Who Wanted What?

By James Kwak

Look, I’m familiar with the argument for the tax cut deal. It’s not a terrible argument. In simple form, it goes, the top priorities are to stimulate the economy and to cushion the impact of unemployment, and a two-year tax cut extension was worth it to get that, especially since we can kill the Bush tax cuts in 2012. Now, no one who wasn’t born yesterday buys that bit about killing the Bush tax cuts in 2012, but you could still make the argument that two years of stimulus is worth making the tax cuts effectively permanent. (I don’t agree, but it’s not a crazy argument.)

But that’s not Austan Goolsbee’s argument on YouTube.

Here’s his slide:

Basically he’s trying to convince you that Obama won: Republicans wanted the top-end tax cuts and Obama wanted the “middle-class” tax cuts, and Obama conceded the top-end tax cuts, but in exchange he won lots of other great things: unemployment insurance extension, some sweeteners to the earned income tax credit, American Opportunity tax credit (for college), some sweeteners to the child tax credit, lower payroll tax, and an extension of some business investment credits. Notice which column he put them in.

To call this framing disingenous would be kind. Republicans also wanted the “middle-class” tax cuts; they were the Bush tax cuts, after all, and I don’t recall any Republican saying we should only extend them for the very rich.

And if I try to imagine what it would be like to be a Republican, I’d have to say I probably like the extension of the investment tax credits (because they’re for business, and they’re LOWER TAXES); I probably like the American Opportunity credit (first because it’s not very progressive–you have to be going to college in the first place, and it only phases out above $160,000 for married filers–and second because it’s LOWER TAXES); and I probably like the payroll tax cut (first because it’s a tax cut that benefits everyone–the more you make, the more it benefits you, up to the cap–second because I like anything that hurts the funding for Social Security, and third because it’s LOWER TAXES). I’m probably neutral on the child tax credit; I like subsidizing families, and it is LOWER TAXES, but this one might be a little bit progressive. And I’m probably against expanding the EITC (because it feels like welfare to me), and I’m definitely against extending unemployment benefits (because I think they’re all deadbeats).

So I would reorganize this as follows:

  • Both sides wanted tax cuts for the lower 98%, the payroll tax cut, the investment tax credits, and the American Opportunity credit.
  • Obama wanted the EITC expansion, extended unemployment benefits, and the sweetened child tax credit.
  • Republicans wanted tax cuts for the top 2%.

I’d say Republicans got a pretty good deal, especially since, as Goolsbee says, everything in the second bullet is temporary, while many observers are thinking today that the third bullet is forever.

I just noticed, thanks to Ezra Klein, that Goolsbee’s argument, minus the crazy claim that tax cuts for the lower 98% were not something Republicans wanted, is the core of the White House’s marketing campaign:

To which I make the same response as to Goolsbee’s video.

But let’s leave aside this “who won” question. I admit I don’t know what the Republicans want and don’t want. But I wouldn’t necessarily trust what they are saying, either. If you’re John Boehner, you want to pretend you don’t want things that you secretly want, so you can “concede” them in negotiations. And anything that lowers tax revenue is good for a fair number of Republicans. (In any case, this question turns largely on the question of whether or not Republicans are happy with the payroll tax cut. A lot of people have addressed that question already. Here’s Mike Konczal.) Finally, note that Mitch McConnell has said that the vast majority of Republicans will vote for the deal. That should tell you something.

There’s a bigger issue. If you watch the video, the flow goes like this: “We wanted these tax cuts. The Republicans wanted these other tax cuts, and they were holding our tax cuts hostage. But we won, because not only did we get our tax cuts and they got theirs, but we got all these other tax cuts!” Face it, the only thing on that board that isn’t a tax cut is extended unemployment benefits, although you can certainly make the argument that the EITC is more like a welfare program than a tax cut (and I’m certainly a fan of the EITC). The same goes for the chart.

So if you’re Grover Norquist and what you want more than anything else is lower tax revenue, you should be celebrating like it’s Christmas and your birthday at the same time. We had an argument where one side wanted tax cuts A, the other side wanted tax cuts B, and they compromised by adding tax cuts C? Here’s a great illustration from Klein, who despite the chart is still in favor of the deal:

And the Democratic argument–trying to get support from the base–is “we got more tax cuts than they did”?

87 thoughts on “Who Wanted What?

  1. This blog was better when it was less blatantly partisan.

    Who is “we”? Who is “they”?

    From my perspective, there is no “we”. Both parties want the exact same thing: To stay in power and to increase their power. So of course “compromise” means free ponies for everybody and always will.

  2. Thank you for another informative (yet painful) post.

    Whoever is doing marketing for the Dems needs to go on unemployment. Big time. Because this monstrosity is not flying.

    If the Dems do not stand for something different from the Repubs, what ever is the point of voting for them?

  3. James, I hate to wander here, but I think it’s important to look back on the 2008 election. Who were the major candidates? Obama, clinton, McCain, a few ex governors, that’s it. At some point it was decided or determined that to effectively run the country, the president had to be closely connected to the Senate if he expected to get anything done. And what we have seen since 2008 is Obama originating all legislation in the senate. And only negotiating with senate members. And what we have in the senate is strong representation of the rich monied parties. So what we have is Obama essentially negotiating with rich people and telling poor people to fall in line without complaints.
    I refuse to bow to rich people. Nowhere in the constitution does it say rich people have more rights than poor people.

  4. I think that is what James is saying. The “we” in the above is his paraphrasing of the narrative from the Democratic perspective. I don’t see anything particularly partisan here. Or at least not strongly so. Certainly, he takes a position on the wisdom of this deal but, as you say, looks like both Dems and Repubs are equally culpable.

  5. All of this debate by economists about who won or lost in the tax cut extension is disappointing. I would much rather hear that both parties obviously either don’t understand our monetary system and federal spending or are maliciously duplicitous about the whole subject.

    Taxes only function to remove money from the system. Taxes and bond sales do not fund federal spending. Ignoring that fact invalidates any further discussion.

  6. I responded to Goolsbee with this comment:

    You left out the Republican accomplishment of defunding Social Security.

    You left out the Republican accomplishment of making it harder to cut the deficit except on the backs of the people who can least afford it.

    You left out the the Republican accomplishment of making any attempt at economic stimulus be as ineffective as possible.

    You left out the Republican accomplishment of rolling the President on a fight they couldn’t win. Their electoral chances were toast if they blocked the unemployment insurance extension.

  7. Are you saying that taxes are put into a big hole in the backyard at the Whitehouse?

    What do you think funds government spending? You certainly can’t think that the deficit would be no larger if no taxes were collected.

    Since what you postulated is not a fact, the discussion continues.

  8. This kind of analysis strikes me as a kind of triage on a system that is tearing itself apart, and I think it is simply the wrong way to think. America was a great nation because it was birthed, under great duress, out of the highest ideals, and legally structured upon wise principles forged from those ideals. It is not about “what we got” in this legislation — it is about what we stand for. We must debate the principles. And if there is something going on that we simply cannot live with, then at some point we must stand and fight. That is what the founders did.

  9. I largely agree, except that I think the Republicans can block an extension of unemployment insurance. Frankly, the median American doesn’t care about the unemployed that much, even with increased economic insecurity. And the Republicans can just say something about how unemployment benefits are too generous and increase the budget. Wasn’t that what they were saying back in the 1990s? And that gave us welfare reform. I guess we’ll find out for sure in thirteen months.

  10. from my perspective it is not that stimulative. Any spending on infrastructure would be more effective than these programs. If businesses are as is said sitting on mountains of cash why aren’t they investing in equipment already? If low interest rates and plenty of cash doesn’t persuade them to invest why will an investment tax credit.And I think Roubini mentioned that those investments will reduce the need for labor.

  11. Well, on this issue I’m pretty much a liberal Democrat. But we are truly in Bizarroland when the wonkish liberals like me are the only deficit hawks left. Both the Republicans and the moderate Democrats (let’s call the administration that for simplicity) want to cut taxes, and to compromise they cut even more taxes. The mainstream Congressional Democrats want tax cuts for the “middle class” ($3 trillion) but not for the rich ($0.7 trillion). So I guess we’ve completely flipped positions since the 1960s.

  12. What a nice chart, by the end of next year all those tax cuts in the left column will be in the hands of the right column.

  13. What are the rich going to spend their tax cuts on when they already have enough money for more than they could possibly want?

  14. I’m with you, except, for the sake of simplicity it seems more apt to call this administration moderate Republican.

  15. And so, James, and the other commentors, let’s understand one thing that is certain in this whole dance show (ultimate Off-Broadway with rave reviews). What we need to understand is that this is what the PLUTOCRATS WANT, NOT WHAT WE BARGAIN FOR WHEN WE LISTEN TO CAMPAIGN RHETORIC (deficit reduction – not). Oh yeah, and so, with things in place, assuming that this bill passes (with whatever other things get added — after all, what Goolsby says doesn’t really tell the whole story), and it will in some form essentially as outlined, just exactly whom will the benefits of any potential recovery flow to? The Plutocracy (politicians and the wealthy) of course. Clinton tonight highlighted the fact that between banks and corporations there’s currently 3.8 trillion dollars essentially sitting idle. When that money comes back in, it will result in the generation of recovery. When Congress comes back into session in January with the new configuration, there will be lots of tweaking of whatever was passed recently and an opportunity to further degrade what is left of the middle class. And so it goes.

  16. “If the Dems do not stand for something different from the Repubs, what ever is the point of voting for them?”

    Keeping Sarah Palin out of the Whitehouse at all costs.

  17. $900 billion they spent and essentially no stimulus – that is the ultimate stupidity of this. A $900 billion stimulus spent on infrastructure investment (and the unemployment extension ) as well as your investment in teachers especially community college teachers might have brought us back from the brink. And most importantly the republicans have successfully defunded social security. Vote now if you think the payroll tax holiday is really going to end.

    It seems his Oliness thinks he is going to reform the tax code- well if his healthcare plan is any indication we are completely screwed. And this will be be started with a republican controlled house. Whoa nellie! the middle class better get rich soon because that is your only hope.

  18. As a scientist, I challenge you to produce the data, James, for this BELIEF you hold:

    “Frankly, the median American doesn’t care about the unemployed that much, even with increased economic insecurity”.

    Numbers, please, as to this “median American”….where is “median” on the trillion lottery give away scale created by the FED….

  19. Obama Triangulation, though he denies it. Senator Minority Leader Rich McConnell & the Republicans got cleaver with the semantics by continuing to say in their talking points, “all Americans” “everyone”.

    It’s a no-win situation so accept the tax cuts for the wealthy; support corporate welfare, and try paying your bills, mortgage, medical, your kid’s piano lessons on $450 a week of unemployment checks okay. Mr. Orzag is now with Citigroup (the revolving door career builder) but nonetheless, he shared some observations in his NYT opinion piece on disability; the unemployed and economically distressed are increasingly applying for “permanent disability” as a way out of their financial troubles. Would almost anyone be an improvement over Lawrence Summers:


  20. I think a valid way of looking at it is simply that raising taxes on the middle class would do substantial damage to economic recovery (and his re-election prospects), and Obama ate the rich peoples’ tax break to avoid that.

    What I don’t like is the pattern.

    When the banks were failing he didn’t go for the looters’ jugular by getting rid of the top management.

    When he was doing health reform, he diodn’t go for the looters’ jugular by fighting for a single payer that could exert controls on over-pricing.

    Now, when he’s doing the taxes thing, he doesn’t go for the looters’ jugular by eliminating the high end tax cuts.

    The US only has small to medium size problems. What is going to run us into being a second rate economy is that we don’t have the character to deal with them.

  21. @RA: “What I don’t like is the pattern.”

    The pattern is even more stark if you look at Obama’s handling of the “war on terror.” You know, we can speculate endlessly on what he “really wants” in the economic sphere–but we can’t read his mind and we can only imagine to what extent his hand is forced by Congress and other influences.

    But in the “war on terror” he has nobody telling him what to do: his decision making latitude is complete and unconstrained. But Guantanamo continues to hold people indefinitely without charges. Torture, though they say it is not being carried out any more, is still authorized. Airport security has only become even more intrusive. His administration still invokes the bogus “state secrets” defense to quash legitimate lawsuits by victims of state kidnapping. The President maintains a list of people, including American citizens, for targeted assassination (without, of course, any charges, or trial).

    In short, in the one area where he is free to do as he pleases he has continued the same policies as Bush. We don’t have to speculate where he’s coming from.

    We were snookered in 2008. Never again!

  22. Well it doesn’t matter what republican or democrats want.
    What does the ruling class want, those that donate
    money and corporations that control them.

    I see the you are also not seeing what is really going on.
    which is another bubble forming in the name of Dollar.
    How long will other countries allow their currency to
    be destroyed in order to have growth in America.

  23. “You left out the Republican accomplishment of rolling the President on a fight they couldn’t win. Their electoral chances were toast if they blocked the unemployment insurance extension.”

    I will treasure this sentence forever — and quote it often — as a perfect encapsulation of how deluded leftwing Democrats are about the politics of this country. The idea that Republicans would be punished at the polls for failing to extend unemployment benefits is utterly distant from reality. No one expects Republicans to vote for unemployment benefits. Everyone knows they don’t care about the unemployed. When politicians do what’s expected of them, they are not punished, unless things go horribly wrong. The reason Obama made the deal was that he knew Republicans would happily reject the UI extension, and this was the only way to get it.

    I’d love to see a trace of evidence that unemployment benefits matter at all to most American voters. On the contrary, the political-science literature suggests that even the unemployment rate is not all that important — income growth is what really matters.

  24. One of the really important political issues here is that, for the first time, the Repubs are clearly shown as dead-solid in favor of tax breaks for the really wealthy. This point has never really been made in the public mind, but now it is. This undercuts future anti-deficit claims by Repubs.

  25. Look, I’m as opposed to tax cuts for the rich as anyone, but really, “average tax cut *per tax payer*? Would this deal be worth it if there were only two tax payers in the top bracket?

    Anyway, my point is that fairness isn’t the argument the Obama is making; its that in the aggregate he did well.

  26. @ nobdoy noticed___”During the American revolution, more inhabitants of the American colonies fought for the British than for the Continental Army”

    “In the Declaration of Independence as first written by Thomas Jefferson, there was a clause abolishing slavery. Because of popular pressures, however, Jefferson deleted the clause”

    “George Washington was not the first president of the United States. The first president was John Hanson, Maryland’s repesentative at the Continental Congress. On November 5,1781, Hanson was elected by the Constitutional Congress to the office of “President of the United States in Congress Assembled.” He served for one year.

    “Male landowners were the only persons to cast a vote”

    “Senators were elected by the House of Representatives”

    I guess what I’m trying to convey is that our democracy is constantly evolving, and adapting as it should be. Our Founding Fathers were rich merchants and very well educated, but they realized centuries ago that wealth distribution was the glue that a held a free, and great society together.

  27. Something that might have made everybody happy – the Democrats, the Republicans, and both the employed and unemployed of both parties – is for the Senators to have compromised on doing away with unemployment benefits and substituted a direct-hire federal work program for the unemployed.

    There are so many things this country needs done, and there are currently unemployed from every job description (except TBTF bankers and global corporate CEO’s), from engineers and project managers to laborers, who would much rather work on federal projects, even part time, than sit at home wondering whether they’ll have a job before further UI benefits are again left to the tender mercies of the U.S. Senate.

    If these people were working, no one would consider them deadbeats. If they were working no one would consider their wages “giveaways.” If they were working – and particularly if the media followed some of their activities – no one would think their efforts were not productive.

    Economists could construct graphs of how much in taxes these people were paying back to the both the federal and state governments as well as the Social Security trust funds. And who knows, such a program might even kick-start our economy.

  28. earle, I’m a little confused by your quotation marks, unless of course you are simply quoting yourself.

    Nevertheless, as far as I know and/or understand, everything you wrote is true, regardless of punctuation.

  29. @RA: I agree about the pattern, but argue with your statement “The US only has small to medium size problems. What is going to run us into being a second rate economy is that we don’t have the character to deal with them.”

    It may be that YOU and the people YOU know only have “small to medium size problems.”

    I put the following in that category:
    – a high-school dropout rate of 30 percent
    – top 1% of the population owning 50% of the wealth
    – a real unemployment rate of (conservatively) 17%
    – ranked 37th in healthcare delivery in the world

    We are a second-rate economy right now; some comfortable and powerful people are so insulated they can’t see it.

  30. The aim must be to maximize the well being of the whole population. If free competition is truly the best way to achieve this goal, then it does not matter much that a very few get very, very rich. But if free competition results in great suffering for a large part of the population, then we need systems in place to correct this suffering by equalizing income disparity. It does not matter whether this is accomplished by religious charities, ration vouchers, or government taxation & redistribution, as long as it helps. But if these attempts to correct the income disparities are wasteful and breed laziness and inefficiency, then in the long run the greater good may lie in free competition and devil take the losers. As Mother Nature does it — but NOT as Yeshua commanded.
    If we are not acting from ideals and principles, then we are just making deals with those who are utterly selfish and corrupt. No different than making deals with the Mafia. I think the people who founded the United States were thinking about principles even though they had to make compromises.

  31. You wait until we go past a tipping point of losing the benefits of being able to borrow cheaply, of issuing debt priced in our currency, of being able rehabilitate our manufacturing sector, then you’ll know what I’m getting at. Visit some Latin American countries.

  32. @ Carla___Funny…the first time I ignored to put a Ref. tag on a quote? Ashamed am I, for I’ve quoted this author/book once before. It’s a wonderful read by Mr. David Louis titled “2201 Facinating Facts”. PS. If your a history buff…a one line phrase can be a full books reading summed up? Thanks Carla:-) Note: Isn’t it a shame that George Washington never sired any children from his wife…to many long nights on the road I suppose (where’s Waldo?)

  33. This same video was recently used in a camera enthusiast’s forum. Hitler was apparently incensed that his coveted Nikon D7000 would not be shipped in time for his meeting with Stalin.

  34. “you could still make the argument that two years of stimulus is worth making the tax cuts effectively permanent.”

    Two years of stimulus? How do you figure that? One year is more like it. The main stimulus being the extension of unemployment insurance, right? Why not extend that for two years, as well?

  35. RA, again, I agree with most of what you said in your previous post.

    In fact, I have visited some Latin American countries. None of them has ever attained the level of wealth and global power that the United States has achieved, nor to my knowledge has any of them ever really enjoyed the benefits of a large middle class, so I’m not sure the comparison is valid. But surely enough, we seem to be squandering those great advantages as fast as we can.

    Perhaps even more to the point: if we are able to rehabilitate our manufacturing sector, why have we not done it?

    I think it was the late Kurt Vonnegut (surely someone will correct me if I’m wrong about this) who wrote a few years ago that before long, we would be a nation whose economy existed simply of our selling houses to each other. That’s what we became, and now there’s a dearth of buyers.

  36. I think it was Bernie Sanders who pointed out that as long as the unemployment level has been above a certain threshold (much lower than it is now), the Republicans have never refused to extend the unemployment insurance no matter which party held the power in either house of the Congress or the Whitehouse.

    I seem to remember the time span of “never” was 40 years or more.

  37. No, the country is not moderately Republican. On individual issues, they’re generally slightly liberal. It’s all up to the Dem leaders. If Obama and Clinton truthfully explained to Americans all the dangers to our social safety net that will come into play by continuing the Bush tax cuts, including the very real danger that this could be the beginning of the end for Social Security, a very popular program, and also for Medicare, then I think letting all the Bush tax cuts expire would be a winner for the Dems in 2012. Instead, Obama, who does not seem all that intelligent, decided to act just like W. and thus almost surely lead the Dem party into a general defeat in 2012 unless the economy shows a miraculous uptick. This so-called compromise unfortunately creates a crisis for the Dems from which they probably won’t recover soon — unless the House holds out and says No!

  38. who cares, Earle?

    The grandsons and grand daughters of “moon walkers” dying on the opium trail in the Kyber Pass and coming home to a nuked out USA except that no actual nukes were detonated in the “process” (cheap war) – only “virtual derivatives”…

    Don’t blame any of this on the imperfection of “democracy”…

  39. Carla, “Perhaps even more to the point: if we are able to rehabilitate our manufacturing sector, why have we not done it?”

    Because the “software” god wants manufacturing “deconstructed”….

  40. The idea that Republicans would be punished at the polls for failing to extend unemployment benefits is utterly distant from reality.

    We’ll never know for sure. But I agree, they weren’t punished in any meaningful way for destroying the economy, or for obstructing progress since 2008 on fixing things. Why should this be any different?

  41. @ Annie___Your correct again, as always? The unique problem our country is facing today is a seminal moment in history! What’s different today is that every sector of “The Macro`Economic (*2% excluded) Scale” is getting their “Ox Gored”! PS. Let us unite and find answers instead of constant rants of criticism! PS. My apologies being a lowly high school drop-out to a scientist ;^0

  42. @S.D. Jeffries–This is a great idea. If those people in Washington were working for us, and for the good of the country, it might happen. But they are not working for us. And the great majority of them seem to enjoy spitting on the good of the country.

    Do you think there’s any chance we could interest Warren Buffett, Bill Gates and their billionaire buddies who have pledged to give away half their wealth in your wonderful idea?

    Of course the billionaires may only incidentally have the good of the country in mind, but some of them might be willing to throw us a bone.

  43. Annie, I think it’s because the oligarchs make a higher profit on goods manufactured by people making pennies an hour in Asia and other parts of the developing world.

    Financiers have no interest in investing in manufacturing here and we’re forgetting how to make anything anyway.

  44. @S.D. Jeffries, I’ve thought that would be a good idea too. After reading your post this morning, I kept wondering why isn’t it happening? My thought, Insurance, if someone gets hurt working, it’s a lot more expensive than the unemployment check. If we had single payer, this would not be a problem. Countries that have it look out for their citizens, our system is something else.

  45. I found this incredible interview over at Max Keiser. Paul Craig Roberts (according to Wikipedia) served as an assistant secretary of the Treasury in the Reagan administration and is a “co-founder of Reaganomics.” It appears some thoughtful Republicans and Democrats share similar views on the state of the American political economy.

  46. Roberts is confirming what the inestimable Jake Chase has been saying here at Baseline for the past year and more.

  47. annie, Saw a video yesterday about the Navy’s new projectile. Reminded me about being ready to fight the last war. But man, now they’re about three wars back.
    1, the religious war in the mid-east.
    2, the resource war in the Sudan.
    3, the economic war in the “developed” economies.
    I don’t see where balistics other than small arms play a roll, well except for Napoleon’s cannonade on the populace of Paris.

  48. Carla,yes.
    How many Americans know how to do initial smelting and metal working, the knowledge that distinguished societies? We’re dead ducks.

  49. Re: @ tippygolden___Thanks, enjoyed the interview. Here’s alittle history path of how we got where we are today:

    Gov. Arnold Swartzenegger (Calif./ 7-8 largest economy in the world)* Not (Austria) U.S. Born Citizen (Kennedy?)

    Henry Kissinger: Family fled Germany (DOB 5/27/1923) into the U.S. in 1938 and became citizens? Note: Again not a U.S. born citizen but was appointed the 56th / “Secretary of the State” (Nixon Adm. 1973-77)

    Zbigniew Brzezinski: Again, another high held position in our Gov’t during the entire Carter Adm.(1977-81)/ 10th “United States Nat’t Security Advisor”. Born in Poland (*Not in the United States) under the USSR rule on Mar. 28, 1928 and became a U.S. citizen in 1958. Note: Backdoor citizenship through Canada?
    There’s more but no time TP, but I have one more tidbit that you might find intriging? Ref: “Obama Bilderbergers 160”

  50. Press TV takes revolutionary steps as the first Iranian international news network, broadcasting in English on a round-the-clock basis.

    Our global Tehran-based headquarters is staffed with outstanding Iranian and foreign media professionals.

    Press TV is extensively networked with bureaus located in the world’s most strategic cities.

  51. Appendum: “The Bank of International Settlements (BIS)” via Bilderberg Group via “World Bank” {(WB/Loonie Tunes?) designed to fail entity?) via “International Monetary Union” {(IMF/ the “Grim Reaper” that pillages, rapes, and disembowels said *carrion*`entity (*euthanasia?)}! This is the circle of poison that enshrines our financial universe today. All aformentioned are members of the “Bilderberg Group”…Gates, Buffett,Thatcher,Hillary baby,Blair,Albright,Holbrook, Geither…etc.,etc.,…
    PS. I can only think of one guy that doesn’t belong being Mr. Ted Turner?

  52. The trend seems to be away from government directly hiring people to work (especially laborious work). Yeah there are exceptions but often projects such as airports, highways, etc. are contracted out to firms that have a work force already. That said, I like your idea.

  53. Why didn’t they put a bill forth without the extensions for the upper-income individuals and forced the Republicans to vote against extending the taxes. In 2012 every ad the Democrats ran against a Republican incumbant could have harped on how the Republicans wanted to ‘raise taxes’ in sluggish economic times.

  54. Ep3:

    ” Nowhere in the constitution does it say rich people have more rights than poor people.”

    You have to look for it, but it is there in the 14th amendment, that says that corporations are persons with all the rights thereof, and in the 1st amendment, that says that all persons have the right of free speech, and that money equals speech.


  55. So why not organize as the “plutocrats” have for a long while? The people have made their collective weight felt in the past, once achieving a momentum of philosophical energy that established policies that helped to create a thriving middle class. Every time I suggest on one of these blogs that we who basically agree that we’re getting screwed organize, I get studiously ignored. We may as well go get drunk and have happy sex. It would be more fun than these tears.

  56. Bayard
    A fair portion of that money sitting on the sidelines is overseas. There are tax consequences which need addressing if you catch my drift.

    What better way to stimulate the engines of commerce than a little tweaking during the write up of a major tax bill.

  57. You’re absolutely right about organizing, jonboinAR. Seems to be more easily said than done. During the last ten years, I’ve been involved in organizing (or attempting to organize) for universal single-payer healthcare, for campaign finance reform, and against corporate personhood. To say it is difficult to engage people is an understatement.

    On healthcare reform, the unions (shadows of their former selves to begin with) were quickly co-opted by the mirage of a “public option,” since REAL healthcare was much too scary and communistic for those bastions of the people.

    JonboinAR, do you have any experience in mobilizing large numbers of people to pursue a common agenda? If so, our country sure could use your help.

  58. Min, you say “You have to look for it, but it is there in the 14th amendment, that says that corporations are persons with all the rights thereof, and in the 1st amendment, that says that all persons have the right of free speech, and that money equals speech.”

    Maybe you’re just joshin’ us, but if you’re serious, you’ll have to quote the exact words, cause I can’t find ’em in either amendment. Methinks they exist only in the imaginations of certain Supreme Court justices and corporate apologists.

  59. Look, again we are being led down the wrong path and arguing the wrong arguement. The problem is overproduction and not enough jobs. What we must do is suck in our gut and do something which seems counter to logic. We must reduce Social Security retirement age to 58 so younger and more productive people can enter the workforce. Yes that would mean higher taxes but more jobs, more new homes being sold and more, new ideas.

  60. James,

    What am I missing here? It has been admitted this Bill will cost $825 Billion dollars. Why do your charts and every other discussion I’ve read on this subject is talking about $352 billion. Where is the other $473 billion going?

  61. What do you think funds government spending?

    The government’s sovereign ability to print whatever money it needs/wants.

    Were you thinking it depended on how much gold the State had, or something?

  62. Taxes, in this view, are a more malleable or potentially more progressive version of raising interest rates. They fight inflation by reducing private-sector demand for scarce resources, thus reducing the inflationary effect of public-private competition for them.

    They don’t strictly “go” anywhere, though if you like to think of them as reducing the government’s need to print money on a current basis, that works. But the government has a gigantic infinite pool of money; if you pour the tax revenue into that pool, it doesn’t change the size of the pool.

    [Thinking of the implications of the infinite pool of money is tough. Here’s a thought experiment that ultimately convinced me. Imagine two situations: in one, the Social Security trust fund is broke today. In Situation B, the trust fund is flush and has enough money deposited in wherever-you-like-safe-place to fund its obligations for 100 years.

    Now the Baby Boomers retire. What happens? Well, in Situation A, you could print money to meet the commitments — but that would cause inflation! But here’s the trick — in Situation B, you *still get the same amount of inflation*, because the government is spending money and competing for qualified labor from the private sector. You still have to hire people out of the labor market to provide elder care or whatever, which is what’s going to actually drive inflation.

    So ultimately, there’s no difference between government spending from printing and government spending from saved surplus. The government has an infinite pool of money. Whether you put some taxes into that pool earlier or not doesn’t matter; what matters is the competition for scarce resources. This is also why deficit spending in the face of a soft labor market cannot cause inflation; it is just using idle resources, it doesn’t drive labor-scarcity-based wage increase demands.]

  63. How to respond without trying to give you a graduate course in economic theory?

    You mistake the theoretical pool from which money can be created with the actual pool of money that has been created.

    You mistake the scaling of concepts in sizes where there is no feedback to the scaling of ideas where their change in size changes the assumptions.

    You forget to consider the difference in time scales in which theoretical money can be produced and the time that the physical economy can respond.

    You forget that economics is a social science in which the system being studied is self aware. The system behavior modifies itself to respond to expectations of future behavior.

    These types of effects knock your speculative theories into a cocked hat.

    Increasing demand for something faster than the physical economy can respond is quite different from expanding demand at a rate at which the physical economy can respond. One rate of demand expansion causes the physical expansion of the economy measured in hard assets (useful assets). The other causes expansion of the economy only in terms of the value in money (it changes the measuring stick, but not the dimensions of the physical world).

  64. In all seriousness, I would be interested in knowing where I’ve assumed the things you say — which seem to boil down to “expectations matter” and “there’s already idle money in private hands”, both of which I acknowledge.

    It doesn’t seem to impact the factual description of how a fiat money system works. It may constrain, like politics, what governments can do in a pragmatic sense — one way to keep the bond markets fat dumb & happy is for government to imply stable prices by am implicit promise to extract the value it consumes through taxes rather than through inflation* — but once you start talking about what markets expect, you’re out of the social sciences and into amateur mass psychology, a larger subject than I’d intended to address here. Still, I’d welcome concrete examples of how your response alters the mechanics of how government spending works.

    * (assuming a situation in which the economy is supply-constrained and public demand crowds out private, rather than the present situation)

  65. “but once you start talking about what markets expect, you’re out of the social sciences”.

    Have you done any reading in Behavioral Economics and rejected this line of research for some reason?

    Have you read about George Soros’ description of economics as a reflexive system?

    What other economics have you rejected because it doesn’t fit your picture of how you think economics ought to work?

  66. but once you start talking about what markets expect, you’re out of the social sciences

    Okay, this is maybe a little ambitious, but again, please do tell — how does the fact of market psychology being important, change the fact that in a fiat money system, there is no inherent connection between government spending and tax receipts?

    I’m not looking for a fight, I’m looking to understand what you’re talking about. I can see how market expectations affect what a government chooses to do (and I assert that was outside the scope of my original comments, about what it *can* do), but I don’t see how their existence changes the fact that the government can print what money it needs, if it is willing to accept the consequences.

  67. @ Bruce___Thanks for the links :-)

    Have been studying all for many, many years religiously! eg.) Central Asia & “911”

    CIA Chief ” William ‘Bill’ Casey” died (@ 74 yrs) May 16, 1987 (CIA Chief 1981-87 Reagan Adm.)
    Resigned Jan. 29, 1987 [brain tumor < 4months later dead/ (kenndy?)]…Ref: "Balochistan is the Ultimate Prize/ Pakistan" ie.) rare earth paradise , and geography – sovereighty from Pakistan?
    Note: Unocal is now Chevron (Arab's?) alot of past controversy about this "Unocal"!

    Next we have the "Game",…What it's all about is "Blue Gold", period! (Trillions{$} upon Trillions[$$] at stake and world energy dominance)

    Ref: Iran – Pakistan – India (IPI) via China?
    Ref: Turkmenistan – Afghanistan – Pakistan – India (TAPI) via China?

    PS. Please take notice…The World Bank (WB) via International Monetary Fund (IMF) have set their eyes upon the actual takeover of "Balochistan, Pakistan" for the very reason – "Unrestricted (no-man's-land) Territory and drain on Pakistan's pathetic economy"? Think of the trade-offs, amazing? Oh, by the way the U.S. has enough natural gas (propane gas) to supply our energy (fuel) needs for the next century…no frackin way!

  68. Nice summary & perfect analyzation,

    This problem offers some interesting questions. The unemployment insurance affair is a big one. I suppose that reports have suggested that this business brings their profits for one year. While this may be good in the short run, given the depth of the recession, is this enough? It seems to me that tying some kind of tax credit for prepared movers is a good thing. Probably, there are south parts of the country – Florida, Arizona or Nevada, say – where the jobs are not going to return too instantly. Some are going to have to move, if they want better work. Finally, it seems to me that the best approach is an even one – rich people get a one year extension just like working people get a one-year cut just like unemployed people get a one-year extension.

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