Economy

[Timber Loftis]

Getting to Crazy
By PAUL KRUGMAN

There aren’t many positive aspects to the looming possibility of a U.S. debt default. But there has been, I have to admit, an element of comic relief — of the black-humor variety — in the spectacle of so many people who have been in denial suddenly waking up and smelling the crazy.

A number of commentators seem shocked at how unreasonable Republicans are being. “Has the G.O.P. gone insane?” they ask.

Why, yes, it has. But this isn’t something that just happened, it’s the culmination of a process that has been going on for decades. Anyone surprised by the extremism and irresponsibility now on display either hasn’t been paying attention, or has been deliberately turning a blind eye.

And may I say to those suddenly agonizing over the mental health of one of our two major parties: People like you bear some responsibility for that party’s current state.

Let’s talk for a minute about what Republican leaders are rejecting.

President Obama has made it clear that he’s willing to sign on to a deficit-reduction deal that consists overwhelmingly of spending cuts, and includes draconian cuts in key social programs, up to and including a rise in the age of Medicare eligibility. These are extraordinary concessions. As The Times’s Nate Silver points out, the president has offered deals that are far to the right of what the average American voter prefers — in fact, if anything, they’re a bit to the right of what the average Republican voter prefers!

Yet Republicans are saying no. Indeed, they’re threatening to force a U.S. default, and create an economic crisis, unless they get a completely one-sided deal. And this was entirely predictable.

First of all, the modern G.O.P. fundamentally does not accept the legitimacy of a Democratic presidency — any Democratic presidency. We saw that under Bill Clinton, and we saw it again as soon as Mr. Obama took office.

As a result, Republicans are automatically against anything the president wants, even if they have supported similar proposals in the past. Mitt Romney’s health care plan became a tyrannical assault on American freedom when put in place by that man in the White House. And the same logic applies to the proposed debt deals.

Put it this way: If a Republican president had managed to extract the kind of concessions on Medicare and Social Security that Mr. Obama is offering, it would have been considered a conservative triumph. But when those concessions come attached to minor increases in revenue, and more important, when they come from a Democratic president, the proposals become unacceptable plans to tax the life out of the U.S. economy.

Beyond that, voodoo economics has taken over the G.O.P.

Supply-side voodoo — which claims that tax cuts pay for themselves and/or that any rise in taxes would lead to economic collapse — has been a powerful force within the G.O.P. ever since Ronald Reagan embraced the concept of the Laffer curve. But the voodoo used to be contained. Reagan himself enacted significant tax increases, offsetting to a considerable extent his initial cuts.

And even the administration of former President George W. Bush refrained from making extravagant claims about tax-cut magic, at least in part for fear that making such claims would raise questions about the administration’s seriousness.

Recently, however, all restraint has vanished — indeed, it has been driven out of the party. Last year Mitch McConnell, the Senate minority leader, asserted that the Bush tax cuts actually increased revenue — a claim completely at odds with the evidence — and also declared that this was “the view of virtually every Republican on that subject.” And it’s true: even Mr. Romney, widely regarded as the most sensible of the contenders for the 2012 presidential nomination, has endorsed the view that tax cuts can actually reduce the deficit.

Which brings me to the culpability of those who are only now facing up to the G.O.P.’s craziness.

Here’s the point: those within the G.O.P. who had misgivings about the embrace of tax-cut fanaticism might have made a stronger stand if there had been any indication that such fanaticism came with a price, if outsiders had been willing to condemn those who took irresponsible positions.

But there has been no such price. Mr. Bush squandered the surplus of the late Clinton years, yet prominent pundits pretend that the two parties share equal blame for our debt problems. Paul Ryan, the chairman of the House Budget Committee, proposed a supposed deficit-reduction plan that included huge tax cuts for corporations and the wealthy, then received an award for fiscal responsibility.

So there has been no pressure on the G.O.P. to show any kind of responsibility, or even rationality — and sure enough, it has gone off the deep end. If you’re surprised, that means that you were part of the problem.

[Azred]

Originally Posted by Timber Loftis President Obama has made it clear that he’s willing to sign on to a deficit-reduction deal that consists overwhelmingly of spending cuts, and includes draconian cuts in key social programs, up to and including a rise in the age of Medicare eligibility. These are extraordinary concessions. As The Times’s Nate Silver points out, the president has offered deals that are far to the right of what the average American voter prefers — in fact, if anything, they’re a bit to the right of what the average Republican voter prefers!

I highly doubt this. The President and his team have not been offering their own comprehensive budget plans, only stating what they will or will not accept. The reason the Administration is so keen on wanting a budget deal is simple--when the budget fails to work whatever magic all the politicians seem to think it will work, the Democrats will loudly cry "look at how awful the Republican budget has made things!" as 2012 elections get into high gear.

There is absolutely no reason for any Republican in the House to be involved in budget negotiations. The budget has to be passed by the House and signed by the President. All the House Republicans have to do is put together whatever budget they want and then send it to Obama's desk, at which point he has three options: sign it, veto it, or let it sit until it becomes law by default. Their best strategy is precisely this--it will make him make a decision.

Originally Posted by Timber Loftis First of all, the modern G.O.P. fundamentally does not accept the legitimacy of a Democratic presidency — any Democratic presidency. We saw that under Bill Clinton, and we saw it again as soon as Mr. Obama took office.

The Republicans didn't run to the Supreme Court crying "it isn't fair--they stole our election".

*************

Mr. Krugman wants to discuss responsibility, hm? Why didn't the Democrat-controlled Congress from 2008-2010 pass budgets that they liked? Answer: they didn't want to take all the blame onto themselves.

Why did they always want "bi-partisan" support? Again, so that they wouldn't have to accept all the responsibility.

Now...I am no fan of Republicans, either--Heaven knows they are just as much to blame for everything as the Democrats--but it is because of articles like this that no rational person considers Mr. Krugman to be anything other than a hack.

[Timber Loftis]

Azred, first of all, you're ignoring incredible concessions on Obama's part regarding the budget. I'm mad at him for it. He's killing social welfare, and basically handing Repugs what they want: lots of spending cuts, very little in tax increases. I'll vote against him for this... assuming the Repugs can put up a candidate that doesn't subscribe to a 6,000 year old earth belief. (Idiots.)

Regarding running to the courts crying foul over election fraud, that's more than a decade old, and it was totally true. But... water under the bridge, mkay?

But, what he's saying is true. Ever since Reagan, the Repugs flip out whenever there is a Democrud Pres. in the WH. They really f'n flip. They call him Nazi, etc. With or without the birther movement (which is totally retarded), you get my drift.

If you're no fan of Republicans, then act like it and scrutinize the current situation... plz.

[Timber Loftis]

Originally Posted by John D Harris TL did you notice the price of Gold today over $1600, let me see that's $600 per ounce proft you could have made if you'd have listened to me.... how's your investments compared to that Silver has more then doubled...

Yeah, um, you're one of those people I don't listen to much. Hope your investments are well, I wish you no harm personally. But as for intelligent input, I don't actually seek much of it from you. If you post something of interest during your ramblings, mayhap I'll reply. Mayhap.

Also, you're at the point in your life when you have investments, and they mean something to you. (I wish you the best with those.) I'm not quite there yet, I work off income garnered. So... best of luck to you? But I can't compare notes with you on this.

I sold my gold, btw. I may have sold it for too little, but gold rope and herringbone chains from the 80's are the last thing I need cluttering up my drawers at the moment. I tried to sell when it was fairly high, but yes it seems to have gone higher. Frankly, I wanted rid of my gold, I consider it tacky for my style. My watch is a steel one (Rolex GMT/Expy II or Panerai 244 GMT depending on the day), and my wedding ring is White Gold, and any other jewelry I wear is of similar ilk. Yellow Gold just doesn't fit my style now, and I have chosen to avoid it for about 11 yrs (including my one earring, which I got at age 14 and which, when I wear it has a WG-mounted diamond). I'd do a WG DJII, or maybe a SS DJ 36mm, had I the funds, but that's just more non-yellow jewelry. I don't like yellow, end of story.

Note: I AM all for putting this country back on the gold/silver standard, even though any economist would recognize those values are as arbitrary as any others. (When ZD arrives, will gold/silver really save you? Not likely unless ZD is really Werewolf Day, in which case you should count your silver and see if it can make bullets.)

BTW: If you've got a bunch sunk in yellow gold, why not try things that are likely more profitable -- Groupon is getting its IPO up and going, I'd advise to invest in that, though preferred stock would be..., well, preferred. Also, look into LivingSocial.

[SpiritWarrior]

Originally Posted by Timber Loftis Note: I AM all for putting this country back on the gold/silver standard, even though any economist would recognize those values are as arbitrary as any others. (When ZD arrives, will gold/silver really save you? Not likely unless ZD is really Werewolf Day, in which case you should count your silver and see if it can make bullets.)

Thank you. But try telling this to Glenn Beck and his many gold sponsors. They are convinced gold will somehow save them, wth?

[Micah Foehammer]

Originally Posted by Timber Loftis 1. Increase the debt ceiling -- out to 2013, on a lock-step 3-stage system per annum. 2. Balance the budget. 3. Have an equal amount of spending cuts and revenue increases (i.e. new taxes) Notes: At first I was thinking a 33/66 split on this one, but I really believe some of the pre-existing taxes that the rich have been able to lobby themselves out of should come back. First no-brainer is reinstate the pre-Bush tax rate for dollars made over 250/350,000 (a 2% increase). Second no-brainer is getting rid of loopholes for the rich in the tax code, such as the one I posted an article about that allows them to treat income as capital gains. I also think they should re-insert the 60's era "millionaire tax" (my term, there, but the tax kicked in at around $300K, which is roughly a millionaire or more in today's dollars). I'd suggest setting that at 40%ish on dollars made in excess of $1/1.25 M. I would suggest no change in corporate tax rates. Regarding the spending cuts, I'd like him to suggest that at least half of those have to come from the military. It's not a sticking point, but I don't see how the WWJD folks and the liberals can't come together to see that torching planned parenthood or programs for the poor isn't the most obvious or ethical way to cut our budget. 4. Congress has very little that it MUST do, and balancing the budget is one of those things. Plus, they need to quit asking the President to do their homework for them and solve their problems.

TL,

I'm with you on items 1,2 and 4. To get close to balancing the budget here's my proposal:

New Taxes/Revenue:
a) Eliminate Bush Era tax cuts on incomes over 250K - 42 billion $
b) Eliminate SS cap on income subject to FICA tax - 293.3 billion $
c) Eliminate the capital gains loophole TL mentioned previously - 2 billion $
d) Restore Estate tax to 2001 levels - 68 billion $
e) Impose an additional 5% Tax surcharge on incomes over 1 million $ - ~70 billion $
f) Increase capital gains tax rates to max of 20% - 23 billion $
g) Cap the allowable mortgage interest deduction for those making more than 250K$ - 4 billion $

Total new revenue - 502.3 billion $

Notice that the Bush era cuts for the middle class are still in effect as are the EIC and several other credits designed specifically for lower and middle class families.

There are only three other revenue sources that come to mind:
(a) Tax all capital gains as normal income. That would raise approximately 100 billion dollars.
(b) Partially repeal some of the Bush Era tax cuts for the middle/lower class. The estimated cost for those (excluding the portion from taxes on the upper incomes) for 2012 in ~230 billion dollars. If you raise taxes in those brackets to recover a quarter of that money, you actually generate a surplus in the budget. I chose to leave them out for this exercise.
(c) Income Phaseouts for Itemized Deductions and Personal Exemptions for High-Income Taxpayers - In 2010, income limits have been repealed, and the recent tax relief act extends the repeal for two more years, through 2012. Reinstating the phase out is only a short term fix.

Political footnote: The Republicans will scream bloody murder about this proposal on general principle as all of the new revenue comes from the upper income levels. They'll likely pull out their antiquated and bogus "trickle down" theory of economics as a defense. Raising tax rates across the board might mollify some of those arguments. The one obvious offset would be to replace the millionaire's tax surcharge with a very slight increase in the lower tax rates to diffuse some of that debate.

TL, if you want to go with your gut instinct of a 33/66 split between spending cuts and revenues, the Bush era tax cuts for the lower class and/or some of the other low income tax breaks will have to come onto the table. Setting aside any discussion about whether that's fair or appropriate, I simply can't see any other way to generate a total of 800 billion $ of new revenue without including them.

Spending cuts:
a) 15% across the board - no programs eliminated = 559.4 billion $

No programs are eliminated - quite frankly I am NOT going to go thru the entire budget and make decisions on individual programs as which should go and which should stay. In this proposal, every department in the government is forced to tighten it's belt. I'm not even going to address whether this should be modified to eliminate specific programs as Azred has attempted - frankly that would require a lot more time and effort than I am willing to put into this. Whether this is the BEST way to do things, I'll leave to you. I know TL advocates extremely deep cuts in defense spending but not everyone agrees. I took the simplest approach.

Following TL's lead, I left corporate tax rates untouched. Is that the right thing to do? Probably not, since the current corporate tax code probably has as many loopholes as the individual tax code which allow major corporations to avoid paying their "fair share" of taxes. In the interest of simplicity, I'll simply sidestep the issue.

The Bottom Line:

Total deficit reduction:
$1.059 Trillion

Current 2012 deficit:
$1.102 trillion

Remaining 2012 deficit:
$43 billion

Notes:
- The cost of the Bush Era tax cuts for the rich might be a bit low. I've seen numbers as high as 70 billion dollars, but the most frequently quoted number I have seen from multiple sources is 42 billion$.
- The SS revenue is much higher than Azred's number due to the matching fund principal. Employees pay 6.2% and employers match it. Self employed people have to pay BOTH. I used Azred's figure of 2.365 trillion $ in untaxed (for FICA purposes) income x 12.4% to arrive at the 293.3 billion dollars.
- The millionaire's tax revenue is just an estimate. I used Azred's income percentile's and calculated 1.396 trillion dollars from the top 0.5% of income earners and applied 5% to that to arrive at 70 billion $.
- The cap on mortgage deduction is another estimate. The average tax savings for those with incomes above 250K is 5459$, for those making 125K to 250K it's 2703$. Capping the allowable deduction so the tax savings in the upper income group matches that in the next lowest bracket raises an additional 2756$ per return. I used Azred's estimate of the number of earners in that bracket to arrive at the 4 billion $.

[John D Harris]

ROTFLMAO TL I didn't and don't expect you to listen to me, even though I have supplied ample evidence of why you should, but hey it's your life do what you want.

Throughout history man has always had a desire for shiny objects, including the yellow stuff, and silver. The more things change the more they stay the same. Don't worry your pree'ty little head about how many bullets I got, I got that under control.

I don't live off money invested, I live off money I make by my labor, my work. That's the difference between you and me TL I don't get money garnered, I get money I earn.

TL you're what? In you're late thirty's or early fourty's now, It's been over 10-12 years since we started conversing and IRRC you were in your late twentys then, It's time to start investing. you don't have to spend much just be consistant and get a little every chance you get. Gold isn't the best thing to buy right now, cause if the pukes come up with a debt deal the price will drop sharply, from all the johny come latelys buying it yesterday. Time to buy it will be after there is a deal, then hold it for awhile, the pressures that are causing gold to rise in price are still there and it will recover to even higher prices. If the Pukes don't come up with a deal, which very very very remote, then gold isn't the best to have cause the price will be so high, it's going to be hard to break and ounce of Gold. buy silver it's cheaper now and if there is a deal you won't loose as much if you panic and decide to sell. If you hold on to itit will rebound also. But invest at your own risk.

[Azred]

Originally Posted by Timber Loftis Azred, first of all, you're ignoring incredible concessions on Obama's part regarding the budget. I'm mad at him for it. He's killing social welfare, and basically handing Repugs what they want: lots of spending cuts, very little in tax increases. I'll vote against him for this... assuming the Repugs can put up a candidate that doesn't subscribe to a 6,000 year old earth belief. (Idiots.) Regarding running to the courts crying foul over election fraud, that's more than a decade old, and it was totally true. But... water under the bridge, mkay? But, what he's saying is true. Ever since Reagan, the Repugs flip out whenever there is a Democrud Pres. in the WH. They really f'n flip. They call him Nazi, etc. With or without the birther movement (which is totally retarded), you get my drift. If you're no fan of Republicans, then act like it and scrutinize the current situation... plz.

Gutting social welfare is a good thing; making people dependent upon the Nanny State is a very bad thing.

Remind me to locate the pictures of Democrat protesters carrying signs calling for Bush's demise or presenting him as Hitler, etc. The party out of power always freaks out about the opposing party's President.

Unless the Republicans put up someone worthy and presuming Obama doesn't pull an LBJ and not seek reelection, he very well might win reelection. If the Republicans make too many mistakes now they will lose 2012. This fight is the Republicans' to lose....which I suspect they eventually will.

I am scrutinizing the situation--all the lamebrains in Washington are going about this whole situation incorrectly.

[Timber Loftis]

Originally Posted by Azred Gutting social welfare is a good thing;

Why not end welfare for the rich before taking it from the least privileged among us?

Social welfare is necessary and unavoidable. The poor, sick, elderly, and indigent will cost us money whether we have a program in place to manage their needs or not.

But yeah, I guess cutting money off from the poor rather than raising taxes on the rich from their 50year low would be exactly what Jesus would do.

[Lord of Alcohol]

Originally Posted by Timber Loftis Why not end welfare for the rich before taking it from the least privileged among us? Social welfare is necessary and unavoidable. The poor, sick, elderly, and indigent will cost us money whether we have a program in place to manage their needs or not. But yeah, I guess cutting money off from the poor rather than raising taxes on the rich from their 50year low would be exactly what Jesus would do.

I do not quite understand why so many middle class people are so willing to let the rich escape paying taxes while they take up the slack. Misology seems to rule them.