It seems as if the Republicans, meaning both John Boehner and Mitt Romney, are trying to turn the national debt back into a major political issue. Now, a visitor from Mars might wonder how this is possible. How could a party that (a) passed the massive tax cuts that were the single largest legislative contributor to today’s record deficits, (b) increased spending rapidly the last time it controlled the federal government, and (c) cannot talk in detail about anything except deficit-increasing tax cuts possibly think that calling attention to deficits could be a political winner?

Well, despite the Republican Party’s abysmal record when it comes to fiscal responsibility, it could still turn out to be smart politics, for a few reasons. One is that many Americans reflexively associate large deficits with excessive spending, even though reductions in tax revenues have played just as big a role since George W. Bush became president. (Compare, for example, receipts and outlays in 2000 and 2011 as a percentage of GDP.) Then they associate excessive spending with Democrats, although the only president to reduce spending significantly in the past forty years was Bill Clinton. It turns out that if you repeat the same tired attack lines year after year—Democrats are all tax and spend liberals, for example—people believe them.

The other, more important reason why Republicans like talking about the national debt is that Democrats don’t have a good response. Sure, Democrats have lots of policy proposals, and theirs make a good deal more sense than the Republicans’; it was President Obama who proposed trillions of dollars in spending cuts and tax increases, which is what people supposedly want (according to opinion surveys, at least).

But most Democrats just don’t like talking about deficits and the national debt. They think it’s a distraction from talking about jobs and unemployment, or they think simply broaching the subject is succumbing to a vast right-wing conspiracy to slash entitlements, or both. The result is that there is no liberal progressive position on the national debt. There’s the Republican one (Romney, Boehner, Ryan), which is to cut taxes (boggle); and there’s the Obama one, which is basically the Republican-Lite position of George H. W. Bush, and which many liberal Democrats run away from. On the left, all there is is a vague belief that you can balance the budget by increasing taxes on the rich, but no one really wants to come out and say it. (Also, the numbers don’t add up unless you’re willing to boost the tax rates on millionaires to very high levels; just, say, repealing the Bush tax cuts for the rich won’t cut it.) Instead, the strategy is to demonize RyanCare, which is effective as a short-term tactic, but doesn’t really amount to a coherent message on the national debt.

This is one reason why I wrote White House Burning. I say “I” because Simon probably wouldn’t call himself a liberal, but I do call myself a liberal, and I think liberals need to have a coherent message on the national debt. I think the message should be something like this: the national debt is a real problem that needs to be addressed; we need to address it in the way that’s best for the American people as a whole; that means preserving the social insurance programs that almost everyone depends on; and we can preserve those programs, while bringing the debt under control, through a set of policy changes that make sense on their own grounds (eliminating distorting subsidies, eliminating tax expenditures, introducing Pigovian  taxes like a carbon tax and a financial activities tax).

You don’t have to agree with our recommendations. But as long as the liberal wing of the Democratic Party has nothing to say about the national debt, conservatives will be free to lead the debate, and the most likely outcome will be some sort of compromise between the moderate Republican Barack Obama an the now-”severe” conservative Mitt Romney. And you can expect the Republicans to bang on this drum from now until November.

I haven’t been writing about the JPMorgan debacle because, well, everyone else is writing about it. One theme that has stuck out for me, however, has been everyone’s reflexive surprise that this could happen at JPMorgan, supposedly the best and most competent of the big banks. For example, Lisa Pollock of Alphaville, who has provided some of the most detailed analyses of what happened, asked, “could this really happen under CEO Jamie Dimon’s watch?” Dawn Kopecki and Max Adelson at Bloomberg referred to “JPMorgan’s cultivated reputation for policing risk.” Articles about Ina Drew’s resignation are sure to point out her relative success at dealing with the financial crisis of 2007–2009.

“Highly intelligent women tend to marry men who are less intelligent than they are.” Why? Is it that intelligent men don’t want to compete with intelligent women?

No. It’s mainly because if you take two draws from a random distribution, and the first is at the high end, the second is almost certain to be lower, even if the two are somewhat correlated. This example comes straight from Thinking, Fast and Slow by Daniel Kahneman, which I’m finally reading (chapter 17).

The performance of anyone doing anything will exhibit regression to the mean. If you do well at something, it’s because of some combination of skill and luck. If JPMorgan came through the financial crisis well, it was some combination of skill and luck. Remember, JPMorgan didn’t have as big a portfolio of toxic assets as its competitors because it was late to the party; only in retrospect do we ascribe this good fortune to the supposed skill of Jamie Dimon. JPMorgan was never as good as people (both supporters and critics) made it out to be, so we shouldn’t be so surprised that it just lost $2 billion (and counting).

The more disturbing thing isn’t that commentators fell for this statistical red herring. It’s that people inside JPMorgan seem to have fallen for it, too. This was Dimon’s response to a question about whether the Chief Investment Office was becoming more aggressive, as reported by Bloomberg:

“I wouldn’t call it ‘more aggressive,’ I would call it ‘better,’” Dimon told analysts yesterday. “We added different types of people, talented people and stuff like that.” Until recently, they were careful and successful, he said.

People don’t suddenly go from being good to bad overnight. What happens is they go from lucky to unlucky. They are the same people doing the same things.

“Inside JPMorgan, leadership is stunned by the situation, according to two senior executives,” also as reported by Bloomberg. If that’s true, that’s bad news for all of us. It’s one thing if, as many of us thought, JPMorgan was consciously trying to take on more risk (as has been amply documented, Dimon pushed the Chief Investment Office into profit-seeking trades) while denying it to regulators and the press. That’s what we expect.

It’s another thing if the bank didn’t realize it was taking on risks of this magnitude. That implies that JPMorgan executives had started believing their own hype—that is, they believed that they really were just good, not lucky. And that should make all of us very worried.

Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort – sometimes referred to as the Brown-Kaufman amendment – received the support of 33 senators and failed on the floor of the Senate. (Here is some of my Economix coverage from the time.)

On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE, which would force the largest four banks in the country to shrink. (Details of this proposal, similar in name to the original Brown-Kaufman plan, are in this briefing memo for a Senate banking subcommittee hearing on Wednesday, available through Politico; see also these press release materials).

His proposal, while not likely to immediately become law, is garnering support from across the political spectrum – and more support than essentially the same ideas received two years ago.  This week’s debacle at JP Morgan only strengthens the case for this kind of legislative action in the near future.

The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic. This idea had been gathering momentum since the fall of 2008 and, while the Brown-Kaufman amendment originated on the Democratic side, support was beginning to appear across the aisle. But big banks and the Treasury Department both opposed it, parliamentary maneuvers ensured there was little real debate. (For a compelling account of how the financial lobby works, both in general and in this instance, look for an upcoming book by Jeff Connaughton, former chief of staff to former Senator Ted Kaufman of Delaware.)

The issue has not gone away. And while the financial sector has pushed back with some success against various components of the Dodd-Frank reform legislation, the idea of breaking up very large banks has gained momentum.

In particular, informed sentiment has shifted against continuing to allow very large banks to operate in their current highly leveraged form, with a great deal of debt and very little equity.  There is increasing recognition of the massive and unfair costs that these structures impose on the rest of the economy.  The implicit subsidies provided to “too big to fail” companies allow them to boost compensation over the cycle by hundreds of millions of dollars.  But the costs imposed on the rest of us are in the trillions of dollars.  This is a monstrously unfair and inefficient system – and sensible public figures are increasingly pointing this out (including Jamie Dimon, however inadvertently).

American Banker, a leading trade publication, recently posted a slide show, “Who Wants to Break Up the Big Banks?” Its gallery included people from across the political spectrum, with a great deal of financial sector and public policy experience, along with quotations that appear to support either Senator Brown’s approach or a similar shift in philosophy with regard to big banks in the United States. (The slide show is available only to subscribers.)

According to American Banker, we now have in the “break up the banks” corner (in order of appearance in that feature): Richard Fisher, president of the Federal Reserve Bank of Dallas; Sheila Bair, former chairman of the Federal Deposit Insurance Corporation; Tom Hoenig, a board member of the Federal Deposit Insurance Corporation and former president of the Federal Reserve Bank of Kansas City; Jon Huntsman, former Republican presidential candidate and former governor of Utah; Senator Brown; Mervyn King, governor of the Bank of England; Senator Bernie Sanders of Vermont; and Camden Fine, president of the Independent Community Bankers of America. (I am also on the American Banker list).

Anat Admati of Stanford and her colleagues have led the push for much higher capital requirements – emphasizing the particular dangers around allowing our largest banks to operate in their current highly leveraged fashion. This position has also been gaining support in the policy and media mainstream, most recently in the form of a powerful Bloomberg View editorial.

(You can follow her work and related discussion on this Web site; on twitter she is @anatadmati.)

Senator Brown’s legislation reflects also the idea that banks should fund themselves more with equity and less with debt. Professor Admati and I submitted a letter of support, together with 11 colleagues whose expertise spans almost all dimensions of how the financial sector really operates.

We particularly stress the appeal of having a binding “leverage ratio” for the largest banks. This would require them to have at least 10 percent equity relative to their total assets, using a simple measure of assets not adjusted for any of the complicated “risk weights” that banks can game.

We also agree with the SAFE Banking Act that to limit the risk and potential cost to taxpayers, caps on the size of an individual bank’s liabilities relative to the economy can also serve a useful role (and the same kind of rule should apply to non-bank financial institutions).

Under the proposed law, no bank-holding company could have more than $1.3 trillion in total liabilities (i.e., that would be the maximum size). This would affect our largest banks, which are $2 trillion or more in total size, but in no way undermine their global competitiveness. This is a moderate and entirely reasonable proposal.

No one is suggesting that making JPMorgan Chase, Bank of America, Citigroup and Wells Fargo smaller would be sufficient to ensure financial stability.

But this idea continues to gain traction, as a measure complementary to further strengthening and simplifying capital requirements and generally in support of other efforts to make it easier to handle the failure of financial institutions.

Watch for the SAFE Banking Act to gain further support over time.

This is an updated version of a post that appeared in the NYT.com’s Economix blog on Thursday morning.  If you would like to reproduce the entire post, please contact the New York Times.

Experienced Wall Street executives and traders concede, in private, that Bank of America is not well run and that Citigroup has long been a recipe for disaster.  But they always insist that attempts to re-regulate Wall Street are misguided because risk-management has become more sophisticated – everyone, in this view, has become more like Jamie Dimon, head of JP Morgan Chase, with his legendary attention to detail and concern about quantifying the downside.

In the light of JP Morgan’s stunning losses on derivatives, announced yesterday but with the full scope of total potential losses still not yet clear (and not yet determined), Jamie Dimon and his company do not look like any kind of appealing role model.  But the real losers in this turn of events are the Board of Governors of the Federal Reserve System and the New York Fed, whose approach to bank capital is now demonstrated to be deeply flawed.

JP Morgan claimed to have great risk management systems – and these are widely regarded as the best on Wall Street.  But what does the “best on Wall Street” mean when bank executives and key employees have an incentive to make and misrepresent big bets – they are compensated based on return on equity, unadjusted for risk?  Bank executives get the upside and the downside falls on everyone else – this is what it means to be “too big to fail” in modern America.

The Federal Reserve knows this, of course – it is stuffed full of smart people.  Its leadership, including Chairman Ben Bernanke, Dan Tarullo (lead governor for overseeing bank capital rules), and Bill Dudley (president of the New York Fed) are all well aware that bankers want to reduce equity levels and run a more highly leveraged business (i.e., more debt relative to equity).  To prevent this from occurring in an egregious manner, the Fed now runs regular “stress tests” to assess how much banks could lose – and therefore how much of a buffer they need in the form of shareholder equity.

In the spring, JP Morgan passed the latest Fed stress tests with flying colors.  The Fed agreed to let JP Morgan increase its dividend and buy back shares (both of which reduce the value of shareholder equity on the books of the bank).  Jamie Dimon received an official seal of approval.  (Amazingly, Mr. Dimon indicated in his conference call on Thursday that the buybacks will continue; surely the Fed will step in to prevent this until the relevant losses have been capped.)

There was no hint in the stress tests that JP Morgan could be facing these kinds of potential losses.  We still do not know the exact source of this disaster, but it appears to involve credit derivatives – and some reports point directly to credit default swaps (i.e., a form of insurance policy sold against losses in various kinds of debt.)  Presumably there are problems with illiquid securities for which prices have fallen due to recent pressures in some markets and the general “risk-off” attitude – meaning that many investors prefer to reduce leverage and avoid high-yield/high-risk assets.

But global stress levels are not particularly high at present – certainly not compared to what they will be if the euro situation continues to spiral out of control.  We are not at the end of a big global credit boom – we are still trying to recover from the last calamity.  For JP Morgan to have incurred such losses at such a relatively mild part of the credit cycle is simply stunning.

The lessons from JP Morgan’s losses are simple.  Such banks have become too large and complex for management to control what is going on.  The breakdown in internal governance is profound.  The breakdown in external corporate governance is also complete — in any other industry, when faced with large losses incurred in such a haphazard way and under his direct personal supervision, the CEO would resign.  No doubt Jamie Dimon will remain in place.

And the regulators also have no idea about what is going on.  Attempts to oversee these banks in a sophisticated and nuanced way are not working.

The SAFE Banking Act, re-introduced by Senator Sherrod Brown on Wednesday, exactly hits the nail on the head.  The discussion he instigated at the Senate Banking Committee hearing on Wednesday can only be described as prescient.  Thought leaders such as Sheila Bair, Richard Fisher, and Tom Hoenig have been right all along about “too big to fail” banks (see my piece from the NYT.com on Thursday on SAFE and the growing consensus behind it).

The Financial Services Roundtable, in contrast, is spouting nonsense – they can only feel deeply embarrassed today.  Continued opposition to the Volcker Rule invites ridicule.  It is immaterial whether or not this particular set of trades by JP Morgan is classified as “proprietary”; all megabanks should be presumed incapable of managing their risks appropriately.

Dennis Kelleher and Better Markets are right about the broad need for implementing Dodd-Frank and they are particularly right about the problems that surround non-transparent derivatives (follow them @bettermarkets for some of the smartest lines and best links as the JP Morgan debacle continues to develop).  The Better Markets press release on Thursday night put the entire situation in a nutshell:

“Jamie Dimon and JP Morgan Chase just proved what anyone not getting a paycheck from a Wall Street bank already knows: gigantic too-big-to-fail banks are too-big-to-manage.”

Anat Admati and her colleagues at Stanford (and her growing band of supporters in the US and around the world) are right about bank capital.  The people in charge of Federal Reserve policy in this regard are dead wrong – perhaps because they spend far too much time talking to Jamie Dimon and his fellow executives, while consistently refusing to engage with their better informed critics.

Ms. Admati skewered Jamie Dimon at length and in detail 18 months ago on exactly these issues.  You must read her original Huffington Post piece.  She has been relentless ever since – see this material.  She was right then and she is right now: we need much higher capital requirements and much simpler rules – focus on limiting leverage.  Big banks should be forced to become smaller – small enough and simple enough to fail.

It is time for the Federal Reserve to move its policy on these issues.

While working on a new Atlantic column, I came across this article by Donald Luskin (hat tip Felix Salmon/Ben Walsh) arguing that “Taxmageddon” (the expiration of the Bush tax cuts at the end of the year) will cause the stock market to fall by 30 percent.* His argument is basically this: if the marginal tax rate on dividends increases from 15 percent to 43.4 percent, the after-tax yield falls by 33.4 percent, so stock prices should fall by about the same amount.

Ordinarily I don’t bother with faulty claims like this—there are only so many hours in the day—but it bothered me so much it cost me some sleep last night.

The first problem is the only one that Luskin acknowledges: lots of investors don’t pay taxes on dividends. He mentions pension funds; there are also non-profits and anyone with a 401(k) or IRA. According to Luskin, only about one-quarter of dividends are received by people who will pay the top rate. Maybe they are the marginal investors who set prices, he speculates. Well, maybe. But an increase in the tax rate will make dividend-paying stocks more expensive for them but the same price as before for non-taxpaying investors—so as long as we’re going to stick to theory, the former should sell their stocks to the latter for some price between the two.

More important, the price of a stock (in theory, again) is the discounted present value of its future dividend stream aggregated over an infinite horizon. So we need to know what the tax rates will be in all future years. That’s clearly unknowable. If the tax rate goes up on January 1, 2013, that will give us no information about the tax rate in 2113. On the other hand, it will give us very good information about the tax rate in 2013. And it will give us a little bit of information about the tax rate in 2023. In other words, the informational value of a change in tax rates only affects a small part of the summation you have to do if you want to value a stock by its dividend stream. If a company is going to shut down in 2013, liquidate its assets, and return one massive dividend to shareholders, it affects most of the value. If a company is Facebook and is unlikely to pay dividends for a long time, it affects very little of the value. So the impact of such a change on stock prices will be a lot less than the theoretical 33.4 percent that Luskin calculates.

Then there’s the little matter of markets. Luskin’s article chides the “stock market” for ignoring the upcoming change in tax rates on dividends. How does he know? Did he ask the market? More likely, the market is pricing in the possibility of a change in tax policy. In theory, market prices today should reflect the expected future tax level, which is somewhere between 15 percent and 43.4 percent—closer to which one, we don’t know. This is another reason why the actual impact of a tax increase will be smaller than 33.4 percent; the latter assumes that every single investor today is blindly assuming that the tax rate will remain at 15 percent.  (Actually, since the Medicare surtax is already law, every single investor knows that the tax rate will be at least 18.8 percent, not 15 percent.)

But this is all theory. There is actually a way to test these things. To the extent that a change in the dividend tax rate affects stock prices, it should affect high-dividend stocks more than low-dividend stocks. Even on the theory that the value of a stock is the discounted value of its future dividend stream, for a high-dividend stock, much of that value comes from dividends in the next decade, which are likely to be affected by a change in the tax rate. By contrast, for a company that doesn’t pay dividends, the value of its dividend stream is located far out in the future, where a change in today’s tax rate has little expected impact. So if Luskin is right, the 2003 tax cut (which established the 15 percent rate for dividends) should have caused not only a sharp increase in stock prices but also a sharp increase in the price of value stocks relative to growth stocks.

So, courtesy of Yahoo! Finance, here are the closing prices of the Vanguard Value Index (red), which includes high-dividend stocks, and the Vanguard Growth Index (blue), which includes low-dividend stocks, for November 2002 through May 23 2003, the day the final bill was passed by both houses. The question, though, is when the 2003 tax cut would have affected stock prices. There’s no separation between value and growth stocks around November 5, the day the Republicans won the midterm elections.  (Remember, the Democrats had a Senate majority in 2002.) There’s none around January 28, when President Bush called for tax preferences for dividends in his State of the Union address. There’s no reaction around February 27, when the bill that would cut taxes on dividends was introduced.

Now, there is a separation around May 15, when the Senate version initially  passed. (Passage in the House was assured because of the Republican majority there.) This implies that there was significant uncertainty about whether the bill would pass; when the uncertainty cleared, high-dividend stocks gained relative to low-dividend stocks. Score one for Luskin!

But if there was uncertainty that cleared on May 15, and Luskin is right, then two things should have happened: high-dividend stocks should have gained relative to low-dividend stocks, and all stock prices should have shot up. But that’s not what happened. High-dividend stocks went up; low-dividend stocks went down. Investors’ overall appetite for U.S. stocks didn’t change; at the margin, some realized that after-tax dividend yields had just gone up, so they switched from low-dividend to high-dividend stocks.

By May 23, the last date on that chart, passage was a certainty, so the impact of the tax change should have been 100 percent priced in. Do you see a 30 percent increase? I don’t.

Want more evidence? Here are the same two index funds for December 1 through December 17, 2010, when the dividend tax cut was extended for two years. The extension was in serious doubt until December 6, when Democrats and Republicans reached a compromise agreement. Again, you can see an increase in the price of high-dividend stocks relative to the price of low-dividend stocks, starting around December 6. This indicates that the market was reacting to a significant change in the probability of an extension. But there’s no sharp, 30 percent increase in the overall level of stock prices.

So the tax rate on dividends does seem to have a small but visible impact on the relative price of high- and low-dividend stocks. And it may have a small impact on the overall price level, which would make sense. But 30 percent, or anything close to it, is pure fantasy.

So why all this hysteria about a collapse in the stock market on January 1? Well, here’s one hint, from Luskin’s article:

“If there’s a bargaining failure and the scheduled tax hikes on dividends aren’t stopped, we’ll be sorry we’re spending so much political energy now debating about the ’1%’ and their supposed privileges. It’s the 30% down in the stock market we ought be worrying about.”

This is just another attempt to mask the blatant unfairness of the Bush tax cuts by arguing by arguing that that they are good for all of us (well, at least all of us who own stocks, but that’s a matter for another post). They’re not.

* Luskin also talks about “trillions more in new tax hikes under ObamaCare.” Huh? The revenue provisions of the Affordable Care Act are projected to bring in $520 billion over the next decade; even if you include the revenue-increasing coverage provisions (like the excise tax on high-cost health plans), you only get up to $813 billion. That’s not “trillions,” unless you’re talking about an undiscounted infinite horizon.

The Internet has made possible a golden age of commentary. Anyone with a computer and an Internet connection can create a blog and comment to her heart’s content.

Yet as one of those commenters with a free blog, I am painfully aware that this hypertrophy of analysis has not been matched by corresponding growth in the stuff that we analyze: facts. There is no way we could have written White House Burning, with its one hundred pages of endnotes, without someone else to do the primary research: either the journalistic kind, calling around to sources in Washington to figure out what’s going on, or the data-gathering kind, visiting grocery stores in Brooklyn to track prices and calculate the inflation rate.

So I would just like to second what Menzie Chinn said about the importance of government statistical organizations, which are (along with most of the rest of the government) under attack from Paul Ryan and his troops. Even if you don’t agree with what I say, if you like reading economics blogs, you should realize that they couldn’t really exist without the BEA, BLS, Census Bureau, etc.

Of course, if your economic policy prescriptions are based entirely on pure theory, then I guess you can do without data.

Catherine Rampell wrote a post last week about how Americans expect to retire later and how more elderly Americans are working. Her last chart also showed that a growing proportion of nonretirees expect Social Security to be a major source of their income in retirement.

That shows that Americans are becoming more realistic. But still, just 33 percent?

Just how important is Social Security, anyway? Let’s look at some numbers. Around 2003, Barbara Butrica, Howard Iams, and Karen Smith analyzed the composition of household income for people at age 67. They projected that median-income early baby boomers, when they reached 67, would have mean per capita family income of $33,000 (Table 3), of which Social Security made up $13,000, or 40 percent. Does 40 percent qualify as a “major source” of income? I would say so. Imagine losing 40 percent of your income.

But Social Security is actually more important than that. Remember, these are 67-year-old people, and 49 percent of them are still working. Yet most people hope to stop working someday. If you subtract out earnings, imputed rental income (the non-cash benefit you get from living in a house you own), and co-resident income (earnings of younger family members who happen to live with you), you’re down to a total of $23,000, of which Social Security is now 57 percent.

Another way to look at Social Security is to compare it to the things that, in some people’s eyes, were supposed to make it unnecessary: 401(k) plans. In the projection, for early baby boomers (people retiring now), about half were expected to have defined benefit pensions and the other half were expected to have individual retirement accounts like 410(k)s and IRAs. The latter group are getting about $4,000 from those retirement accounts. That could go up; maybe people are withdrawing less while they are still working. It could also go down; maybe people are withdrawing money at an unsustainable rate. But in any case it isn’t much, and it’s not even close to what Social Security contributes. (Remember, the Social Security figure of $13,000 also doesn’t include people who have chosen to delay taking benefits until after age 67.)

In 2008, Andrew Biggs and Glenn Springstead did a similar analysis, with similar results. Social Security provided 41 percent of income for beneficiaries ages 64–66 (Table 5), but when you strip out earnings and co-resident income, that figure goes up to 53 percent.

Both of these analyses focus on people in their 60s. As people get older, it seems that they rely on Social Security even more—not only because they stop working, but probably because they exhaust their other assets, or because their other pensions are not indexed for inflation (unlike Social Security). According to Sylvia Allegretto, if you look at retirees in the middle of the income distribution in California, a full 70 percent of their income comes from Social Security, with only 16 percent coming from retirement funds.

There’s a lot of talk today, some of it coming from Simon and me, about how the federal government is in danger of running out of money. But at least the federal government has some pretty potent options, like raising taxes. But American families as a whole are also running out of money, and they don’t have a lot of options. That’s a major reason why now is not the time to dismantle our social insurance programs.

The conventional wisdom in American presidential politics is that once a candidate has secured a party’s nomination, he tends to move away from articulating the views of the party faithful toward the political center. This makes sense as a way to win votes in the general election, and there has been a presumption that Mitt Romney will head in that direction.

However, in a panel discussion on Tuesday, Vin Weber, a senior adviser to Mr. Romney, indicated that the campaign may be moving toward positions on fiscal policy that are close to those proposed by Representative Paul D. Ryan of Wisconsin and his Republican colleagues on the House Budget Committee.

To be sure, when Mr. Ryan presented his budget in March, Mr. Romney described it as “marvelous”. In the Wisconsin primary, Mr. Ryan campaigned with Mr. Romney and speculation arose that Mr. Ryan might be the Republican vice presidential candidate.)

Yet Mr. Romney’s embrace of the Ryan plan during the general election campaign would represent a significant shift toward a much more extreme view on the future of government than many Romney proposals during the primaries (see this assessment of his primary proposals by the Committee for a Responsible Federal Budget). Mr. Weber said he was not speaking for Mr. Romney; I was on the same panel, and my strong impression is that Mr. Weber was floating trial balloons.

Mr. Ryan’s proposals would substantially phase out the federal government’s role in providing basic social insurance for older people by massively reducing Medicare and by eliminating almost all nonmilitary discretionary spending. The House Budget Committee is also proposing to remove the only safeguard we have against the failure of another mega-bank. Some libertarians praise these proposals. But these Republicans’ strategy is not so much to remove government in favor of abstract “markets” but to shift the balance of power away from government and toward entrenched private lobby groups, particularly in the health-care sector and on Wall Street.

On Medicare, Mr. Ryan’s proposal is very simple. He wants to cap increases in spending on Medicare below the rate at which health-care costs increase. By his own estimates, the share of Medicare spending relative to the size of the economy would shrink dramatically over the coming decades. (Mr. Ryan proposes to keep Medicare in place for people currently retired and soon to reach the eligibility age of 65, so his proposal would affect people 55 and under today (I, by the way, am not yet 55).

Mr. Ryan’s approach certainly reduces this dimension of government spending over time. But keep in mind how the nonpartisan Congressional Budget Office has assessed these ideas: according to the C.B.O., this approach would increase total health-care costs as a share of the economy and as paid by you (see Figure 1 in this C.B.O. document, which analyzes the proposal Mr. Ryan presented last year; while some details are different this year, the essential substance is the same).

The idea behind this C.B.O. scoring is simple. At present the government buys health care for about 100 million Americans. Certainly, the government could use this buying power more effectively as a way to hold down costs. The government has much more market power than you or I would have relative to health-care providers and insurers when we are in our 70s, 80s and 90s.

The C.B.O. scoring is based on actual experience, including administrative costs in Medicare compared with private insurance. These costs will fall directly on older Americans and their families.

Before Medicare was created in the 1960s, there was no meaningful health-care insurance for older Americans – and there will be none after Medicare is phased out. For the private sector, this is a set of uninsurable risks.

The federal government provides a minimum level of social insurance to all of us, in case we outlive our assets and our families’ ability to support us. Mr. Ryan – and now perhaps Mr. Romney – would end this role.

According to the C.B.O., the net impact would be to increase what you pay for health care. The government-provided piece would decline, but your insurance premiums and other out-of-pocket expenses would increase.

Just as striking is Mr. Ryan’s proposal for nonmilitary discretionary spending. This currently amounts to about $650 billion, about 4 percent of gross domestic product, and it has been around this size relative to the economy for about 50 years.

This now represents about 20 percent of federal government activity. The federal government is roughly a $3.3 trillion shop, annually, with the big chunks of spending being Social Security, Medicare and other government-backed health care, and the military. The United States economy has a total annual production, or G.D.P., of about $15 trillion.

Mr. Ryan is less clear on the details, but assuming that he would seek to maintain military spending at no less than 3 percent of G.D.P. – which is its lowest level in the postwar period – my colleague James Kwak has projected that the domestic discretionary spending would fall to almost zero in the coming decades (see the charts at the end of this blog post).

I’m all in favor of bringing the federal debt under control – and stabilizing it at a reasonable level relative to the size of the economy (say, 40 or 50 percent of G.D.P.). But there is no need to eviscerate the federal government in order to achieve this over a reasonable time frame.

Mr. Ryan’s plan would effectively shut down the federal government’s ability to set rules for the economy and to provide essential public services, such as air-traffic control, the monitoring of hurricanes and the provision of disaster relief.

Big private companies will no doubt do well under this approach; there will be less restrictions on what they do (e.g., as the Environmental Protection Agency winds down or food-safety rules go unenforced), and they will be able to increase their market power (as the Department of Justice drops its remaining interest in antitrust issues).

This is bad news for entrepreneurs or anyone seeking to invest in start-up companies. The playing field will become ever more uneven – just as it was when J.P. Morgan and his colleagues were building the original industrial, railroad and energy trusts at the end of the 19th century.

From the perspective of too-big-to-fail banks, the news from Mr. Ryan is even better. The House Republicans are proposing to repeal Title II of Dodd-Frank, which creates the legal authority to wind down large financial institutions in an orderly fashion.

Without this, we are back at the situation of fall 2008, where big banks can blow themselves up, inflict great damage on the economy and also receive large-scale bailouts (see my recent post in this space for more on exactly how that works).

None of these Republican proposals should be dismissed as pure rhetoric. For many Republicans in Congress, the Ryan proposals are a very real agenda. And, as Ezra Klein has argued, if Mr. Romney is elected president, the Republicans are likely to gain control of the Senate and would almost certainly be able to push through a version of the Ryan agenda – particularly as the key details would be immune to filibuster in the Senate.

Under such a Ryan-Romney approach, big risks – such as severe ill health and the danger of other calamities – would be shifted from society to individuals. Large corporations in health care and finance and perhaps in other sectors would benefit. So, too, would the people who control those favored legal entities.

This is a return to the way the United States economy operated more than 100 years ago – in what Mark Twain ironically labeled the Gilded Age. A few people would do very well; almost everyone else is in for a hard time.

An edited version of this post appeared this morning on the NYT.com’s Economix blog.  It is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

“The Mitch McConnells and John Boehners and Eric Cantors just can’t seem to help themselves. These guys and their right-wing supporters regard deep pockets like Christy Walton and Sheldon Adelson the way little girls regard Justin Bieber … which is to say, with wide eyes, slack jaws, and the drool of adoration dripping from their chins.”

Like me, King wants his tax bill to go up.

At least, that’s the impression I get from reading Walter Isaacson’s biography of Steve Jobs, which I finally finished this weekend. It’s not a particularly compelling read; it basically marches through the stages of his professional life, which is already the subject of legend, so there isn’t much suspense. I fear that it will inspire a new generation of corporate executives to imitate all of Jobs’s personal shortcomings—but without his genius.

The picture you get from the book is basically that Steve Jobs acted like a five-year-old for his whole life. He could be wrong about some basic, uncontroversial fact yet insist stubbornly that he was right. He divided the world into things that were great and things that were terrible, and his classifications could be arbitrary. He was an obnoxiously picky eater, constantly complaining about his food and sending it back. He threw epic tantrums that only a CEO (or a five-year-old) could get away with.

Some of his flaws, however, took more self-deception than a five-year-old is capable of. For example, when he came back to Apple in the late 1990s, he insisted he wasn’t in it for the money and took the famous $1 salary. When the board offered him stock, he said he would rather have an airplane. The board gave him a Gulfstream V and 14 million options—and Jobs insisted on 20 million (which he got). When the stock market crashed, he got them repriced (leading to the Apple backdating scandal), and when the stock price kept falling, he eventually traded them in for an outright stock grant. Now, this is the behavior you expect from corporate CEOs, but it’s a bit galling coming from someone who insisted, very publicly, that he didn’t care about money.

For a similar example, Jobs refused to have a dedicated CEO parking spot at Apple headquarters—but he regularly parked in handicapped spots. What kind of a person does that?

But, of course, the results speak for themselves. And Isaacson’s biography displays some of the traits that made Jobs such a successful businessman. He could have immense personal charm, when he wanted to. As Steve Wozniak said, “Steve could call up people he didn’t know and make them do things.” That ability, to get on the phone and talk someone else into do something that isn’t in her interests, is what I consider the most important skill in business.

Jobs was also incredibly opinionated about his products, and his opinions were usually right. He was a compulsive micro-manager who almost always got his way, and the result is the world of personal computing we see around us, from touchscreen phones to the rounded windows in desktop operating systems.

What you don’t see is any of the conventional management mumbo-jumbo that big-company CEOs spout to justify their fortunes—nothing about focusing on people, mentoring, creating a supportive work environment, giving people freedom but making them accountable, leading by following, etc. As I’ve said before, Steve Jobs violated just about every rule of generic company management. He succeeded because he had great product instincts, he was incredibly convincing, he was inspiring enough to get some great people to work for him, and he was a little bit crazy. In other words, he was the farthest thing you could find from the generic corporate executives who rule most of the business world.

Most Americans paid no attention this weekend when the International Monetary Fund announced it was well on its way to roughly doubling the money that it can lend to troubled countries – what the organization calls a $430 billion increase in the “global firewall.”

The United States declined to participate in this round of fund-raising, so the I.M.F. has instead sought commitments from Europe, Japan, India and other larger emerging markets.

At first glance, this might seem like a free pass for the United States. The additional I.M.F. lending capacity is available to euro-zone countries that now face pressure, such as Spain or Italy, so it might seem that global financial stability is increased without any cost to the American taxpayer.

But such an interpretation mistakes what is really happening – and actually represents a much broader problem with our budgetary thinking. The I.M.F. represents a contingent liability to taxpayer sin the United States – much as the Federal National Mortgage Association (known as Fannie Mae) and Freddie Mac (formerly the Federal Home Loan Mortgage Corporation) have in the past — and as too-big-to-fail mega-banks do now.

The budgetary consequences of all those government-supported enterprises are known as “contingent liabilities” – simply meaning that, when something goes wrong, the taxpayer is on the hook. (If you believe any of these guarantees are costless, please read the new book James Kwak and I wrote.)

The I.M.F. is not a corporation nor does it exactly resemble any other legal entity you are likely to encounter. To understand the way in which the American taxpayer is on the hook, focus on the fact that, like any corporation, the I.M.F. finances its activities with a combination of equity and debt.

Traditionally, the I.M.F. was funded mostly with “equity” – contributions paid in by member governments. In the 1940s, when the organization was created, the United States paid in dollars and gold (this was when gold was the mainstay of the international payments system). Other countries have also paid in gold, as well as in acceptable “strong” currencies.

According to the I.M.F. Web site: “The I.M.F.’s gold holdings amount to about 90.5 million troy ounces (2,814.1 metric tons), making the I.M.F. the third largest official holder of gold in the world.”

(On Tuesday, gold was trading around $1,640 a troy ounce, so the market value of the I.M.F.’s holdings was close to $148 billion. For more detail, including on how countries might get back “their” gold, see this fact sheet.)

More recently – and particularly since 2009 – the I.M.F. has increased its lending capacity not so much through additional equity (known as “quota” in I.M.F. jargon) but through debt. In effect, the I.M.F. is borrowing from some countries in order to lend to other countries.

There is a simple reason for this switch. The I.M.F. quota comes with voting rights – and these are currently skewed toward those countries that held the balance of power in the 1940s and 1950s (the I.M.F. was created in 1944). The United States has a veto, and the Europeans are overrepresented.

Now, the emerging markets, like China and the oil producers, have the cash reserves. Emerging markets would be happy to get more quota at the I.M.F., but there is no way that Europe or the United States and its allies would be comfortable with a big shift in who is calling the shots within the international monetary system.

But there’s the catch and to see it, think about the European Union’s recent decision to lend 200 billion euros (about $260 billion) to the I.M.F. If the E.U. lends to European countries under duress, it could lose this money, in the event of a complete default. But if the E.U. lends to the I.M.F. and the I.M.F. lends to stressed European countries, then the E.U. has some downside protection – from I.M.F. shareholders.

In the event of default or complete nonpayment on official borrowing, including loans from the I.M.F., the losses would be borne in the first instance by shareholders. In this sense the I.M.F. is like a bank, with loss-absorbing shareholder capital. If that capital were exhausted by losses, then the I.M.F. would be unable to pay back what it in turn had borrowed.

Some officials assert that none of this could happen, because the I.M.F. always gets paid back – one way or another. Certainly that has been the pattern in the past, but then again we have not seen this level of stress on the international system at least since the 1930s, when all the rules were torn up repeatedly.

A major euro-zone meltdown would cause severe damage around the world. Anyone who thinks otherwise has not been paying attention.

Over the weekend, the I.M.F. became a lot more leveraged – that is, its debt increased relative to its equity. The potential future liability to American taxpayers went up, because the risk of large credit losses increased, and those losses would need to be covered by shareholders (and our stake in the fund is 17.69 percent of quota, with 16.8 percent of the votes).  There is also an implicit guarantee – arguably without limit – from the US to the IMF.  We set up the world trading system after World War II, and we have a huge amount to lose if it fails.  We also have deep pockets, compared to almost other countries.

Therefore, unlike with a typical corporation, we the shareholders in the IMF do not have limited liability – so we should care a great deal about the downside risks.  The Europeans are currently increasing those risks – by lending to the I.M.F. and planning to use I.M.F. loans as part of future bailouts.

The Congressional Budget Office is getting better at scoring contingent liabilities, including United States obligations to the I.M.F., but there is still a lot more work to do. It’s time for Capitol Hill to pay more attention to the implications for the United States budget (and therefore the likely path for our national debt) of what is happening at the I.M.F. – points also made by Desmond Lachman in recent congressional testimony (see points 12-16 here.)

Do not take the statements of global leaders at face value. Congressional leaders on both sides of the aisle should begin by asking the C.B.O. to update its scoring of American commitments – explicit and implicit – to the fund.

An edited version of this material appeared this morning on the NYT.com’s Economix blog.  It is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

A couple of days ago I criticized Mitt Romney for thinking that eliminating the deductions for mortgages on second homes and for state and local taxes would pay for his 20 percent rate cuts. But there’s a more important general point to be made.

The deduction for state and local taxes is a subsidy from the federal government to state and local governments. This is how it works: If you’re in the 35 percent tax bracket, for every $100 of taxes you pay to state and local governments, the federal government gives you $35. In other words, for every $100 of taxes levied, you pay $65 and Barack Obama pays $35. That’s called a subsidy. Without it, the state and local governments would only get $65—or they would have to raise taxes by over 50 percent, which would make you mad.

So eliminating this deduction basically transfers money back from states and municipalities to the federal government. The federal budget deficit goes down, but state and local budget gaps go up—meaning either higher taxes or lower services. (And these are the levels of government that pay for teachers, police, firefighters, etc.) So this is one of those solutions that helps the federal budget balance by hurting ordinary people.

That said, I still think we should get rid of the deduction because it’s a highly inefficient subsidy. It mainly benefits rich people because poor people tend not to itemize their deductions. (Their deductions aren’t big enough to be worth itemizing.) Since state taxes are not very progressive to begin with, this makes them even less progressive, or even regressive. Massachusetts, for example, basically has one tax rate—5.3 percent—so people who take the deduction are paying a lower effective rate than people who don’t take the deduction.

In addition, rich towns get bigger subsidies than poor towns, simply because they have higher property values and hence people pay higher property taxes. If Greenwich needs more money for its schools, it can increase property taxes. Residents might grumble, but they know that for every $2 they pay, the federal government is kicking in $1. In Hartford, not so much.

For these reasons, in White House Burning we recommend phasing out the state and local tax deduction entirely (p. 212). In order to reduce the damage to state and local finances, however, we recommend using half of the proceeds to fund direct grants to states and municipalities. If this were done using a population-based formula, the effect would be to reduce subsidies to Greenwich much more than to Hartford; it might even increase the amount of federal aid to poor cities, where relatively few people take the deduction today.

If, by contrast, you simply axe the deduction, you’re just transferring money from one level of government to another. At the least, that’s a problem you need to acknowledge—unless it’s a feature, not a bug.

But the distrust goes deeper and further, just as Ms. Atwood implies. Many people understand perfectly well that the government let the bankers take excessive risk. There was a high degree of group think among prominent officials in the United States and top banking executives in the run-up to the crisis of 2008. As chief economist at the International Monetary Fund from March 2007 through August 2008, I observed some of this first hand.

And politicians are also tarnished. They appointed the officials who failed to regulate effectively. And in 2007-8 the politicians decided to save the big banks – and most of their managers, boards of directors and shareholders – both under President George W. Bush and under President Obama. Now attention turns toward the federal government’s fiscal problems, including the complicated mess that is our tax system. Politicians say they want “tax reform,” but can you trust them to do this in a responsible manner, without falling captive to particular special interests or to otherwise undermine the general social interest?

The latest indications from Mitt Romney are not encouraging. Mr. Romney is proposing to implement a tax overhaul that he says would be revenue neutral. But his actual plans amount to cutting tax rates, particularly for high-income people, while not closing enough loopholes to make any difference (see this assessment by my colleague and co-author James Kwak, or this take by Matthew O’Brien of The Atlantic).

At the same time, President Obama is focused on increasing taxes for relatively well-off Americans. Mr. Obama wants to make the Bush-era tax cuts permanent for people earning less than $250,000, while not extending them for people with income above that level. What exactly will control the trajectory of deficits and debt in that scenario?

Perhaps we should trust our politicians to control future health-care spending, even though none of them can specify exactly how this should be done.  But what is really likely to happen given that health-care providers – hospitals and doctors — are a powerful lobby, while insurance companies may be even stronger.

All significant loopholes, including the tax exemption of employer-provided health benefits and the tax deductibility of mortgage interest payments, will be defended fiercely by powerful special interests.

Top military officials seem willing to curtail spending, but members of Congress frequently resist base closings and the cancellation of weapons programs. President Eisenhower famously warned against the military-industrial complex; perhaps we should update that to acknowledge that it’s the industrial-political complex that’s the danger.

The financial crisis blew a giant hole in our budget and, with good reason, greatly undermined confidence in our political elite. Gridlock in Washington has reached a new peak – President Obama proposed the Buffett Rule, which would have raised a very small amount of additional revenue by creating a minimum tax rate of 30 percent on all income over $1 million, and the Republicans immediately blocked consideration of it in the Senate.

Most of what poses as “tax reform” in Washington today is actually tax reduction. With our public finances in their current state, this is the last thing we need. The idea that reducing taxes “pays for itself” through higher growth is just wishful thinking; in our new book, James Kwak and I debunk this in part by citing the research of Greg Mankiw, former chairman of the Council of Economic Advisers under George W. Bush and a key adviser to Mr. Romney.  Yet Mr. Romney and Mr. Obama are likely to compete in November partly on the basis of their tax reduction proposals.

May we hope that there are ways to bring our national debt under control? Prospects are not so gloomy, for two reasons.

First, if true gridlock prevails, the Bush-era tax cuts will expire at the end of this year. Whatever happens in the November general election, the Democrats and the Republicans would need to agree in order for these tax cuts to be extended. It is quite possible that this will not happen.

That’s a big fiscal adjustment, to be sure. But it could well be buffered by a temporary payroll tax cut, linked to employment relative to population. As employment recovers, the payroll tax cut would fade away.

Second, one day soon the private sector will wake up to the fact that rising health-care costs are undermining the American economy, and making it much harder to earn a profit.

With money-driven politics, the only way to fight a lobby is with a bigger lobby. American businesses are typically reluctant to trespass into someone else’s sector. But they will do it when their own bottom line is at stake – as, for example, when they resist various forms of protectionism.

Health-care costs are not under control; we pay more for the same or less-good services over time; this is like the worst kind of taxation. In 20 years, the adverse impact of health-care costs of businesses will be much worse than any negative effects of taxes.

But don’t wait for the politicians to take this on. The problem is far too important and that route will take too long. Talk instead to private-sector executives and entrepreneurs. Persuade them that health-care costs need to be brought under control, and force them to think about how they can push the health-care industry in this direction.

Don’t leave banking regulation to be decided by the banks. And don’t let the health-care industry control the discussion on what needs to be changed in cost of the delivering medical services.

Cam Fine is now willing to take on the big banks – he should be commended and supported more broadly on this basis.  By working on this issue at the highest political level, he can help restore grass roots confidence in community banking.

Who within the private sector is willing to take on the healthcare lobby?  Who will take the lead on restoring trust in our market-based economy more broadly?

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

From his closed-door fundraiser yesterday, courtesy of NBC:

“I’m going to probably eliminate for high income people the second home mortgage deduction,” Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well.

“By virtue of doing that, we’ll get the same tax revenue, but we’ll have lower rates,” Romney explained.

Let’s check Romney’s arithmetic.

The home mortgage deduction was worth $22 billion to households making over $200,000 in 2009. Even if half of that was attributable to second houses—and the actual figure is certainly less—that gives you $11 billion. The deduction for state and local income taxes was worth $20 billion for those same households. So together you get a total of $31 billion.

The top 1% paid about 36 percent of individual income taxes in 2009, which were $915 billion. So they paid $329 billion in individual income taxes.

Even if we assume that all $31 billion in benefits from the deductions for interest on a second home and state and local taxes went to households in the top 1%—an unrealistic assumption, since the cutoff for the 1% is far above $200,000—that only brings their taxes up to $360 billion. Factor in the 20 percent across-the-board cut in rates that Romney has promised, and their taxes fall to $288 billion. Net, that’s a $41 billion reduction. On top of that, you have to add Romney’s proposed reduction in corporate income taxes, since the rich pay a large proportion of corporate income taxes, at least according to the Tax Policy Center and the CBO.

Republican tax cut plans fall into two categories: the ones that don’t bother pretending that they’re going to be revenue neutral and the ones that do. But the latter can never make the numbers add up because you can’t have massive rate cuts and be revenue neutral unless you’re willing to eliminate popular tax expenditures for the middle class, the preference for investment income (the most important tax break for the rich people who pay for Republican politicians’ campaigns), or both.

This is the guy who’s supposed to be the hard-headed businessman?

Update: The title is a reference to this Atlantic column, which shows that there just aren’t enough tax expenditures to balance out the huge rate cuts that Romney has promised to the 1%.

Some high income Americans pay a lot of tax; others do not.  If you have right tax advice and if most of your income can be structured as some form of “capital gains”, your marginal rate – what you pay on the your last dollar of income – may be very low.  The highest marginal income tax rate currently is 35 percent, while long-term (over a year) capital gains are taxed at 15 percent at most.

The Buffett Rule is a proposal is establish a minimum tax rate for “millionaires” – people earning more than $1 million per year – and the Senate is likely to vote on a version this week.  The exact amount of revenue that this would bring in depends on the details, but there is no question that it is small relative to the country’s need to control the federal budget.  (The Joint Committee on Taxation scored one version of this proposal as generating about $30 billion over ten years; the annual budget deficit will remain over $1 trillion in the near term even under the most optimistic projections.)

The biggest sticking point for any reasonable strategy to control the US federal budget is that one side – the Republicans – steadfastly refuse to raise taxes, at all and on anyone.

There are three ways forward.  Either the Republicans begin to compromise – and agree to raise taxes as part of a comprehensive deficit reduction and debt control strategy, just as Ronald Reagan did.  There is a great deal of confusion about whether Reagan raised taxes after first cutting them; see chapter 3 of White House Burning for the details of what actually happened.

Or the Republicans who have signed the Taxpayer Protection Pledge will prevail – no one’s taxes will go up and, most likely, some people’s taxes will go down.  In this case, either the deficit will continue to grow (which is what Newt Gingrich is proposing) or Medicare and almost everything else the federal government does will be scrapped (which is the position represented by Paul Ryan).  My guess is that, in this scenario, we will say farewell to any meaningful form of social insurance – good luck getting healthcare when you are 85 (unless you earned over a million dollars a year for many years).

Or the Republicans will lose big – and fiscal consolidation can proceed without them.

A complete loss of support for the Republicans seems unlikely – they will surely hold more than 40 seats in the Senate for the foreseeable future.

So the fiscal trajectory of the country – and whether Social Security and Medicare survive – depends very much on whether the Republicans will compromise on taxes.

The Buffett Rule is a tiny tax, of little consequence to the people who would pay it or to the country as a whole.  The idea that $30 billion of additional revenue would tip the balance in any way is simply ludicrous.

But this is precisely what gives the Buffett Rule its powerful symbolism.

Much of federal government public finance is complex and hard for people to comprehend – demystifying deficits and debt is a major reason we wrote White House Burning.  Some of the reaction to our book is encouraging, particularly from people who are willing to spend some time with the details.

But the question behind the Buffett Rule is crystal clear and does not require you to buy a book or even read the newspaper.  Should all high income Americans pay a moderate level of tax?