Go Long in Red Ink Stocks

|

USA Today reports that the feds are borrowing 46 cents for every buck they spend this year.

As Veronique de Rugy noted in a recent issue of Reason, there's been something like a three-part response to deficit-spending over the past couple of generations.

At first, any deficit was seen as a horror-show waiting to happen (hence the outrage over Ronald Reagan's then-large, now-quaintly tiny budget deficits); then a period where relatively small, persistent deficits seemingly had little to no effect on the larger economy (and hell there was even a budget surplus from time to time); to an era spearheaded by the Bush admin (whose vice president exclaimed that Reagan proved deficits didn't matter) that laid out a big fat line of deficit on the table and proceeded to snort away like Al Pacino in Scarface.

And clearly, the Obama crew wants to keep on bumping like there's no tomorrow. Which there won't be when it comes to spending. Right up until the moment it all goes kerblooey.

See you all on the morning when all the coke/money is gone and somebody has to pay/clean up for the party. But you know what, at least we'll have a fistful of shovel-ready projects to keep us warm.

Reason on the economy of late.

NEXT: Reason Morning Links

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Aren’t there mulligans in national debts? I predict an International Monetary Mulligan Conference sometime in the next decade. All the countries will meet at The Hague, shrug and say, “Oops.”

  2. Time to raise my (your, everyones) taxes!

    Suck it up and quit whining.

  3. Remember also that those are budget estimates. Those numbers are only correct if you buy McHopey’s economic forcasts. Basically, those numbers are about as credible as forcasting your credit card debt over the next five years assuming you have an incredible run at the blackjack table in 2010.

  4. More debt in two years of Obama than 8 years of Bush. Remmeber when everyone was outraged about that $400 billion deficit? Those were the days weren’t they.

  5. Last week’s treasury auction was a bust – people are getting less and less willing to lend Uncle Hope money. I’m sure the administration will cut their outlays in response.

  6. They said that if I voted for McCain the deficit would rise uncontrollably.

    They were right.

  7. How many people here are willing to admit that if McCain had been elected, the deficits would have been about the same size. All that would be different is there would have been slightly less spending increases and slightly more tax cuts? The problem isn’t left vs right, it is that Americans (including you) aren’t willing to suck it up and pay their bills. It is OUR fault that our politicians aren’t willing to be responsible, as we would vote them out of office if they dared try.

    It’s amazing how thick some peoples’ partisan blinders are.

  8. “Time to raise my (your, everyones) taxes!”

    Time to cut spending and taxes and allow more money to stay in the private sector to stimulate the economy.

  9. Raising taxes in a recession is the last thing you want to do.

  10. It’s amazing how thick some peoples’ partisan blinders are.

    Chad? Chad? Are you there? Irony that clueless can be deadly and we’re just worried about you…

  11. I think McCain would’ve proposed less spending. While he’s no fiscal conservative, I don’t think he would’ve ushered in Spendapalooza, either.

    Naturally, I’d prefer a third option. In Congress as well as in the White House. The fact is, while Obama is singularly unimpressive, his real failure is in not curtailing the mania in Congress.

  12. Chad: sequoia, mote.

  13. we’re just worried about you

    “We” are?

  14. bookworm | May 12, 2009, 8:56am | #

    Time to cut spending and taxes and allow more money to stay in the private sector to stimulate the economy.

    There are only four things that you can cut that would make any substantial difference to the budget. Please go ahead and list your 1.8 trillion in cuts to defense, Social Security, Medicare and Medicaid. Are you shutting down the military or throwing grandma out onto the street? Please be explicit.

  15. Pro Lib,

    While I think McCain would have spent less than Obama, if he won we would still be talking about how he was spending even more than Bush did.

    Why lesser of two evil voting doesnt work…at their level, the difference in evil isnt worth worrying about.

  16. Raising taxes in a recession is the last thing you want to do.

    Next year is fine. A five percent increase for everyone, including YOU. Be a grown-up and pay your bills for once.

  17. Are you shutting down the military or throwing grandma out onto the street? Please be explicit.

    Both. Next question?

  18. Be a grown-up and pay your bills for once.

    They arent my bills. Congess passed em, congress should pay for them. Out of their own fucking pockets.

  19. I speak for the trees.

  20. or throwing grandma out onto the street?

    It’s right there in the Constitution: “all grandmothers shall be wards of the state”

  21. Debt is to our economy as heroin is to a junkie. Expect the same results.

  22. Doom
    DOOM
    doom

    or whatever, its been a while.

  23. Please go ahead and list your 1.8 trillion in cuts to defense, Social Security, Medicare and Medicaid. Are you shutting down the military or throwing grandma out onto the street? Please be explicit.

    Gladly:

    (1) Close all foreign military bases and bring our military personnel home. Make them all reserves to be called up when we actually need to defend against an invasion of US territory.

    (2) Explicitly eliminate Social Security and Medicare for everyone under 50, and reduce benefits for those over 50 along a sliding scale.

    (3) Eliminate Medicaid. That’s what charity and family are for.

    (4) And, of course, no bailouts to private banks that fucked up. Most of that $1.8T is for that, you realize.

    My operating assumption is that taxation is theft and that therefore taxation is wrong. However, under the flawed assumption that taxation is okay, it certainly is not okay for transfer to other people: taxes should be used to pay only for common goods (e.g., roads, the military, the courts). Everything else must be eliminated.

    So, yeah: grandma on the street and no more blood for oil. Any questions?

  24. Be a grown-up and pay your bills for once.

    I take zero responsibility for the government’s odious debt. I pay taxes only because they will take my property or throw me in PMITA prison if I don’t.

  25. squarooticus,

    Nice detail, but I think my “Both” was more succinct. 🙂

  26. More debt in two years of Obama than 8 years of Bush. Remmeber when everyone was outraged about that $400 billion deficit? Those were the days weren’t they.

    Will you take the partisan blinders off for one second? The bulk of the $1.8 trillion came under Bush. Remember that whole $700 billion TARP bill? And December loans to auto makers, extra billions to Citi, BofA and Merrill and the AIG money pit? That all happened before inauguration and are all in fiscal 2009. The federal fiscal year runs from October to September.

  27. robc: I started my reply before yours showed up. That, and I wanted to make sure there wasn’t any doubt as to where I stand. 😉

  28. My comment is not to say Obama isn’t making things worse. The 2009 budget was projected to be $1.2 trillion at the end of the last presidency and Obama added another $600 billion on top of that. $600 billion by itself would be a horrid deficit, let alone as an add on to an already massive deficit.

  29. an era spearheaded by the Bush admin (whose vice president exclaimed that Reagan proved deficits didn’t matter) that laid out a big fat line of deficit on the table and proceeded to snort away like Al Pacino in Scarface.

    Not to minimize the Bush spending spree, but he was actually shrinking the deficit the last few years, up until he fucked it all up with TARP and bailouts.

    Will you take the partisan blinders off for one second? The bulk of the $1.8 trillion came under Bush.

    Well, yes and no. Obama voted for TARP and the bailouts, so he gets some ownership of them. And he has proposed spending and budgets far beyond anything we have seen before, so I really don’t see any blame being assigned to him that isn’t deserved.

    Granted, of course, that Congress, including the Feckless Minority, is of absolutely zero help on this.

    Bottom line: plenty of blame to go around, including to Obama.

  30. Aren’t there mulligans in national debts?

    Of course. Its called runaway inflation. The Euros have an amusing variation on this, where they “recall” their currency and “reissue” it at a fraction of its former value.

  31. “Will you take the partisan blinders off for one second? The bulk of the $1.8 trillion came under Bush. Remember that whole $700 billion TARP bill? And December loans to auto makers, extra billions to Citi, BofA and Merrill and the AIG money pit? That all happened before inauguration and are all in fiscal 2009.”

    That was one round of TARP And as RC pointed out Obama voted for them so he owns them as well. Further, there have been several rounds of TARP after that and a $700 billion plus porkulus bill and more auto bailouts that Obama owns. So whatever Bush started, Obama has contineued in spades.

    Beyond that, BUSH IS NOT PRESIDENT ANYMORE!!! Obama is responsible for the spending that is going on now. He could have ended TARP and the bailouts and the wars in Iraq and Afghanistan and has chosen to do the opposite. That deficit now belongs to him. It doesn’t matter what Bush did or didn’t do or what McCain might have done. What matters is what Obama has done.

  32. John,

    Technically, and constitutionally, congress controls the purse strings, so the deficit isnt Bush’s or Obama’s.

    It belonged first the GOP congress then the Dem controlled congress. So all the TARP spending falls on the Dems (and the GOPers who voted for it).

  33. Can we all please stop caring which wing of the Government Party is responsible for the debt? Is the GOP that much better than the Dems that it is worth pointing the finger at the Dems for this problem?

    It seems pretty clear to me that the problem is the federal government and the power it claims: the precise personnel in charge are irrelevant to the degree that they are electable.

  34. robc,

    By no means was I suggesting that McCain would’ve been good or not appalling. I just think on this issue, he would’ve been less voracious than Obama.

    Besides, as you note above, it’s really Congress that’s the problem. If only Dr. No were president, then we’d see the kind of vetoes we should be seeing right now.

  35. “DIC, the world’s largest ink manufacturer and Sun Chemical’s parent company, has eight ink manufacturing sites in China under the DIC and Coates labels;”

    Maybe China will bail us out of this one, too.

  36. Pro,

    Yes, it is Congress, but the President can veto. Ultimately they are both responsible. Regardless it seems beyond silly to be blaming hte deficit on Republicans who have not had control of Congress for nearly three years and lost the Presidency in January. These are Obama’s deficits.


  37. squarooticus | May 12, 2009, 9:22am | #

    Gladly:

    My operating assumption is that taxation is theft and that therefore taxation is wrong. However, under the flawed assumption that taxation is okay, it certainly is not okay for transfer to other people

    My operating assumption? People who propose plans that have absolutely zero chance of political success are a waste of time. None of your proposals has even a hint of being remotely politically viable, so why do you bother wasting time fantasizing about them?

    We aren’t going to cut most of our military and just sit in our bunkers waiting for the bad guys to come. We aren’t going to cut SS for everyone under 50. And we aren’t going to take grandma’s health care. Period. Please come up with a real plan.

    You do get one thing right, though…these are the kinds of cuts you would need in order to balance the budget without tax increases. I applaud you on making a wonderful case as to why a 5% tax increase is a lot more palatable than the cuts that would be necessary.

  38. “(1) Close all foreign military bases and bring our military personnel home. Make them all reserves to be called up when we actually need to defend against an invasion of US territory.”

    Yah, much better to have all that death and destruction on US soil.

  39. Okay, the pure GOP government generated a 6.8 on the Libertate Economic Outrage Scale (a logarithmic scale). The pure Democratic government is generating an 8.1.

  40. Beyond that, BUSH IS NOT PRESIDENT ANYMORE!!! Obama is responsible for the spending that is going on now. He could have ended TARP and the bailouts and the wars in Iraq and Afghanistan and has chosen to do the opposite. That deficit now belongs to him. It doesn’t matter what Bush did or didn’t do or what McCain might have done. What matters is what Obama has done.

    Wrong. Most spending is non-discretionary, and the plummeting tax revenues are a function of economic conditions which Obama inherited, not created. The fact is, NO MATTER WHO WE ELECTED, deficits would be huge. Therefore, it is absolutely irrational to assign the deficits to the person whom we did choose.

    If McCain had been elected, you probably would have seen around $100-150 billion switched from spending to tax cuts. It would have had no discernable impact on the deficit, which is a function of global macrotrends and the many long-running policy choices made by both parties.

  41. I’m voting for “both,” too, Chad. You got a problem wid dat? Bring it on, son.

  42. “””Beyond that, BUSH IS NOT PRESIDENT ANYMORE!!!”””

    Just curious, how far into Bush jr’s time did you still blame Clinton?

  43. “Wrong. Most spending is non-discretionary,”

    Bullshit. All spending must come from congress and any spending can be stopped from Congress. There is no such thing, strictly speaking as non-dicretionary funding. That is just a bullshit misnomer put out by politicians who refuse to take responsibility for their actions.

    “and the plummeting tax revenues are a function of economic conditions which Obama inherited, not created.”

    He is responsible for spending $700 billion that the CBO admitted would over the length of the program destroy more jobs than create. He is also responsible for not adjusting spending to fit revenue. Further, he is responsible for doing nothing about the economy beyond paying off chronies and looting the treasury.

    “If McCain had been elected, you probably would have seen around $100-150 billion switched from spending to tax cuts. It would have had no discernable impact on the deficit, which is a function of global macrotrends and the many long-running policy choices made by both parties.”

    Who cares? McCain is not President. Intellectual masterbation about what he would or would not have done as President doesn’t mean anything. Even if you are right, the fact that McCain would have been even worse than Obama, doesn’t make Obama any better than what he is. One has nothing to do with the other.

  44. We aren’t going to cut most of our military and just sit in our bunkers waiting for the bad guys to come. We aren’t going to cut SS for everyone under 50. And we aren’t going to take grandma’s health care. Period. Please come up with a real plan.

    So? That doesn’t mean that we shouldn’t at least entertain these ideas on a site for semi-enlightened political discussion.

    I think these cuts would be super. Anything that reduces rent-seeking behavior is a plus in my book. The persistence of these programs makes me think “how can I get some”. Pending expansion of such programs makes me want it even more. I can feel my yearning to be on the dole grow each and every day. I want the government to stop giving me incentives to stop working, but they won’t. It’s tough being a pretend libertarian.

    How does one become a true liberal?

  45. Oh, and by the way, Chad. Help your own fucking grandma. I’ve got one of my own to worry about.

  46. Yah, much better to have all that death and destruction on US soil.

    Killing Canadians in Pennsylvania or Minnesota is kind of a dream of mine.

    (New Yorkers are on their own, if they cant stop them, I will meet the ravaging Canadian hordes at the NY-Penn border)

  47. “Just curious, how far into Bush jr’s time did you still blame Clinton?”

    You can’t blame the prior President for actions you take. Bush didn’t run into the oval office and put a gun to BO’s head and force him to waste trillions on the TARP paying off Golman Sachs. Bush didn’t for BO to waste $700 billion on a useless porkulus package paying off political chronies. Bush didn’t force Obama to support raising taxes on the productive and moonbat cap and trade policies that drive capital out of the country and worsen the recession. Bush didn’t force Obama to believe in some kind of mongrel Keynsianism where spending and borrowing on anything and everything is somehow the sollution to a recession.

  48. “Yah, much better to have all that death and destruction on US soil.”

    With a strong defense, who’s going to attack us? Without a meddling foreign policy, who’s going to attack us?

  49. Give it up, John. Your man Bush built the on-ramp for Obama’s fiscal highway, or something like that…

  50. Killing Canadians in Pennsylvania or Minnesota is kind of a dream of mine.

    (New Yorkers are on their own, if they cant stop them, I will meet the ravaging Canadian hordes at the NY-Penn border)

    I have three conditions for which I would gladly join in the bloodbath.
    (1)The enemy is undead.
    (2)The enemy will soon become undead, or is carrying a flesh-eating disease.
    (3)Canada Attacks! (for real this time)

    WOLVERRRRRINES!!!

  51. How does one become a true liberal?

    Step 1: Lobotomy.

    Step 2: ???

    Step 3: Profit!

    Step 3A: Profit taken by windfall profits tax.

  52. With all that hockey hullaballo and that bitch Anne Murray too…

  53. I’m sorry, but the idea that tax cuts are not good for the economy is a liberal meme that needs to die. What, pray tell, do you think generates our GDP? The government? Or, maybe, the rest of us? More money for us, more money for the economy. Government spending doesn’t have a multiplier effect; it has a divisor effect.

    A true stimulus would’ve been something radical, like a temporary moratorium on the income tax or something like that. Immediate and profound effect. Arguing that something along those lines increases the deficit only holds when you operate a government with no interest whatsoever in adhering to a budget. Besides, the immediate positive effect of a massive tax cut or suspension beats the crap out of spending money on things that will have almost no immediate impact.

    When the recovery inevitably comes, I intend to call out, over and over and over and over again, the fact that it happened despite the actions of the government, not because of them. Show me anything of substance in the stimulus package that helps our economy today (or, really, ever).

  54. My operating assumption? People who propose plans that have absolutely zero chance of political success are a waste of time.

    The fact that my views don’t fit within the existing political order is IMO a validation of my viewpoint, and something of a challenge.

    More importantly, however, is that the course that Western nations are on is unsustainable. Whether quickly or kicking-and-screaming, the situation is going to correct itself and those things you decry as impossible outcomes are going to become the norm. Opportunities will abound then, but the pain for many people will be incredible, especially if plans aren’t made now to ease the transition. (Of course that won’t happen; I’m not na?ve. But I see value in pointing out the obvious, because most people today are blind to the most obvious truths about economics.)

    Finally, stop telling others that confiscatory taxation and wealth transfers are natural and right and that people need to figure out how to live within those boundaries: the status quo is the status quo exactly until it isn’t. Without people working toward its end, would things not simply get monotonically worse without hope of improvement?

  55. John, the president can veto, but he doesn’t want the “shut down the government”, which will always happen when there’s a budget pissing contest. And you can bet the one blamed for “shutting down the government” will be the party that wants to spend less (note: I didn’t say cut spending, god only knows what reaction that would actually get).

    Of course, budgets are rarely in dispute when one party owns it all. The last time it happened was when Jimmy Carter went up against Ted Kennedy and Tip O’Neill.

  56. “John, the president can veto, but he doesn’t want the “shut down the government”, which will always happen when there’s a budget pissing contest. And you can bet the one blamed for “shutting down the government” will be the party that wants to spend less (note: I didn’t say cut spending, god only knows what reaction that would actually get).”

    True. But, Democratic Presidents are never blamed for the shutdown since they own the media. Clinton wasn’t blamed for shutting down the government in 1995, Gingrich was. No way would Obama have been blamed for doing so.

    Of course that doesn’t matter because Obama got exactly the budget he wanted and the stimulus package he wanted. Yet, somehow it is all Bush’s fault that Obama got the stimulus package and budget he requested. Only a true cult member could beleive something like that. Sadly, most of Obama’s supporters are just cult followers and unable to admit any fault with any action he takes.

  57. “Democratic Presidents are never blamed for the shutdown since they own the media.”

    Christ. Here we go again…

  58. More importantly, however, is that the course that Western nations are on is unsustainable.

    A libertarian talking about “sustainability”, when the entire capitalist system is based on the exploitation limited resources until they run dry, and then moving like a locust plague onto the next, until everything is gone.

    Haha funny funny.

  59. Chad:

    A libertarian talking about “sustainability”, when the entire capitalist system is based on the exploitation limited resources until they run dry

    Please read about straw man fallacies before posting again.

  60. “I applaud you on making a wonderful case as to why a 5% tax increase is a lot more palatable than the cuts that would be necessary.”

    A 5% tax increase would barely begin to solve the the problem. The government’s estimated revenue for FY09 is something like $2.1T, outlays something like $3.9T, with a deficit of $1.8T so a 5% increase in all taxes, fees, etc. should net about $105B in extra revenue. That would take the deficit down to $1.7T. To actually close the FY09 deficit, we’d need a tax increase on the order of 85% (and of course, that assumes static economic projections, which isn’t even close to realistic when we’re talking that kind of tax hike).

  61. “Democratic Presidents are never blamed for the shutdown since they own the media.”

    Christ. Here we go again…”

    Please explain how it was that Reagan was blamed for shutting down the government in the mid 1980s, but Clinton was not in the 1990s? The circumstances were virtually identical; a President vetoing a continueing resolution in a conflict with an opposite party congressional leader. The only difference was the players; Reagan and O’Neil, and Clinton and Gingrich and of course the parties of the players.

  62. “A libertarian talking about “sustainability”, when the entire capitalist system is based on the exploitation limited resources until they run dry, and then moving like a locust plague onto the next, until everything is gone.”

    Wow that is some serious comedy. Come on, stop being unfair to liberals. No one with an IQ above 70 actually beleives that.

  63. What, pray tell, do you think generates our GDP? The government?

    The government prints money and gives it to us. That’s how economies work.

  64. “””Democratic Presidents are never blamed for the shutdown since they own the media. “””

    John, you do realize that the most watched media, that consistantly has 6 of the top 10 most popular shows. Is the Fox News network.

  65. “The government prints money and gives it to us. That’s how economies work.”

    That is apparently what Chad thinks.

  66. “Beyond that, BUSH IS NOT PRESIDENT ANYMORE!!! Obama is responsible for the spending that is going on now.”

    No, Obama made it clear that his spending bill was actually the money Bush SHOULD HAVE SPENT BUT DIDN’T. He made that very clear.

  67. The entire capitalist system is based on the exploitation limited resources until they run dry! The capitalists move like a locust plague until everything is gone! The capitalists want us to starve!

  68. Adam:

    A 5% tax increase would barely begin to solve the the problem. The government’s estimated revenue for FY09 is something like $2.1T, outlays something like $3.9T, with a deficit of $1.8T so a 5% increase in all taxes, fees, etc. should net about $105B in extra revenue.

    If you calculate the government’s shortfall with GAAP metrics taking into account the net present value of future obligations under Social Security, Medicare, etc., the budget gap is much, much larger.

    The truth is therefore even worse: taxes cannot possibly be raised high enough to cover government debt, because we’d hit the peak of the Laffer curve before raising enough revenue. The shortfall will be covered either by inflation or by repudiation: there are no other ways.

  69. “John, you do realize that the most watched media, that consistantly has 6 of the top 10 most popular shows. Is the Fox News network.”

    But they are literally the only major network that doesn’t falaciate Obama at every opportunity. They therefore own an entire sector of the market. If you can’t stand Obama, Fox is really the only network you can watch. Meanwhile, Obama cultists have every other network to chose from and thus are splintered giving Fox higher ratings. If you reversed it and made every other news network conservative and made Fox all Obama all the time, Fox would still have the highest rating since they would dominate one segment of the market.

  70. And remember, Chad is unwilling even to take care of his grandma. What a monster.

  71. The only way mankind, while we’re limited to mucking about the Earth, can continue to exist is by exploiting limited resources. If we ever get to the point that we can generate unlimited energy, perhaps then the equation will change.

    So, in effect, you’re complaining about the very existence of the human race.

  72. Smarmy Ppeople who propose plans that have come onto libertarian sites asking for details and who then denounce those details as having absolutely zero chance of political success are a waste of time.

    FTFY

  73. “The shortfall will be covered either by inflation or by repudiation: there are no other ways.”

    I am betting on the former. Either way we totally screw our creditors and allies. That is smart diplomacy for you.

  74. And I’m even willing to make this deal with Chad. I’ll trade you your 5-percent tax increase — oh, hell, let’s make it 7 percent — for a true balanced budget.
    Deal?

  75. we’d hit the peak of the Laffer curve before raising enough revenue

    We are already above it.

  76. who oh why did a troll come and discredit my good name?

  77. Chad: serious commenter, or performance art?

  78. So, in effect, you’re complaining about the very existence of the human race.

    Well, yeah…

    Admit it: the earth will be nothing but a scorched, dessicated husk in a matter of weeks. The “locust horde” will be forced to turn on itself; I hope you have plenty of guns, and a taste for human flesh.

  79. Chad (not The Chad, of course) trolled you bitches something fierce.

  80. “the entire capitalist system is based on the exploitation limited resources until they run dry, and then moving like a locust plague onto the next, until everything is gone.” [citation needed]

  81. “Chad (not The Chad, of course) trolled you bitches something fierce”

    So he WILL take care of his poor old grandma? Whew. That’s a relief.

  82. “John, you do realize that the most watched media, that consistantly has 6 of the top 10 most popular shows. Is the Fox News network.”

    “Cause I’m a JERK!

  83. So he WILL take care of his poor old grandma? Whew. That’s a relief.

    But he plans to do it with *your* money.

  84. “And remember, Chad is unwilling even to take care of his grandma. What a monster”

    He kicks my dog!

  85. True. But, Democratic Presidents are never blamed for the shutdown since they own the media. Clinton wasn’t blamed for shutting down the government in 1995, Gingrich was. No way would Obama have been blamed for doing so.

    John, that’s why I wrote, “And you can bet the one blamed for “shutting down the government” will be the party that wants to spend less (note: I didn’t say cut spending, god only knows what reaction that would actually get).”

    And that’s why Jimmy Carter had to fold when he went up against Ted Kennedy and Tip O’Neill. Poor guy, To get beaten by Reagan, the GOP hardly had to fire a shot, he’d already been destroyed by his own party.

    And the party that wants to spend more money will always win because the one’s that want to spend less clearly want poor old Aunt Maude to starve to death in a snowbank and the terrorists to win. And the children to all die of diphtheria without ever having been able to go to school to learn how to spell it.

  86. We are already above it.

    I suspect you are right: since the location of the peak of the Laffer curve depends on lots of factors, including the relative tax rates and regulatory regimes of other countries, you are probably right in the sense that high taxes and onerous regulation in the US are slowly forcing capital to move to jurisdictions less punishing toward investment.

    The US has sown the seeds of its own decline through its spending policy and currency management. It’s theoretically possible to fix it, but as a practical matter-taking into account the power claimed by the federal government, the incentives present in democracy, the size of the debt in GAAP terms, the inertia of government, and the resistance to making difficult changes that will prevent even greater pain later-it’s a fait accompli AFAICT.

  87. “And remember, Chad is unwilling even to take care of his grandma. What a monster”

    He kicks my dog!

    When did he stop beating your granddaughter-in-law?

  88. “When did he stop beating your granddaughter-in-law?”

    That only lasted about ten minutes.

  89. As to anyone who wants to raise taxes to balance the budget, I’m with the Reason writer 9I forgotten which one, but long gone) who asked in the mid-eighties when the Dems wanted to raise taxes “They’re running a $350B deficit now with the highest federal tax revenues in history, can you imagine what kind of deficit they’d run if they had even more revenue?”

  90. “Clifford the Big Shaggy Cunt”

    Name of the Day winner!

  91. squarooticus,

    Noted. I was only addressing the FY09 deficit, not future year deficits. Those are of course much bigger.

  92. “””The US has sown the seeds of its own decline through its spending policy and currency management. “””

    Right, and political party affiliation has been irrelevant. Something the partisan crowd will never get. America, in general, wants government to be answer. I say it’s a side affect of taxation. When you are required to give government your money, it’s natural to want something in return.

  93. A 5% tax increase would barely begin to solve the the problem.

    I mean 5% of our income, not of our current tax payments. We have been taxing around 19% of GDP and spending around 22% for several decades. The spending will grow slowly to 23-24% as the entitlement programs get swamped with boomers.

    Yes, those making $100,000 a year can suck up another $5000 in taxes. Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.

  94. Admit it: the earth will be nothing but a scorched, dessicated husk in a matter of weeks. The “locust horde” will be forced to turn on itself; I hope you have plenty of guns, and a taste for human flesh.

    I got plenty of guns, ammo, and a smoker. If you can prepare long pig like the regular kind, I should do just fine…

  95. All those people wanting balanced budgets need to remember is that every time that the government ran a surplus in the latter half of the twentieth century it was followed quickly by an economic downturn.

    Of course as the ninteen seventies and the two thousand oughts have shown deficit spending is no guaratee either.

    Perhaps it’s time to bite the bullet and take the fiscal discipline necessary. The only people who’ll get rich are the one’s betting on that not happening.

  96. “Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.”
    I vote for harvesting and selling Chad’s grandma’s organs. Yes, she’ll have to give up a kidney. Get over it. Oh, right. He doesn’t care anyway…

  97. The truth is therefore even worse: taxes cannot possibly be raised high enough to cover government debt, because we’d hit the peak of the Laffer curve before raising enough revenue. The shortfall will be covered either by inflation or by repudiation: there are no other ways.

    The peak of the Laffer curve is up around 70% tax rates. Our tax rates are in the low 30s. The Laffer curve my be an issue for Sweden but it is irrelevant here in the US. At our effective tax rates, a $100 billion tax increaes will reduce economic activity by around $20 billion, which would reduce tax revenues by about $7 billion….leaving the government $93 billion ahead.

    When the right yaps about the Laffer curve, it reminds me of the morbidly obese women who are afraid to lift any weights because they don’t want to look like some steriod-infused freak. The argument that “We shouldn’t do this at all because in principle we could over-do it” is just silly.

  98. Yes, those making $100,000 a year can suck up another $5000 in taxes. Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.

    Umm. Yeah. Fuck you, okay? Why should I pay more so Obama can act like a dictator (Roman variety) and rewrite bankruptcy law to suit his buddies? Why should I pay for the comically poor decisions of a bunch of ignuts? Explain to me on what basis these inept bastards have a moral right to any of my resources, and I’ll think about it. But fuck this whole rewriting the social contract on the fly to screw me. I’m tired of it.

  99. T, speaking of Chad’s grandma, what’s the proper age for harvesting long pig?

  100. “Yes, those making $100,000 a year can suck up another $5000 in taxes.

    I couldn’t help but notice you wrote “those making $100,000 a year” and not “those OF US making $100,000 a year”. Very telling.

  101. Chad,

    No.

  102. “I mean 5% of our income, not of our current tax payments.”

    You don’t think that increase in taxes will have an effect of hurting the economy by taking more money out of the private sector and causing more unemployment and thus not really raising revenue by 5%?

  103. “When the right yaps about the Laffer curve, it reminds me of the morbidly obese women who are afraid to lift any weights because they don’t want to look like some steriod-infused freak”

    Why do you hate fat people, Chad?

  104. Fat people, old people…
    Those lefties are monsters, I tell ya’.
    (Almost as bad as the righties.)

  105. All those people wanting balanced budgets need to remember is that every time that the government ran a surplus in the latter half of the twentieth century it was followed quickly by an economic downturn.

    That’s because any time the government “balanced the budget”, it was largely due to massive tax revenues from one bubble or another, which was just about to burst.

    In any case, the budget hasn’t been balanced in decades. Clinton’s one year of “balanced” budgeting was solely a result the accounting standards that would get any CEO arrested (this is not limited to Clinton, it is simply the status quo for the government). Go back and look at the gross federal debt for every year from 1990 to present. Show me the year where debt went down or stayed the same. THAT would be a year where I considered the budget “balanced”. There was actually a period of a few months right before the bubble burst in 2000 that the debt was actually decreasing, but there was no fiscal or calendar year where it decreased.

    Of course, a blind monkey could have balanced budgets in early 2000, so that really isn’t say much.

  106. The shortfall will be covered either by inflation or by repudiation: there are no other ways.

    Tattoo that on the inside of your eyeballs, my friends.

    We have been taxing around 19% of GDP and spending around 22% for several decades. The spending will grow slowly to 23-24% as the entitlement programs get swamped with boomers.

    Err, no, Chad. US Government spending as a percentage of GDP has been steadily increasing, and is now above 40%.

  107. “Of course, a blind monkey could have balanced budgets in early 2000.”
    And now he’s anti-monkey. Oh, Chad. Is there no limit to your hate?

  108. bookworm | May 12, 2009, 11:48am | #

    You don’t think that increase in taxes will have an effect of hurting the economy by taking more money out of the private sector and causing more unemployment and thus not really raising revenue by 5%?

    Around our current levels of taxation, the econmomic dead-weight loss of income and payroll taxes is around 20%. Therefore, a 5% of gdp tax increase would decrease gdp by about 1%.

  109. I suspect you are right: since the location of the peak of the Laffer curve depends on lots of factors, including the relative tax rates and regulatory regimes of other countries, you are probably right in the sense that high taxes and onerous regulation in the US are slowly forcing capital to move to jurisdictions less punishing toward investment.

    I disagree for a similar reason. The other major markets are Japan, China and the Euro zone. The Euro zone has much higher taxes and much stricter worker, environmental and other regulations (plus higher unionization). Japan also has higher taxes, with the top tax rate at 40% and cap gains treated as regular income. China has even more abusive tax regime than Japan does. So if you look at the markets we compete with, especially industrialized ones, we’re still on the low-end.

    However, our headline corporate tax rate is higher, but if you take into account what companies actually pay on US profits we’re in the 2nd lowest quartile, when looking at industrialized countries. This is largely due to the system of tax bookkeeping vs. filings bookkeeping.

  110. “In any case, the budget hasn’t been balanced in decades”

    Then why bother now?

  111. John, that’s why I wrote, “And you can bet the one blamed for “shutting down the government” will be the party that wants to spend less (note: I didn’t say cut spending, god only knows what reaction that would actually get).”

    Good point. But if anyone could have gotten away with it, it would have been Obama. Imagine a counter history where after coming into office Obama says that he meant what he said about bi-partisianship and that means the Dems and Republicnas both in Congress have to give up their goodies and start being responsible. He really could have done something about spending. Instead, he just decided to break the bank.

  112. “””Perhaps it’s time to bite the bullet and take the fiscal discipline necessary.”””

    Perhaps. But that’s usually political suicide. Giving people less for the same amount, or more taxes isn’t popular. Even the republicans know this is true. Every politician knows it’s about bringing federal dollars back to your state. That will never go away as along as government taxes it’s citizens.

    Bloomberg pulled it off but he did the bad stuff, cutting services, firehouses, and such in his first year. His approval rating shot down into the low 20’s. But that turned things around by the end of his first term and he came out smelling like a rose for his second campaign. Obama seems to be doing the opposite. The hammer will come down toward the end of his first term. His ratings will tank when he needs them for his second run.

  113. The peak of the Laffer curve is up around 70% tax rates.

    Ive seen papers suggesting everything from 10% to 50%, but that is a new one.

    Citation needed. Austrian economist citation preferable. 🙂

  114. Err, no, Chad. US Government spending as a percentage of GDP has been steadily increasing, and is now above 40%.

    I was speaking solely of the federal government. Spending has been very constant for the last forty years when adjusted for gdp, ranging from high teens to low twenties. Taxation has typically been a few percent lower. That is the problem.

  115. “Yes, those making $100,000 a year can suck up another $5000 in taxes. Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.”

    Cause I don’t want my extra $5000 shoveled into the pockets of democratic party cronies?

  116. I believe that we’ll pull ourselves out of the current idiocy somehow, probably with double-digit inflation for an uncomfortably long period.
    But I’m finally beginning to suspect that I or my children may, indeed, be around to suffer through the big one.
    Perhaps it’s time to lay down some long-term contingency plans, just in case. Anyone know a source of good, non-wingnut, worst-case scenerio planning info? A kind of “bomb/tax shelters for cosmotarians Web site?

  117. Chad:

    Yes, those making $100,000 a year can suck up another $5000 in taxes. Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.

    Theoretically, what if I’m in that position and I don’t want to? What gives you the right to make me?

    Clinton’s one year of “balanced” budgeting was solely a result the accounting standards that would get any CEO arrested (this is not limited to Clinton, it is simply the status quo for the government).

    A stopped clock is right twice a day. This is one of two for you today, Chad.

    The peak of the Laffer curve is up around 70% tax rates.

    [citation needed]

  118. Ive seen papers suggesting everything from 10% to 50%, but that is a new one.

    http://en.wikipedia.org/wiki/Laffer_curve

    Wikipedia cites an emperical study that puts it at around 80%.

    Your 10% figure doesn’t even pass a whiff of a smell test mathematically. Imagine you made $100000 and were paying 10%, but the government decide to raise your taxes to 20%. For the government to lose money on this proposition, your response would have to be to cut your hours or effort in HALF such that your income was under 50000. That is absurd.

    Now if you were being taxed 70% of your 100k income, and the government increased it to 80%, you would be losing a third of your take-home pay. The break even point would be if you were to cut back your effort by 1/8th and drop your income to $87500. Now THAT seems somewhat of a realistic response for normal people.

  119. Chad | May 7, 2009, 10:47pm |

    And yes, I like to come here and annoy the heck out of you guys.

    He’s just a stupid griefer guys… unlike herpes, if you just ignore him, he’ll go away.

    Filtering has made my life immeasurably better.

  120. “Around our current levels of taxation, the econmomic dead-weight loss of income and payroll taxes is around 20%. Therefore, a 5% of gdp tax increase would decrease gdp by about 1%.”

    Why support anything that will reduce gdp? Why not cut spending and taxes to stimulate growth?

  121. Yes, those making $100,000 a year can suck up another $5000 in taxes. Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.

    Or my kids’ college funds. Or my retirement fund. Or my savings. Or used to improve my home. Or buy a new car. Etc. Etc.

    Thank god I paid my way through both my undergrad and graduate degrees so I can live to see that investment in myself usurped by collectivist scumbags. Now I can take that time and money spent and shovel it out the door to the rent seekers and corporatists who have done jack and squat to earn my money.

    I’m so glad we have our betters around to tell us what we should be doing with the wealth earned from our labors.

  122. Government spending doesn’t have a multiplier effect; it has a divisor effect.

    A divisor is a multiplier too. Just happens to be less than 1.

  123. I look forward to the clean-up. Democrats will get their much-beloved abortions…en masse.

    It will be time to flush those giant clumps of cells.

  124. In ’92 my wife and I made a 100 K, paid 40 K in fed and state taxes. We quit working and retired, at age 55, when we realized we could live on the 40 K and not have to work at all. Our life style changed for the better.

    And Grandma isn’t working the streets, at least not yet.

  125. Wikipedia cites an emperical study that puts it at around 80%.

    Didn’t follow that link, did you? Neither did anyone else who edited the page on the Laffer Curve. From the abstract:

    Major findings show that the bellshaped Laffer curve is statistically significant and that the revenue-maximizing tax rate is between 32.67% and 35.21%

    So, there goes that 70-80% right out the fucking window. Reading comprehension is a fine thing, as is consulting original source material.

  126. “Now if you were being taxed 70% of your 100k income, and the government increased it to 80%, you would be losing a third of your take-home pay. The break even point would be if you were to cut back your effort by 1/8th and drop your income to $87500. Now THAT seems somewhat of a realistic response for normal people.”

    Moot point. Obama said he wouldn’t raise taxes on folks making less than $250K.

  127. And say, Chad, instead of unproductively waisting your time on this blog, why not go get a job and add to the Federal coffers?

  128. This was a brilliant opportunity to remove some of the inefficencies in the government and regulation. Then dump money on truly meaningful projects and cut taxes where appropriate. In one felled swoop Obama could have improved the American economy forever.

    Obama blew it.

  129. There was actually a period of a few months right before the bubble burst in 2000 that the debt was actually decreasing, but there was no fiscal or calendar year where it decreased.

    Well, remember, the budget has one build in debt increaser. The “Social Security Surplus” becomes debt the government owes itself.

    The fact is that once debt got to a certain point the government could not get by without borrowing just to pay the interest on the debt. If you check, you’ll find that through the eighties and nineties the deficit closely tracked interest. From 1980 or so on the National Debt has basically grown through the magic of compound interest alone.

    The last president who could have done anything might have been Jimmy Carter. I’m not sure he could have but the actions of the Democratic Congress guaranteed that he he couldn’t.

  130. Moot point. Obama said he wouldn’t raise taxes on folks making less than $250K.

    I have no doubt that Obama will raise the EITC to make up for raising taxes on smokes hitting low incmome people hardest.

  131. Zeb,

    Agreed. I just liked the way multiplier/divisor sounded.

  132. Chad,

    Laffer curve isnt just an affect of how hard an individual will work, but also the economic multiplier of my spending vs government spending.

    As govenment spending almost always has a less than 1 multiplier (and sometimes possibly even a negative multiplier), that has to be factored in.

    I personally think the laffer curver peak is probably somewhere around 30%. Since my marginal tax rate is somewhere around 50% (15.3+25+5.8+2.2), Im well over it.

  133. “And Grandma isn’t working the streets, at least not yet.”

    Are you sure?

  134. “And Grandma isn’t working the streets, at least not yet.”

    Are you sure?

    Of course he’s sure. She’s chained up in the basement, so he can fatten her up for the harvest.

  135. “I have no doubt that Obama will raise the EITC to make up for raising taxes on smokes hitting low incmome people hardest.”

    My post was snark.

  136. There is a reason that every time the feds cut taxes, the states start rolling in money. Being above the Laffer curve pushes up state income and sales tax revenue when the curts occur.

  137. My post was snark.

    Mine was just bitter. 😉

  138. I was speaking solely of the federal government.

    From an economic perspective, it makes no difference.

    I have no doubt that Obama will raise the EITC to make up for raising taxes on smokes hitting low incmome people hardest.

    Doesn’t work. He didn’t promise not to raise the net tax burden. He promised that he would not raise any taxes, period.

    In any event, this still represents a transfer via taxes from smokers to non-smokers; there’s just no way around the fact that he raised taxes on smokers at all income levels.

  139. Mine was just bitter. 😉

    Are you clinging to guns and religion, too?

  140. Are you clinging to guns and religion, too?

    Just guns, though I don’t begrudge others their religion, as long as they don’t use it to justify oppressing me.

  141. We should skin Osama for not other reason than messing up such a beautiful slope on that curve!

  142. The government prints money and gives it to us. That’s how economies work.

    True, true, true! The Fed is unconcerned with the dollar as a store of value, rather that it only loses value at a constant rate. This role of the Fed is not unrelated to the issue of “capitalists exploiting resources” since as you can imagine, with a constantly declining dollar you are going to produce more and consume more natural resources than you otherwise would.

    Right?

  143. If they were going to borrow over a trillion dollars anyway, couldn’t they have just kept spending constant and eliminated the income tax instead? Wouldn’t that have stimulated the economy a heck of a lot more than giving hundreds of billions to incompetent bankers to sit on?

  144. Chad, you do know that you are squarooticus’ intellectual inferior, don’t you?

  145. Will you take the partisan blinders off for one second? The bulk of the $1.8 trillion came under Bush. Remember that whole $700 billion TARP bill? And December loans to auto makers, extra billions to Citi, BofA and Merrill and the AIG money pit? That all happened before inauguration and are all in fiscal 2009. The federal fiscal year runs from October to September.

    You are absolutely correct, Mo. Obama inherited this problem. He also chose to inherit the solution: throwing more money at failing financial institutions. The only difference between Obama and Bush is that Obama made a lot of blustery hot air about a few million in bonuses while wiring billions to those same firms.

  146. Yes, those making $100,000 a year can suck up another $5000 in taxes. Yes, you will have to give up the new TV or the pool or the trip to Vegas. Get over it.

    So we take $5000 from someone making $100,000 and put that money where? In your scenario, the $5000 would go to the local Circuit City for a TV, or a company and several laborers building a pool. Or an airline ticket and a hotel in Vegas. But thanks to the federal government, that $5000 will go elsewhere. And that elsewhere will be much a much better chosen destination than the electronics shop, pool labor or the airline companies– all of which are struggling (at least according to NPR).

    And you seem to think this is some kind of central planning genius?

  147. Paul

    While I agree with you that the net sum of tax and spent is zero (at best), borrow and spend is almost always worse – because you have to raise taxes even more to pay for the spending later.

    Like you, I would prefer cutting spending, but that ain’t going to happen.

    Deficit spending is just another jolt of economic cocaine. If you don’t get off it now, the withdrawal pains are going to be even worse later.

    (Another one for you, Warren.)

  148. If they were going to borrow over a trillion dollars anyway, couldn’t they have just kept spending constant and eliminated the income tax instead?

    Because when you spend a trillion, you get to direct it to your campaign contributors. This ain’t rocket science.

  149. robc | May 12, 2009, 12:30pm | #

    As govenment spending almost always has a less than 1 multiplier (and sometimes possibly even a negative multiplier), that has to be factored in.

    Citation and explanation please. I am baffled how you could believe that if the government hires a bunch of construction workers, that somehow they would spend LESS money, which would result in other cut-backs in their community, and so forth.

    The multiplier effect is real, but it differs little whether you buy an SUV or a road.

  150. R C Dean,

    That’s an obvious point, yet one worth stressing over and over again. It’s difficult to focus a broad tax cut in such way as to only benefit your donors and voters in your party. It’s not so difficult to do so in a massive spending bill.

    Which, of course, is why no one ever talks about a major tax cut or tax moratorium for stimulating a recovery, even though no other single act could do as much for the economy in the short term. It’s also why true tax reform never gets anywhere.

  151. Citation and explanation please.

    The citation is a Reason article from a month or two ago. Search the archives. It was in relation to war spending but had a more general government spending multiplier.

    Explanation is easy – inefficient spending causes losses. If I spend on a building a road, I have added X amount of productivity (depending on the road). If I build a road to nowhere, I add nothing to productivity. The government does a lot of the latter. Me buying porn and crack (or bibles, or whatever) is exactly as productive as I want it to be. Its very efficient spending. Government spending is inefficient, because my money is being wasted on something I dont want, like turning steel into weapons and destroying them in the middle east. Zero productive value. No multiplier. In fact, since it is throwing away stuff of value, it is negative.

  152. Shorter robc:

    Government spending imposes opportunity costs on the economy as a whole. Money taken from taxpayers to pay for government spending would be more efficiently/productively spent by the taxpayers themselves.

Please to post comments

Comments are closed.