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November 17, 2010

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I like the basic outline of their tax plan (reduce/remove deductions, lower rates), but I'd lower the rates less and I'd keep lots of brackets (indeed, I'd add more brackets for really high earners). And I'm all pro-estate tax and stuff.

I didn't see much discussion of S-B's plan to tax capital gains as income, but maybe I missed it. I confess I started skimming.

I like the basic outline of their tax plan (reduce/remove deductions, lower rates), but I'd lower the rates less and I'd keep lots of brackets (indeed, I'd add more brackets for really high earners). And I'm all pro-estate tax and stuff.

I could sign-on to the Rob Commission's plan.

There was plenty in the plan that was practical, but as Paul Krugman pointed out, the whole point of the exercise was to find something that could be voted on as-is.

It was not to think up some interesting new ideas on deficit reduction and bundle them with some utterly unpalatable limits on revenues and a major shift in distributional outcomes, the whole having no possibility whatsoever of passing.

It's not particularly hard to balance the budget if you don't care about having a plan that can actually pass Congress and be signed by the President. You can cut like crazy or raise taxes a bit or a bit of both. It's easy. The hard part is getting it through Congress.

"There's simply no way Democrats can agree to assume Bush's low, low tax rates on the rich as a starting point, and then have the commission claw back some of those rates."

bold mine, this statement "There's simply no way", with either Democrats or Republicans after it will prevent us from reaching a compromise that serves the country the best.

I hope that both Dems and Reps learn to not start their statements with that line in the sand.

Well, the co-chair's sketch is one thing... the commission is supposed to release a full plan at some point.

That said, yeah right like anything is gonna happen.

The GOP is going to spend the next 2 years just stonewalling and spinning, waiting for the 2012 election, in which they believe they will take full power back. The Dems will whine that they're being all reasonable and stuff and why oh why can't the other guys just be reasonable too?

They have no incentive to be reasonable. No incentive to compromise. Why would they? They think that being uncompromising is the key to winning, and I'm not sure they're wrong at this point. The Dems compromise before they get out of bed in the morning and where does that get them?

Bah.

Marty,

I think the argument is that even if the Dems might ultimately compromise on the issue, they should not START there. It should be bargained for. The Dem start position should be "Bush tax cuts expire." If the GOP wants something else, they should have to give up something they want to get it.

Negotiation 101, which most Dems failed.

Exactly what Rob said.

The starting point should not be a compromise. Just because that's been the Obama admin MO doesn't mean that it should be treated as though that were somehow the natural state of affairs.

I sympathize with Obama on this stuff. It's in my nature to try and find a reasonable compromise right off the bat and try to avoid negotation ping-pong. But it's not really possible to do that. I've learned that.

In order to reach my preferred goal, the Dems would need to start well to my left, because we all know the GOP will start on the right and any pre-emptive move to the middle will just drag the result to the right.

Actually, the Dem start position should probably be/have been to the left of "let the cuts expire."

Then simply allowing expiration (return to Clinton-era rates) becomes your first move.

Then, if needed to reach a productive compromise, you make a second move and perhaps you end up inbetween Clinton-era rates and today's rates.

It's possible to be successful in negotiating by pre-compromising, but you have to assess the person you're negotiating with first. Someone who has negotiated in bad faith before and done absolutely everything they can to undermine the deals you make and to drive them towards their preferred outcome is not the kind of party that is going to notice and appreciate pre-compromise.

There is no one negotiating strategy that fits all situations. This one is not suitable for the current situation, hasn't been for 2 years. I wish Obama would notice.

They have no incentive to be reasonable. No incentive to compromise. Why would they?

I suspect that Rob is correct here. Because why would they? Being reasonable would require some small interest in doing what is best for the country. And clearly the primary goal of the Rebublicans in Congress, in the words of their own leaders is to make things as bad for the nation as possible so that they can (they think) win power in the next election.

Read that again, their goal is to make things as bad for the country as possible. And then they wonder why some of us who are conservatives of long standing think that these pseudo-conservatives are destroying our country, our party, and our philosophy of government.

Their GOAL is to win elections. That's true of both parties.

I don't think their goal is to make things as bad for the country as possible. Their goal is to win the 2012 elections, by pinning all bad things on the Dems and claiming credit for anything good themselves. Which is to say they're politicians.

Yes, I do think they happen to be worse about it than the Dems (perhaps simply more skilled), but the difference isn't huge.

"Actually, the Dem start position should probably be/have been to the left of "let the cuts expire."

Then simply allowing expiration (return to Clinton-era rates) becomes your first move."

I agree with the point of this. We should either let them expire or start from the assumption that they all have expired.

Worst case, the Democrats could support a smaller middle class tax cut and call it a tax cut, the Republicans could support a much smaller tax cut for the less than a million crowd to save small business and the more than a millions would just "stay the same".

Best case, many of the changes talked about in the commission and even some of the more different tax policies (VAT) could then be weighed against the post expiration positions.

Actually, the Dem start position should probably be/have been to the left of "let the cuts expire."

Agreed. Overton window.

Part of the problem here IMO is that people really and truly do want different things. I'm not sure there's a middle to meet in.

Another part of the problem, also IMO, is that Obama is pretty much in the center of current-day American political thought. Maybe one degree to the left of that. Which makes him kinda center-right.

He's also a technocrat, which makes him lean toward public-sector solutions, but that's not actually the same as "left" or "liberal".

It's one thing to say that your goal is to win elections. It is, IMHO, quite another to announce (as Senator McConnell did a few days ago) that you are going to make sure that nothing gets done, in order to keep the President from having any "victories."

Given that, on those occasions in the past two years where President Obama has adopted programs championed by the Republicans, they promptly denounced and resisted them, I don't see any prospect for any kind of cooperation in the national interest. Whether that will turn out to have been a good electoral strategy or not remains to be seen. Personally, I suspect it will work about as well as their 1990s' "shut down the government" strategy did.

So, the problem they have with the report is that it's not punative enough towards the wealthy? Not that, say, it doesn't propose to balance the budget for A QUARTER CENTURY

from now, meaning, never?

what I find shocking is the dems unwillingness to embrace the fact that under the clinton tax structure, no only did we have real economic growth, we had "surpluses as far as the eye can see". It's what works and its proven -- and all that democrats need to do is keep repeating that phrase "it works, its proven" over and over while the GOP tries to argue for deficit creating/economy destroying tax cuts.

Personally, I suspect it will work about as well as their 1990s' "shut down the government" strategy did.

Which is to say, it cost them seats in the next two elections, like their insane behavior did in 1996 and 2000? I sure hope so.

People forget that the Lewinski scandal and government shutdown were actually politically very bad for the Republicans--most voters hated both charades and the Democrats picked up seats in both of the following elections.

So, the problem they have with the report is that it's not punative enough towards the wealthy? Not that, say, it doesn't propose to balance the budget for A QUARTER CENTURY

Who is "they"?

This article is by Jon Chait.

Kevin Drum, Paul Krugman, Matt Y and countless others made that exact argument: it doesn't actually address the deficit.

I believe russell made the same point.

And, really, it's not about "punitive." We're talking about the tax rates that prevailed in the 1990s. Not exactly punishment.

paul lukasiak: all that democrats need to do is keep repeating that phrase "it works, its proven" over and over

You assume that Democratic politicians taken as a whole actually want to pass tax increases or even want to let higher-income rates revert to those of the Clinton years. I would say that fact is far from proven, and there are good reasons to think it is not true, beginning with the way both parties suck up to those who can make large campaign donations.

I look at the Democratic maneuvering over the Bush tax cuts as being far more about the desire to somehow renew the high-income tax cuts without too overtly breaking campaign promises and annoying Democratic voters than it is to actually achieve the goal of not renewing them.

So, the problem they have with the report is that it's not punative enough towards the wealthy?

Dude, they want to tax cap gains as ordinary income. I'd call that a kick in the behind for Scrooge McDuck.

Most likely scenario for dropping the mortgage deduction would be for mortgages above some safely middle-class minimum. Another blow against the empire.

The genius of Bowles-Simpson is that it manages to gore at least one of everyone's oxen.

I think the time has come for the Dems to outdo the GOP in tax-cutting. I think they ought to propose to eliminate federal taxes altogether. Then they should invite the Republicans to make amendments to the Democratic "no taxes on anybody" proposal. Let the Republicans propose what taxes should be re-introduced, and at what rates.

Sheer fantasy, I know. But I'd be curious to see the GOP arguing something like: "Obama is proposing to destroy the country by not taxing YOU, and we're here to stop him."

--TP

No, the problem is that in a "We all have to make sacrifices" proposal, they actually mean, "We all have to make sacrifices, except rich people, who get a tax cut."

The proposal is intentionally punitive towards everyone except the rich (make the Smithsonian charge fees, it won't make a rounding errors difference in the deficit, but at least school children will have to pay for the mistakes of the Bush years).

Is there a tax rate other than zero that isn't punitive, at least in so far as taxes can be considered punitive? I could understand this whole "punitive" thing a lot more if, say, the tax code singled out individual citizens by name for higher taxes than everyone else. But last I checked, rates apply to incomes, not people. Round and round we go. Same conversation, different day.

"what I find shocking is the dems unwillingness to embrace the fact that under the clinton tax structure, no only did we have real economic growth, we had "surpluses as far as the eye can see". It's what works and its proven "

Besides not being accurate (Bush inherited a bursting bubble) the problem with this is that it destroys the "last thirty years of bad policy" mantra.

Otherwise, someone would have to actually detail what worked and didn't for the past thirty years.

The problem with the idea that the GOP repeating the same mistakes of 1994 thus leading to a second Obama term and (perhaps) the Dems re-taking over the House is that for that to happen the economy needs to turn around. And, quite frankly, I have a hard time seeing such a trun around, absent another massive government intervention, which the GOP is in position to prevent, which they will do.

If Nov 2012 rolls around and we still have 8%+ unemployment (and perhaps 7%+), who are people going to blame? It ain't going to be John Boenher and the GOP, let me tell you. One can hope that the GOP screws the pooch and nominates Sarah Palin, but if the economy is bad enough even she might win.

Marty,

Dubya and his minders were pushing for a huge tax cut BEFORE the bubble burst, and they kept pushing for a huge tax cut AFTER the bubble burst. The "bursting bubble" had NOTHING to do with their pig-headed determination to pass a huge tax cut.

No, their argument initially was PRECISELY that we must cut taxes because the government will be running "surpluses as far as the eye can see", so it doesn't need YOUR money.

You're entitled to remember history any way you like. Just as entitled as I am to point out that your version is bullshit.

--TP

Otherwise, someone would have to actually detail what worked and didn't for the past thirty years.

Yeah, but you always have to ask the musical question: good for whom?

Also, a brief walk down memory lane:

During Bush I, the marginal tax rate on the highest earners was *lower* than on the next lowest bracket.

It's true, you can look it up.

Good times.

So, even when you think things are about as screwed up as they can possibly get, just remember: it can always be worse.

TP, I remember exactly what you said, doesn't change my point at all.

How does saying the Clinton policies were proven and right not kill the whole "last thirty years" mantra?

Most of his policies were supply side continuations of Reagan policies, plus some good solid cost savings carried over from the Reagan Democratic Congress.

the whole "last thirty years" mantra?

What mantra is that Marty?

The genius of Bowles-Simpson is that it manages to gore at least one of everyone's oxen.

That's not genius. Look: if you come up with a brilliant plan to deal with a big ugly thing, you probably will hurt (and therefore piss off) a lot of people. But that doesn't mean pissing people off is the mark of a good plan.

Pissing off everyone in this context isn't genius; it's cheap cunning, at best... a marketing strategy.

Marty,

You are conflating two arguments, I believe:

1. The last 30 years sucked for the average worker.

2. The tax rates during Clinton's era were not overly onerous and balanced the budget.

These two arguments are not in contradiction. It is fully possible for Clinton's tax and social services policies to be the best we've had since 1980 and still not be very good.

It is something of a low bar to cross.

What DFS said.

2. The tax rates during Clinton's era were not overly onerous and balanced the budget.

Not quite accurate, I think. You balance the budget by either going out and finding new sources of income (as opposed to, by analogy, twiddling your salary so that it matches expenditures) or by cutting expenditures.

To further analogize, let's say you're a real estate agent working on commission, which is relatively fixed. Periodically you might accomplish some changes in your commission, but it's not easy. Let's say there's a housing boom, which is actually a bubble. In that event you can take full credit for balancing your personal finances (you might even be in the black for a few years), but when that bubble pops, back you go into the red.

This is my interpretation of what happened during the Clinton years. In reality, it was a bit of two things, I think: Congress/President disagreeing over spending priorities meant that less spending actually occurred, and the dotcom bubble provided some extra income. For a while.

Not quite accurate, I think.

One can agree with everything you wrote after this sentence, Slarti, and still think that:

2. The tax rates during Clinton's era were not overly onerous and balanced the budget.

is quite accurate. You might disagree with what you are inferring from this simple statement of fact, but that doesn't make the statement, itself, at all inaccurate.

That aside, why is it that the Bush era failed to achieve similar results during its bubble, even for a while?

Well, there was this GWOT thingie, which I think affected the state of budget-balance quite a bit.

Voluntary, surely. But balancing the budget, or not, was a matter of matching expenditures to income, not vice versa. Unless you're advocating a constantly-varying tax rate as a way of ensuring that the budget is balanced.

Probably not, I'm guessing. The US government changed tax rates once during the Clinton administration, and it wasn't until 5 years later that the budget ran into the black.

The US government changed tax rates once during the Clinton administration, and it wasn't until 5 years later that the budget ran into the black.

I'm not sure what this is supposed to demonstrate. I'm not suggesting that one only adjust one side of the balance, or that it be done "constantly." What was done during the Clinton era was effective at deficit reduction and ultimately elimination. Parse it all you like, but the tax rates were key to the overall plan. Perhaps there could have been a change in tax rates at some point after 2001, taking the GWOT into consideration. That would hardly have required contant adjustment.

If Nov 2012 rolls around and we still have 8%+ unemployment (and perhaps 7%+), who are people going to blame? It ain't going to be John Boenher and the GOP, let me tell you.

That depends. One thing Obama has to master is the art of demanding "a bill that (he) can sign" (assuming he's demanding good legislation, of course).

If he can do this, there are more paths to success.

If the Republicans play ball, and the economy improves, he gets to claim credit.

If they refuse, and the economy stays lousy, he gets to say "I told them to pass X!"

If the Republicans play ball and the economy stays lousy, they can't blame *him* for the failure.

If they refuse, and the economy booms, hey, the economy is booming!

But he has to modify his stance. He's been a "community organizer" for two years - that's a good thing, let's figure out what we *can* do, and do it. But that's not a key for political success when one side wants to paint your side as evil.

Now, he has to *lead*. He has to say "this is what the nation needs!" and make the Republicans look bad if they refuse to step up to the plate with *something* (that is: something besides tax cuts and deregulation).

Well, there was this GWOT thingie, which I think affected the state of budget-balance quite a bit.

There was also the 2003 tax cut thingie, passed when the GWOT thingie was already in full swing, and the Iraq invasion thingie was already eating "supplementals" for breakfast.

Dubya was perfectly content to change taxes in response to changing conditions -- as long as "change" meant "cut".

--TP

Yeah, when you cut taxes to the tune of trillions of dollars, you have trillions of dollars less in your coffers.

(we weren't even in the neighborhood of Laffer)

I don't know what neighborhood Laffer lives in. He's probably in a nice one, if he gets a royalty everytime someone invokes his name.

Speaking of taxes and expenditures and such, though, has anyone noticed that the budget projections over the next five years assume a rather robust rate of growth in revenues? Like, 15-20% per year?

And that without said revenue growth, we're even more thoroughly boned than they predict we'll be?

Probably no one has noticed that.

No one has cut taxes to the tune of a trillion dollars. But if that purported trillion dollars comes back, all in one year, it's still not even close to enough to balance the budget for that year. We're looking at trillion-dollar shortfalls every year, for the next several years.

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