Robert Samuelson: Americans and Congress Assisted Fiscal Suicide

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No exit

The always perspicacious and frequently depressing Washington Post economics columnist Robert Samuelson has a particularly downbeat column today. In the print edition the title is "Suicidal Politics," while online it's "Government on the Brink." Just a few highlights (lowlights?) below:

By suicidal, I mean that government has promised more than it can realistically deliver and, as a result, repeatedly disappoints by providing less than people expect or jeopardizing what they already have. But government can't easily correct its excesses, because Americans depend on it for so much that any effort to change the status arouses a firestorm of opposition that virtually ensures defeat. Government's very expansion has brought it into disrepute, paralyzed politics and impeded it from acting in the national interest.

Few Americans realize the extent of their dependency. The Census Bureau reports that in 2009 almost half (46.2 percent) of the 300 million Americans received at least one federal benefit: 46.5 million, Social Security; 42.6 million, Medicare; 42.4 million, Medicaid; 36.1 million, food stamps; 3.2 million, veterans' benefits; 12.4 million, housing subsidies. The census list doesn't include tax breaks. Counting those, perhaps three-quarters or more of Americans receive some sizable government benefit. For example, about 22 percent of taxpayers benefit from the home mortgage interest deduction and 43 percent from the preferential treatment of employer-provided health insurance, says the nonpartisan Tax Policy Center….

Polls by the National Opinion Research Center at the University of Chicago consistently show Americans want more spending for education (74 percent), health care (60 percent), Social Security (57 percent) and, indeed, almost everything. By the same polls, between half and two-thirds of Americans regularly feel their taxes are too high; in 2010, a paltry 2 percent thought them too low. Big budget deficits follow logically; but of course, most Americans want those trimmed, too.

The trouble is that, despite superficial support for "deficit reduction" or "tax reform," few Americans would surrender their own benefits, subsidies and tax breaks — a precondition for success.

Samuelson concludes:

Government is suicidal because it breeds expectations that cannot be met. All the partisan skirmishing over who gets credit for averting a shutdown misses the larger issue: whether we can restore government as an instrument of progress or whether it remains — as it is now — a threat.

It appears that acute 19th century political observer Alexis de Tocqueville's prescient warning that unfettered democracy would lead to this sorry state is coming all too true:

I think, then, that the species of oppression by which democratic nations are menaced is unlike anything that ever before existed in the world …

Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if, like that authority, its object was to prepare men for manhood; but it seeks, on the contrary, to keep them in perpetual childhood: it is well content that the people should rejoice, provided they think of nothing but rejoicing. For their happiness such a government willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness; it provides for their security, foresees and supplies their necessities, facilitates their pleasures, manages their principal concerns, directs their industry, regulates the descent of property, and subdivides their inheritances: what remains, but to spare them all the care of thinking and all the trouble of living?

However, Tocqueville missed one point–the immense tutelary power would become bankrupt.

Perhaps there is a way to avoid doom. My colleagues at Reason have been doing excellent work in analyzing the manifold problems posed by our current fiscal mess. For just one example, see "The 19 Percent Solution: How to balance the budget without increasing taxes," by Nick Gillespie and Veronique de Rugy.

The whole Samuelson column well worth reading.

NEXT: Ann Arbor-Area Reasonoids: Radley Balko Speaking at the University of Michigan Law School This Week

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  1. about 22 percent of taxpayers benefit from the home mortgage interest deduction

    Anyone who classifies this as a benefit needs a history lesson in taxation.

    1. might as well say any form of tax deduction is a benefit paid by the government.

      1. THIS IS WHAT TONY ACTUALLY BELIEVES

        1. Well, we all know how ridiculous he is.

    2. This is exactly what I thought when I read this article, and you can throw in the bit about preferential tax treatment of employer provided health insurance, too.

      To mention these tax breaks in the same breath as Medicaid is, well, asinine.

      1. Hey, when the state has first dibs on all property/income, then a deduction is spending. How else does letting people deduct the cost of religious education get to the supreme court as a first amendment issue? (Mind you I don’t agree with the sentiment, just sayin)

      2. The same goes for veteran’s benefits. A person agreeing to exchange their services for a defined amount of compensation is much different than a handout.

    3. This is only the second year of filing since I’ve become a home owner. I have almost thirty years of renter tax filings behind me to recognize the bullshit in your assertion.

      The mortgage tax deduction really is a big subsidy to home owners. That is is delivered via the tax code makes it no less a subsidy. Don’t let your hatred of taxation fool you, it is a special privilege for a specific class of people, for the espress purpose of promoting the government’s goal of more home ownership. It is the state trying to mold your lives into the form it wants.

      Libertarians shouls not be for government handing out preferential treatment to particular classes of people.

      1. Libertarian solution: get rid of all but the standard deduction, and then CUT the tax rate! Preferential treatment only distorts the market.

      2. This is only the second year of filing since I’ve become a home owner. I have almost thirty years of renter tax filings behind me to recognize the bullshit in your assertion.

        WRONG! The only bullshit is the denial of your envy.

        30 years is enough time to remember when you could deduct ALL interest payments, not just mortgage interest. Renters pay interest, too. They used to be able to deduct it.

        Again, you need to learn the history of taxation.

        1. Imbizzible. I’m actually interested in your arguments. Can you provide some links?

        2. Envy? I’m now getting that subsidy! I’m not envious at all, I’m just another hog at the gub’ment trough.

          Get rid of the deduction and cut the overall tax rate. You end up with the same amount of money at the end of the year, so it’s no skin off your back.

  2. Quoted one of the paragraphs twice.

  3. Spoonman: Thanks for catching that — I meant to add another paragraph on polling results which I have now done.

  4. Kinda crazy when you think about it, I really like that idea. Wow.

    http://www.total-privacy.it.tc

    1. A little off the mark on that one, Anonbot, but you’re still doing better than Tony.

  5. AKA, public choice theory. Except the interest groups are the majority of Americans. Tyranny of the majority, indeed.

    Best subtitles for “Democracy in America”: “The smaller the citizen, the bigger the government.”

    Or, my favorite, “Self-government requires the governing of the self.” (Santayana).

    Small citizens = big government, big citizens = small government.

    We need bigger citizens and not just smaller government.

    1. “We need bigger citizens and not just smaller government.”

      No, I think this country’s citizens are big enough right now, thank you. Care for some arugula?

    2. We need bigger citizens

      PRESENT!!!

  6. But- my friendly neighborhood union parasite thinks we (Montana) are being STOOPID by not sponging every last penny possible off other, more productive, states.

    Does this mean he’s wrong?

    1. Today the Mayor of Seattle was going on about “external threats” to the Seattle City budget. What he was talking about was state and federal dollars that Seattle gets for its special programs that might get cut by Republicans at the federal level, or legislators at the state level.

      Essentially his argument unwittingly boiled down to lamenting the lack of consistency of the provision of other people’s money.

  7. “For example, about 22 percent of taxpayers benefit from the home mortgage interest deduction and 43 percent from the preferential treatment of employer-provided health insurance, says the nonpartisan Tax Policy Center….”

    I’m not sure you cn classify the latter as a benefit rather than an example of the government incentivizing being employed by others rather than self-employed. Another example would be the SS taxes, as the self-employed have to pay both sides out of their official compensations while the employed do not.

    1. Taxes are still payed by the employer

      1. Re: rather,

        Taxes are still [paid] by the employer

        That was MJ’s point, rather.

        1. Another example would be the SS taxes, as the self-employed have to pay both sides out of their official compensations while the employed do not.

          OM, my point was why should you not pay employer taxes when you are self-employed? My point is not the legitimacy of taxation but the fair application

          1. Maybe cause that’s double fucking taxation.

            1. Nuance beyond comprehension for Tony, rather, et al.

          2. Re: rather,

            OM, my point was why should you not pay employer taxes when you are self-employed?

            Maybe you should have made that point from the beginning, rather.

            A self-employed person is not an “employer.” The question still stands: Why would he pay as an employer?

            My point is not the legitimacy of taxation but the fair application

            There can be no fair application of taxation, rather, just like there can be no fair stealing. Getting that fact out of the way,

            1. double fucking taxation…A self-employed person is not an “employer.”

              Whether you have a corporation, LLC, or you’re self-employed, a tax burden exists. It isn’t necessarily dualized taxation when weighed against other tax benefits.

              By your definition, the individual who owns a LLc or a corp. is taxed twice too

              1. Re: rather,

                It isn’t necessarily dualized taxation when weighed against other tax benefits.

                Bad argument: “Losing an arm ain’t so bad compared to being dead.” Such comparisons are irrelevant. The point made by MJ is regarding the Social Security tax and how it is applied against a person’s income.

                In reality, according to the 2011 tax schedule for a self-employed person, you only pay SS taxes of 13.3% for up to $106,800 USD of your net earnings, afterwards only paying 2% for the Medicare portion for the additional earnings. One can deduct 1/2 the burden by either calculating the tax burden for only 1/2 the net earnings, or you can deduct them from your 1040. So, basically, a self-employed person pays more or less the same in taxes as an employed person.

                The question becomes: Why does an employer pay the other 1/2 of the SS caused by his employee, if the income is the employee’s? In reality, a COMPANY is thus taxed TWICE, as it has to deduct the SS portion from the employee’s wage plus pay the other portion. No matter how you want to spin it, an employee is much a part of the company as the rest of the people that manage it, so it is clear a company or business that has EMPLOYEES has to pay DOUBLE the taxes for employment than a self-employed person.

                http://www.ssa.gov/pubs/10022.html

                1. so it is clear a company or business that has EMPLOYEES has to pay DOUBLE the taxes for employment than a self-employed person.

                  They also get to write it off

              2. Now she gets it.

                1. Fucking limits on nesting… that was for the double taxation on llcs & corps.

                  Then she again demonstrates her idiocy by saying they can “write it off.”

                  Rather, do you even know what “writ(ing) it off” means?

                  1. Don’t you have a snack to eat? My site has a shiny object story to keep you entertained

      2. You really are that fucking stupid.

      3. It’s paid from the employer’s account, but it’s almost certainly passed through to the employee.

        However, since people don’t see it, they don’t realize how much it’s costing them. Whereas the self-employed get to feel the full bite without any accounting anesthetic. No surprise that they’ll yelp more.

    2. ” Another example would be the SS taxes, as the self-employed have to pay both sides out of their official compensations while the employed do not.”

      Actually, it is a wash. Employees earn less than they would because employers are paying that tax. The employer calculates the *overall* cost of the employee, which includes the employer half of FICA.

  8. “All the partisan skirmishing over who gets credit for averting a shutdown misses the larger issue: whether we can restore government as an instrument of progress…”

    Rhetorical Trojan Horse Alert! Rhetorical Trojan Horse Alert!

    Government should be an “instrument” to protect the ability of people to create their own progress. If it goes beyond that charter, it eventually becomes an impediment to (true) progress and all hell breaks loose. Because our government has long been in the “impediment” phase, a shutdown was not something to be feared as much as welcomed for the demonstration of government’s redundancy, which it would provide.

    1. ^^This^^

      The way Obama was trying to seel the idea that government shutdown = TEH END OF DA WURLD!!!, what we need was a government shutdown to SHOW people that it wouldn’t have been that big a deal. Only government workers and those who have made a living either directly from government (contractors) or indirectly (people who run small shops and restaurants outside of national parks for instance) would have noticed anything at all.

  9. the interest groups are the majority of Americans.

    “Awwwwww, MOM! EVERYBODY’S doin’ it! PLEEEEEEEEZE?”

  10. 43 percent from the preferential treatment of employer-provided health insurance

    Overall, I’m willing to bet we all lose from the distortion engendered by this policy.

    1. T, true but the privately insured are the biggest losers. Obamacare will bring about a growth in private insurer market; a silver lining

      1. Re: rather,

        Obamacare will bring about a growth in private insurer market; a silver lining

        Look, rather! A unicorn!

          1. Re: rather,
            Please present arguments, like a person, or a good link. I am not wasting my time sifting through several dozens of hits just to find what you’re talking about.

            1. Sorry, I should have clarified it is my presentiment.

              1. Re: rather,

                Sorry, [“]I should have clarified it[“] is my presentiment.

                Your presentiment is irrelevant. Either provide an argument, or a link. Otherwise, you’re wasting my time.

  11. It’s amazing how accurate de Tocqueville was. Predicting the modern regulatory state 200 years in advance is no small achievement of the mind.

  12. Samuelson leaves out one critical bit of detail, and one that needs to be repeated again and again and again….

    We CANNOT rich-tax our way out of this hole:

    The federal government could annex every dollar earned above $250k per annum, from every household in this country, and the proceeds of that would only yield $1.4 trillion, not enough to cover our deficit for th current fiscal year. Of course, upon confiscation of all that money, the corrosion in both incentives and available capital would absolutely decimate GDP the following year and we’d be facing another huge deficit the following year… this time without as many $250k households to stick it to.

    We. Are. Fucked.

    1. Well, you also have to figure in the loss of taxes from sales taxes on the stuff they would buy, and the loss of revenue from the people who are employed by those rich folks to work on their houses and do other jobs the rich don’t want to do themselves. So there’s more people suffering and sucking at the government’s teet to get by. So, it would generate even less money.

    2. No we’re not. The Federal Govt is fucked. Very different. The people are in great shape.

  13. “We CANNOT rich-tax our way out of this hole”.

    ^Tell the people posting at the Washington Post site where the piece is located.

    Unbelievable.

    “The numbers, the numbers, the numbers….”

    Tomorrow and tomorrow and tomorrow…

    1. Ah, you forgot their final trick in the bag, devaluation of the currency.

  14. Samuelson: “Government is suicidal because it breeds expectations that cannot be met.”

    Samuelson totally misses the point. It is not like government is Daddy Warbucks and we’re all Little Orphan Annie. The “promises” that government makes are nothing more than excuses for fleecing everybody: “Look, I understand you’re naked, but trust me: I am going to give you a snazzy loincloth out of your shirt and pants!”

    Government steals; that is what it does. Government promises are nothing more than excuses to steal, whether they happen to be rosy or not.

    1. Well, yes, but all you’ve done is frame the argument differently without saying anything different.

      Distinctions without a difference.

      1. Re: mad libertarian guy,

        Well, yes, but all you’ve done is frame the argument differently without saying anything different.

        Not exactly: Samuelson still leaves the door open for a government that can keep its promises. I contend that government, by its very nature (as an organized den of thieves,) CAN’T.

        Government will always make promises it cannot keep, because it has no incentive to do otherwise, as it obtains its income from force and aggression, kidnapping and murder; not from exchange.

  15. HMMMMM that’s some good government cheese.

  16. There is far more info on how much the government spends per household (more than the median household income) on the site StopNationalDebt.com

    We need to start talking differently about the size of the debt and unfunded liabilities so it sinks into the general public to whom numbers in the $trillions are too abstract.
    Federal government will need >$1 million per household to pay its IOUs!
    > $116 trillion =”official” debt plus money  short for future social security, medicare, etc
    Even its “official debt” of $14.2 trillion  is $123,754 per household!
    Details at http://StopNationalDebt.com
    Facebook at http://www.facebook.com/pages/…..0177811775

  17. Perhaps there is a way to avoid doom.

    There is, but it will require replacing, wholesale, any member of Congress who has been there more than two terms. See, e.g., the post on farm subsidies.

    The current political class has failed, and cannot help but continue to fail. As long as they are in place, we are, in fact, doomed.

    There may or may not be a way to avert fiscapocalypse. Let’s say we get a Congress that actually starts cutting $500BB/year. That will set off an immediate recession as leveraged liquidity drains from the economy, with asset values crashing, employment going up, interest, one expects, rising, etc.

    That, in turn, will reduce federal revenues, and will likely increase the cost of federal debt service in the short term as our current debt (shamefully short-term as it is) rolls over in a higher interest rate environment. State budgets will also be cut, adding to the withdrawal pain.

    Even a best-case scenario, in short, calls for lots and lots of pain.

    1. Make that unemployment going up.

    2. Ever see the parents of fat kids? They wanted to make their children happy.
      Ever see fat kids turn into lean kids? (sure, one in a 100? 1 in a thousand?)
      Now we have fat unhappy kids…all due to the inability to say no.
      We are doomed.

    3. “There is, but it will require replacing, wholesale, any member of Congress who has been there more than two terms. See, e.g., the post on farm subsidies.”

      Or better yet, eliminate congress all together. Instead of each state sending representatives to DC, just allow the state legislatures to vote in their place. Require that all votes occur on Saturday’s, that way more people can take the time to drive down to their state house and direct threatening stares in their law makers direction before he/she casts a vote.

  18. Few Americans realize the extent of their dependency[…] Polls by the National Opinion Research Center at the University of Chicago consistently show Americans want more spending for education (74 percent), health care (60 percent), Social Security (57 percent) and, indeed, almost everything. By the same polls, between half and two-thirds of Americans regularly feel their taxes are too high; in 2010, a paltry 2 percent thought them too low.

    They all want the shopping spree, they just want it for free.

    1. Everyone does; even you. The only problem is, it isn’t free. It costs all of us more than we know.

      1. Re: Matrix,

        Everyone does; even you.

        Don’t presume to know what *I* want, unless you can prove you can read minds.

        1. I’m sure you want a free shopping spree. Don’t lie!

    2. ” By the same polls, between half and two-thirds of Americans regularly feel their taxes are too high; in 2010, a paltry 2 percent thought them too low.”

      That’s funny, since about half the population doesn’t actually pay any federal income taxes.

      And they STILL think their taxes are “too high”.

      1. Maybe it’s the half that do pay taxes that feel they are too high.

        For those that think their taxes are too low:
        Gifts to the United States
        U.S. Department of the Treasury
        Credit Accounting Branch
        3700 East-West Highway, Room 622D
        Hyattsville, MD 20782

      2. They pay sales taxes, payroll taxes, property taxes, etc.

      3. “That’s funny, since about half the population doesn’t actually pay any federal income taxes.”

        They are upset that their tax refund only equaled the amount paid in federal taxes, instead of turning a profit.

  19. Even a best-case scenario, in short, calls for lots and lots of pain.

    In theory (according to ME), we should probably maintain our current level of government revenue but redirect a big chunk of spending to debt retirement.

    This would have a sort of double-whammy short term effect of removing government spending “stimulus”, while not reducing the tax burden and allowing for increased private spending.

    Tough.

    “We” dug this hole, and now we’ll have to climb out. And of course, that means making hard decisions about priorities.

    HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

    Now, watch me pull a triceratops outta muh hat, Rocky!

  20. about half the population doesn’t actually pay any federal income taxes.

    The overwhelming majority of them get paychecks, and can plainly see the difference between gross and net. “Everybody” pays the Ponzi Tax.

    1. “Everybody” pays the Ponzi Tax.

      Well they get the biggest free ride in that category as well. SS benefits are “progessively” engineered to give those on the low end of the income scale a larger benefit relative ti their FICA taxes paid than is the case for those higher on the income scale.

      1. Those on the low end of the income scale (especially if non-caucasian and male) tend to die before they’re eligible for benefits. Why any black male would support the current social security system is beyond me.

  21. As usual not a word from Samuelson who is a shill for corporations and the rich on making them pay for their fair share of taxes. Its all too easy to get people suckered into believing tripe like Samuelson writes.

    1. That’s class war bullshit and not going to go far around these parts of the intertoobs

    2. Define “Fair Share”.

      Corporations and the Rich pay the freight for Congressional re-elections and are rewarded by the whores on Capital Hill with special access and a tax code they can exploit. Before you demonize sources of productive capital I suggest you fix that hairy problem first; otherwise, the capital will leave and seek out better returns elsewhere, taking economic growth, jobs, and prosperity along with it.

      1. Define “Fair Share”.

        Until I physically cannot covet another loaf, another penny. Until my terrible, grasping want is finally sated, and then some.

    3. I didn’t realize that the bottom 50% of the country that by-the-way don’t pay taxes were paying their fair share. Asshole.

    4. Re: Darwin,

      As usual not a word from Samuelson who is a shill for corporations and the rich on making them pay for their fair share of taxes.

      “When in doubt, rely on Ad Hominem attacks.”

      Old Statist-fuck Proverb

    5. “fair”

      Cute word, means whatever you think it does, yes? Have you heard of a word called “covetous”?

      1. Funny how “fair share” inevitably morphs into “equality of outcome”.

    6. Try this: cbo.gov

      If the rich and corporations paid 100% of their incomes (and that’s assuming they wouldn’t take their capital elsewhere, which they would), we’d still not have enough money.

      It’s called “trillions” with a “T”.

    7. “fair share of taxes.”

      If you jack up tax rates, you will simply create enormous demand for tax shelters and endless tax deferment plans (most of which will be justified in terms of “creating jobs”.)

      The Reagan-era tax cuts did reduce the rates, but they also eliminated many tax shelters – resulting in more revenue.

      Unfortunately, since the 1980s many preferences have returned to the system and even the ones that were left have been made larger (e.g. the ceiling on the home mortgage interest deduction has been raised repeatedly).

      Raise taxes and you will reduce revenue in the long run.

      However, the left has always preferred the illusion of (their definition of) fairness to reality.

  22. Its all too easy to get people suckered into believing tripe like Samuelson writes.

    Fucking truth- how does it work?

  23. I’m sure you want a free shopping killing spree.

    We all do, Son.

    We all do.

  24. The schools worked their plan to perfection. Nobody can do simple math anymore.

  25. That’s always been the problem with entitlement programs. We need politicians that will buck up and acknowledge that they’ll (likely) serve one term and be hated for it?not a cake walk by any means.

    http://www.intellectualtakeout…..arian-view

  26. Government’s very expansion has brought it into disrepute, paralyzed politics and impeded it from acting in the national interest.

    Our plan is working… as planned.

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