August 2 – before people learn what they are really doing to Medicare.”
Isn’t this exactly what the Republicans accused Palosi and Reid of doing with “Obamacare?”
“There is some evidence that House Republicans are starting to get the message that their tax position is crumbling. On May 11, a senior Republican staffer told Atlantic reporter Derek Thompson that his party’s position on taxes is intellectually dishonest. ‘There are two worlds,’ the aide said. ‘One world is political and the sole objective is to maintain party message. The other world is real and in the real world fixing the deficit is a matter of national survival. When you get down to the real world decisions, it’s not about whether to raise taxes; it’s about the ratio of spending to revenue increases.’“
At some point you have to actually govern.
Lane Kenworthy demonstrates that anti-tax zealots’ predictions of economic apocalypse are about as credible as other doomsayers.
Taxes reduce the payoff to entrepreneurship, investment, and work effort. If taxation is too heavy, these disincentives will weaken a nation’s economy. But at what point does the harmful impact kick in? And how large is it?