Upgrading the U.S.A.

How to fix the country’s debt-to-GDP ratio

This summer, for the first time in history, Standard & Poor’s downgraded the United States from AAA to AA+. Whether or not we think the country deserved it, whether or not S&P holds any credibility, whether or not the move will have long-term consequences, the rating agency’s rationale for the reduction boils down to a legitimate fear: that America will fail to get its financial act together in time.

But how do we put our house in order? Even if lawmakers allow the Bush tax rates to expire at the end of 2012, the debt-to-GDP ratio is still projected to increase dramatically over the next decade. And then the real problems kick in with the explosion of spending on Social Security, Medicare, and Medicaid. You could make the deficit situation look better by refusing to soften the blow of the alternative minimum tax through the types of “patches” that are passed each year, but that is both unlikely and unwise. And it would be very helpful if we got all the savings promised by boosters of the recent health care overhaul, but that too is highly doubtful.

The bottom line is that the debt problem in the United States will not go away as long as we don’t reform Social Security, Medicare, and Medicaid. The coming explosion in entitlement spending will blow apart any possibility  of an equilibrium between revenue (no matter how high marginal tax rates get) and expenditures.

Unfortunately, the debt-limit deal passed this summer failed even to fake a solution. And things can get much worse. S&P has served notice that a further downgrade is likely if more progress is not made at upcoming deficit-reduction meetings to reduce the debt-to-GDP ratio within the next few months. Prior to the debt-limit deal, you may recall, S&P had talked about wanting a long-term plan in place by October. And that means doing precisely what our representatives refused to do over the past seven months: moving decisively off this unsustainable path.  

Thankfully, we are not the first nation to struggle with a dangerous debt-to-GDP ratio, and thankfully, the academic world has already produced great insights into what can be done to help the problem without hurting the economy.

Take Alberto Alesina and Silvia Ardagna, two Harvard economists. In an October 2009 working paper published by the National Bureau of Economic Research, the duo look at 107 efforts to reduce debt in 21 OECD nations between 1970 and 2007. Several countries were successful, among them Austria in 2005, Finland in 2005, and Sweden from 1997 to 2004. Spending cuts, the scholars found, are more effective than tax increases in reducing the ratio of debt to GDP. With successful fiscal adjustments, spending as a share of GDP fell by an average of 2 percent while revenue also fell by half a percentage point. Unsuccessful fiscal-adjustment packages involved smaller spending reductions (only about eight-tenths of a percentage point, on average) and large revenue increases.

Following and building on the work of Alesina and Ardagna, American Enterprise Institute economists Andrew Biggs, Kevin Hassett, and Matthew Jensen published a working paper in December 2010 covering more than 100 instances in which countries took steps to address their budget gaps. They identify successful consolidations as those in which the ratio of debt to potential GDP three years following the first year of the consolidation has declined by at least 4.5 percentage points.

Their conclusion: “Countries that addressed their budget shortfalls through reduced spending were far more likely to reduce their debt than countries whose budget-balancing strategies depended upon higher taxes.” What’s more, “the typical unsuccessful fiscal consolidation consisted of 53 percent tax increases and 47 percent spending cuts. By contrast, the typical successful fiscal consolidation consisted of 85 percent spending cuts.”

Alas: Even (or especially) in a time of crisis, lawmakers are driven more by politics than by good public policy. Countries in fiscal trouble generally got there through years of catering to pro-spending constituencies, be they senior citizens or the military-industrial complex, and their fiscal adjustments tend to make too many of these same mistakes. As a result, failed fiscal consolidations are more the rule than the exception. Eighty percent of the adjustments that Biggs, Hassett, and Jensen studied were failures.

The United States cannot afford to follow this pattern. Those who are not ideologically inclined toward austerity measures should remember that all this research is consistent with the work of the Berkeley economists David and Christina Romer—the same Christina Romer who used to chair Obama’s Council of Economic Advisers. In a paper published in the June 2010 American Economic Review, the Romers show that increasing taxes by 1 percent of GDP for deficit-reduction purposes leads to a 3 percent reduction in GDP. Alesina and Ardagna discuss Romer and Romer’s paper, noting that while their methodology is different enough to make it hard to compare the two results formally, the studies are consistent in their conclusions. 

Finally, Biggs, Hassett, and Jensen look at how successful different kinds of spending cuts are at reducing the debt ratio. Consistent with other studies, they find that winning fiscal consolidations tend to focus spending cuts in two areas: social transfers, which largely means entitlements in the American context, and the government-wage bill, which means the size and pay of the public-sector workforce.

I can’t stress enough the importance of these findings. At a time when many politicians and pundits are calling for a “balanced” solution that features an equal mix of revenue increases and spending cuts to address our debt crisis, we must remember that this path has systematically failed in the past.

It may not be “balanced,” but what works is a package that mostly cuts spending. In the short term, that could mean means-testing Social Security and Medicare, increasing the programs’ eligibility age, and/or block-granting Medicaid. In the longer term, we must rethink the system on a fundamental level. A system that assumes an entitlement due to the simple fact of being American and over 65 cannot be sustained.  

Contributing Editor Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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  • ||

    I can't decide whether crashing and burning would be better. It seems like any "fix" is just going to signal to the politicians that they can fuck things up royally, and still recover.

    I guess we'll find out.

  • Joe M||

    Not long now.

  • Collapse is Economizing||

    Thesis #19: Complexity ensures collapse.
    Thesis #20: Collapse is an economizing process.
    Thesis #26: Collapse is inevitable.
    Thesis #27: Collapse increases quality of life.
    The Thirty Theses
    by Jason Godesky
    http://rewild.info/anthropik/thirty/index.html

  • Blight Engine||

    Pardon sir,
    Could you come back later this evening? I've been using your commentary to bore me to sleep at night, but this is too early. I don't want or need a nap right now.
    Thank you for your cooperation.

  • blighted mind||

    zzzzzzzzzzzzzzz

  • DLM||

    Even if everything was fixed tomorrow and we had 0 debt, that would only start the whole process over. Something major needs to change and not just personnel.

  • John Tagliaferro||

    If these ratings were looked at as what they are, the opinion of analysts (with the details of their analysis laid out for the curious to read), it would not be all that big of a deal. Unfortunately, the US and other governments have codified these opinions into legally binding decision criteria for large swaths of investment managers, like pension fund management.

  • ||

    I don't follow economics much, but didn't S&P give Enron a glowing credit rating months or weeks before the curtain was drawn back?

  • CrackertyAssCracker||

    Correct. They can be overly optimistic at times.

  • Joe M||

    Hence the ridiculous delay before they finally lowered the U.S. credit rating.

  • ||

    Yes, but Enron was cooking the books, I'm not sure S&P has the authority (or manpower) to run a complete audit on every company it rates. IOW, S&P rates on information they are given, Enron gave them faulty information.

  • Ska||

    And Arthur Anderson, who signed off on those financials, went from Big 6 to non-entity.

  • Gilbert Martin||

    And the feds are cooking the books as well, since they don't operate on accrual basis accounting.

  • John Tagliaferro||

    Little Robert Ruben did too. He was on the phone with the Bush administration trying to get the new regime to leave Enron alone when Enron was sinking.

  • ||

    Actually, IIRC, leaving them alone was what they did. I believe that what Reuben wanted was for the administration to give them a helping hand.

  • DLM||

    Just a theory I'll throw out. I suspect the problem will be 'solved' via the magic of inflation. The CPI will deliberately be miscalculated and come out lower than reality. This will cause SS and other payments that factor in the CPI to be reduced. In addition, this will be cause to be inflated away. In the long run, we'll have a lower standard of living plus the government will end up spending more anyway and we'll still be screwed.

  • ||

    The CPI always has deliberately understated inflation.

  • ||

    That's a good thing from the standpoint of SS and gov't employee COLAs.

  • ||

    Probably a big reason for why they do it.

  • ||

    The politicians will do anything--anything--they can to just ride this out. It is a golden time to be a politician; their powers have never been greater in this country's history. While the rest of us are screaming "stop", all they want to do is keep the train rolling for as long as possible.

    Their aims and desires are directly, completely at odds with the rest of the people.

  • ||

    Yes they will. and that makes liberals whining about the need to spend to save the world especially infuriating. This is about power and corruption and nothing else.

  • Robert||

    What makes you think their powers are the greatest now?

    Anybody can be a politician. Why is there such a thing as "the rest of us", when mixing seems inevitable?

  • sevo||

    Is that ol' Warren B. there on the left, kicking in the dough voluntarily?

  • wef||

    When the political class issues debt denominated in dollars, and it gets to create those dollars, then ......

    As long as the political class considers that the slow default, which is inflation, is an alternative to raising taxes or cutting spending, then nothing else will happen.

  • CE||

    It's already too late to do anything. Certainly spending could be hacked back to FY2006 levels or so to balance the budget and stop adding to the problem in the near term, but as the article notes, no solution will work unless Social Security and Medicare are changed, and there is no political will to change them. It won't matter if the government moves toward austerity/spending cuts or higher tax rates -- neither will be enough.

    This baby's going down....

  • Robert||

    By "going down", do you mean they'll milk it as long as possible, and then suddenly the payments will simply stop?

  • anonymous commenter some guy||

    Endgame in that case is either war or one world government.

  • k2000k||

    No that would cause riots and a fundemental shift in the American polity. The political class will try to stave that off via inflation. You'll still get your money in nominal terms, but what you can buy will be astronomically high. The politicos will then blame evil opportunist businesses saying they are rising the price to high and shift blame from them to others.

  • DLM||

    It may not be “balanced...

    I never understood what's so sacred about 'balance'. I suppose it's just a compromise between those who want to leave something for future generations and those who don't care.

  • ||

    Without "balance" we'll have fewer slush funds from which to buy votes.

  • Warty||

    I see that rectal is on an especially manic manic phase today.

  • ||

    The plus side is that a manic this epic will have a depressive even more epic. She has one hell of a crash coming, and it couldn't happen to a more deserving freak.

  • rts||

    Paul Anka: To stop those monsterstrolls 1-2-3,
    Here's a fresh new way that's trouble-free,
    It's got Paul Anka's guarantee...

    Lisa: Guarantee void in Tennessee.

    All: Just don't look! Just don't look!
    Just don't look! Just don't look!
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  • MNG||

    I don't think rectal is white indian. I've alway imagined rectal as a teen with a smart phone texting her posts. White Indian I imagine as a Jared Loughner-esque college student who recently took and failed an anthropology class in which some of the readins had a seriously profound impact on his thinking which he has just GOT to share with the world.

  • ||

    She admitted it yesterday during her epic manic, so you're wrong.

  • MNG||

    Really? See what one misses around here by working.

  • Elder Scrolls Enthusiast AuH20||

    Here's where she appears to admit it, in a thread about banning her, not WI.

    I'm not sure that it is absolute proof, and fully admit that they may both just be nutters who found each other, but the weird rapport between them on that thread also hints at something. Maybe two friends who decide to troll a site together?

    Actually... rather has mental problems, so does WI, they meet in a support group... I may be on to something here.

  • Scruffy Nerfherder||

    I waiting for Reason to ban her IP address.

    HINT HINT

  • ||

    Seconded. Ban plz.

  • MNG||

    I don't get the move to ban people. WTF? You know how to scroll down, right?

    The only time I can sympathize with moves to ban posters is when, like the Hercules guy, they post walls of texts. Otherwise you're talking about wanting to ban someone just because you don't like their contribution. That's not just goofy and pussified, it's counter-productive in a democracy where if you want the ideas you believe in to win out you will have to air them out with folks who disagree some day.

  • ||

    Hercule is one of the greats. Banning him was a sin.

  • T||

    He blogs. I assume you can find him with that fact.

  • Almanian||

    What ProL said - I loved Herc.

  • Old Mexican||

    Re: MNG,

    Otherwise you're talking about wanting to ban someone just because you don't like their contribution.


    I agree, I am not in favor of banning the White Imbecile, who would cry like a little wussy girl when having his food taken by squirrels if in his beloved "original affluent society."

  • Beloved Rev. Blue Moon ||

    It is a rare day I call for a ban. However, it is warranted in this case. If WI (whomever he is) wants to have an honest and open debate about the particulars of property, how it works as a concept, and (if desirable) how to unwind the allegedly lethal concept, then let him do that.

    What you do not do, however, is post the same thing over and over and over again, taking advantage of the threaded comments to shit all over every conversation, and constantly change your name so that you can avoid people filtering you. That is beyond community standards and deserving of a ban.

    The only time I can sympathize with moves to ban posters is when, like the Hercules guy, they post walls of texts.

    He was at least entertaining. This constant trolling is ruining every thread.

  • MNG||

    One person's sticking to their principles is another person's "not wanting to have an honest debate." When WI or someone you think is not worth your time posts, why not simply scroll down?

  • Anonymous Coward||

    One person's sticking to their principles is another person's "not wanting to have an honest debate."

    Principles ≠ spamtrolling.

  • k2000k||

    Could Reason at least add a collapse option so we can collapse the comments of indivduals we don't want to read?

  • ||

    You shouldn't ban people for being contrary. No matter how annoying Tony or Shrike are, they should never be banned because they always talk about the topic. That is free expression.

    What makes whoever WH is worthy of a ban is that they never talk about the topic. They use every thread to make the same tiresome point.

  • Beloved Rev. Blue Moon ||

    You shouldn't ban people for being contrary. No matter how annoying Tony or Shrike are, they should never be banned because they always talk about the topic. That is free expression.

    Yes, this should be the standard, MNG. Want to be the House Contrarian? Knock yourself out. But when a post about the Political Horse Race or Solyndra or whatever is filled to the brim with "POLIce POLIS POLItics" etc. etc., then it is time for a ban.

  • White Indian||

    POLIce POLIS POLItics" etc.

    Good boy!

    My etymological lesson is living in your head rent-free.

    Thanks for the feedback.

  • MNG||

    I don't think you want to apply that neutrally, lots of people come on to posts and try to threadjack it, or it will devolve into a Game of Thrones or NFL discussion.

  • PantsFan||

    devolve into a Game of Thrones or NFL discussion.

    or worse: Wheel of Time.

    You're welcome.

  • ||

    I don't think you want to apply that neutrally, lots of people come on to posts and try to threadjack it, or it will devolve into a Game of Thrones or NFL discussion.

    Sure and it is its own little mini thread you are free to ignore. If someone responded to every post with a rant about GOT or put up a thread jack on every post for the same rant, they would be ban worthy as well.

  • ||

    I don't get the move to ban people. WTF?

    Signal to noise ratio FTW.

  • ||

    I don't get the move to ban people. WTF? You know how to scroll down, right?

    You act like it's as easy as using the volume button on a tee-vee remote or something.

    She's a griefer troll. No other reason to be here other than to rain shit down on the comments and chew up whitespace. Add up her trolling and it's as much as a wall of Herculean text. Just fucking ban her, already.

  • MNG||

    "You act like it's as easy as using the volume button on a tee-vee remote or something."

    WTF? It involves scrolling past it, which involves the exact same thing as TV remote button, pushing a button.

  • Beloved Rev. Blue Moon ||

    Sorry, MNG, but my displeasure and inconvenience outweighs WI's "right" to shit all over every thread.

    How does that utilitarianism taste now?

  • ||

    WTF? It involves scrolling past it, which involves the exact same thing as TV remote button, pushing a button.

    MNG|10.1.10 @ 9:02AM|#|show direct|ignore
    I'm fine with the commercials bill. I buy my tv, I set the volume. For them to "hijack" my volume control is something like a fraud or conversion.

    Jebus, it's like you aren't self-aware.

  • MNG||

    I'm curious as to how this is analogous? Do your best.

  • ||

    Do you honestly need it spelled out for you by someone who makes less than you do? That would be embarrassing for you.

  • ||

    JW, do even have enough money to be worth talking to? False utilitarian compassion got to get paid, yo.

  • ||

    Not really. [kicks pebble]

    I'll shuffle off now, back to my job cleaning out sewage lines with my bare hands.

  • AlmightyJB||

    Not that I really give a shit but I've probably seen more whitespace chewed up talking about White Indian and Rather than by them over the last week. I would agree that Herc was worse with the 5 page cut & paste. Maybe that's because I'm on my phone a lot of the the time and that's annoying as shit. White Indian is a waste of space but he or she is pretty easy to ignore as long as people aren't feeding the troll.

  • ||

    It is all over two of the threads today. And yes, they should be ignored.

  • Warty||

    I think they did, temporarily. Remember how there were a few weeks where we didn't have rectal posting as herself, White Indian, or anonopussy?

  • ||

    Or she was institutionalized against her will for a while; I think that's probably what happened.

    Oh man, her crash after a manic cycle this huge is going to be unreal. So delicious. So brutal.

  • ||

    No, no... she was working on her book, which I can only imagine can only be described as The Hunger Games meets Fat Princess.

  • Warty||

    Her book already has more substance than the usual 4-paragraph blog post you produce. What kind of pussy are you, anyway? Plus, I bet I make way more money than you.

  • ||

    Plus William Sleator's House of Stairs.

    She identifies with Blossom, of course.

  • T||

    Epi, I've been trying to remember the name of that book for years. A sincere thanks.

  • ||

    Don't forget Interstellar Pig either, dude. Sleator's best book.

  • Almanian||

    Really? I missed this! I'm having trouble reconciling WI w/rectal - they can't be the same! Come on!

  • Bingo||

    They're the same. WI is just another persona that rectal came up with when people stopped responding to her. Note that WI didn't start constantly changing its handle until rather realized that people could ignore it with the Chrome/Firefox plugins. It bothers her that people can ignore her.

    This site seriously has a troll that dedicates 10+ hours per day posting nonsense in various personas in order to get attention. How fucking pathetic.

  • kinnath||

    The non-stop changing of handles; simultaneous posting under multiple handles; and posting of crap that has no bearing whatsoever on the thread is damaging to the point of being banworthy.

    It frequently not possible to sort through a thread to figure out whats worth reading or ignoring (stuck wi'th IE8 at work).

    Lonewacko and Herucle were at least occasionally amusing.

  • mad libertarian guy||

    I think that was a spoof.

    Dumb as WI is, he at least writes coherent English.

    I agree with MNG.

  • Old Mexican||

    Spending cuts, the scholars found, are more effective than tax increases in reducing the ratio of debt to GDP.


    What is revealing is not the finding. What IS revealing is that it took a couple of Harvard eggheads a full comparative study to find out what every housewife the world has ever seen already knew: That lowering your expenditures is MORE EFFECTIVE in the short run at improving your situation than trying to find a new source of income.

  • MNG||

    OM

    Why is that so obvious? If I were in debt I would certainly cut back and try to make more. That seems the obvious strategy.

  • ||

    The "make more" in the household analogy would not be the analogue of raising taxes, though. It's analogue in the federal budget would be to raise GDP. That's not so easy...and it's certainly less easy when you raise taxes.

  • MNG||

    I'm not sure about that. I guess what you are saying is the GDP is like the family income and raising taxes would be like one spouse taking money from the family income to pay her expenses. But if we are only talking about the spouse's income that can work to bring down her debt, though likely only in the short term.

  • ||

    Raising taxes would be the analogue of asking your boss for a raise (with no additional duties...i.e. believing your are underpaid for the productivity you are providing).

  • Old Mexican||

    Re: MNG,

    I guess what you are saying is the GDP is like the family income and raising taxes would be like one spouse taking money from the family income to pay her expenses.


    The easiest path is to lower your expenses. Searching for new income is hard, compared to curtailing expenses, considerin that what is fully under YOUR control IS your expenses, whereas new income depends on other people's willingness to trade with you. By the way, this simple concepts is not udnerstood by simple-minded folk like comrade Tony - just an FYI.

    Besides this, you cannot avoid the fact that taxing people is taxing.

  • MNG||

    I agree what you spend is more under your control than what you make but what you make is under more of your control than one might think...

  • Tony||

    Which is why it's a fallacy to treat government as if it operated on a family budget. It does have the power to tax, and to operate as the spender-of-last-resort when there is depressed aggregate demand in the private economy.

  • Old Mexican||

    Re: Stoopid In America,

    Which is why it's a fallacy to treat government as if it operated on a family budget.


    Thus spake the economics ignoramus. The ONLY difference is one of scale, not of economics. Saying that governent is different is nothing more than special pleading.

    It does have the power to tax, and to operate as the spender-of-last-resort when there is depressed aggregate demand in the private economy.


    You're begging the question, sockpuppet. It has the power to tax so it has the power to spend... because it can tax.

    By the way, spending is not the engine of the economy - it's PRODUCTION. And one has to produce FIRST in order to spend, not the other way around. You're just another fool that believes this Keynesian canard.

    Better let us adults discuss adult things. Go and play with your dolls or something.

  • ||

    OM, you can say that again!
    i foresee an increase in admissions at Harvard if the pols follow their lead...
    and Cris Mathews screaming blue-faced how the educated elites had it right after all...

  • k2000k||

    It may have the power to tax but it does not have the power to prevent people from leaving. It is no secret that after Mass. added a tax on those making over a million dollars their millionar population dropped off precipitously. This isn't fucking sim city where you can raise taxes and all you have to deal with are little pixil people with frownie faces. People say "FUCK IT" and up and leave resulting in a permanent loss of the tax base.

  • Old Mexican||

    Re: MNG,

    If I were in debt I would certainly cut back and try to make more. That seems the obvious strategy.


    That's because you're not a housewife.

  • GW||

    Yeah, but we're always trying to make more. I think if you were in dire straits, you cut your cable TV off and stop eating out before you go get another job.

    Most people that are consistent broke asses don't have the best work ethic to begin with.

  • MNG||

    I dunno. It seems to me all this financial crisis of the government stuff is simply because the economy crashed and so revenues are really low right now. Don't get me wrong, we had crazy and immoral debts, but it just got so pressing with the economic crash.

    Now, having said that, this shows what I've been saying for a while, the government must tighten its belt because, well, the economy is tanking and revenues are down. The Democrats, public employees, the military and military contractors, all of them simply cannot expect there not to be cuts when this is the case.

  • Tman||

    The Democrats, public employees, the military and military contractors, all of them simply cannot expect there not to be cuts when this is the case.

    But thanks to President Goldman Sachs and The Democrats, public employees, unions and welfare recipients simply believe that if we just tax the rich more than we will have plenty of money and we will be able to meet our debt obligations.

    Then you try and explain to people things like what Martin Feldstein writes about today in the WSJ- The Tax Reform Evidence From 1986
    Experience implies that the combination of base broadening and rate reduction would raise revenue equal to about 4% of existing tax revenue.- and people look at you like you're crazy.

    Reality is a tough sell for certain segments of the population right now.

  • MNG||

    I agree it is silly to think taxing the rich can plug the holes in the dike at this point. Maybe it would go towards that, but it cannot by itself.

    Your other point is a bit more problematic imo. I've seen evidence that in the US context that there is a limit to revenue increases as % of GDP that can be gotten via taxes and that supports what you say. But many on the other side point to the experiences of other developed nations that is contrary to this. So it looks like it is not impossible.

  • Tman||

    You should read Feldsteins piece, I'll excerpt a bit of it here, with the key part in bold-

    The Tax Reform Act of 1986, enacted 25 years ago last Friday, showed how a tax reform that includes lower rates can change incentives in a way that grows the tax base and produces extra revenue. The 1986 agreement between President Ronald Reagan and House Speaker Tip O'Neill reduced the top marginal tax rate to 28% from 50%. A conservative Republican and a liberal Democrat could agree to a dramatic reduction in top rates because the legislation also eliminated a wide variety of tax loopholes.

    A traditional "static" analysis that ignores the response of taxpayers to lower tax rates indicated that those combined tax changes would leave total revenue unchanged at each income level. But the actual experience after 1986 showed an enormous rise in the taxes paid, particularly by those who experienced the greatest reductions in marginal tax rates.

    To measure that response, I studied a sample of individual tax returns (stripped of all identifying information) for more than 4,000 taxpayers provided by the U.S. Treasury Department. Because the sample contained the tax return of each individual for the years 1985 through 1988, I could compare the taxable income of individuals in 1985 with their taxable incomes in 1988, two years after their rates were lowered.

    Taxpayers who faced a marginal tax rate of 50% in 1985 had a marginal tax rate of just 28% after 1986, implying that their marginal net-of-tax share rose to 72% from 50%, an increase of 44%. For this group, the average taxable income rose between 1985 and 1988 by 45%, suggesting that each 1% rise in the marginal net-of-tax rate led to about a 1% rise in taxable income.

    This dramatic increase in taxable income reflected three favorable effects of the lower marginal tax rates. The greater net reward for extra effort and extra risk-taking led to increases in earnings, in entrepreneurial activity, in the expansion of small businesses, etc. Lower marginal tax rates also caused individuals to shift some of their compensation from untaxed fringe benefits and other perquisites to taxable earnings. Taxpayers also reduced spending on tax-deductible forms of consumption.

    A similar picture emerged for the group of taxpayers who faced slightly lower marginal tax rates of 42% and 45%. The reduction to 28% raised the marginal net-of-tax share of this group by 25% and their taxable incomes rose by 20%, suggesting that each 1% rise in the marginal net-of-tax share raised taxable incomes by 0.8%, quite similar to the estimate for the group with the highest marginal tax rate.

    The substantial sensitivity of taxable income to the taxpayer's marginal net-of-tax share has important implications for the effect of tax-rate reductions on total tax revenue. For a 10% across-the-board reduction in all tax rates, a traditional "static" analysis implies that revenue would fall to 90% of its previous level. But reducing a current 40% marginal tax rate by 10% to 36% raises the net-of-tax share to 64% from 60%, a rise of 6.7%. If that causes the taxable income of those at that tax level to rise by 6.7%, their taxable income would fall to only 96% of what it had been. In short, the behavioral response of taxpayers in this highest bracket would offset 60% of the static revenue loss.
  • ||

    Wow. That is a great piece of work. I can hear the crickets chirping in response.

  • MNG||

    It's interesting but there are many studies on this topic reaching different conclusions. This kind of thing is pretty hotly debated in professional economic circles, one study doesn't conclude much.

  • ||

    Then lets see them. Or lets hear some criticisms of that study. Sorry but "nut ah!!" doesn't count as a response.

  • MNG||

    Dude, you want to get in a citing contest? This is debated in economics, there are peer reviewed articles all over the place on this topic. I don't know what to tell you other than that only a fool reads one article in a hotly debated area and says "well, that's enough for me!"

    You really have no critical thinking faculties at all do you?

  • ||

    I don't expect you to get into a citing contest. But I do expect you to at least try and articulate why this study is not definitive or even instructive on the subject. You need to better than "well other people think differently". Well no shit. Tell why that is and why you think they are right.

    And to think you are calling Warty inarticulate below? Jesus Christ MNG, you can't even make an argument up here.

  • MNG||

    John, I make my living doing social scientific number crunching. A person should not say a study is wrong without reading it, and I didn't say it was. But when you are in my field you realize that in hotly debated areas there are numerous studies all over the place that look good in a newspaper summary but often, upon scrutiny, are less impressive. To have your mind changed or solidified by one of them is the sign of a weak, inexperienced mind.

  • ||

    I don't care what you make your living as. If you have a reason Feldstein's work is not definitive, I would like to hear it. In fact, if you really believe that raising taxes raises revenue, you should be able to recite by rote the reasons to doubt Feldstein. The fact that you can't do that and when asked to do so get defensive and start attacking people says that you haven't ever given Feldstein's work any thought. And just believe it to be wrong because that is what you want to believe.

  • Tman||

    MNG,

    Do you have anything from someone other than Krugnuts that argues against the premise in the above mentioned article? I agree that Keynesians argue that lowering the tax rate lowers revenues, but the data isn't supporting their argument. Those that argue that lowering the tax rate actually raises the revenues have plenty of data from which to support their argument.

    I would be interested in reading studies on this topic that you are aware of that can actually show that raising the tax rates increases federal revenue more than lowering it. The data from this particular study along with several other time periods in which tax revenues increased due to a lowering of the tax rates would seem to show otherwise.

  • Tony||

    No they don't. There is not a single serious study that claims that recent tax cuts increased revenue from where it would otherwise have been. The usual estimate on the Bush tax cuts is that it cut revenue more than a trillion dollars from where it otherwise would have been. Which has the benefit of being sound arithmetic.

  • Tman||

    So Tony, you didn't read Feldsteins piece at ll , did you.

  • ||

    Just what the thread needed, another fucking troll.

  • Tony||

    Would you be referring to yourself SugarFree? Because playing blog police is certainly more trollish than merely having a different opinion from the majority.

  • ||

    If you notice, the whining about Warty, or Episiarch or me playing "blog police" always comes from rather, or, in this case, another of her sockpuppets.

    Now, she's not always Tony, other people sockpuppet him too, but there was less Tony during The Glorious Fortnight than usual.

  • MNG||

    In SF's world anyone who he cannot sway with his eloquent and logical arguments in a half hour is obviously, OBVIOUSLY, a dishonest troll.

    You know, I think for a significant and pathetic number of regulars here this place is not a place to come on and give intellectual give-and-take about political philosophy and such, it is their fucking "online community" with their "online friends." Like any such sad equivalent these people actually have lil' cliques, and the treatment of people like rectal is like the clique that picks on the weird guy who picks his nose at school.

    It's like John's sad desire to be liked by the posters here. John is a self-identified "national security conservative", the anti-thesis of the Ron Paul libertarians here. But he is constantly engaged in transparent pandering to the folks here. Sometimes it comes through, when John is mad and he's not cussing or raping the English language he will actually say "that's why noone here likes you" (as if the liberal is on the libertarian blog to win popularity contests).

    Hell I'd more likely vote for Paul than John, though I wouldn't pander about it to make "friends" here.

  • Joe M||

    But what about the studies showing the opposite of the one Tman cited? I'd like to see competing evidence. A study that actually looked at real tax returns over a period of time encapsulating a significant change in the tax code seems pretty compelling to me.

  • ||

    You realize that her name isn't actually 'rectal', right minge?

    Dick.

  • ||

    Yeah, I really want to be liked on here MNG. Do you read the threads on atheism? But I am the dishonest one.

  • MNG||

    Tman
    If you go to Google Scholar and type in "Feldstein Tax Reform" you will get Feldstein's 1997 article in which he presents this research. It has 470 cites, so it is pretty well discussed. If you click on that you will have 470 articles that at least cite it, and I imagine many that thoroughly scrutinize it.

  • ||

    Ok. MNG, why can't you tell us why you think Feldstein is wrong? You don't have to give us cites. Haven't you read any of these things? Do you even know why you think the way you do beyond "someone told you"?

  • Tman||

    MNG,

    I understand that there are plenty of discussions on this topic. But the fundamental point of Feldstein (and a myriad of others) is that lowering the tax rate increases overall revenue.

    Either this is true or it isn't. For another example, I give you that bastion of right-wing thought, President JFK who indeed lowered tax rates and this was the result-"Tax revenues climbed from $94 billion in 1961 to $153 billion in 1968, an increase of 62 percent (33 percent after adjusting for inflation)." Funny that JFK would get laughed off the Democratic plantation for uttering such blasphemy to today's Democratic Establishment.

    So if you have counter examples, I'm all ears.

  • Tony||

    I'm pretty sure Feldstein has never claimed that. No serious economist has claimed that reducing tax rates increases revenue (except maybe at the extreme upper end of rates).

  • ||

    Did you even read the damned article Tony? And yeah, it is called the Laffer curve you moron. And everyone left and right agrees there is a point of diminishing returns on tax rates.

  • Tony||

    Yeah and that point is not to be found in any realistic tax policy change on the horizon. It's completely irrelevant.

  • The Ingenious Hidalgo||

    No serious economist has claimed that reducing tax rates increases revenue (except maybe at the extreme upper end of rates).

    And no doubt you rule out anyone who does claim that from being serious a priori.

  • ||

    I bet a lot of scholarly works cite Mein Kampf. Does that make Hitler right or merely well-cited? Are those the same thing?

  • That's Our Epi||

    David Graeber is his own "White Indian":

    "He studied the people of Betafo, a community of descendants of nobles and of slaves, for his 2007 book, Lost People.

    Betafo was "a place where the state picked up stakes and left," says Mr. Graeber, an ethnographer, anarchist, and reader in anthropology at the University of London's Goldsmiths campus.

    In Betafo he observed what he called "consensus decision-making," where residents made choices in a direct, decentralized way, not through the apparatus of the state. "Basically, people were managing their own affairs autonomously," he says.

    The process is what scholars of anarchism call "direct action." For example, instead of petitioning the government to build a well, members of a community might simply build it themselves. It is an example of anarchism's philosophy, or what Mr. Graeber describes as "democracy without a government.""

    http://chronicle.com/article/I.....ll/129428/

  • Warty||

    You're really going to keep tolerating this forever, editors?

  • MNG||

    See, this proves my point. Why should this be banned? As a post it has much more substance than the usual four word sentence post from Warty for example. It makes a claim about the evils of the state and about this idea of direct action and consensus.

    But let's say it is beyond stupid, why not just scroll the fuck past it? I mean, what kind of a pussy are you? The mere sight of it makes you faint?

  • ||

    Look out, Warty! He probably makes more money than you! He's studied the wealth distribution in this country, damn it!

  • Warty||

    Three fucking sentences? Please. Come back when you have more substance. I make more money than you.

  • ||

    17 words, Warty? Did you crack out the thesaurus or something? Much more substantive than you normally manage.

  • Almanian White Injun's Ghost||

    Is Warty not free to gambol about the thesaurus, Mr. Die of Beetus? Your [state]ments indicate your [state] of mindlessness.

    Derp! Hurr durr hurr!! Gather. Hunt. Rinse. Repeat.

  • Warty||

    Oh, and now SugarFree chimes in with a glib and content-free post. No wonder I make so much more money than you.

  • ||

    Whatever, Warty. It's clear you haven't studied wealth distribution in this country.

  • PantsFan||

    But no metal video

  • Warty||

  • MNG||

    Oh, now all three stooges chime in.

    Is it me or is Warty a less substantial and articulate version of SF and SF is a less substantial and articulate version of Epi? It's like that Michael Keaton clone movie where each copy comes out a little dumber.

  • Beloved Rev. Blue Moon ||

    Another notch in the Three Amigos belt.

  • ||

    Multiglibcity

  • ||

    It is you. Warty is quite funny and quite articulate. Just because he understand brevity and has a sense of humor and you don't, doesn't make him a less commentator.

  • MNG||

    "Just because he understand brevity"

    John, was Steve Smith your English teacher?

  • ||

    Yes MNG, I forgot that "S" just for you. I figured it would give you something else to say besides Shirley Sherrod. I am good guy like that.

  • Warty||

    Also, why thank you, John.

  • Warty||

    What the fuck is this bullshit? I expect no less than five sentences denouncing me.

  • ||

    Anything else is really just a rip-off, Warty, you inarticulate version of me.

  • Beloved Rev. Blue Moon ||

    I make more money than all of you...combined.

    BEST BELIEVE.

  • ||

    That is probably true. Why else would you be beloved?

  • Warty||

    Whatever, SugarFree. You're just a version of me without the cooking ability. Plus, I bet I make way more money than you.

  • ||

    We'll both send our tax returns to a neutral 3rd party. It's the only way to settle this, because obviously whoever makes more money is the one who is right.

  • ||

    The only true way to settle this dispute is the oldest way. RAP BATTLE

  • Warty||

    Jesus, JW. Try to say something of substance for once.

  • MNG||

    I doubt anyone here can recall any posts of substance from warty. He usually strolls in and drops some equivalent of "that guy is so dumb!" and then strolls out. Can anyone recall any position of Warty's on, well, anything? For him to call for bans for lack of substance is the ballz.

  • ||

    As opposed to your gems that amount to "well other people think differently" or "you were wrong about some tangential trivia four months ago". Really MNG, you don't lack for nerve do you?

  • MNG||

    John, you were wrong on...so much.
    You don't need another refresher do you? My fav was this weekend when you said that 86% of our economy was private sector and 25% was public sector...

    Look, I know you desperately want to be liked here, but it's just getting sad...

  • ||

    You are funny MNG. You have gotten increasingly nasty on here in the last few months. I don't really know why. Usually you reserve your nastiness for me, which doesn't bother me, I give as good as I get and find your loathsomeness entertaining. But why you feel the need to now turn on everyone else I don't know. I guess defending the indefensible every day starts to get to someone after a while.

  • ||

    You have gotten increasingly nasty on here in the last few months.

    Sorry, John... but you're wrong. MNG has always been a petulant asshole, it is just that as long as he had joe around to be an even bigger dipshit, he could hide in the glare.

    It took me years to figure out he wasn't worth talking to and now I'm just waiting on everyone else to catch up.

  • MNG||

    Yeah, noone has the open mind of SF, which I can't recall ever being changed on anything.

    Of course 15 year old minds are rarely changed.

  • ||

    OH SNAP

    He called you 15, NutraSweet! Fucking burn!

  • ||

    He called you 15, NutraSweet! Fucking burn!

    Yeah, I'm all broken up inside. He's only be using that insult for years. You see, he has too much substance to come up with any new material.

  • MNG||

    "I give as good as I get and find your loathsomeness entertaining."

    Which is why you were cursing me and threatening to fight me just the other day. Face it John, you're habitually sloppy and dishonest and I've begun to call you out on it. So you're mad. Go whine about it some more.

  • ||

    Yeah MNG, mindlessly calling me a war monger and lover of war is really calling me on my dishonesty.

  • MNG||

    When your well known raison d'etre here is to defend a war everyone else here hates (Iraq) and to advocate for another one everyone else here doesn't want (Iran) but you suddenly appear as, in Tony's words, a "soft, squishy pacifist" about wars during a D's administration, then yeah calling you out as such is substance dude.

  • ||

    When I have I ever advocated for a war with Iran? I have gone back and forth about Iran. I am pessimistic that we eventually will be at war with Iran. But that is not because I want it but because I understand they get in vote in that. But I certainly do not advocate attacking Iran. At this point, nothing short of invasion will stop them from getting nukes. And we don't have the political will to invade and there is no guarantee we wouldn't wind up with something worse as a result. The best we can do with Iran now is to hope their own people wipe out their government.

    And just because I support one war does not oblige me to support every war or mean that I don't understand what a nasty business war is.

  • MNG||

    "John|10.24.11 @ 2:53PM|#
    When I have I ever advocated for a war with Iran?"

    Ok, it's unfair to make me laugh that hard.

  • ||

    Yeah MNG, you will be coming with all of my war mongering for Iran right after you explain why Feldstein is wrong. Beyond which, I just gave you my thoughts on Iran.

  • Beloved Rev. Blue Moon ||

    MNG @ 2:11

    Four sentences with attacks on a person. Try posting something with substance next time.

  • ||

    To minge copy and paste = substance, but he studies social numbers or something so watch out.

  • ||

    J'accuse!

  • Joe M||

    Axis of Glib, the lot of you.

  • ||

    J'accuse!

    Wow, talk about substance-free posts... is that even in English?

  • ||

    Le busted!

  • ||

    I went to SF's link above. Read this

    Mr. Nice Guy|1.23.08 @ 9:47PM|#

    e-propertarianism (called "libertarianism" here) often seems to consist of people who have stuff and advantage over others who lack it being able to dictate ("consensual") terms to those people who lack (they can always "ge their own in the magical market"). They don't just think it necessary, they orgasm over it...

    And tell me that maybe MNG isn't White Indian. That sounds very White Indian to me.

  • rather||

    I heart you MNG. Helle states the guy is real too; I guess epi and warty need another delusion:


    I admit.... I'm .....SATAN, and I need fresh BBQ

  • Almanian||

    PWN'ED!

  • ||

    Because it has nothing to do with the topic and just uses the thread to make the same tired and insane point, that is why it should be banned. It disrupts the conversation.

  • Beloved Rev. Blue Moon ||

    Why should this be banned?

    What does it have to do with tax rates or the bond market? Most posters, even when they are joking, are on-topic. Even when the topic deviates, it is a natural tangent to the original. It reminds me of someone who has just seen a television show the LOOOOVE and they try to drop references to it at the most inappropriate times, only worse.

  • rather||

    Most posters, even when they are joking, are on-topic. Even when the topic deviates, it is a natural tangent to the original

    I have never hear such adorable bullshit; you need to write for a politician

  • PantsFan||

    btw, the article states that Graeber is a founder of the occupy movement.

  • Almanian OWS'er||

    I took a shit in Zuccotti Park, once

  • ||

    So, his idea of "direct action" appears to be swarms of committees, with all cash being held and managed by an unknown and unaccountable group.

    While the experience of the Occupados may (or may not!) show that anarchy cannot work in principle, it certainly shows that anarchists cannot get it to work.

  • ||

    The Occupiers are not anarchists. They are the real life version of Animal Farm.

  • ||

    That's giving them too much credit, if you ask me.

  • ||

    Animal Factory Farm: Two-Legs Bad; Fattening Pen Good

  • ||

    That's about it. They want to be led to the slaughter.

  • mad libertarian guy||

    They're not anarchists unless the meaning of anarchists has changed to "those who whine that the government is not stealing enough from its productive citizens in order to transfer it to us".

  • Old Mexican||

    From the link,

    The defining aspect of Occupy Wall Street, its emphasis on direct action and leaderless, consensus-based decision-making, is most clearly embodied by its General Assembly, in which participants in the protest make group decisions both large and small, like adopting principles of solidarity and deciding how best to stay warm at night.


    The writer clearly lacks any sense of irony. There is nothing anarchic about a group of people that rely on a so-called "General Assembly" to decide how to stay warm at night. It merely shows the childish character of the group.

  • k2000k||

    *face palm* Someone should tell W.I that if we didn't have the city state these morons wouldn't survive a fortnight.

  • Jersey Patriot||

    Two things:

    1. It is truly stunning that an article can be written about America's debt problem and not a single word talks about America's enormous military, "security" bureaucracies, or needless wars. Money is fungible, and cutting spending on the military is just as good as cutting spending on anything else. Better, actually, since you get out of the business of incinerating Third World goat herders.

    2. It is equally absurd that an article can be written about America's debt problem without mentioning the easiest way to get rid of debt: default. No more debt means no debt-to-GDP problem.

    Truly bizarre lack of vision here.

  • ||

    The entire cost of the Iraq war was around 800 billion dollars over eight years. That won't even buy you one year of the stimulus or a single year of the increase in overall spending since 2007.

    Yeah, it is nice Iraq is over. But it is not what is driving us broke.

  • MNG||

    John believes in the CBO

    this week.

  • ||

    I think CBO is quite capable of counting money that has been spent. That is different than guessing money that will be spent. The guesses are not quite as reliable as the actual accounting.

    And I guess this was one of those content filled posts you are so proud of.

  • Warty||

    Four sentences. I won't even bother to read this post; it clearly doesn't have any substance.

  • ||

    Yeah Warty, you are not reading my posts

    this week.

  • Warty||

    Do you want citations? I'll cite Krugman so fast your head will spin. SUBSTANCE.

  • Beloved Rev. Blue Moon ||

    I CAN'T SEE ANYTHING FOR ALL THE LACK OF SUBSTANCE.

  • ||

    SUBSTANCE ABUSE

  • Warty||

    What was the substance in Frank Booth's tank, anyway? I always assumed it was ether or something similarly nasty.

  • ||

    It was Fuckanythingthatmovestrogen.

  • MNG||

    See? We have to ban WI so we can back to these spirited, substantial "who's on first" styled discussions...

    I've posted on here a long time. Sometimes people debate political and cultural ideas intellectually. But there's always been a significant amount of sometimes amusing but often childish stuff of this sort. That's cool. What's ballzy is when the cut-ups start to push for other people to banned for not being substantial enough.

  • ||

    Have you studied the substance distribution at this blog? Extensively? Do you make more substance than other posters?

  • k2000k||

    Really what reason should do is give us an option to collapse certain conversation threads. I understand not wanting to police this too heavily, but frankly I sympathetic to MNG. No other thread or forum I read on the internet is filled with so much trollish crap. It is too bad because sometimes you find a real gem when it comes political and ideological discussion.

  • MiNGe||

    Axis of Glib! Axis of Glib! I bet you're all JOOSS!!!11!!!

  • rather||

    word orgasm :-)

  • rather||

    MNG

  • MNG||

    It is substance. You and other GOPers have said the CBO is worthless when it produces numbers you don't like, but when Drudge puts a CBO related number that cuts against liberals up you embrace it and parade it. You have no shame or integrity.

  • ||

    No. MNG. I have said that the the CBO's projections of how much programs will cost in the future are often wrong or based on inaccurate numbers. No one has ever said that the CBO can't count the money that has already been spent. CBO isn't saying the Iraq war and the stimulus will cost this much in the future. They are saying they have cost this much in the past.

    Do you really think the people reading this can't see that distinction? You are just trying to change the subject and attack the messenger because you don't like the facts presented.

    Look the stimulus cost more money than the Iraq war. If you don't like that, too bad. Go live in another universe where it is not true.

  • MNG||

    Did they CBO say they spent 111% of that money John?

  • ||

    Yes MNG, because I hit a "8" rather than a "7" that must mean that the stimulus really didn't cost that much.

    Once again, the facts are what they are. Attacking me doesn't change them or cause anyone reading this to not realize what they are.

  • MNG||

    because I hit a "8" rather than a "7"

    You must have some stubby fingers to account for all the fuckups you've had in the past few months...

    Was it your stubby fingers that made you say the ESA had no exceptions, and then you admitted it had exceptions?

    Was it your stubby fingers that said that the assasination in Syria ended the Cedar Revolution when it actually began it?

    Was it your stubby fingers that typed that you thought Sherrod should be fired and then later typed that she shouldn't and then yet later typed that she should (and tried to deny the second move)?

    Was it your stubby fingers that wrote that Oslo had been bombed by Muslim terrorists?

    Was it your stubby fingers that claimed that GPS trackers were in the FF guns and then claimed they were not?

    Was it your stubby fingers that cut and paste the Fox story claiming the fed judge was forbidding any mention of religion at graduation when he actually explicitly allowed that?

    This is just in the past few months. Thems some stubby-ass fingers John!

  • ||

    Again MNG, the facts don't change because you attack me. The stimulus cost more than the Iraq war. The more you try to change the subject, the more you look defensive and weak. Why can't you just deal with it?

  • Joe M||

    You're changing the subject. However, the point remains that the Iraq war was extremely expensive, both in terms of money and lives lost.

  • ||

    Of course it was expensive Joe M. It was very expensive. But it is astounding that Obama could spend more money on a single stimulus than Bush and Obama could spend on eight years of war in Iraq.

    MNG changes the subject and attacks me because that is a very uncomfortable fact for someone who ran around screaming during the Bush years that the Iraq war was bankrupting us.

  • Joe M||

    Aren't they about equal? The stimulus was around $776 billion, I thought. Iraq cost about $800 billion. And it's possible to say, hey, at least the stimulus money wasn't directly killing people, even though it was incredibly wasteful. I of course oppose both the stimulus and the war. And don't forget the bailouts, which spent about the same amount of money as the other two. Ugh. Two and a half trillion down the toilet.

  • ||

    Here are the numbers Joe M

    According to CBO numbers in its Budget and Economic Outlook published this month, the cost of Operation Iraqi Freedom was $709 billion for military and related activities, including training of Iraqi forces and diplomatic operations.

    The projected cost of the stimulus, which passed in February 2009, and is expected to have a shelf life of two years, was $862 billion.

    http://www.foxnews.com/politic.....mulus-act/

    It is fairly close in raw numbers. But the Iraq war lasted 8 years. The stimulus raised baseline spending that much every year. Every single year under Obama we are spending an extra Iraq war in the name of "stimulus".

  • k2000k||

    It should also be noted that try to cut spending back down to pre-stimulus levels is seen as too radical. The fact the Stimulus spending is even more harmful than the war, not that the war isn't harmful, simply because will be much easier to cut war spending than the stimulus spending.

  • Mo||

    The stimulus spend $550B, not $800B. The remainder of the stimulus came from tax breaks and incentives.

  • Tony||

    Of course the Bush tax cuts cost more than Iraq or the stimulus.

  • Toni||

    Because letting people keep their own money is a 'cost' that has to be 'paid for'. Derp

  • Tony||

    You can either make a fiscal argument or a moral argument about taxes. You can't just shift the subject when convenient.

    This is what pisses me off about this whole debate. You guys have to lie and cry about the immorality of taxation in order to ignore prudence and advocate for the policies you want. You can't just argue for them on their merits, because nobody would buy it.

  • ||

    The costs of those programs is what makes them undesirable. What pisses me off about people like you is that you act like money comes for free. It doesn't. There is a cost to all of those programs.

  • Tony||

    But you act like you can save individual people money by getting rid of a government healthcare access scheme, when the entire reason those programs are having budget crises is because of the increasing cost of healthcare itself. Remove the access programs and all you do is leave ever-increasing healthcare costs with individuals. You've reduced the scope of government, but you've made life more costly for individuals. This isn't about saving taxpayers money, it's about an ideological crusade to end programs you don't like.

  • Old Mexican||

    Re: Stoopid In America,

    Remove the access programs and all you do is leave ever-increasing healthcare costs with individuals.


    This assertion runs contrary supply and demand.

    Basically, in one sentence, you have proven to be totally motivated by ideology and not economics, exactly what you accuse others.

  • Red Rocks Rockin||

    But you act like you can save individual people money by getting rid of a government healthcare access scheme, when the entire reason those programs are having budget crises is because of the increasing cost of healthcare itself.

    That's like arguing that if the government quit guranteeing student loans, that tuition rates would rise even higher than they are now.

  • Red Rocks Rockin||

    This isn't about saving taxpayers money, it's about an ideological crusade to end programs you don't like.

    The cost of government before these programs were implemented was $760 billion a year, inflation-adjusted, in an era where over half of federal spending went towards defense. That cost is now over $3.5 trillion. So it's pretty obvious that cutting these programs are going to save the taxpayers money.

  • Joe M||

    A $100 billion here, a $100 billion there, pretty soon you're talking real money.

  • Jersey Patriot||

    The entire cost of the Iraq war was around 800 billion dollars over eight years. That won't even buy you one year of the stimulus or a single year of the increase in overall spending since 2007.

    The military, the security bureaucracies, the needless war, and the hidden MIC costs in other departments total well over a trillion dollars a year. Cutting them is as good for closing the deficit as cutting anything else. It's all well and good to mention that entitlement reform is badly necessary - and it is - but to completely omit any mention at all of the MIC is ludicrous.

  • ||

    That is tin foil hattery JP> The war cost what it cost.

  • k2000k||

    The thing is though that much of that would have been spent regardless of whether or not we went to Iraq.

  • Beloved Rev. Blue Moon ||

    Because Defense does not have a projected $116 trillion in unfunded liabilities, goofball. Entitlements really are the one and only problem.

    SLD applies and I support halving the DoD and ending the wars. But not every article targeting the real problems needs to give this silly lefty trope a play.

    It is equally absurd that an article can be written about America's debt problem without mentioning the easiest way to get rid of debt: default. No more debt means no debt-to-GDP problem.

    Too much stupid in two sentences.

  • Jersey Patriot||

    Because Defense does not have a projected $116 trillion in unfunded liabilities, goofball.

    Money is fungible, bro. Every cent spent by Social Security or "Defense" or Medicare or whatever counts the same. By your logic, every single cent of military spending is an unfunded liability.

  • Beloved Rev. Blue Moon ||

    argh.

    No.

    De Rugy is saying without entitlement reform, the dollar number of obligations is going to vastly outstrip anything we could hope to collect in taxes.

    This is not true of Defense. Saying "money is fungible" makes no sense in this discussion whatsoever. Even if you directed all 700 billion of Defense Spending, you would still have anywhere from 61-115 trillion in projected deficit spending.

  • cynical||

    We should cut 80% of defense spending, but implement a plan to use the elderly and poor as meat shields in the case of invasion. Kills two birds with one stone.

  • ||

    What does SLD stands for here, please?

  • GW||

    Default only solves the problem because then no one would be stupid enough to loan us money, thus deficit spending is halted.

    I think that's ultimately where we will wind up, but it's by far the worst option. Talk about the end of the world as we know it.

  • Red Rocks Rockin||

    Default only solves the problem because then no one would be stupid enough to loan us money, thus deficit spending is halted.

    And the only way default would ever occur would be if we couldn't pay the interest on our debt. The problem becomes when you rack up so much debt that the interest as a percentage of federal spending becomes as large as things like defense and the social welfare programs.

    That's why strolling merrily along with $1 trillion deficits is the height of insanity. It's as if people like Tony never heard of compound functions.

  • MNG||

    Of course the DoD doesn't have "unfunded liabilities" they get budgeted more than they ask for every year. WTF does that have to do with how much they are costing us?

  • Beloved Rev. Blue Moon ||

    Do you understand how "credit ratings" work?

  • MNG||

    The credit rating of the United States has nothing to do with its budget and its components?

    Well, yes I would like to hear about that.

  • MNG||

    JOOS?

  • AlmightyJB||

    But the media mantra is that it has to be balanced because that's "only fair" Because intentions are much more important than actual results. They're the reason we have a bunch of brain dead idiots camping out around the country spouting nonsense.

  • Tony||

    Unlike the claim that we can't cover deficits by raising taxes because taxation is morally wrong? Which, of course, is to change the subject.

    It sure would be nice if those who want to eviscerate Medicare and Social Security would explain just why that policy choice would be good, instead of pretending we have no other choice.

  • GW||

    I think those items have been explained many times before. You refusing to listen to reason is the issue.

    Oh, and we have no other choice. Math is funny that way.

  • AlmightyJB||

    The example in the article was that a successful fiscal adjustment had a 2% reduction in spending. Other than for left wing moonbats that is hardly evisceration. The other point made in the article was that you can set the tax rate at whatever rate you want and that still would not cover the shortfall. So your solution is?

  • Toni||

    Higher taxes, of course. For the fairness.

  • Toni||

    Higher taxes, of course. For the fairness.

  • Tony||

    The paper is criticized for not distinguishing between liquidity trap eras and non liquidity trap eras. It doesn't include any examples of an attempt to do fiscal stimulus--the time Japan tried it in 1995 is curiously left out. Other papers include zero-rate eras (like the 30s) and get results that confirm Keynesian stimulus theory.

    We'll never get anywhere by trying to forever chase debt--except perhaps bludgeoning all those government programs that advocates of austerity have an ideological issue with anyway. The only thing that can be done with a zero-bound interest rate is large stimulus spending to make up for demand shortfall, which will increase government revenues when it succeeds in jump starting a hiring and consumer spending cycle.

  • ||

    It wasn't a demand created recession. It was a debt created recession. There never was a liquidity trap.

  • Tony||

    We tripled the US monetary base from 2008-2011 and interest rates are near zero, yet no significant change to domestic price indices occurred over that time.

  • ||

    Because people used that money to pay down their debts. So basically what didn't directly go to the banks indirectly went to them. But the banks didn't lend because of Dodd Frank and general uncertainty. All that money is just sitting there waiting to create huge inflation as soon as the uncertainty ends.

  • Tony||

    You don't have any clue what you're talking about do you?

  • ||

    Tony, if you don't have anything intelligent to say, just say "I never thought of that". Saying stupid insulting substance less shit is MNG's job.

  • Tony||

    Substanceless are the GOP slogans you just tried to pound together into something resembling a point.

    Tripling the monetary base and deficits over a trillion dollars a year haven't caused hyperinflation or driven up interest rates. That is to say, economists who take the liquidity trap seriously have been right and those with inflation hysteria have been wrong.

    A nonpartisan, objective view of the evidence suggests the only course to take is large amounts of stimulus.

  • ||

    No it doesn't say that Tony. It says that people haven't spent the money that has been pumped into the economy. If it had been a liquidity trap, the economy would have turned around instead of double dipping into another recession.

  • Red Rocks Rockin||

    You don't have any clue what you're talking about do you?

    Revolving and non-revolving consumer debt, outside of student loans, has been dropping since July 2008.

    A nonpartisan, objective view of the evidence suggests the only course to take is large amounts of stimulus.

    A non-partisan, objective view of the evidence suggests that further stimulus will do nothing but draw out the economic downturn for years.

    That is to say, economists who take the liquidity trap seriously have been right and those with inflation hysteria have been wrong.

    You cannot run deficits at a greater rate than your production forever. The math won't allow it.

  • k2000k||

    Prices most certainly have gone up, the only reason you aren't suffering more is because many business are eating the difference for fear of losing customers. Or the don't change the price but decrease the portion given to you.

  • Old Mexican||

    Re: Stoopid In America,

    The paper is criticized for not distinguishing between liquidity trap eras and non liquidity trap eras.


    There is no such thing as a "liquidity trap." Think about it for a second and you will see why.

    It doesn't include any examples of an attempt to do fiscal stimulus--the time Japan tried it in 1995 is curiously left out.


    That's a possibility. Exactly what did the Japanese stimulus accomplished, by the way?

    Other papers include zero-rate eras (like the 30s) and get results that confirm Keynesian stimulus theory.


    Really? LINK TO THEM, don't just say they exist.

    [...]except perhaps bludgeoning all those government programs that advocates of austerity have an ideological issue with anyway.


    How dishonest of you. Any economics-based criticism you can simply explain away as "ideologically based."

    The only thing that can be done with a zero-bound interest rate is large stimulus spending to make up for demand shortfall, which will increase government revenues when it succeeds in jump starting a hiring and consumer spending cycle.


    Without regard for the fact that throwing money like to spur demand only increases inflation. After all, where do you think the money would come from, the money-fairy? No mater how many Monopoly bills you throw at people, that does not change the number of goods automatically.

    We tripled the US monetary base from 2008-2011 and interest rates are near zero, yet no significant change to domestic price indices occurred over that time.


    That is a lie, sockpuppet. You are certainly NOT a housewife - she would know.

    You're such a twit.

  • Elder Scrolls Enthusiast AuH20||

    Has anyone else seen the recent AARP commercials warning politicians not to change Medicare because the AARP has 50 million members (which seems high, and I got to think that that is really the over 65s in this country, which still seems high)?

    It basically boils down to, "Nice Congressional seat you got there... shame if anything were to happen to it."

    And that is why we are fucked. Because old people will scream and yell that they want what they are "owed" and no politician or organization is either informed or ballsy enough to tell them the truth. The younger people won't do shit because they too have largely bought in to the, "You pay in to the system, ergo the system owes you" bullshit. Anyone attempting to tell the truth, and call it things like a Ponzi scheme, will be run out of town on a rail.

    We are royally fucked, and if you are under 35, like me, I would suggest buying some shares in Vasoline. Maybe we can lobby to let us have lube while we're being fucked.

  • ||

    FYI: You only have to be 55 to be in AARP, so 50M might not be that far off.

  • Joe M||

    There are about 309 million people in the country, so 50 million doesn't seems totally reasonable.

  • Elder Scrolls Enthusiast AuH20||

    Actually, looking at it, 50m is about 16% of this country, which matches demographic data.

    Jesus, it looks a lot different when you assign a number, instead of just hearing 16%. Is it to late to pull a Logan's Run?

  • ||

    As much as I want to kill SS, I can't say I blame them for wanting to keep it set up as it currently is. Getting a significant source of your retirement revenue cut off in the middle of retirement, without warning and no recourse, would be a royal bitch.

    That said, keep it in place for the 65 and up and tell everyone under 30, tough shit, but the good news is that you get to keep more of your earnings. As the SS recipients die off, the withholding percentage should drop, in a just world.

  • ||

    The government fucked those people. They taxed the shit out of them when they were working and convinced the to rely on a ponzi scheme. And now they are saying "too bad we can't pay". Yeah they should known better. But to me that are no different than the victims of Madoff, who also should have known better but are hardly the villains. The villain is government not the people it fucks over.

  • ||

    The villain is government not the people it fucks over.

    Well, yeah. The flip side is to kill SS outright and give a lump-sum payout to retirees and to those X number of years under 65. Making the process of killing SS a gradual one, only raises the chance of that whatever balls they had to kill it to begin with will quickly shrivel up and drop off.

  • ||

    Imagine if instead of the stimulus we used that money to buy our way out of the Social Security mess. We could have paid older people off and stopped taxing younger people and let them start saving. Instead we just pissed away trillions and still haven't fixed the problem.

  • k2000k||

    Wait...I don't think that works since the stimulus was all borrowed funds to begin with. Whatever savings the young peopel would have had would be eaten away by the increase in national debt servicing. We need to kill the program and let families and charities solve this. It sounds cruel but it is the most humane way to handle this out of a bunch of impalatable options.

  • Elder Scrolls Enthusiast AuH20||

    The villain is government not the people it fucks over.

    Well... yes and no. I can't kill them for wanting back what they actually put in. But the program has been paying out more than that since its inception, and I do grow tired of the, "We want back what is ours!" rhetoric.

    No, you don't want back what is yours. You want back what you put in, plus money for the latest drug and medical treatments, plus COLAs, plus money until you shuffle off this mortal coil even though life expectancy when you put it in was much lower. Now, you were promised all of that by politicians, and they lied to you, but the lie they told you was that you were owed it because you had put in, not that you were owed it because you were 65. Were it the latter lie, I'd have more sympathy.

    Yes, it will be a weaning process, but if I have to see another AARP commercial threatening a politician for daring to think about Medicare adjustment, I am going to get pissed. The AARP should be the leader of reform, because without reform, it's going to be, in the end, vastly more painful for seniors. We will either have mass inflation and screw over older savers on a fixed income or we will have brutal austerity that will hurt those same seniors. The AARP is on the wrong side of this fight because it is thinking only of its current membership, not its longer term future and future membership.

  • Jersey Patriot||

    That actually makes the problem far worse.

  • ||

    Sure. Because the gummint siphoned off the surplus for years and left IOUs. That and the fact that it takes the full 15% now to keep the system solvent doesn't help.

    I guess our masters will just have to man up and start trimming other entitlements in order to make the transition less wrenching.

    Better to deal with it now, than to allow the unfunded liabilities eat us alive. I'm saving my ass off to my 401K. Hopefully, there will be enough left in that to eat and have a nice cardboard box to live in, maybe a Maytag box, once the gummint gets through fucking the economy in general and inflating away any value it ever had.

  • ||

    Maytag? You 1% bastard!

  • ||

    :::cocks shotgun::: Get off my cardboard flap.

  • Joe M||

    I don't think the younger generation has bought into anything. I'm pretty sure a majority support being allowed to opt out, and also think SS won't be around when they retire.

  • Elder Scrolls Enthusiast AuH20||

    Also... anyone want to start an InTrade or whatever that gambling site is on, "Chances, when John and MNG meet in real life, they get rip roaring drunk and wake up the next morning spooning together in the nude"?

    Cuz I would put so much money down on that.

  • ||

    I wouldn't spoon with him. But I might leave him cab fair if I was in a charitable mood.

  • Warty||

    $20 says he'd immediately take a swing at you.

  • ||

    He'd probably hit you with his rolled up, dot-matrix PhD, that he carries around to settle arguments about substance that he makes all day when bravely not trying to win any popularity contests.

  • Elder Scrolls Enthusiast AuH20||

    Hey- that looked like a lot of sentences, but it was just one.

    THIS GUY'S A PHONY EVERYONE! HE'S JUST A BIG, FAT, PHONY!

  • ||

    He wouldn't take a swing at me in a million years. No way.

  • Kelly Thomas died for your sin||

    Bums drive down property values. The police protect and serve the property values of the polis, i.e., the city-State.

    That is real politics.

    The love of money is the root of all police brutality.

  • POLIS POLICe POLITics||

  • PRIVation PRIVilege PRIVate||

  • the root of all cop beatings||

    ...the deceitfulness of riches...

    verse 37, chapter 5
    The Jefferson Bible

    For the love of money is the root of all evil.

    verse 10, chapter 6
    1 Timothy, King James Version, Cambridge Edition

    For the love of property values is the root of all police brutality.

    White Indian has spoken.

    You must look in your hearts.

  • GW||

    SS would be simple to phase out....you just have to realize that there's no way that one group or another won't get fuct on the deal.

    You establish an age, say 35, as the cutoff. 35 and under, you pay the SS tax with the knowledge that you will NOT, under any circumstances, get benefits. People 45 and over get what they were "promised", and between 35 and 45, you pro rate the benefit.

    As the system winds down, taxes are reduced, until the tax is finally zero because there are no people that can receive benefits. It'll take 3 decades, but it's probably the solution with the least overall negative impact.

    It's a high stakes game of musical chairs. You just have to plan it so that the guy who is left without a chair is the best able to plan for it.

  • Canuck Commenter PantsFan||

    So this is still not a Wheel of Time thread?
    Reason I am disappoint.

  • cw||

    You know, I have to agree with MNG: While WI can be very irritating with his copy-and-paste, agriculture-is-teh-evul ranting, he should be able to say it all he wants.

    It really doesn't take much to scroll past it all.

    And, I have to add, he has included several different sources that support his beliefs. They do make valid arguments (though that doesn't mean they're correct, just logical).

    One other thing: I really don't believe WI is rather; the two have vastly different writing styles and expressions.

  • ||

    The first line of defense for any citizen of the United States is to get educated on what the Constitution and Bill of Rights say. Schools don't teach it anymore because big government does not want you to know. Check it out at http://www.squidoo.com/educati.....-you-know-

  • fghu||

    hello,welcome to www.luckygrip. com,i hope everyone will more like them because of there have more nice top goods and cheaper price in there,thanks

  • Pdh||

    Just wondering if any of those successful countries had a worldwide empire to maintain and were fighting a whole fistful of wars. Wasting trillions of dollars that wary. People will never buy that entitlements should be cut back as long as it is maintained that we can afford to support and/or fight the rest of the world, and rightly so.

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