Should taxes be raised at the end of this year?

[dagon]

Tax relief for the working class is a phrase that sounds good, but I don't know how that would work at the federal level.  Depending on how you define the "working class", most of them pay no federal income tax as it is.  So how are they going to get "tax relief"?  They pay payroll taxes for social security and Medicare, but they will be beneficiaries of both of those some day.  They could be exempted from those taxes as well, I suppose, but shouldn't they be required to pay something toward their own support during their eventual non-working years?  Shouldn't they have to pay something toward their own retirement?

SC,  i don't care about the semantics of "working class".  how about the "middle class"  which makes a hell of a lot more than 30K a year and are being squeezed into extinction.  i'm talking about helping them;  you know most of us don't make 250K a year so there's your answer. 

anyone under.

peace

[Velleity]

true,  i'm just pointing out that observer hasn't thought this through.  i really don't think he was to live in a country with NO money for crumbling bridges, highways, medical innovation and oh yeah,  a lot of really expensive weapons and starving middle class.

oh that's right,  the private sector will just pay for all of that right?

peace

Observer never has to think anything through. His ideology is a priori. He reduces the world to a half dozen or so bromides, and simply barfs those bromides up when it seems appropriate for him to do so.

So why bother to think?

[johnhp]

I didn't say I don't want them to expire.  I'm just trying to understand the various hypotheses on fiscal policy.

You are referring to their expiration as tax hikes.  This is inaccurate.

[ivanm]

This question is directed at Vell, mainly, but anyone else is of course welcome to weigh in also.

This is a point that I just want to get clear on.  I'm pretty sure that I remember Vell, at some point in the past, saying that it makes no sense to stop the government spending while the economy is in need of stimulation.  I also think, but I'm not sure, that he also said taxes should not be raised during such a time.  If that is true, should the Bush tax cuts be allowed to expire at the end of the year?  

I also have an additional question I've been wondering about.  When the government does stimulus spending, there is an argument to be made that the government is simply removing money from the economy, only to inject it back into the economy, with a corresponding loss due to adminstration costs, fraud, inefficiencies, etc.  So does it really do any good, or is it a valid operation to remove funds from one part of the economy and reintroduce those funds into another part of the economy?  In order to get around this problem, is it necessary for stimulus to be performed through deficit spending, so that money is not being removed from the economy, but borrowed from future growth instead?

Judging from the large fiscal budget deficit, over 1.3 trillion or so, I would say that stimulus spening is financed wholly by borrowing.

[johnhp]

It was civil

Yes.  Until that post.

[ivanm]

Yes. Money circulates through a healthy economy like this all the time. One group simply cannot hold all the money. This is what creates problems.

Money is created and those who are wealthy will either spend it on big ticket items or will invest it.  It makes no sense to stuff huge sums of money into a vault or under the mattress. 

[ivanm]

SC,  i don't care about the semantics of "working class".  how about the "middle class"  which makes a hell of a lot more than 30K a year and are being squeezed into extinction.  i'm talking about helping them;  you know most of us don't make 250K a year so there's your answer. 

anyone under.

peace

The middle class covers a very broad range of incomes.

[IM2]

The graduated system we use now penalizes success and rewards failure. It never ceases to amaze me how some of you can cry out to "Tax the Rich" in one breath, and in the next, wonder why they take their businesses overseas.

Bullshit! You seem to forget the word loophole, which is what most of the top 2 percent use to get out of paying their fair share. Like the real rich guy who moves his business overseas and then tries to claim that his business overseas is actually his vacation home. Or the guy who owns a fleet of trucks and claims on his taxes that they belong to his wife and kids.  Those like Observer always miss this. The biggest gouge we get relative to money stolen or missed revenue is from the top top tier who pay accountants top dollar to make certain they do not have to pay what they owe.

Judging from the large fiscal budget deficit, over 1.3 trillion or so, I would say that stimulus spening is financed wholly by borrowing.

So right now we have a 1.3 trillion dollar deficit. Bush 2 lost over 1.2 trillion dollars before he left office. So then really what do you guys keep on talking about the deficit and blaming Obama like he is the one who inherited the projected surpluses?   The truth is that there should have been more money allocated for the stimulus.

[Velleity]

Money is created and those who are wealthy will either spend it on big ticket items or will invest it.  It makes no sense to stuff huge sums of money into a vault or under the mattress. 

The empirical data shows that tax cuts for the rich return about 80 cents on the dollar, compared to food stamps which returns somewhere under $2 on the dollar.

I have posted the real numbers on several occasions. Tax cuts for the rich are absolutely the worst form of stimulus.

[ivanm]

The wealthy are paying the lowest overall tax rate (not just income taxes) that they have paid since the 1950s. You're citing the "conservative" argument and you're making the same mistake they make--you're ignoring the overall tax burden. State taxes are up. Local taxes are up. Property taxes are up. Employment taxes are regressive and while they're not up, they haven't gone down.

What makes you think government spending necessarily comes out of future growth?

You're thinking like a "supply-sider" again. There is currently no valid theory, in terms of math or empirical evidence, that anything we do affects the supply curve in any meaningful way. There is a lot of conjecture but no model to support it.

I don't perceive you as a person who likes to just make stuff up. So understand this: no one can give you any meaningful prediction about the economy more than 6 months from now. No one. There are too many variables.

What you want, SpaceCadet, is a steady growth. You don't want booms. You don't want busts. You want a nice, long, protracted period of sustainable recovery.

The rest is bullshit and you know it's bullshit because I've seen you declare it to be bullshit and your declaration is both concise and impressive. Tell me that Laz isn't batshit crazy. Tell me that Obs has done his homework and presents a well thought out argument.

You can't tell me that.

SpaceCadet, there is only one school of economic thought that even has a model for the current conditions, and that school of thought tells us that the only thing that matters is keeping the economy close to full employment. I'm not going to tell you that model is perfect. I do think we ended up with stagflation in part because of problems with this model. However when you reach the zero bound, like we're at right now, there is one and only one prescription. It's just not the right time to worry about austerity.

Consumer Spending + Investment + Government Spending + Exports - Imports = GDP.

And it's all about expectations. And it's all about consumer spending so what you have to work on right now is fixing the problems that are preventing consumers from consuming. It will happen sooner or later. Until then what do you do here?

I'll take a slow recovery because it's better than the alternative.

Federal borrowing and then having to pay interest on the amount borrowed seems to be taking money from future growth to me.

[SpaceCadet]

Why are you worried about "Shouldn't they have to pay?" Isn't the overall economy more important?

You have to enable consumers to consume, one way or another. That's the bottom line. You can't take away their earnings, home equity, and 401(k) and then expect them to consume indefinitely. You have to have policies that flatten out the distribution of income. If you have a better idea than progressive taxation and unions, great.

So far I haven't heard anything constructive from the likes of Observer. He won't even acknowledge the economic basics here.

I'm not a socialist.

[Velleity]

I'm not a socialist.

It has nothing to do with socialism. Capitalism works when consumers can consume. If you have a capitalist system but no one can buy anything, what's the point?

Keynes saved capitalism.

Or do you prefer Mexico where they have more millionaires per capita than anywhere else in the world, while the average wage is $5 per day?

[SpaceCadet]

You are referring to their expiration as tax hikes.  This is inaccurate.

More taxes is more taxes, however you wish to phrase it politically.

[Velleity]

Federal borrowing and then having to pay interest on the amount borrowed seems to be taking money from future growth to me.

There is no difference between paying interest and monetizing the debt. If the economy is growing, where does the additional money come from?

It may affect future growth to some extent but not the way you suggest.

[IM2]

I'm not a socialist.

And what's proposed is not socialist. You see SC everyone pays taxes. If you own acar, you pay taxes on it. When you shop, you pay taxes. So then you cannot accurately say that the working class does not pay taxes. They are disproportionately affected by any amount of tax they pay, far more than the very wealthy who pay huge sums of money to make certain they don't have to pay their fair share. And we pay for their retirements, yet I don't see anyone like you mentioning this.

Do not fall for the beat up the poor cowardly campaign ran by the richest of the rich. Because all they want is everyones money, including yours.