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Reality — Why Now?
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sources of the Deficit

The Center on Budget and Policy Priorities takes on Tax Cuts: Myths and Realities. Using Congressional Budget Office data they demonstrate that tax cuts are far and away the largest single cause of the deficit, with “security” spending in second place.

The Clinton “surplus” that the Shrubbery gave to the wealthy in tax cuts, was the planned surplus in withholding taxes to pay for the retirements of the Boomers – the Republicans looted the Social Security trust fund.

Reducing taxes, as proposed by the Cat Food Commission, will further increase the deficit, not decrease it. Changing the tax rate on corporation is totally irrelevant as they don’t pay taxes under the current system. Google manages to maintain its tax rate at 6% 2.4% by laundering money through Ireland and the Netherlands. Exxon made a $19 billion profit one year and received a tax rebate in excess of $150 million. There is no connection between the corporate tax rate and the rate that corporations actually pay.


1 Badtux { 11.11.10 at 7:19 pm }

Uhm, except the banks right now have *plenty* of money to lend, right now the reserve ratio is about 80% (i.e., 80% of banks’ deposits are on reserve at the Federal Reserve) — but nobody to lend it to, because nobody is borrowing, and they’re not spending, because they’re worried their income is going to go down (i.e. *deflation*) because of the bad economy, or because, if they’re businesses, they’re not borrowing money to expand because, well, their sales are *falling*, because again nobody is spending because they’re worried their economy is going to go down with the bad economy (and that’s the 80% who have jobs, the other 20% aren’t spending because they’re unemployed or underemployed and don’t have money no matter *what* you do tax-wise because, well, duh, you gotta have income before you can pay taxes on it!).

And *that* is the reality that the rest of us live in, not your fairy tale universe of unicorns and cotton candy trees where banks have a shortage of money to lend and tax cuts result in higher income.

To put it in terms maybe a moron ideologue who lives in an alternate universe can understand: If I charge $80/hour, I probably won’t make a lot of money cutting lawns. If I charge $1/hour, I probably won’t make a lot of money cutting lawns. If I charge $25/hour, or roughly the going rate around here, I’ll probably make plenty of money cutting lawns. Right now the U.S. government is taxing at $2/hour — the U.S. effective tax rates right now more resemble third-world countries like Mexico or Turkey than a modern civilized country, at 24% of GDP *TOTAL TAXES AT ALL LEVELS OF GOVERNMENT* whereas the next-least-taxed OECD nation is South Korea at 28% of GDP. In short, once you’re at ridiculously low taxes, clearly cutting taxes is going to be about as effective at increasing income as cutting your lawn-mowing rates from $2/hour to $1/hour. Not to mention that if you cut expenditures, well, there goes the U.S. military (1/4th of the discretionary budget), there goes the entire highway system (a huge chunk of the budget), there goes the whole police establishment (a huge chunk of the budget), there goes the fire departments (our local fire department just laid off 1/4th of their firefighters)… gosh darn it, though, we’ll have low taxes while being raped in our burning-down houses because the few firefighters and policemen left can’t get to our house because all the bridges have fallen down due to lack of maintenance!

And that’s all that counts, while we’re being raped in our burning down houses… that we have low taxes, right? Right?!

– Badtux the Reality-based Penguin

2 Kryten42 { 11.11.10 at 8:37 pm }

Bryan and Badtux are right (as usual) and the moron is wrong (also as usual). Duffy is prob the BP CEO (or son of) in drag! Or maybe he thinks that if he keeps drinking their cool-aid and parroting their garbage, they will in turn give him a pat on the head and a million $ bone for being a good boy! 😆 (Like that would happen! *They* don’t give a damn about anyone, whether they agree with *them* or not!) Talk about “Fool’s Paradise”!

So… what’s new?

3 Badtux { 11.12.10 at 11:30 am }

Uhm, no. My taxes have shit all to do with whether I’m spending or not. We pay ridiculously little in taxes in the US, and our tax rates in the past were much, much, MUCH higher, like under that evil Democrat President Dwight D. Eisenhower they were over 75% on the upper classes (real actually-paid taxes, not nominal tax rates, which are a different thing altogether) and now they’re under 30% (again, real actually-paid taxes, not nominal tax rates). Rather, it’s whether I think I’m going to have a job next month that decides whether I’m going to spend or not. If I’m worried about my job, I won’t spend — I’ll save instead. Which is nice for me, personally, but if *everybody* in the economy stops spending, then employers have no reason to employ all those now-idle workers, who get laid off, which in turn makes *more* people worried about their jobs, who stop spending, wash, rinse, repeat, spiral downwards until you have Great Depression levels of unemployment because nobody’s spending because everybody’s worried about their job because everybody’s laying off because nobody’s spending.

The only thing that has *ever* stopped this spiral is when somebody stepped forward and started spending. And usually that has been government — maybe government spending on war gear (see WW2), but government nonetheless.

This isn’t theoretical bullshit. We can actually go out there and measure this and examine the historical record of when it’s happened in the past. And it’s happening. At least in *this* universe. I don’t know what’s happening in *your* universe, where apparently U.S. tax rates are 80%+ so nobody wants to spend because their taxes are too high. What color are the unicorns in your universe? Does cotton candy grow on trees there?

– Badtux the Snarky Penguin

4 Kryten42 { 11.13.10 at 12:58 am }

Curiously, if one bothers to actually check some *facts*… Well, I’ll let Krugman “esplan it to yous’! 😉 😀

OK, let’s say goodbye to the deficit commission. If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes. Even if those cuts are offset by supposed elimination of tax breaks elsewhere, balancing the budget is hard enough without giving out a lot of goodies — goodies that fairly obviously, even without having the details, would go largely to the very affluent.

I mean, what’s this about? There is no — zero — evidence that income taxes at current rates are an important drag on growth.

Oh, and they’re talking about raising the retirement age, because people live longer — except that the people who really depend on Social Security, those in the bottom half of the distribution, aren’t living much longer. So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever.

Still, I guess this is what it takes to get compromise, if by compromise you mean something the center-right and the hard right can agree on.

Update: It’s here. And it really is that bad. The idea that co-chairs of a commission whose charge is fiscal sustainability should take it upon themselves to (a) declare that federal revenue must not exceed 21 percent of GDP — that’s right, putting a cap on receipts and (b) call for reducing the top rate from 35 to 23 is just awesome.

*Emphasis mine.*

yup! Awwwww—-some! (But whole unsurprising!) *shrug*

Unserious People

What truly amazes me, and the other sane people here, is that many of the loudmouth’s supporting this kind of thing are the same morons that this kind of thing is going to hurt the most! So much for the theory of *self-preservation*! I wonder when these people were cross-bred with lemmings? (not the wealthy, of course, the low-to-middle class morons I mean. The wealthy will be the ones laughing all the way to wherever they want to go.) 😉 *shrug*

5 Kryten42 { 11.13.10 at 1:03 am }

Oh! And here’s another piece of reality, particularly for those who think China would *NEVER* do anything to the USA! *Cuz… ya jes knowes them commies love them some Amerikans!! Yeee-haw!* 😛

B-Rating America

OK, actually A+ rating America. Via Calculated Risk, China has created a new, independent rating agency — and it has now sharply downgraded the United States:

Dagong has downgraded the local and foreign currency long term sovereign credit rating of the United States of America (hereinafter referred to as “United States” ) from “AA” to “A+“, which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment.

The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment. Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors.

Way to build credibility, guys — just in case anyone wondered whether Dagong would be truly independent, or just a tool for Chinese policy ….

*Emphasis mine.*

B-Rating America

6 Kryten42 { 11.13.10 at 10:22 am }

And… yet another from Krugman! (He’s definitely on a roll! And annoyed as hell!) 😀

The Soft Bigotry of Low Deficit Commission Expectations

I’m not the first person to make this point, but those who are defending the deficit commission on the grounds that there are some potentially good ideas in there are missing what the purpose of the commission was supposed to be.

After all, anyone can come up with some good deficit-reduction ideas; I can come up with a dozen even before I’ve had my morning coffee. Brainstorming is easy.

What the commission was supposed to do was something much harder: it was supposed to produce a package that Congress would give an up and down vote. To do this, it would have to produce something much better than a package with some good stuff buried in among the bad stuff; it would have to produce a package good enough to accept as is.

And it didn’t do that. Instead, it produced a package that may have had some good things in it, but also, remarkably, introduced a whole slew of new bad ideas that weren’t even in the debate before. A 21 percent of GDP limit on revenues? Cutting the top marginal rate to 23 percent? Sharp reductions in the government work force without, as far as anyone can tell, a commensurate reduction in the work to be done? Instead of cutting through the fog, the commission brought out an extra smoke machine.

Or put it another way: what on earth are people who say things like, “This proposal can be a starting point for discussion” thinking? We’ve been discussing and discussing, ad nauseam; the commission was supposed to provide a finishing point for discussion. Instead, it produced a PowerPoint that is one part stuff that has long been on the table, one part conservative wish-list, and one part just weirdly ill-considered.

The kindest thing we can do now is pretend the whole thing never happened.

Yup! I couldn’t agree more!

The Soft Bigotry of Low Deficit Commission Expectations

7 Bryan { 11.13.10 at 5:49 pm }

Kryten, you should be thrilled that you don’t have to deal with the idiots who are in charge in the US, the UK, or the Euro zone. Save your pennies because there are going to be some great deals in the future when the Austerians drive those areas into the deflationary spiral.

Your friend who likes to buy real estate should keep her money banked, because there will probably be some great buys on castles, especially in Ireland. The key in this situation is cash, not gold, gems, or art, because those are hedges against inflation, and will be worth less in the future. That’s why all of the art auctions are going on, people are dumping them to get cash, and will probably buy them back when things bottom out.

Old money people know how this works and aren’t going to get caught again. They are saving not investing. US Treasury bills are being auctioned off with negative interest rates as a safe place to park cash, so the real money people are definitely not concerned with inflation. You have to have serious money to get into the auctions, so these aren’t fly-by-night operators.