Jon Chait Watch: Libertarian "Vacuity" on Budget, Taxes, Once Again Causes Liberal Pundit to Erupt!

In my mind, I picture Jon Chait of The New Republic as the Gale Gordon of the liberal punditocracy (full disclosure: Chait, whom I've met a few times, looks nothing like Gale Gordon). As the hapless Mr. Mooney on The Lucy Show, Gordon was the perpetually put-upon straight man whose eye-rolling and ribs-elbowing were never recognized by a single other human being, including the audience. The comic result: The gold standard of slow burns giving rise to comic eruptions that at least one other Reason staffer finds memorable enough to mention with semi-disturbing regularity.

Not long ago, Chait accused me of being a conservative dupe after I wrote a post about how the massive spending increases under George W. Bush deserved credit for massive deficits rather than his evil tax giveaways to billionaires who light their cigars with cardboard ripped from the very appliance boxes that all middle-class people (defined as everyone making less than $200,000) are now forced to live in. I even cleverly titled my piece " "Why is everyone picking on the 'Bush tax cuts' rather than the 'Bush spending increases'?" You can read Chait's response and my rejoinder by going here and working backwards.

Woops, I've done it again, says Chait, with the Reason.tv video "Budget Chef Explains How to Balance the Budget W/O Raising Taxes." Let's take a look. It's about two minutes, so why don't you grab a nice cup of coffee or take another hit of salvia. (Happy birthday, Miley! Call me when you need help injecting heroin directly into your eyes).

Chait correctly notes that the video is based on a piece I coauthored with Reason columnist and Mercatus Center economist Veronique de Rugy (a Chait bete noire who, like me, exemplifies in his mind the dread curse of "libertarian sanctimony." Read our piece, "How to balance the budget without raising taxes" by clicking here.

The video and article are my and Veronique's answers to the challenge that President Barack Obama threw down to his Commission on Fiscal Responsibility and Reform: balance the budget by 2020. The comission, headed by Erskine Bowles and Alan Simpson, offered up a bunch of spending cuts and tax increases to cover the bill in a mathematically unconvincing way. In particular, they rely on levels of revenue that have never been achieved by the feds (21 percent of GDP and higher). The same goes for most of the other budget plans floating around out there. And incidentally, I look forward to the milk cartons containing pictures of Bowles and Simpson, who, along with their recommendations, will never be heard from again.

Using the Congressional Budget Office's alternative scenario figures, which assume continuation of the Bush tax cuts and continuing fixes to the AMT, CBO says that federal revenue will rebound over the next several years to about 19 percent of GDP. So Veronique and I took as a given that, if we want a balanced budget, the feds cannot spend more than 19 percent of projected GDP in 2020. The feds have been spending significantly more than that for years, so the budget-cutting question becomes, How do you get there from here over the next 10 budgets?

Chait writes:

In the video, Gillespie chirps, "it's so incredibly simple that virtually any elected official should be able to pull it off." The hook is that, under their plan, "you only need to trim 3.6% of each year's budget."

Gillespie displays a piece of pork, which symbolizes the federal budget, divided into ten slices, representing each of the next ten years. He trims a tiny bit of fat off each slice ("all we need to do is cut this little piece of fat right here.") Voila!

But, of course, the visual is completely misleading. He is representing a plan to cut 3.6% of the budget every year. His actual plan is to cut 3.6% the first year, then another 3.6% the next year, then another 3.6% the following year, and so on....

The specific claim that you only need to cut 3.6% of the budget, and the broader claim that you just need to trim a little bit of fat here and there, are utterly false. The idea that the budget can be balanced without any increase in tax revenues and without imposing substantial pain is one of the most debilitating pathologies of right-wing thought.

While the Warner Wolf in me wants to say "Let's go to the videotape" (watch above!), let's instead look at the main figure from the piece Veronique and I wrote. This lays out, in pretty clear detail I think, how you can make small, systematic cuts to bring projected total federal outlays in 2020 into line with 19 percent of expected GDP (the amount the CBO says will be in play).

In the above, we lay out what 3.6 percent annual cuts in each of the next 10 budgets would come to if applied across the board to major spending areas (note that debt payments are included in the "other" category).

Here's something that non-libertarians might want to consider. Over the past 70 years, the feds have not succeeded in generally jacking up the amount of revenue as a percentage of GDP (thank you, AOL's John Merline, for this essential insight). The average is in fact slighly below 18 percent, so by using 19 percent (the CBO's number, which is consistent with Hauser's Law), we're even giving DC some slack. If balancing the budget is a good thing, and reality exists, you're going to have to find some way to introduce the two to one another for the long haul, if not a shotgun wedding.

The feds have managed to increase revenue to over 20 percent of GDP every once in a while (Bill Clinton managed it, for instance, but balanced the budget by significantly cutting spending as a percentage of GDP), but they have not proven able to do so for any length of time. You can bitch and moan about that all you want - that it's politics or business cycles or whatever - but until you come up with a feasible way of pushing revenue up and up for the long haul, you're shit out of luck. And the country will be stuck with the mother of all unpayable bar tabs.

But that's just the vacuous libertarian in me talking, I guess.

Here's some more Chait:

I'm sure they could find at least $1.3 trillion in spending [over the next decade] that they don't like. But the point is that you would have to eliminate a lot of functions of the federal government, and/or reduce a lot of social benefits.

First off, don't forget that the $1.3 trillion that we're talking about cutting over the next decade comes out of budgets that are projected to increase every year from 2012 on (see above) and that total federal spending over the next decade will come to over $42 trillion. I wonder if Chait is willing to name any functions of the federal government that he thinks we can live without? Maybe the two ongoing wars that his magazine happily supported (at least until recently). Maybe the Medicare prescription drug benefit, which gives relatively wealthy seniors free or reduced-price drugs regardless of ability to pay? Indeed, why not take a longer look at Medicare in toto, a program that former Obama adviser Christina Romer has said wastes 30 percent of its funds?

Or to put it slightly differently, could you find that much dough from the last decade's spending you'd like to cut? The Aughts have not been kind to spending hawks, that's for sure. Since Bill Clinton wrote his last budget, total federal outlays have increased by about 60 percent in 2010 dollars. As this web site is never to slow to point out (the same goes for Veronique everywhere else she writes), that is a bipartisan disaster. 

I could go on, but for the purposes of our exercise, Veronique and I didn't single out specific programs (though we'll suggest some in a forthcoming article-length piece in Reason magazine). The point was to show how the federal budget could be brought into balance in 2020 per Obama's dictate.

But there's one more thing to consider. Bouncing off the budget argument, Chait says that de Rugy, who blogs at National Review's The Corner and is regularly pilloried there for showing how rotten on spending the GOP is, is wrong, wrong, wrong, about the effect of the Bush tax cuts because she is, you know, a blind, one-eyed ideologue who as a libertarian is alas a dupe of hate-the-poor conservatives who stay forever young by shooting their hunting partners in the face.

As it happens, the other day, Veronique posted on the same data from the Tax Foundation that I had. The data show that, contra many of the claims emanating from such Democratic Party bit players as Joe Biden and Hilary Clinton, top earners actually paid larger shares of total income taxes under Bush than Bill Clinton. Here's my quick gloss on that:

In 2000, for instance, the top 1 percent of income earners paid 37.42 percent of all income taxes collected. In 2008, they paid 38.02 percent. That's down a bit from the peak of 2007 and reflects the recession hitting. The bottom 50 percent of filers saw their share of the income tax burden fall from 3.91 percent to 2.7 percent.

That sort of thing just isn't good enough for Chait, who must insist, once again against reality, that

The real story here is that the proportion of pre-tax income earned by the top 1% has been rising since the late 1970s. The rich paid a higher share of the tax burden in 2008 than in 2001 because they earned a higher share of the income. If de Rugy was right that the Bush tax cuts caused the rich to pay a higher share of the taxes, then the share of the taxes paid by the rich should have fallen during the Clinton era. In fact the opposite occurred.

You got that? Yes, it's true that the wealthy have been getting a bigger share of income growth for a long time. Nobody disputes that (and indeed, I pointed out as much in my post). But Chait then goes into a "does not compute" spasm: The rich couldn't be paying a higher share under Bush because... because... because... because...

Oh Gale Gordon, oh humanity!

But the rich were paying a bigger share, and what Veronique pointed out was that "the main impact the rate reduction had in the first place was to make the rich pay an even bigger share of taxes that they paid before."

You can argue that the projected $70 billion a year that won't clang in federal coffers over the next couple of years by extending the Bush tax rates is a tragedy because, I don't know, we need to keep waging war in Afghanistan or buying obsolete weapons systems or bailing out big banks or repaving highways and extending stimulus funds that have worked out so well.

But in the name of all that's holy - and in loving memory of Gale Gordon - can some of us take a few quick deep breaths?

Chait's whole piece here.

Update: Chait responded to this and my final response (promise) can be read here.

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  • ||

    Hey, Gale Gordon was very good as the easily angered straight man.

  • Robert||

    He played to that type in role after role, because so many comedies need exactly such a type. I remember one really great delivery as the concluding line in an episode of (IIRC, but could be confused) Camp Runamuck: "And the punishment for this will be...[practically turning blue]...d-d-double desserts for everybody!"

  • Robert||

    No, wait, it wasn't a camp, it was a military school, so I don't think it had that name. Eh, you get the idea.

  • Jersey Patriot||

    I'm curious how you plan to cut Medicare and Social Security. Their numbers are due to explode this decade. "Waste and fraud" don't count.

  • ||

    I'm curious how you plan to cut Medicare and Social Security.

    Carousel?

  • ||

    Promoting cannibalism as the next big fad. Those Twilight and zombie movies are just laying the cultrual groundwork "For the Children."

  • ||

    With the Cannibal perk, when you're in Sneak mode, you gain the option to eat a corpse to regain Health. But every time you feed, you lose Karma, and if the act is witnessed, it is considered a crime against nature.

  • Hooha||

    it's okay; just give a Dasani to the nearest hobo and you're all set on the karma front.

  • ||

    Hey Matt, you wanna cut down on the wordiness? Some of us don't get paid by the word--either writing or reading--and have jobs.

  • Derp||

    Whaaaaaaa Reading!!!!

  • We||

    Reading is hard.

  • ||

    Of course, without reading, you wouldn't get the pleasure of seeing how Nick combines a serious public policy discussion, with obscure cultural references from a 50s TV show, along with slamming Miley Cyrus. (A fish-in-the-barrel target, admittedly, but acceptable).

    Really, what better way to spend your time?

  • this was||

    Gillespie's post. Besides, the worst offender around here for impossible-to-read (yet probably good) posts is Cavanaugh.

  • Trespassers W||

    Agreed. I thought I was the only one.

  • ||

    Nope. It might actually be unanimous.

  • Typical lefty||

    "Over the past 70 years, the feds have not succeeded in generally jacking up the amount of revenue as a percentage of GDP."

    But but this time is different. We just need to tax the rich so they pay their fair share.

  • Robert||

    Is the 3.6% above before or after inflation?

  • ||

    Oh, now I get it. We're fucked.

  • IceTrey||

    For God's sake! Clinton did not cut spending! The Republican Congress did!

  • ||

    not only that but let's see the analysis of the reported budget "surplus" using social security payments in addition to tax revenue vs the actual budget deficit using just tax revenue. clinton didn't come close to balancing the budget, he like his 6 predecessors spent all the SS money on rube goldberg scemes. By spending SS money they essentially just deferred tax increases to future administrations.

  • Gilbert Martin||

    That's right.

    Furthermore, a significant factor in the balancing the budget was the increased government revenue from the economic expansion that began before he ever took office and ended before he left office.

    He gets no credit for creatng it or sustaining it and no credit for the government budgetary effects driven by it.

  • Jimbo||

    All true...but at least he decided to waste his time fucking interns, rather than fucking us.
    Obama isn't going to make that "mistake"...unfortunately.

  • The Liberals||

    It's not how much they pay, it's what we let them keep that tells us whether we've achieved economic justice.

  • ||

    Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.

    Taxes are not about revenues and budgets, they are for punishing people we don't like and placating those whose votes we need.

  • ||

    I wonder why the rich keep getting richer? Could it have anything to do with regulatory capture?

    Naaaaah. That couldn't be it.

    Just like bailing them out didn't make them richer.

  • ||

    It's that nice program that confiscates the capital of the working poor for safe-keeping.

    Social Security as opposed to Social Mobility. Some traitor to his class that FDR turned out to be.

  • ||

    The whole scheme depends on increasing revenues...kinda, uh, exactly like a Ponzi.
    They nominally give you more rectagular pieces of paper with pictures of dead presidents, while you actually end up worse off.
    Look at what you were making 20 years ago - twice as much? Are you twice as well off?

  • Jon Chait||

    You went ad hominem on me, therefore you have conceded the entire argument!

    Nyah nyah I win!

  • Eve Arden||

    You ARE Gale Gordon.

  • alan||

    Nice job of roasting that marshmallow, Nick. You would have done Rothbard proud.

    In fact, Chait's rhetoric reminds me of somebody. You know who else said essentially what Chait said here:

    I'm sure they could find at least $1.3 trillion in spending [over the next decade] that they don't like. But the point is that you would have to eliminate a lot of functions of the federal government, and/or reduce a lot of social benefits.

    None other than Herbert Hoover. From Murray Rothbard's indispensable America's Great Depression

    Other economizers were more stringent, and urged Hoover to balance the budget by reducing expenditures by $2 billion, rather than by raising taxes. These included the redoubtable Rep. James M. Beck of Pennsylvania, formerly Solicitor General of the United States.[6] But Hoover rejected the pleas of numerous businessmen and bankers, many of them adherents of the Democratic Party. To one protesting businessman who urged him to reduce expenses by $2 billion, Hoover answered with the typical hysteria of the bureaucrat:

    Your thesis is that the government expenses can be reduced by $2 billion—the amount of the tax decrease. This is . . . wholly impossible. It would mean we must give up the postal service, the Merchant Marine, protection of life and property and public health. We would have to turn 40,000 prisoners loose in this country; we would have to stop the maintenance of rivers and harbors; we would have to stop all construction work going on in aid of unemployment; it would mean abolishment [sic] of the Army and Navy. In other words it means complete chaos.

    Let us waive the important question whether many of these functions are really so vital, or whether they may only be performed by the compulsory monopoly of the Federal Government. Would a $2 billion budget cut have led to these effects? Taking the fiscal year 1932, the Federal expenditures (including government enterprises) of $4.8 billion equaled $59.50 per person in a "real" index based on the wholesale price level of 1926. During the 1920s, the Federal Government spent a real amount of about $25 per person, and from 1890-1916, spent approximately $10 per person. This means that the Federal budget could have been cut by $2.8 billion to maintain the services provided during the 1920s, and by $4.0 billion to maintain the services provided from 1890-1916, not a period that lacked protection, post offices, etc.[7]

    Section: The Hoover New Deal of 1932, Expenditures versus Economy

    In other words, Mr. Chait, the Hoover policies your party has adopted, falling in line with the George Walker Bush Republicans are destroying America. Thank the Angry HillBilly God there are patriots like Nick Gillespie who fight back.

  • ||

    The Angry Hillbilly God would like the Jacket so much more if the sleeves were cut off.

  • ||

    For surely sleeves are sin to Him. The sleeved turn their face from Angry Hillbilly God.

  • alan||

    From such minor acts of apostasy like full sleeves He derives his Anger that sustains the immovable tree stump and the irresistible F150 in their eternal struggle.

  • ||

    And, yea doth The Great Ford-Chevy Truck Debate sustain him. And NASCAR. And K-Mart. And The Sacrifice Of The Abandoned Washing Machine.

  • ||

    When I'm president, The Jacket will be my Press Secretary. He can speak condescendingly to everyone in the room without being as obvious as Stossel, has Press Secretary hair, and will drop some choice F bombs to make everyone gasp which will be awesome. Those pricks deserve it.

  • ||

    the worst offender around here for impossible-to-read (yet probably good) posts is Cavanaugh.

    Nonsense.

    At least Cavanaugh (unlike Doherty) can write.

  • Mike Laursen||

    It usually begins with a verbose overture, meandering through the themes to be developed later. Perhaps, it's only when he is blogging.

    The key to reading Cavanaugh is to realize he jumps right in at the middle, then gets to introducing the reader to the subject around the second or third paragraph.

  • ||

    If we were to
    (1) cut everybody's federal taxes to zero, but
    (2) made Bill Gates pay one dollar in taxes per year, and
    (3) borrowed the other $2.5 Trillion the federal government spends,

    then you could say:
    "ooooooh! loook! the rich pay a bigger share of the federal budget than they ever have before!"

    Big. Deal.

    Your analysis of the Bush tax cut means exactly nothing. It is a non-contextual, vapid, contentless presentation of empty numbers.

    Deficit-financing a tax cut for the top rate payers, even as you deficit-finance a tax cut for the lower rate payers, does not in any way, sense or form mean that the top rate payers are carrying more of the budgetary burden -- relatively, comparatively, absolutely, or otherwise. It's just a windfall piled atop a windfall.

  • robc||

    Danny,

    Offer for you.

    Cut spending below current revenue levels first and I will consider adjustments to the tax code to shift the burden around. Deal?

  • ||

    Why would I bargain with people who have no leverage? Your idea isn't on the table of anybody with power.

    Drop dead. But pick your poison: You get to choose between the Dems, or another bunch of big spenders who think that Adam and Eve rode to church on the backs of dinosaurs.

  • robc||

    Fuck you, I will stay with what I got. I dont have to choose between loser a and loser b.

  • robc||

    Your idea isn't on the table of anybody with power.

    Power doesnt determine whether an idea is right or wrong.

    Until you understand that, you will never understand why the government keeps failing.

  • Red Rocks Rockin||

    People like Danny only understand power; comes with the territory when you adopt the Marxist view that all relationships are exploitative.

  • robc||

    Its funny, since Im sure he has none.

  • ||

    Game, set, match!

  • Paul||

    You get to choose between the Dems, or another bunch of big spenders who think that Adam and Eve rode to church on the backs of dinosaurs.

    But the Dems think Adam and Eve didn't get enough fiber in their diets, were dressed inappropriately and had inadequate healthcare.

    I'm really trying to figure out which is worse...

  • ||

    But the Dems think Adam and Eve didn't get enough fiber in their diets, were dressed inappropriately and had inadequate healthcare.

    Is this what passes for wit in these parts?

  • Gilbert Martin||

    We are not deficit financing a tax cut because refraining from raising taxes on somebody does not constitute an expenditure.

    Only actual expenditures count as expenditures.

    That is why they are called expenditures to begin with.

  • Gilbert Martin||

    "It's just a windfall piled atop a windfall."

    The only people getting "windfalls" are those whose absolute dollar amount of federal income taxes paid is less than the absolute dollar value of their pro rata share of the particular government services that is providing them personally a demonstrable direct benefit calculated on a user fee basis.

    And that group would primarily be the bottom 50% of income earners who pay about 3% of federal income taxes collected.

    It would not be those in the top 50% who pay 97% of the taxes collected.

  • Red Rocks Rockin||

    Your analysis of the Bush tax cut means exactly nothing. It is a non-contextual, vapid, contentless presentation of empty numbers.

    Translation: "Math is hard and I don't like these numbers interfering with my preconceived disapproval of people who make a lot of money."

  • alan||

    That's why Chait and Danny reach for a dictionary, hoping a few well placed adjectives and adverbs like 'vapid' and 'vacuity' will sweep it all away. The only thing interesting about what they have to say is the extent the words they pick are matters of projection. That likely impresses the kind of audience to which they are use to communicating, and who live in an impenetrable fortress of bad assumptions as they do, but, fortunately, we do not share their sickness.

    Take this statement from Chait:

    If de Rugy was right that the Bush tax cuts caused the rich to pay a higher share of the taxes, then the share of the taxes paid by the rich should have fallen during the Clinton era. In fact the opposite occurred.

    How many times is it necessary to point out to them that lower taxation on capital during the Clinton administration more than offset the rise in income taxation for the rich? How many times? It will never sink in with these people. The bad faith upon which their house is built is too resistant. Chait has certainly read enough of Nick G.s work to have seen the point made and backed up, but he doesn't give a rip whether or not it turns his argument on its face. All he has to do is sustain the narrative, no admission of error being necessary so long as Peretz puts up with it.

    As Danny pointed out, political relevancy, the fight to hold on to power is much important to them than the search for truth and answers. As if our unwillingness to seek a place at the table through the usual dispensing of monies that do not belong to us (those 'tax expenditures' so beloved of the left of late) were a defect. Sure that makes you popular (politically relevant), but only so long as you are paying your 'friends' way in to the movies. Once you have nothing of value to dispense to them, they will will abandon you like the loser you truly are. Much like the democrats were abandoned in that last election.

  • ||

    The argument that you seem to be making is that the tax cuts for the rich that Bush passed led to the increase in their share of the federal tax burden, not the structural forces that led have led to an ever larger chunk of total income ending up in their hands. As well as that the reason that the taxes paid by the rich went up under Clinton not because he taxed them at a higher rate, but because he lowered their capital gains tax rate from 28 to 20%. If I am misreading you please disregard what I have to say.

    This analysis strikes me as suspect. The main reason is that it seems that you would attribute the steep rise in money collected from capital gains to the lower tax rate. Which to seems like a pretty big leap seeing as their was a huge tech bubble at that time. We could discuss whether the lower rates of capital gains taxation helped lead to the bubble (I tend to think the didn't), but to imply that the reason the rich paid a greater share of federal taxes was because of lower rate on capital gains during the 90's is disingenuous.

    Oh, and ad hominem attack!

  • ||

    It is also worth noting that Nick does not respond at all to the points made by chait. It seems like Nick misses the point that cutting 1.3 trillion over the next decade does almost nothing to balance the budget, it is 3.6% to be exact. And that to balance the budget that 1.3 trillion has to be taken out of the 5.5 trillion projected spending, which is 24%, which is not small potatoes. It seems that Nick and some of the poster here do not understand that we can cut the same 3.6% percent of services every year, and consequently save 1.3 trillion, but that does nothing to change the fact that in 2020 we need to cut 1.3 trillion, which means the cuts in all preceding years must be cumulative. In other words what he wrote "The $1.3 trillion that we're talking about cutting over the next decade", proves that he misses the point. If by 2020 we need to cut 24% of that years budget im order to balance the budget, and we decided to just cut do what Nick does by averaging those cuts over the ten years we end up cutting a much larger amount of money than 1.3 trillion.

  • ||

    I just reread my post, so to clarify. I understand that the plan they put forward is based on cutting cumulatively, but the video, and it seems Nicks reply, don't address Chaits point that the video was misleading, and that cutting almost a quarter of government services would be easy and painless.

  • ||

    Deficit-financing a tax cut for the top rate payers

    Let me keep it simple for you, "Danny".

    Fuck off, slaver.

  • robc||

    Heh. For some reason I responded instead of using my line. Thanks for that.

  • robc||

    Im out of practice since I incifed MNG away.

  • ||

    I can see how some one who always gets "owned" would feel that way.

  • Warty||

    That was sad. Do better.

  • ||

    Like dead-puppy-in-a-grocery-sack sad.

    I suppose all the school closings are what's driving the troll/griefer influx.

  • Ska||

    I like seeing owned in scare quotes.

  • Red Rocks Rockin||

    No one's stopping you from paying more of your income to the government, you feckless waste of carbon molecules. Or is it everyone else but you that needs to sacrifice?

  • Gilbert Martin||

    "No one's stopping you from paying more of your income to the government"

    I have that thought when I hear people like Warren Buffet, Bill Gates Jr & Sr and various other rich people claiming their taxes are too low.

    If they want to pay more, no one is stopping them from cutting a check to the U.S Treasury.

    But of course that's not what it's about. It is about the same thing it's always about - forcibly redistributing other people's money.

  • robc||

    They dont even have to cut a check. There is a convenient website for making the payment. Im sure they will take bank transfers.

  • Brett L||

    Oh yeah. They take my money every quarter that way.

  • ||

    When Buffet does media interviews, does anyone ever ask him why he calls for higher taxes when most of his tax is 'dissapeared' by a tax break? Shouldn't he be calling for the elimination of 'his' tax break before calling on anyone else to pay higher taxes?

    Buffet's tax break - and this is conjecture because private citizens tax returns are private - allows him to donate heavily appreciated BH shares to his own charitable foundation and deduct the fair value, not what he paid for the shares. Wouldn't it be 'more fair' to require Buffett to split the benefit with the government - take the mid-point between tax basis and market value and only make THAT deductable? Further, if I start my own charitable foundation do you think I might set up synergies between my personal activities and charitable activites? Yes, I believe I would. Or rather I'm sure my stable of accountants on the 5th floor will set it up.

    Until Buffett starts a billionaire's club to pay down the deficit he hasn't got anything to add to the discussion.

  • Red Rocks Rockin||

    I've made this point before, but Warren Buffet claiming that his secretary paid more in taxes than he did should have raised a huge red flag, because that's mathematically impossible if one goes by the current income and payroll tax rates.

    Either 1) Buffet is blatantly admitting that he practices tax evasion (which is breaking the law and should have had the IRS up his ass the minute he said it); or 2) he takes advantage of every tax break and loophole that he can.

    Raising the rates on the rich isn't going to solve that problem--Buffet could simply stop claiming the tax rebates and write-offs, and his contribution would grow exponentially.

    These gangsters are only interested in supporting government programs with their own money when a gun is held to their head.

  • Gilbert Martin||

    "I've made this point before, but Warren Buffet claiming that his secretary paid more in taxes than he did should have raised a huge red flag, because that's mathematically impossible if one goes by the current income and payroll tax rates."

    What he's effectively doing is making comparisions between the tax rates on investment income - dividends and interest and the so-called "earned" income rates on wages. Buffet and lot of other high income people derive a significant portion of their income from investments.

    Of course he convienently omits the fact that investment income is double taxed - once at the corporate level and again at the individual level - and he doesn't include that in his calculaton.

    He also doesn't include the fact that the cost basis on investments that is used to determine capital gains on sales is not adjusted for inflation. The tax tables for wage income ARE adjusted for inflation every year.

    Someone who sells a long held asset is therefore paying taxes on a "gain" that, in part, is merely an inflation adjustment and not real wealth gained.

  • Gilbert Martin||

    "I've made this point before, but Warren Buffet claiming that his secretary paid more in taxes than he did should have raised a huge red flag, because that's mathematically impossible if one goes by the current income and payroll tax rates."

    What he's effectively doing is making comparisions between the tax rates on investment income - dividends and interest and the so-called "earned" income rates on wages. Buffet and lot of other high income people derive a significant portion of their income from investments.

    Of course he convienently omits the fact that investment income is double taxed - once at the corporate level and again at the individual level - and he doesn't include that in his calculaton.

    He also doesn't include the fact that the cost basis on investments that is used to determine capital gains on sales is not adjusted for inflation. The tax tables for wage income ARE adjusted for inflation every year.

    Someone who sells a long held asset is therefore paying taxes on a "gain" that, in part, is merely an inflation adjustment and not real wealth gained.

  • Jim||

    I think you meant to say "pwn3d".

  • ||

    Get a job, "Danny".

  • ||

    Lots of hatin', but no rebuttal.

    This whole sad little coffee-klatch of Republicans-in-Denial is facing the brutal arithmetic of our current budget, and losing their minds collectively.

    The tax cuts aren't paying for themselves; the spending cuts don't have enough votes (especially with GOP wingnuts roaring back to power in the ag-subsidy cornbelt); and the only question is whether we are going to fund this mess with printed fiat currency or with big new taxes on carbon, sales, or legacy fortunes.

    Sorry, losers. Maybe you had a point or two on the policy merits, but you could never sell yourselves politically. Now get ready for a reaming.

  • robc||

    Who here isnt expecting a reaming?

    We know exactly what to expect from congress, R or D.

    You really are a complete moron, arent you?

  • ||

    Complete and total, my friend.
    Complete & total.

    MUWHAHAHAHAHAHA!!!!!
    Why?
    So?
    Serious?

  • ||

    I don't rebut cockroaches. I step on them.

  • ||

    Is there a mainstream libertarian?

  • ||

    Nick,

    The real problem with your idea is that it's impractical. It works only as a thought experiment, the pols won't make any cuts in the outlying years unless the bond markets for it on them.
    The real solution is to act massively, now, to dismantle most of the federal edifice.
    The new house should pass two pieces of legislation for each of the non-essential cabinet departments, one which abolishes it, and one which block grants all of the money to the states. Let Obama choose which to sign or veto.

  • Paul||

    Over the past 70 years, the feds have not succeeded in generally jacking up the amount of revenue as a percentage of GDP (thank you, AOL's John Merline, for this essential insight). The average is in fact slighly below 18 percent, so by using 19 percent (the CBO's number, which is consistent with Hauser's Law), we're even giving DC some slack. If balancing the budget is a good thing, and reality exists, you're going to have to find some way to introduce the two to one another for the long haul, if not a shotgun wedding.

    Silly ol' Nick. That's only because the U.S. of A. (a folksinger I heard on an alt-station kept referring to it as that) has been dominated by right-wing thought for those past 70 years. Chait's merely suggesting that we change that, and of course once changed, tax revenues will go to 20, 25, 40% of GDP with prosperity for all!

  • ||

    Anyone who thinks cutting a mere $1.3 trillion in total out of 10 years of budgets will balance the budget is either wildly optimistic about tax revenue or on drugs. We'll exceed a $1.3 trillion deficit this year - probably closer to $1.6 trillion for the 3rd year in a row. With the current federal debt approaching $14 trillion, a 2% increase in average interest rates would cost $280 billion in add'l expense EACH YEAR. Current projections (which are themselves optimistic) call for $20 trillion in debt by 2020. If interest costs rose to 5% (to say nothing of 10%), we'd be spending all of today's tax revenue on interest alone.

  • ||

    The budget wasn't balanced during the Clinton years. They used Social Security revenues to claim that the budget was "balanced". Check out the CBO website; the national debt went up every year.

  • ||

    Danny: a "windfall" is by definition an unearned benefit. Income taxes are on "earned" income. No matter how much earned income you let people keep, it can never consitute a windfall. By definition. It's their money to begin with, they earned it. Now, you may think rich people don't "earn" their money. Yeah, I can see that working at an IRS audit: "You see, I'm rich, therefore my money isn't really earned. Therefore I owe no income tax, because I have no 'earned' income. Ha ha!" Words have meaning, the toughest lesson of all for a liberal to learn.

  • ||

    The solution to our national debt problem is very simple - tax the poor.

    What makes the poor so special that they don't have to pay taxes? 47% of "tax payers" pay no Federal Taxes - these freeloaders are killing America - they need to pay their "fair share".

    These folks have homes, cars, LCD TVs, cable, refrigerators, cell phones, food, all kinds of government handouts to keep them poor - this is a vast untapped reservoir of cash just waiting to be harvested.

    All Americans need to feel the pain of Porky Pig Government and until that happens these freeloaders will simply vote for more spending....

  • ||

    Yes. Rich people should be allowed to 'rifle the pockets' of the poor to balance for the EITC. But if you pay your landscaper late he gets to pee on your rose bushes.

    Are you listening John Boehner? HR1.

  • ||

    You sir are an idiot. I am sure that some one, at some time, has pointed out that the poor do pay taxes. So this is JUST the total federal tax burden by quintile, lowest 20% 38.9%, highest 20% 70%. I mean your post is factually inaccurate, you could change it to say that "47% of 'tax payers' pay no federal (income) taxes. But payroll taxes are still federal taxes, as are the numerous other ways are government taxes us.

  • ntnu||

    You know, I learnt something today. Namely, that all this libertarianism is just bullshit* - after all, the federal government has never for the last hundred years managed to take in less than about 18-19% of the GDP in taxes - and some of these extreme groupings, "libertarians", want to take this down to 10, 7 or even 5% !! But historically speaking this is totally impossible because it will magically amount to 19% anyways. So why not spend it, and have a government sector at 19%?

    * Not really. But that argument is totally weaksauce.

  • ||

    chait is a f'in idiot. despite decades of evidence on the ground, he'll extol the "benefit" of the federal government's insertion into more and more aspects of our lives. like it's impossible that he could ever have a moment of reflection, could ever take his blinders off, and see the truth about the effects of fed policy on welfare, inner city schools, medical bureaucracy, etc. chait is hooked up to The Matrix, while you and I see the world of the federal government as it actually is. that's all a long winded way of saying that he's really just a tool, isn't he? ;)

  • ||

    speaking of evidence on the ground, since the inception of social security, medicare, unemployment insurance, most workplace regulations, and some transfer payments the lives of the working poor have gotten markedly better. Leaving aside the the natural increase in technology that makes life easier the lives of those before and after these programs are vastly different. The access to education (which was not the case before progressive legislation) is the easiest aspect to point to, but the larger point is that it meant that the risks that the poor are most susceptible to were mitigated with help from the federal government.

  • ||

    I think Danny has a point about presentation of tax payments by income group. If you have a society where wealth and income are heading in opposite directions, if tax rates remain constant, then those whose wealth or income are increasing will pay a higher percent. That doesn't mean it is good or bad; it is just a fact. I'm more interested to see Nick's figures presented as spending per person over the course of 20 years. Our population will be increasing, so increased spending per se doesn't mean anything. If, as Chait is asserting, then the cuts that Nick is proposing are "compounding cuts", then he is correct that the assertion of just cutting 3.6% every year is really misleading. Do the math and compound spending that amount. As for asserting that Chait is an idiot, that would be pretty hard to sustain. He might be wrong, but he also has plenty of positions which support the reduction of government spending. In the leftist circles I run in, The New Republic is not the hardcore socialist. It's the moderate center left.

  • Craig||

    At some point people are going to figure out the point of Chait's critique - if you take 3.6% off the budget every single year, cumulatively, then each year's 3.6% has to be accounted for in the next year's budget, even before you make the cut. So you slice that little bit of fat off in year one, then in year two you have to slice that fat off first, then cut off another 3.6%. Then the next year you have to slice off 3 portions, and so on. The critique here is pretty simple. The video is deeply misleading.

  • ||

    No it's not, you're stupid. And the poor need to pay more taxes. Black leather jackets are the coolest!

  • ||

    Craig beat me to it.

    You wrote a piece and made a funny (!) video about how little needs to come off the budget to get balance. But it's not a little. It's not 3.6%. It's 24%. Your grasping for straws when called on it looks foolish.

  • ||

    Nick, you don't appear to understand that the cuts compound year after year. You cut your meat by 3.6% per slice, but you don't cut the budget by 3.6%, you cut it by 3.6% per year *per year*. That's completely different! In your reply here, you still don't seem to understand the difference. Compounding - look it up on Wikipedia or something. You're making an incredible fool of yourself.

  • ||

    THIS.

  • ||

    On second thought -- and having watched the video -- this is wrong.

    The visual proposes cuts that would actually be harsher than what he describes orally. Let's do the math:

    Ten years of slicing $36B annually out of a $1T budget means you're left with a budget that's

    $1,000B - $360B = $640B

    But ten years of slicing 3.6% out of each year's budget is

    $1,000B*(1-.036)^10 = $693B

    Appreciably bigger.

  • poorpeoplesuck||

    Chait is clearly just jealous because he's never worn a sweet black leather jacket, bragged about watching boring TV show's no one's ever heard of from the 1950's, and doesn't have wet dreams of exchanging witty banter with the ghost of Ayn Rand.

  • ||

    Chait is a reliably partisan liar in service of the Democratic party. That is all.

  • ||

    The idea of cutting spending is an anathema to liberals/progressives/statists/socialists/neo-medievalists.

  • LifeStrategies||

    Most people fail to realize that every dollar taken in taxes by the government has unseen consequences - it's a dollar that's not available to the person being taxed. Keeping it simple, that person can do one of three things with that untaxed dollar. He/she would either 1) spend it thus creating a job for someone else, 2) invest it which (hopefully) improves the goods and services people can buy with the income they have left after taxes, or 3) save it and the banks then have it to lend to someone to invest. It's either spent or goes to capital formation which improves things for everyone.

    The inevitable consequence is that high taxes make everybody in the country poorer. But don't believe me, rather read the work of socialist economist 1996 Economics Nobel Prize-winner Dr. James Mirrlees which proved that higher taxes impoverish everyone.

    Professor Mirrlees found that the top marginal tax rate should be only about 20 percent; and it should also be the same 20 percent for everyone. Wrote Mirrlees, “I must confess that I had expected the rigorous analysis of income taxation in the utilitarian manner to provide arguments for high tax rates. It has not done so.”

  • Point||

    Thought you'd be interested in Chait's response to the response:

    http://www.tnr.com/blog/jonath.....ve-no-idea

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