Budget Defi-wha?

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Slate's Dan Gross wonders why fiscal policy was MIA at the DNC. This seems like an easy enough one, actually. Dems aren't really particularly interested in selling themselves as deficit hawks: They're not about to make a big deal of Bush's runaway spending because, while they might spend the money differently, rolling back government outlays isn't exactly high on their priority list. And calling for across-the-board tax hikes is political seppuku. That leaves the more palatable proposal of hiking taxes on the wealhy, which you did see discussed at the convention—but if that's the sole solution to ballooning deficits you're willing to contemplate (publicly), you may as well focus on that by way of a populist "fairness" argument rather than draw attention to the broader problem, some of whose causes you'd prefer not to address.

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  1. Didn’t Clinton promise to raise taxes only on those earning more than $200,000 (or was it $150,000?) back in ’92 before carrying out a far more comprehensive tax hike while in office?

  2. Ah, but the Democrats have a rhetorical device whereby repealing a tax cut is not a tax hike, so if they repeal 50% of the tax cut they can implement their tax hike but still claim it’s a tax cut. Instead of saving $X you save $X*0.5, so the Democrats just gave you a tax cut of $X*0.5!

    So God only knows what Kerry’s tax policy will be. As for me, I’m going to write-in Larry Flynt. He was good enough to cast a protest vote for in the recall, and he’s good enough to cast a protest vote for in this election too.

  3. I think Julian pretty much nails it.

    thoreau, it gets worse. Bush sold his tax cuts as being affordable by sunsetting them. Kerry’s actually proposing to replace them with permanent cuts. Bush tells you he’s going to give you ten dollars this year, five next, and none from there on out. Kerry proposed to give you five dollars every year. Who’s cutting your taxes?

  4. Joe-

    I can’t answer your question until I know the correct interest rate to use in this problem.

    Bush: $10 this year, $5 next year, $0 from then on has a present value of $10+$5/(1+r) where r is the interest rate.

    Kerry: $5 every year has a present value of $5/r.

    I could setup an equation:

    $10+$5/(1+r) = $5/r.

    Multiply both sides by (1+r)*r and divide by $5 to keep the math simpler.

    2r(1+r) + r = 5(1+r)
    3r+2r^2 = 5 + 5r
    2r^2-2r-5=0

    r = (2 +/- sqrt(44))/4

    As long as the rate of return from a one year investment is less than 260% I guess Kerry has the better plan, at least in your hypothetical example.

    But I need to know more details before I comment on any REAL plan. And from what I understand Bush now wants to extend his tax cuts beyond the original sunset. So if we compare both proposals instead of comparing Kerry’s proposal with a scenario where Bush’s proposals aren’t implemented, well, things might very well change.

    In other words, this physicist is just begging for data! GIVE ME DATA!

  5. Me like math!

  6. Political seppuku? If not for the movie Ronin, I would have no idea what that is.

    The sunsetting gives both parties rhetorical devices. The R’s get to charge the D’s with tax hiking when they vote against making the cuts permanent.

  7. And this is why the Democrats cannot win an election. There is no better way of splitting the Republican base than pointing out that Clinton reduced the defict and a Kerry administration at least has a chance of doing the same. Two years of complete Republican control of the government has given us the biggest deficit ever, even using the dishonest accounting that now prevails in government.

    The massive Reagan deficits that the Bush apologists argue were somehow bigger weren’t being offset by the SS “surplus,” nor was he fighting wars off the books.

  8. Damn physicist freak! Just for that, I’m putting it in verse.

    Bush tax cuts
    Sunset
    Kerry’s permanent cuts
    Bush tells you ten dollars, five, none
    Kerry
    Five dollars every year

    Who’s cutting your taxes?

    Om

  9. The fact that the tax cuts have a sunset isn’t terribly relevant, since it’s what Bush and Kerry are proposing to do in the future that matters. Bush supports removing the sunset and making them permanent; Kerry supports making some of the cuts permanent, allowing some to sunset, and replacing the rest with tax hikes.

    So the answer to the question “who’s cutting your taxes” is “Nobody, but Kerry plans to increase them”.

  10. Well, neither is proposing a net spending cut and I’m young enough that Ricardian preferences make sense, so I’m concluding they both want to raise my taxes. Bastards.

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