Tea Party is the cure not the cause
August 7th, 2011 at 11:32 am by David FarrarMatt McCarten writes in the HoS:
US counts financial costs of tea partiers
More damage was done to capitalism this week than any communist revolutionary could have ever dreamed possible.
Matt has it all wrong. The drop in the markets isn’t because Tea Party supported Congressman insisted on spending cuts. It is because the spending cuts did not go far enough to stop US debt growing. The massive deficit and debt is due to a series of Presidents and Congresses spending way more money than they had. Clinton was the one near exception.
Everyday Americans, sick of both parties, rose up and said no more spending increases we can’t afford. Thanks to them, the US may one day get back into surplus – but it is a long time off.
Anyway I would have thought Matt would have liked the Tea Party – like his UNITE union, they don’t like paying taxes. The difference is the Tea Party campaigns to change the law, while UNITE simply takes its employees PAYE tax and spends it elsewhere, rather than passing it onto the IRD as required by law.
The country’s official unemployment is more than 9 per cent and is people’s number one concern. Poll after poll show people want more expenditure on jobs, health and education. Yet the tea partiers – funded by the super wealthy – have forced the Obama administration to cut these three items.
Until now every sane economist will tell a government to spend money when an economy needs to grow. This country is going in the opposite direction.
The 9% unemployment rate came after the biggest spend-up in history. Obama asked for and got a huge fiscal stimulus, in the hundreds of billions. He claimed it would stop unemployment reaching 7%. Instead it made 10%. The myth that the Government can spend itself out of trouble has been dispelled by the evidence.
If that isn’t enough Obama has a Supreme Court with a majority of Republican appointees approving laws allowing corporations to give unlimited amounts of secret funding to politicians.
Not secret. Simply companies in the US, are like companies in NZ. They have to disclose their donations, but there is no limit on them.
Related posts:
- CTU asks UNITE to explain unpaid PAYE tax
- Is Venezuela funding UNITE?
- Wananga and UNITE
- Party Organiser for hire
August 7th, 2011 at 11:41 am
Asking Matt for financial,advice is akin to asking Tikiorangi Morgan and Tania Turia.
Its would also be illegal as I suspect none of them have the qualifications required under the new regs.
Two snippets to support this.
I’m a big spender, Turia says
By Bevan Hurley
5:30 AM Sunday Aug 7, 2011
Turia and Sharples ran up a bill of $4500 at the Radisson Royal Hotel in Moscow. Photo / Mark Mitchell
Turia and Sharples ran up a bill of $4500 at the Radisson Royal Hotel in Moscow. Photo / Mark Mitchell
Their constituents are struggling but Maori leaders are living the high life.
Maori Party leaders Tariana Turia and Pita Sharples have racked up the highest ministerial expenses after Prime Minister John Key – despite not being in Cabinet.
The two are the biggest domestic travel and accommodation spenders at a time of Government cutbacks and high unemployment.
They have also run up big credit card bills, staying in elegant hotels overseas.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10743497
Morgan dumped from Tainui post
8:59 AM Sunday Aug 7, 2011
Tukoroirangi Morgan has been ousted from his position as the head of Tainui’s tribal parliament.
Mr Morgan, who chaired the executive board Te Arataura, was removed for allegedly bringing the tribe into disrepute, the Waikato Times reported.
At a meeting yesterday, the parliament voted on a resolution that sought his removal, which narrowly won by 30 marae votes to 27, with two abstaining.
Last year Te Kauhanganui chairwoman Tania Martin released a report which alleged excessive spending by the executive board, of more than $1.3 million in seven months.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10743544
Money for the poor.
Vote:August 7th, 2011 at 11:48 am
dimes take – this is a battle for the future of the US.
short sighted people blaming the tea party for everything. they arent concerned about the short term… its their entire future.
the yanks arent a left wing country. the good guys will win.
Vote:August 7th, 2011 at 11:49 am
Nuts!
I just posted a comment in GD that would have been far more appropriate in this thread. So …
Whenever I see “solutions” for the US posed along the lines of increased taxes on people earning more than $US 200K per annum, closing loopholes, make corporates pay, and so forth, I’m reminded of this very funny piece from Iowahawk:
Feed Your Family on 10 billion a day. Sample quote:
Yes. That is how screwed the US is. And Iowahawk is just playing with the annual deficit rather than the debt, as he implies near the end:
I bet Matt knows!
Vote:August 7th, 2011 at 12:23 pm
McCarten is just another Leftist, spinning the narrative of the Left.
Vote:He doesn’t care about the US, it’s debt, or it’s people; he only cares about pushing the talking points of the Left, which are to blame the other side for everything, particularly the Tea Party. In fact, some politicians in America, including Joe Biden, have referred to Tea Partiers as “terrorists” – utterly ridiculous.
August 7th, 2011 at 12:26 pm
If The Herald had an ounce of decency it would suspend this columnist until such time as his tax issues have been resolved.
In the event the guilty bastard is sent to jail, his column should be canned, with him.
Vote:August 7th, 2011 at 12:37 pm
But I thought that “terrorists” only became so when pushed beyond the limits of human endurance by the cruel and unrelenting pressures of our modern world? By the demands that they assimilate with the cultural norms of middle class squares and their upper class enablers.
In any case we are surely only talking about a tiny minority of people who think and act like terrorists. Seeking to label and punish an entire group of people will likely not reduce the terrorism but actually make it worse. Hardline ideologues like Joe Biden and the NYT are actually fanning the flames even as they claim to be acting for the best.
Any chance that we’ll see this argument applied by the left to the targets they’ve picked as “terrorists”?
Vote:August 7th, 2011 at 12:38 pm
Obviously there are two sides to the coin of debt. The tea partiers are the ones totally refusing any compromise on tax increases. If you look at the UK which is doing well getting back to surplus, they were very up front that the answer was a combination of tax increases and spending cuts. Obviously the root problem is not the tea Party, it is the last decade of US governance. But running your country into the ground on account of ideology and sloganeering is not what is needed
Vote:August 7th, 2011 at 12:41 pm
Nice comment swan. Just as huge stimulus packages won’t cure all for the US, neither will enormous spending cuts or the fantasy of a balanced-budget amendment. there are no political proposals seriously envisaged in the US that would see an end to their mess.
Vote:August 7th, 2011 at 12:50 pm
I agree with swan and mikenmild, if the US want to reduce their enormous debt they need to also raise taxes, only those blindly opposed to tax increases would disagree and that includes the tea party and most republicans (as well as DPF).
How does the expression go ‘common sense is not so common’.
Vote:August 7th, 2011 at 12:55 pm
Why do we give this guy the time of day. We know now he is morally bankrupt. He might want more taxes, but from his point of view, taxes are for other people to pay. How wrong it is for a good union or union labourer be asked to pay tax as well.
Vote:August 7th, 2011 at 12:55 pm
In this instance I think McCarten is partly right. And DPF is partly wrong.
The claim that the fiscal stimulus did not stop unemployment reaching 10% therefore it did no good is logically flawed. If there had been no stimulus it might have been far far worse.
Remember that at the end of 2008 there was a widespread fear (and not a foolish one) that the global financial meltdown could plunge the US and much of the world into a repeat of the Great Depression. Remember too that that Depression was created not by the meltdown of 1929 so much as by the lurch to protectionism, and the massive monetary and fiscal tightening that followed.
My conclusion – and I am sure this is shared by most of the mainstream economic community – is that the massive fiscal stimuli in the US and other western countries (including NZ) staved off a far worse disaster.
The reason that the disaster is ongoing in the US and much of Europe is a) because of the nature of the contraction – driven by debt default rather than inflation and fiscal tightening, and b) because those countries had been so profligate in the preceeding years, running huge deficits in the midst of an economic boom that they had dug themselves into a hole that was really hard to get out of. One of the few good things that can be said about the Clark administration in NZ is at least Govt debt was reduced to a low level, and there were still surpluses pre-08.
The US does need to get on top of its deficits, and needs to drastically reduce its spending track. But (just as in NZ) this should be done carefully, and not so suddenly that it risks killing the anaemic recovery, or the situation will be made worse, not better. What is needed is long-term fiscal discipline (and huge plaudits to the Nats here that this is what they are applying).
Now infinite argument can be had over the shape of the fiscal reform that the US needs. I for one am happy with the centrist view of 90% spending cuts and 10% tax increases, especially in the form of eliminating loopholes that grossly distort the tax system anyway.
But even if the Tea Party view of what economic medicine is best is correct, I am appalled by the way they have forced it down the US throat: in effect threatening to nuke the US economy unless they get their way. I think that was a gross abuse of power. (Note that I do not condone Obama’s performance in this mess either).
What make this whole thing worse is the shoddy nature of the deal that was done. It is a deal that fails to address the real problems and mostly consists of promises that hard decisions WILL be taken later. Given the track record of the US Congress I am deeply sceptical.
I rather suspect that the realisation that Congress and Obama had agreed not so much to solve the problems as to just postpone the hard decisions is the REAL reason that markets have now reacted so badly to the outcome.
Vote:August 7th, 2011 at 12:55 pm
Something that isn’t widely promoted is this deal to cut spending doesn’t actually cut spending. It cuts proposed spending increases. The deficit is still growing, just not as quickly as before.
Vote:August 7th, 2011 at 12:56 pm
@swan
It is not the debt that is the main worry it is the future liabilities.
The level of social security in Europe is a giant ponzi scheme and it is unsustainable.
The Centre for Policy Studies (at end of 2008) argues that the UK national debt is £1,340 billion, which is 103.5 per cent of GDP. This figure includes all the public sector pension liabilities such as pensions, and Private Finance Initiative contracts e.t.c (Northern Rock liabilities).
As for the rest of Europe?
Vote:The bailouts in Europe will only help for a short time.
Greece is only a start.
Wait for Cyprus, Portugal, Belgium, Spain and Italy.
How many bonds from those countries does the UK hold?
August 7th, 2011 at 1:07 pm
Matt McCarten demonstrates he’s incapable of balancing the books for the Unite union and thinks people should listen to him when he comments on the US economy.
Only a rabid lefty would be that arrogant.
Vote:August 7th, 2011 at 1:08 pm
@YesWeDid
Even if rich folks were taxed to the max and had all their wealth confiscated, there still wouldn’t be enough money to underwrite America’s ever-growing government spending: “This year, Congress will spend $3.7 trillion dollars. That turns out to be about $10 billion per day. Can we prey upon the rich to cough up the money? According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies one as being rich. It’s not even yacht and Learjet money. All told, households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income.”
If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there’s a problem because there are 224 more days left in the year.
How about corporate profits to fill the gap?
Vote:Fortune 500 companies earn nearly $400 billion in profits. Since leftists think profits are little less than theft and greed, Congress might confiscate these ill-gotten gains so that they can be returned to their rightful owners. Taking corporate profits would keep the government running for another 40 days, but that along with confiscating all income above $250,000 would only get the US to the end of June.
August 7th, 2011 at 1:10 pm
While I wouldn’t go as far to say the Tea Party was the cause, I certainly wouldn’t say their blind ideological “no taxes” and damn the creditors approach is the cure.
Up until a month ago, while the increasing debt was a big problem, investors never seriously doubted that the US would pay its debts. By holding the debt ceiling hostage, and even in some cases arguing the US should default, they have done their country a major disservice. Creditors now know that while the US has the means to pay, it may not have the willingness in the future.
The fact that the Senate minority leader Mitch McConnell has suggested that the full faith and credit of the USA will beheld hostage again in the future in order to meet political aims is a new low. All this brinksmanship leads to is both sides taking ridiculous positions and the situation getting worse.
The whole concept of a tying the debt ceiling increase to a Balanced Budget Amendment that required a balanced budget every year (even in a recession when tax revenue decreases) and a 2/3 majority to raise revenue was always going to be a non-starter and the Republicans knew it. It sounds like a good thing in the soundbite of “cut cap and balance”, but it was worded in such a way as to ensure that it would never pass. A more balanced BBA (e.g. no cutting taxes without cutting spending) may be a good idea, but the approach of “pass this or we’ll create a financial crisis” was not the way to go about it.
Cheers, Chris W.
Vote:August 7th, 2011 at 1:11 pm
DPF..so now we again have the usual suspects, mostly tax/raterpayer funded (including Davis-Clark-like academics aka Tax payer bludgers) idiots, weeping on about the man who failed to pay his union’s taxes & PAYE.
Earlier tioday, on General Debate, I quoted Cicero (55 BC) in reply to some of Miken’s taxpayer funded rubbish.
I suppose the HoS has to run McCarten as it’s resident left wing anarchist. But does he know what makes a nation/company work? No. He cannot discern S*** from clay. Neither can most of the idiot left wingers or their apologists. They are still embroiled in their 100 year old views of the world.
One final point. Quote me a left-wing nation/government that ever produced sustainable, real, growth – without decimating the population ala Mao.
Vote:August 7th, 2011 at 1:13 pm
An author on Big Journalism points out that the best way is to do what Germany did and cut taxes, NOT increase taxes…
Vote:August 7th, 2011 at 1:14 pm
Swan,
Vote:You are wrong, the UK economy isn’t doing very well at all, and even there the Chancellor has had to legislate what are considered by the poms to be drastic spending cuts. Growth in the UK was 0.2% for the last quarter, which is barely growth at all. The stimulus didn’t work, either for the UK under Labour nor the US under Obama. All that it means is that both countries now have record levels of debt.
Huge spending cuts followed by tax cuts are the way to go.
August 7th, 2011 at 1:18 pm
Adolf Fiinkensein
It’s not looking good for McCarten, see here;
http://www.newzealandtaxation.com/2009/12/court-sentence-for-paye-fraud/
And that was just over $4,000 !
also;
http://www.newzealandtaxation.com/2009/07/jail-for-paye-accountant-fraud/
12 months jail for circa $21,000
The list of precedent goes on but Matt’s in the special club of parliament isn’t he. He’s probably not expected to follow the rules because they are so confusing…. Perhaps he can just pay it back and move on.
Vote:August 7th, 2011 at 1:22 pm
How does the expression go ‘common sense is not so common’.
Common sense is not common practice.
The calculation is: 80% spending cuts are required to pay of the Federal Debt in twenty years.
Which Congress is going to agree to that?
This not a left or right issue, anyone who paints it as such is a propagandist or a fool or possibly both.
This is a: “Washington is broken” issue.
As long as campaigns are as expensive as they are and lobbyists funds are required to get them re-elected, Congressmen and Senators will continue to bow to their demands which almost always are contrary to the best interests of the US taxpayer.
There is no sign that will change, at all. But until it does, the US will tank. It is now risking Weimar-style hyperinflation if it starts on QEIII, which it will probably do.
The US leadership know all of this, they’re not idiots, yet they continue to propose new policies that exacerbate not alleviate the increasingly critical situation.
We are very lucky that we are where we are, for the Pacific region is where the eyes of the world are turning and where the majority of global growth will take place over the next twenty years. As far as the US goes, I doubt it will retain its greatness, I just hope its people don’t suffer too badly, but I suspect they probably will.
I read an article the other day saying people don’t even get a look in for job applications if they’re not already employed, how’s that for a desperate situation if you are one of the unemployed given their social security cuts off after a time. Plus around 56% of their GDP is “financial services.” Well if they lose the Reserve, what’s going to happen to that?
Vote:August 7th, 2011 at 1:27 pm
The underlying problem here is that it became fashionable for governments to borrow money so as to spend. There was a belief that this could go on forever.
Now, whilst I can understand borrowing money to invest (say, to build a factory, or to build a road, or to build even a broadband network, wasteful though that is), most of these countries borrowed to fund current spending. The analogy here is borrowing for an overseas holiday, not borrowing for your education.
These countries were borrowing when we had the best economic times in a generation. By rights they should have been saving. When the crash came, there wasn’t enough money to pay the bills. The answer some came up with was to spend like a drunken sailor, to keep the party going for a little longer. And that hasn’t really worked.
I’ll readily agree that, in an ideal world, govt spending should be counter cyclical. You should run a surplus in the good times, and a deficit in the bad. The problem is that we don’t live in an ideal world. We live in a world where votes and governments appear to be, on average, idiots. So what they did was go on a spending and tax cutting splurge whilst times were good in the assumption that the business cycle had been banished. So we were all already in deficit when the crash came.
Raising taxes in response to a crash is bad because it discourages job creation. Cutting spending in response to a crash is bad because it hurts the safety net and reduces govt employment just when we need it most. Increasing debt when your debt levels are already unsustainable, in response to a crash, is bad, because it pushes up interest rates, hurts homeowners (and consumption), and pushes down business investment.
Unfortunately, we all made the bed, now we have to lie in it. Which of the bad options would we like to pursue?
Vote:August 7th, 2011 at 1:28 pm
I can always tell when I’m in the presence of calm, reasonable, pragmatists when they identify the side that refuses more tax increases as hardline, extremist ideologues and receive warm encouragement in the form of Nice comment.
Vote:August 7th, 2011 at 1:37 pm
Rotten to the core?.
What Killed Off The GOP Deficit Hawks?
Vote:August 7th, 2011 at 1:51 pm
@Tom:
A balanced budget means that you plan for your revenues match your expenses over some time period. When one side says under no circumstances will we allow revenues to be increased (even by removing loopholes) and then tries to force through an amendment to the constitution under the threat of allowing the country to default, that is an extreme position.
Cheers, Chris W.
Vote:August 7th, 2011 at 1:56 pm
I’ve heard various figures about how much the stimulus package cost per job created or saved, up to about $500,000. Even using the white house’s own figures, it’s currently $278,000. Meanwhile far more jobs were lost than created. Catastrophic failure.
Vote:August 7th, 2011 at 2:14 pm
Tea party are pretty loopy when you hear them speak. But they were not the hardliners. The hardliners were in fact those who wanted to borrow, have always borrowed, and intended to keep borrowing – apparently forever.
Vote:August 7th, 2011 at 2:16 pm
Chris W and others showing significant ignorance here,
The debt limit had NO EFFECT on the ability of the US to pay its creditors. They are constitutionally obliged to service the US borrowing first from government revenues, this costs $59 billion a month, the US government brings in revenues of over $200 billion per month.
The only effect of not raising the debt limit would have been an immediate haircut of 10% for all government departments, there was ZERO CHANCE of the US defaulting on its debt.
Vote:August 7th, 2011 at 2:22 pm
How extraordinarily disingenuous of McCarten to label this a black day for capitalism. The US government was badly overspending before the crisis. Then it really went out of control with spending during it, deciding that a long-discredited set of ideas (Keynesian economics) justified borrow and hope. And, like every other instance of stimulatory public spending, it completely failed. And so, having spent and committed trillions of dolars in new spending (+25% increase in federal spending since 2007!) without seeing the economy grow, entirely predictably, the federal government reaches a crisis.
And McCarten blames capitalism? Outrageous. Even the financial crisis that got this mess started has its roots in a) Fed underpricing of interest rates between 2002-2007, b) nationalising mortgage financing through Fannie and Freddie, and then requiring they finance an ever-increasing a minimum percentage of sub prime borrowers and c) making home mortgages tax deductible and shielding borrowers from personal liability on default. So yeah bad bahaviour is the result when the government insists on lending money to people who can’t afford to repay and protects them from responsibility on default. What a shock. How is this the fault of capitalism, Matt? Yes, bonuses and complexity played its role, and the private is sector has some blame in that (actually the complexity was itself a product of ever more detailed law), but McCarten is wildly off the mark to say the US federal government financial crisis is the failure of capitalism. How anyone can look at that organisation’s level of irresponsibility and blame the system it regulates for the problem is beyond belief.
Vote:August 7th, 2011 at 2:22 pm
@other_andy – Currently the average federal tax paid by US tax payers is only 9.4% of their income and there are over $1 trillion in credits, exemptions and deductions that are claimed.
It would certainly not be an impossible task to balance the budget through a combination of tax increases (mainly reductions in exemption) and cuts in spending, it just might not be political viable. Paying back the enormous debt is another issue.
Vote:August 7th, 2011 at 2:24 pm
It is exceptionally poor of McCarten not to pay his taxes, but that has nothing to do with his argument.
Vote:August 7th, 2011 at 2:26 pm
@Sonny – no need for the personal attacks. I have heard the argument before that the Treasury could simply prioritise interest payments and make cuts elsewhere, and there are two problems:
1. Why would it be that the non-payment on the other commitments (such as payment of Medicare, Social Security and invoices from suppliers, etc, etc) wouldn’t be counted as a default on obligations?
2. Under what law would the Treasury act to make these decisions? It certainly isn’t in the US Constitution that formal debt is paid first from revenues received.
Cheers, Chris W.
Vote:August 7th, 2011 at 2:30 pm
S RUSSELL Said……..”One of the few good things that can be said about the Clark administration in NZ is at least Govt debt was reduced to a low level, and there were still surpluses pre-08.”
Not at all. All they achieved was to grab all the money by tax increases and tax substitute levies so that high debt levels were transferred to the private sector and population at large, kneecapping growth and productivity in the process. The stimulus package of OBama might have been effective if it had been directed at infrastructure in the States as it has been directed in NZ (kudos JOYCE). Instead it went to pet Democratic largely unproductive projects.
Vote:The overarching problem common to all countries now in trouble, is that in good times they introduced socialist reforms that were detrimental to productivity but their successors were then unable to rescind the benefits to key sector groups when circumstances changed.. That is certainly the problem in this country, and it indeed was compounded by a vindictive Finance Minister who entered into destructive wastage when he anticipated defeat.
We now have the spectacle of GOFF lamenting the tax loopholes surrounding housing investment when for nine years he and his leader took advantage of them to build their real estate portfolios.
August 7th, 2011 at 2:36 pm
If that isn’t enough Obama has a Supreme Court with a majority of Republican appointees approving laws allowing corporations to give unlimited amounts of secret funding to politicians.
See here McCarten is putting the cart before the horse. The problem is not secret donations, it is the massive concentration of power that attracts those funds. Lobbying and donations are endogenous to the degree of political power a government votes for itself. In the US this is enormous, and so in comes the money. Whether it is secret or not is really neither here nor there: the money will be flowing in and there will be a quid pro quo of some sort for every dollar invested.
Vote:August 7th, 2011 at 2:37 pm
Sonny you may be right, but the crisis did cause real effects in the value of the US dollar and in a credit downgrade, and this means the crisis did affect investors’ expectations of their chances of being repaid.
Vote:August 7th, 2011 at 2:49 pm
McCarten writes at the level of a posturing teenager.
It’s so unfair that the government can’t keep on borrowing and spending for ever.
Mum, there’s no milk. Life’s so unfair. Everyone’s stupid except me.
ben,
“but the crisis did cause real effects in the value of the US dollar and in a credit downgrade”
Well yes. But that’s still blaming the prudent rather than the recklessly profligate for the situation.
Vote:August 7th, 2011 at 2:51 pm
An anarchist? No – but I’ll let Ryan Sproull explain why anybody who believes in government as much as Matt does is not an anarchist.
Remember too that that Depression was created not by the meltdown of 1929 so much as by the lurch to protectionism, and the massive monetary and fiscal tightening that followed.
To be a little more precise: the massive tax increases employed by Hebert Hoover after the stockmarket crash (before it he’d actually cut taxes, as per his predecessors) sucked even more money out of an economy already suffering from a demand gap, combined with the Fed restricting the money supply.
You’ll note that whenever left-wingers talk about Hoover and the demand gap they almost always talk of how this gap was made worse by the government cutting spending and removing money from the economy – when it’s tax increases involved there’s no mention of how that might be removing money from the economy and “widening the demand gap”. In any case, while governments in Britain, NZ and elsewhere might have been indulging in balanced budget mania via huge spending cuts that was not the case with Hoover. The increases in Federal spending under Hoover were so large that even Roosevelt criticised them, until he won power of course.
Vote:August 7th, 2011 at 2:55 pm
Grrrr – blasted blockquote failed… the comment
Remember too that that Depression was created not by the meltdown of 1929 so much as by the lurch to protectionism, and the massive monetary and fiscal tightening that followed.
came from S. Russell
Vote:August 7th, 2011 at 2:57 pm
I refuse to read McCarten’s columns until he has fully repaid the over $250,000 in tax owing to the IRD on behalf of the Unite Union and Unite Social Services Ltd (put into receivership by the IRD). He has withheld money that he was legally obliged to pay, and dpubtless spent it on other things, including I am sure political campaigns.
McCarten is an absolute hypocrite. If an employer of Unite staff withheld PAYE, Kiwisaver deductions and employer contributions and Student Loan deductions, McCarten would be rightly ropeable. That he has behaved in this was himself is appalling.
A couple of weeks ago I blogged a list of questions which the media should put to McCarten. No-one seems interested in doing so, and for that reason I’m posting the link here. This was not a one-off instance. PAYE was withheld over an extended period; October 2007 and March 2009. That period just happened to straddle to 2008 election, so no prizes for guessing how the money may have been spent; significantly, that is one of the questions asked.
Matt McCarten needs to have accountability for this. If the media is not prepared to condemn its darling, the blogosphere must.
http://keepingstock.blogspot.com/2011/07/questions-for-matt-mccarten.html
Vote:August 7th, 2011 at 3:08 pm
What Killed Off The GOP Deficit Hawks?
Wow – if only it was 2004 we could have a really good argument about big spending Republicans – the sorts that the teabaggers have been targeting.
However, as far as deficits are concerned those hawks were being killed off long before 2004. In fact we could go all the way back to Mr Hardass himself, Barry Goldwater, and find him voting against JFK’s proposed tax cuts in 1961/62 because they were not balanced by spending cuts, thus possibly producing a deficit.
But by the late 1970′s various Republicans realised that the Democrats and the left in general had put them in a trap. The latter would boost spending either directly with discretionary increases or with new government institutions that locked in ever increasing spending (Hey Hey, LBJ. How many kids did you tax today) and then scream for tax increases so as not to go into deficit or debt.
Sweet. Starting with supply siders like Kemp people in the GOP began to fight their way out of that trap by arguing, not without reason, that cutting taxes would actually boost tax revenues. That was hardly a new argument, nor one that can be put down to Laffer and co – see the JFK arguments from 1961. But it was anathema to the traditional GOP deficit hawks. They lost with Reagan’s election in 1980 and they’re not coming back even now. Too many people now recognise the left-wing trap for what it is.
Ultimately what we have is the end point for the clash of two political approaches: Gingrich’s whither on the vine (starve the government of money to limit it) vs. engorge the beast (thereby forcing tax increases to save beloved government programmes).
Vote:August 7th, 2011 at 3:41 pm
McCarten is a good man, love listening to him run circles around Hooten every week on Radiolive
Vote:August 7th, 2011 at 3:44 pm
The US failed to learn what caused the collapse of the USSR. It was not communism nor the oppression inflicted on its own people that caused the USSR to collapse. It went broke because it costs to fight wars. The USSR went broke due to its long war in Afghanistan.
The US financial situation is caused because it cut taxes and increased military expenses. The Tea Party refuse to entertain a cut in military spending and refuse to pay for it by increasing taxes to the wealthy. So the other option is to cut services that people expect.
The economically right of centre Obama also doesn’t want to raise taxes. Especially as those who funded his campaign are the people who would pay more.
The Obama administration and the Congress are destroying the USA. Like when the USSR collapsed it won’t matter except to the new poor and (much smaller) new wealthy that will emerge in the US.
The US is crippled because it went to war in both Afghanistan and Iraq.
Vote:August 7th, 2011 at 3:53 pm
Let’s try this again
Vote:August 7th, 2011 at 3:56 pm
Sigh …
It’s the new reality, which happens to anybody who borrows and borrows and borrows. Objecting loudly that this has never happened before is akin to complaining that the bank’s getting tough on your request to increase the credit card limit to $200,000 when they never objected to earlier, smaller increases. It’s just the politics of blame that have upended a perfectly everyday event that anybody with debt has encountered.
And those “political aims” are actually a fiscal aim – stop the ever increasing spending of government. There’s nothing morally or ethically low about that.
I agree that an amendment to the US constitution is a crock. It will never get the 2/3′s majority of the House and Senate to pass, and even then would not get the required 3/4 of the states to approve it. Moreover, even if it did pass those hurdles it would basically put judges in the business of doing the business of Congress – which would be kind of unconstitutional, not to mention eventually pissing off the politicians themselves.
Having said that – it’s a symbol, supposedly of the new hardline on increased spending. And the reason that the GOP, especially the new members of the GOP, are highly suspicious of allowing revenues to be increased by even things like removing loopholes is given above in my response to Cha’s link on the vanished GOP deficit hawks. Nobody believes in compromising on tax increases anymore because they’ve been down that route before and been shafted on the supposed spending cuts that will also occur. The most recent poison pill along those lines was the 1990 budget deal with good old Mr Bipartisan himself, George H. W. Bush. For good measure the Democrats promptly excoriated him in the 1992 election for breaking his promises on tax. Bipartisanship? Compromise? Yeah – that earned him a lot of points from both sides in 1992.
When one looks even at this debt deal and sees a reduction in increased debt from $10 trillion to $7 trillion over ten years this argument about extremism becomes even more of a joke. That sort of spending insanity is not extreme?
We could argue the economics but this is a political debate on a political blog inspired by a political activist in NZ parroting the US left’s arguments – so let’s go with the politics of the blame game. To whit – the Democrats had the opportunity, right up to January of this year, to increase the debt ceiling to a level that would have pushed them past the 2012 election. It would have been what Obama first demanded – a “clean” debt ceiling deal. There was nothing – zero. Then came the “clean” demand from Obama. Then the demand for the deal to include measures to cut the deficit (it was probably testing well in his 2012 internal polling). Then a demand for changes to entitlements – something that is needed but could never have been achieved in a discussion of just a few months. Whether this is an example of Barry’s low political cunning or his ineptitude as a negotiator is something that’s still up for debate, but either way it’s as much a part of the extremist demands as the Tea Party and appears to precede them.
I’ll grant you that extremist thinking is not helpful:
Thanks to who? The teabagging nutters who have been making such arguments? Oh, of course.
Vote:August 7th, 2011 at 4:01 pm
I used to think that McCarten was at least an honest man Randy; as unionists go. My opinion has changed with the revelation that he has withheld over a quarter of a million dollars of PAYE and other deductions from IRD over an eighteen month period. As a taxpayer AND an employer, that pisses me off more than you can imagine.
Vote:August 7th, 2011 at 4:03 pm
Even the financial crisis that got this mess started has its roots in …
You omit unregulated derivatives. AIA got into trouble because they were writing derivative contracts that no one understood, but were in essence insuring the share-market – an idiotic financial position if there ever was one.
Warren Buffet had been warning about the dangers of derivatives for years (and let’s fact it, who could forget Barings Bank). He described them as “financial weapons of mass destruction” – and by golly he was right. But even with years of warning, no one paid heed and we all paid the cost.
The problem here is the stimulus. It cost bazillions, and delivered basically nothing for that money. Ask any American. Were that money not spent, this debt ceiling would have been years off, and by then the budget could have been back in surplus again. People keep being told that Bush blew the surplus – and he did, but few seem to know that the trend was very much going the right way until TARP – and much of the TARP money was repaid very quickly.
Reading the S&P report, they blame
a) the fact that the cuts were not deep enough
b) the fact that not enough revenue was raise and
c) the fact that no one seemed to care about that as evidenced by the time and posturing it took to get as far as the did.
It’s like the a gunman holding up two guys and demanding $100. The two start arguing, and hours later (still at gunpoint) tell the gunman that they’ve almost come to blows but have agreed to find $20 between themselves if he’d only come back in 6 months.
No surprises that someone got shot.
Vote:August 7th, 2011 at 4:14 pm
True – but they have to be derived from something in order to obtain leverage. Those instruments exist for just about everything that’s bought and sold in the world and by and large they actually help smooth out the market place, which is why they were invented in the first place. Hell, the first use of options and other derivatives in the Chicago exchanges over a hundred years ago was to enable more certainty for both farmers and flour millers, not speculators. They still do that job.
Similarly, when the mortgage bonds on which such instruments had been leveraged in earlier years, rested upon the classic American 15 and 30-year fixed rate mortgage (typically with 10-20% down-payment) they actually worked.
Once the underlying bonds came to rest on ARMs and worse the leverage always had the risk of unwinding in a big way.
Vote:August 7th, 2011 at 4:57 pm
Anyone picking the NZD/USD dollar action on Monday? I would have thought investors fleeing equities and looking instead for safe(ish) bonds could see the kiwi rise further. Except the exact opposite happened last last week. Any ideas?
Vote:August 7th, 2011 at 5:03 pm
Buy real estate in Britain.
Vote:August 7th, 2011 at 5:19 pm
Mark Steyn brings the requisite level of snark to say part of what I was saying with greater humour:
Vote:August 7th, 2011 at 5:25 pm
When people in very large numbers realise its the investment banks running America things might start changing.
Only the investment banks benefitted from the QE’s. Only investment bankers and Wall St are on Obama’s priority appointment list. No other reps from any other industry have access to Obama.
Then there’s the industrial military complex. $35b over ten years cut off military spending of 1.5 trillion budget. Military has lost about 10 cents.
so I see it is no coincidence we have an investment banker as PM and Goldman Sachs is now in this country and commenting on financial issues through the ‘presstitutes’ (Gerald Celente) when we had never heard of them before hand.
Vote:August 7th, 2011 at 5:28 pm
Gold, silver and Swiss Francs are the answer to the failing paper fiat currency
Vote:August 7th, 2011 at 5:29 pm
@Tom
Sounds a bit like my wife.
Spends $80 on another pair of shoes.
Vote:“But they were on sale so I saved $70.”
Nancy Pelosi logic……
August 7th, 2011 at 5:38 pm
Anyone aware of what this man is saying
Vote:
August 7th, 2011 at 6:02 pm
Essentially there is a failure of nerve
1. by investors burnt by bad debts on securities, now wary of public debt risk
2. by supply siders who thought the Bush tax cuts would grow the US economy sufficiently to pay off the debt on the wars (caught by surprise by the need to bail out banks and corporates and the cost of high unemployment).
But the return fo fiscal hawks declaring the death bed of both supply side (tax cut) and spending stimulous as an economic policy does remind one an awful lot of the wisdom that applied during the early years of the Great Depression. Then the policy that ultimately worked was investment in the infrastructure of the economy – public works. And the USA does have to reinvent its economy with green tech to make it a sustainable one for this century.
What is really required is the realism of someone like Cullen – you pay down debt and you save (and restrain spending) when the times are good as Clinton’s administration did. So those nations that get out of this will have to remember that afterwards.
Those with public debt pressure when it is right to invest to create jobs (and this pays for itself) have to find the money from both spending cuts and tax increases.
Vote:August 7th, 2011 at 6:03 pm
I love those that believe spending stimuli improve the situation. There is just as much evidence that it merely prolongs the inevitable and even worsens the situation. It MIGHT spread the pain out over a longer period but the jury is out on that. Either way it’s the only hope for politicians as the alternative of significant reduction in government drag on the economy by reduced spending will get them voted out. This then continues until even the situation becomes so dire enough voters are willing to take the pain. Cue the U S of A.
Vote:August 7th, 2011 at 6:12 pm
And Johnboy was complaining about a lack of humour here! Just quietly SPC, Cullen didn’t pay down debt. He transferred it to the private sector by [taxation policy] decree. As for his saving, can we cash those savings in by selling the train set? Mmmm?
Vote:August 7th, 2011 at 6:15 pm
Wat dabney
Well yes. But that’s still blaming the prudent rather than the recklessly profligate for the situation.
Huh? Pointing out the crisis mattered isn’t the same as assigning blame.
Vote:August 7th, 2011 at 6:22 pm
kk, we are discussing public debt and the impact of that on fiscal policy, and FYI we are one of the lowest taxed countries in the OECD.
And in fact public debt did reduce in the 1999-2008 years and the Super Fund savings were also afforded.
Growing private sector debt was largely of a choice to pay the higher prices for housing (double) and farmland (quadrupled) because of the expection of CG – our existing budget deficit would have be a bit smaller of we had a CGT.
Vote:August 7th, 2011 at 6:31 pm
SPC – the only way public debt reduces is funding this from state trading income, or by taxation on private trading. given the weighting toward the latter (sorry, not sure of the exact split…) it’s not possibly to separate public and private debt. they are inextricably linked. I accept that plenty of private debt was taken on directly. But some of it was from having Cullen’s hatred of rick pricks given legislative clout.
Vote:August 7th, 2011 at 7:58 pm
SPC: so 5 seconds of google leads me to this page: http://www.oecd.org/document/60/0,3746,en_2649_34533_1942460_1_1_1_1,00.html
And particularly the link part way down to this file:
http://www.oecd.org/dataoecd/13/38/46721091.xls
That file shows that there are 33 OECD countries. NZ is 14 of 33. A little lower than halfway. I believe that this amount doesn’t include land taxes (local govt rates), but not certain.
I don’t see close to the mid point as being “one of the lowest taxed countries in the OECD”.
Vote:August 7th, 2011 at 8:22 pm
http://www.oecd.org/infobycountry/0,3380,en_2649_34533_1_70690_119663_1_1,00.html
Vote:August 7th, 2011 at 8:26 pm
Says one of the lowest tax burdens on labour. We have quite high indirect taxes, and quite high corporate taxes. We also have very few deductions. Not the same thing at all as “one of the lowest taxed coutnries in the OECD.”
Vote:August 7th, 2011 at 8:35 pm
The above link indicates we are one of the lowest for income tax (and this was before the recent tax changes) – it’s 13th/33 for tax share of the economy – that is pretty low cost government for a country with our low rate of GDP per head and one that funds tax paid super.
Vote:August 7th, 2011 at 8:40 pm
I would not call our GST quite high, just more comprehensive than others – most have higher rates (sometimes with lower rates for food etc).
Vote:August 7th, 2011 at 9:01 pm
Some data:
Vote:August 7th, 2011 at 9:14 pm
Optimist vs pessimist
http://finance.yahoo.com/blogs/daily-ticker/government-t-save-market-time-151809226.html%3B_ylt%3DAkveMZn83w4tzTtCIv4fi4a7YWsA%3B_ylu%3DX3oDMTE1ZWNrM2huBHBvcwM0BHNlYwN0b3BTdG9yaWVzBHNsawN3aGVudGhlZ292ZXI-?sec=topStories&pos=1&asset=&ccode=
Meanwhile at the ECB…
http://www.telegraph.co.uk/finance/comment/8682283/European-Central-Bank-paralysis-sparks-global-chaos.html
Vote:August 7th, 2011 at 10:04 pm
Understandable, one sees the opportunities for corporates able to borrow more cheaply in terms of lowering costs and improving profits – this sustaining stockmarket values. Whereas the other is concerned at the impact of rounds of hari-cuts on entitlements and the fiscal cost of tax funded bail-outs on the wider economy (when this is just to lower private lending risk).
Vote:August 7th, 2011 at 10:07 pm
@Reid
Ah yes, those evil millionaires.
“And of the 235,413 taxpayers who earned $1 million or more in 2009, 1,470 of them paid no taxes.”
If you look at the actual IRS report, you will find that the reasons for those with “income” over $1 million without a tax liability fall into the following catagories:
1. Inheritance. $2 mil in inheritance is exempt from taxes. So if someone inherited between $1 – $2 mil, they would have had to report it as income, with no tax liability. If you look at the charts, there were about 1,000 returns for under 26 year olds (about 300 for under 18) that had income over $1 mil.
2. Capital loss carry forward. Net capital gains dropped 51% or over $230 billion.
3. Small business losses. Small businesses would have to report their gross revenues as income. If their expenses exceeded their revenues, they would have no tax liability but could show “income” in excess of $1 million.
AND
Even if those ‘millionaires’ had paid tax it wouldn’t even cover 1 hour of interest on July’s debt payment which is a tidy sum of $35,813,917.97 for every hour of the day for 31 days!
Vote:(July’s interest cost on US debt was $26,645,554,967.44)
August 7th, 2011 at 10:34 pm
Other Andy, let’s get real.
If the Bush tax cuts were rolled backed for those earning over $250,000. the govt would gain 350 billion per year in revenue. Over ten years, and lets throw in a bit of inflation, we are looking at around 4-5 trillion in increased revenue.
That’s significant.
And that’s without actually increasing taxes. The govt can and should double or even triple that revenue increase with actual increases in tax.
Then there is a more than a few billion that can and should be gathered by closing loopholes – like tax breaks to oil companies who are living through a truly golden period in terms of earnings.
You know what they say, a billion here, a billion there, pretty soon it adds up to some serious money!
When Clinton left office the US govt income was 20% of GDP, now it’s 14%.
Throw in a couple of unjustified wars (not the assault on al Qaeda in the case of Afghanistan, just the next nine years), massive fraud in the mortgage market, largely unpunished, and you have all the ingredients of catastrophe.
But Matt is wrong.
The US remains the most powerful economy in the world. It registers the most patents. It develops the most profitable companies. It is a truly empowering environment for innovators.
Once they get some decent management (maybe Pervez Musharraf could take over the armed forces and, well, take over the country) the debt can be bought down quickly, without causing even more harm to the most vulnerable.
And a major step forward, in addition to redirecting war money into renewable energy development, would be adopting our healthcare model, lock, stock and barrel, and putting all those rip-off insurance companies out of business!
Vote:August 7th, 2011 at 10:39 pm
And, really, we are debating Keynes v Hayek, so listen to this: http://downloads.bbc.co.uk/podcasts/radio4/analysis/analysis_20110803-2040b.mp3
It’s a debate hosted by the LSE. One of the participants is a Kiwi, Jamie Whyte, a former philosopher, someone whose work I really like and respect, and who is on the side of the Austrians.
Enjoy.
Vote:August 7th, 2011 at 10:39 pm
Oh indeed:
The shorter version: when they had the power the Democrats did not have the stones to pass the sort of tax increases they’re now demanding. Which is also why the Senate Democrats have not produced an actual, written budget for 800 days and counting, not to mention the cynical joke that was Obama’s budget several months ago.
Politically it’s much easier to pull the same stunt as in 1990 – go all vague, play defense, let the other side make the suggestions that they can then be hung for and get the GOP to swallow tax increases instead, under cover of threats about blowing up the US economy and sending poor people starving into the street. Spread the blame, allow your political enemies to anger their own base, and cover further spending increases without the need to borrow as much. A threefer!
Sweet. But I think a fair chunk of the GOP is now wise to that bullshit.
Vote:August 7th, 2011 at 10:59 pm
Tom, one of your better posts, for sure.
But I don’t think it was a failure of nerve so much as recognition of reality that the Senate Blue Dogs would have voted any such tax increase down.
So Obama decided to box clever, perhaps too clever by half, as it turns out.
All this leftie angst about the reds being the problem is just misguided. Obama was on their side all along, and used them as cover. Sure, he would like tax increases, that’s sensible, but cuts were his priority.
QE3 is on its way – the annoited one needs Wall Street money for his relection campaign, much more so than last time.
Where the US needed an Infrastructure Bank, Obama delivers bankers bonuses.
Bonkers, or clever?
Vote:August 7th, 2011 at 11:41 pm
Far to cruel on Poor MMMMMMMMMAAAAAAAAAAAATTTTTTTTT MMMMMMMMMMMMMMMMCCCCCCCCCC
He is still ttttttttttrrrrrryyyyyyyyrying to read Kkkkkkkkkkkkkkarl MMMMMMMMMMaaaaaarrrxxxarx..
Just leave him alone.. He will catch up one day..
That is probably his excuse line to the IRD.. CCCCooouullldddnnnn””tttt ssssiiiggggn ttttthhhheeeee ccccccchhheeeqqqquuuee..
Vote:August 7th, 2011 at 11:47 pm
Ok.. Whilst you are debating taxes..
I will throw in NO INCOME TAX… Consumption tax to replace it..
Do not punish the workers and savers..
replies ??
Vote:August 7th, 2011 at 11:54 pm
tom, so the Democrats planned to lose the 2010 Congressional elections as part of a clever plan?
Vote:August 8th, 2011 at 12:03 am
adam2314. Australia’s learning at the moment what happens with consumption taxes. People buy lots of stuff on the internet, and put a hole in your tax take. Hard to run consumption taxes in a global economy. Land taxes are one of the less avoidable taxes…
Vote:August 8th, 2011 at 12:16 am
Their money comes out of the banking system.. No loop hole.. The banks collect..
Land taxes are only paid when land holders can afford it.
Thank you PaulL.. for the reply.. Keep them coming
Vote:August 8th, 2011 at 12:35 am
I am quite surprised everyone has let this idiotic statement pass
It’s called checks and balances.
Vote:I thought that was one of the main reasons the left foisted MMP on us.
Except to them, it’s not okay to them when its the right that is blocking their agenda.
August 8th, 2011 at 1:01 am
DPF, if you actually read the reasons given the primary reason was actually because of concerns that the political system is incapable of fixing the crisis because all the politicians are just posturing. Its absurd to say the Tea Party didn’t damage america, via forcing a near default and refusing to compromise on anything (tax take is the lowest it has been for 45 odd years, yet tax rises are off the table is ludicrous).
Vote:August 8th, 2011 at 1:13 am
Is The IMF not supposed to monitor the excesses. of Gummint excesses. ??
Why was this allowed to build up ?? ALL OVER THE OECD ?
Conspircy ??..
Vote:August 8th, 2011 at 5:23 am
“Matt has it all wrong. The drop in the markets isn’t because Tea Party supported Congressman insisted on spending cuts. It is because the spending cuts did not go far enough to stop US debt growing.”
If they really wanted US debt to stop growing they wouldn’t insist on absolutely no tax increases, not even allowing the Bush tax cuts that have done so much to bankrupt America to expire. They’re a sham who would be exposed as such in a country like New Zealand, and DPF makes himself look foolish by parroting their rhetoric.
Vote:August 8th, 2011 at 7:40 am
Eh? Even as rhetoric this reply makes little sense. The Democrats blithely assumed that the economy would recover from the recession as it usually does, boosted by their fabulous Stimulus plan, and be roaring ahead by 2010. Tax revenues would then start climbing again, back to the levels of the Bush era and beyond, so they could focus on the burning issue of the day – healthcare.
Of course by mid-2010 it was obvious that things were not going according to plan. By that stage they were so frightened of suggesting anything, let alone tax increases, that they could not even write a budget for 2011, something that was supposed to be their job. That’s gutlessness plus, and it did not help them anyway.
Vote:August 8th, 2011 at 7:43 am
If the problem is not enough partizan rhetoric in U.S. politics; then yes, yes the Tea Party is the solution.
Vote:August 8th, 2011 at 8:20 am
Pity the US left can’t learn what that reality means: a majority of the US population will not wear further tax increases, even in many places that are supposedly Democratic voters. The Blue Dogs knew that reality when elected in 2004 and 2006. Pelosi either did not know or more likely did not care.
I love how the total tax revenue question is morphed into a discussion about tax rates. I’m not sure whether commentators are being cute or stupid but whichever it is the reality is that tax revenues are driven by the state of the economy. In short – of course tax take is currently the lowest it has been for years – what the hell else would be the result of the worst US recession since WWII?
But here’s the kicker: raising tax rates is not the solution to that in the US. It never has been. Take a look at this chart of US Federal tax as a % of GDP.
As another person pointed out, the tax take is currently at about 14% of GDP, compared to something like 20% in 2000. But what this chart also shows is that this is not unprecedented. It was that low in 1948/49 – because that was also a recession. In fact you can trace the rise and fall against every recession the US has had since WWII more than you can against those times when taxes were cut. Income taxes on the highest earners were in the 90% range during the 1950′s – not that you’d know that from this chart.
Looking at this chart also demonstrates why people – starting not with Laffer but with JFK – began cutting tax rates. Because the actual experience of the 1950′s demonstrated a counter-intuitive – that cutting the rates would actually end up increasing total tax revenue, and increasing the tax take was what it was all about for early 60′s Democrats.
But not for the US left nowadays. They’re not even being honest about that anymore: they claim they want to boost the tax take, but what they actually want is to increase tax rates on “rich pricks”, even if the result of that will be, at best, nowhere near as much tax revenue as simple calculations would show. But who cares as long as class warfare is enabled.
Of course even that aspect is a crock: nobody in the Democrat party is proposing going after the likes of John Kerry and his Heinz hieress wife and all the hundreds of millions in their little trust funds, or Bill Gates, Buffet, Zuckerburg and the Google boys. No – easier to catch the schlubs earning in excess of $200K, like that will solve the governments cash problem.
I guess we’re going to see that fabulous chart concocted by the White House and fed to the supine suckups at the NYT, where everything, as usual, was blamed on Bush-era decisions?
Take a look at that tax chart above: it shows that whatever may happen to income and corporate tax rates, and all the other taxes, the total Federal tax take averages around 18-19% over the decades. In that reality the Bush years do not stand out as execeptional: there was a recession, tax revenue dropped, then increased again rapidly to former levels.
Now take a look at this site, US Goverment Spending, a fantastic wealth of stats that can be charted and sliced and diced in various ways. In particular take this look at Federal spending over the last three decades.
Federal spending at 24%: federal revenues historically at 18-19%. You can forget the way the spending tails off a bit in this chart because I’m using the CBO budget, which already assumes the Bush tax cuts will expire in January 2013. Even with that, spending is supposedly set to run at 22% and climbing from 2015 onward in supposedly non-recessionary times.
Shorter version: it’s not the Bush tax cuts that are bankrupting the country and tax increases way beyond those will be necessary if nothing is done to reduce spending down to historic revenue levels.
Finally, whenever people talk lazily about increasing Federal income tax rates they often forget that many states have their own income taxes on top – and they’re also rising in many cases as states like Illinois and California struggle with similar problems to the Federal government. That makes the effective tax rates in various, “wealthy” parts of America, start to approach European levels. You may forget that but the local Congressional reps do not.
Vote:August 8th, 2011 at 8:28 am
Yeah, Yeah. More debate framing.
Apparently the teabagger’s refusal to put tax rate increases on the table is extremist.
But Barry and co refusing to put the pile of crap known as the Patient Protection and Affordable Care Act on the table? That’s not extremist.
Vote:August 8th, 2011 at 8:46 am
What a ridiculously shallow post Farrar.
It sounds more like a party political broadcast
Vote:August 8th, 2011 at 10:30 am
If the US economy was strongly recovering from the Great Recession then much of anxiety about the federal deficit would be easing – that is because a growing economy means more profitable companies who pay more corporate tax and who hire more people who move from being a burden on taxpayers back to being tax payers. Employed and confident tax payers spend and thus companies in the consumer sector expand, are more profitable, pay more tax and so on and so on.
For an excellent primer on why Obama’s stimulus failed to kick start the economy and leave the US languishing in the worst post recession recovery since the Great Depression (as brilliantly illustrated with the following graphs: http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm) read this article about the quickest post recession/depression recovery in modern US history: http://www.nationalreview.com/articles/226645/not-so-great-depression/jim-powell#
Vote:August 8th, 2011 at 10:55 am
kia, were Harding’s methods tried from 1929 till early 1933 and what was the result?
Vote:August 8th, 2011 at 10:59 am
PS FDR’s policy results occured after the international trade downturn – and this was not something he could reverse alone.
Vote:August 8th, 2011 at 11:12 am
tom – you first criticise the Democrats (2008-2010) for having no long term long-term, deficit-reduction package representing a balanced approach between spending cuts and tax increases in the aftermath of the GFC and then for presuming that their GFC response was going to create the growth to take care of much of the deficit problem.
It would have been simply fairer to say that the Democrats delayed focus on a deficit reduction plan as their priority was dealing with the GFC and long term plans can be determined with more information (about how well the GFC recovery was going).
As for finalising a 2011 budget in 2010 before the elections, surely how to deal with the economy and budget was the election issue for the people to have a say on ….
Vote:August 8th, 2011 at 11:16 am
BTW, 95 house Dems and 26 Senate Dems voted against raising the debt limit, 66 house Repubs voted against.
If being opposed to raising the debt limit is extremist then the Democrats are guilty.
Vote:August 8th, 2011 at 11:18 am
Harry Reid has voted on 10 raises of the debt limit. There is a 100% correlation between voting no when a Repub is in the Whitehouse, and 100% voting yes when a Dem is in the Whitehouse.
Now who is partisan?
Vote:August 8th, 2011 at 11:40 am
Blaming the Tea Party for US strife is like blaming the break-up of a family on the victim of domestic violence who finally leaves after 30 years of abuse.
Vote:August 8th, 2011 at 12:04 pm
SPC
The Smoot Hawley Act and the trade war it sparked helped push the recession to a depression. Tax increases didn’t help.
Did Harding’s prescription work in 1921? Read the history. Did you view the graphs comparing this recession to all the others post Great Depression?
FDR’s own Treasury Secretary Henry Morganthau had to admit to the Democrat controlled House Ways and Means Committee hearing on May 9, 1939 (see Mongathau Diary, Franklin D Roosevelt Library)
An excellent epitaph to Obama’s Presidency to date and most relevant to the handwringing going on over the credit downgrade.
Obama had the perfect chance to impliment progressive liberal solutions to the economy – he had a comfortable majority in the House and a filibuster proof majority in the Senate. The Democrat controlled Senate hasn’t produced a budget in 820 + days – that is an abject abdication of governing responsibility and a breach of the law. Obama never once produced a deficit reduction plan – only demagoging speeches – he effect of which was eloquently summed up by Obama’s own Director of the Office of Budget Management Douglas Elmendorf when asked about the fiscal impact of Obama’s plan he said “We don’t estimate speeches” video clip of his response to Congress embedded here http://www.weeklystandard.com/blogs/cbo-director-we-dont-estimate-speeches_575464.html. The one budget Obama DID produce in February of this year was defeated 97 – 0 in the Senate – even his own Senators knew it was a lemon.
Vote:August 8th, 2011 at 12:12 pm
Yes I read about article about the policy of Harding – and so I asked were Harding’s methods tried from 1929 till early 1933 and what was the result?
And my point was that not every recession is the same and not every policy response can be compared because they do not occur in the same environment (sometimes there has been a change in level of international trade or terms of trade etc).
Vote:August 8th, 2011 at 12:16 pm
Now this yet another example of a left-winger being either cute or ignorant.
The US Federal budget year runs from October 1 to September 30. That means that Congress should have had the 2011 budget signed and sealed by the President by September 2010. That’s just standard practice and the only time it does not happen is when political calculations get in the way.
For example, in 2008 the Democrats made it quite clear that they were not going to waste time negotiating with Bush over the 2009 budget, as they expected they would get a much better deal from a new president. Bush had vetoed their 2008 budget, the first for the new Democrat House and Senate since taking power in January 2007, so they were not going to let that happen again. And, as they hoped, a new Democrat President signed the 2009 budget into law shortly after taking office in January 2009. Spending had already been running along its lines via the continuing resolution route. In other words Bush’s last budget actually was not his in any meaningful sense in the way that the 2001 budget was Clinton’s last.
So, to put it bluntly, it was very much the responsibility of the Democrats controlling Congress in 2010 to put together a budget for 2011. They did not, for the very simple reason that they were already running scared of the voters and terrified of the prospect of placing any real decisions in front of them – including all those tax increases that are supposedly so necessary now to fix the deficits. It is very disingenuous to simply wave away their legal and ethical responsibility as something the people would have a say on in November 2010. They had already their say in November 2008 when they continued to leave Democrats in charge of the process and the least they could have expected was for the Democrats to carry out their duties for the timeframe in which they were responsible. They were too gutless and too focused on playing political games to do so – which is partly why they got turfed by those voters. But that electoral decision does not and should not relieve them of their earlier responsibilities.
And this is not unique to the Democrats in Congress. As I pointed out above they’ve punted in exactly the same way in the Senate, where no budget has been produced in over 800 days, technically a breach of the law. Similarly Obama has not bothered producing another detailed budget after his first cynical, status-quo effort failed to win even a single Democrat vote in the Senate. Easier to leave the running to the GOP and then demagogue their decisions.
Vote:August 8th, 2011 at 12:28 pm
I used to think the same thing. But the near out-of-control spending governments that have sneaking to the left over decades has made me reconsider. Problem your suggestion is that it would make governments funded by consumption, rather than production. They would be incentivized to have you and I spend, spend, spend… so they could spend, spend, spend. Keynes would be overjoyed. So would the Chinese. Our kids mightn’t be happy with the tab though. IMO we need a tax system that endorses production for export, savings, and minimises consumption
Vote:August 8th, 2011 at 12:28 pm
You do realize that the Koch Brothers (with a combined wealth only exceeded by Warren Buffet and Bill Gates) have worked very closely with the Tea Party and given it plenty of funding. The Tea Party is NOT the cure, while it has some good points, it also does some serious damage (http://www.monbiot.com/2011/08/01/how-the-billionaires-broke-the-system/).
So the idea of ‘Everyday Americans’ standing up for something, while they may believe they are independent they are actually one of the biggest and most spectacular examples of astroturfing ever.
Vote:August 8th, 2011 at 12:38 pm
SPC
We’ll never know whether Harding’s prescription for 1921 would’ve worked in 1930 because Hoover’s actions (signing Smoot Hawley) in sparking a damaging trade war and enacting the largest tax increase in then US history were the two most flawed policy decisions he made that tripped a nasty recession in the depression.
Tax cuts spurred growth for Kennedy in the early 60′s helping move the US speedily out of recession. Ditto for Reagan in early 80s. By this time into the 1980/81 recession the US economy was growing at 7%+ versus now where were are sputtering along on the verge of a double dip recession AFTER a trillion dollar stimulus that we were told would reduce unemployment to 8%.
Vote:August 8th, 2011 at 12:38 pm
tom, you have a point in your last post about there being no 2011 budget but there was valid reason to delay one because of uncertainty about the recovery – though it can be reasonably argued that taking no position was a little evasive. However later when Republicans had the House majority attempting to broker a consensus instead is not untenable in their political process (your earlier argument was too cute by far and so I called you out on it – what long term deficit management plan was developed was always dependent on how the response to the GFC played out).
minor quibble, are not the House and Senate together Congress?
Vote:August 8th, 2011 at 12:49 pm
kia, well given the Republicans 2000-2008 did not run true to either Hayek or Keynes, the USA was in no position to cut taxes to stimulate the economy afterwards – not when a lot of taxpayer money was going to banks and corporates rather than create new jobs.
PS the one success of the recovery plan to date is that the low interest rate policy and QE has allowed corporates to re-finance at low interest rates – this has reduced costs and increased profits and those still making profits have large reserves for new investment. But how many will spend the money without more confidence in economic growth given these related factors – public debt risk, a downturn caused by cuts in government spending to lower deficits and utilisation of (western) world capital reserves to bail-out weaker economies with public debt. This while the bad debts of the GFC are being absorbed and banks are being re-capitalised to new Basel standards.
Vote:August 8th, 2011 at 12:56 pm
marathonmilk
Vote:You need to stop drinking left wing Kool Aid. Center for Responsive Politics, a non partisan, independent political funding watch dog lists all the top donating organisations for the last 10 years and they are trade unions and left wing PACs donating to the Democrats – see http://www.opensecrets.org. Then there are the myriads of billionaires like Soros, Peter Lewis and a number of San Francisco based liberals who made money from venture capital and the many Hollywood moguls who all donate massively to the Democrats – the combined donations of this group would dwarf anything the Koch brothers have donated to Tea Party related organisations. But of course if a billionaire donates massively to PROGRESSIVE causes, in the eyes of the left that is OK but should that billionaire donate to CONSERVATIVE causes then its an evil conspiracy to rort the political system.
August 8th, 2011 at 1:05 pm
Which might be an acceptable argument if there were precedent for it. Is there? Are there examples where past GOP or Democrat controlled House’s waited to see what would happen with a recession before committing a detailed budget to writing? I’m not aware of one. As far as I know every former House played with the cards they were dealt.
Moroever, it might be an acceptable argument if we did not see the same party pulling exactly the same stunts in the Senate and the Presidency almost three years after the GFC hit. That’s a pattern of irresponsibility that’s hard to ignore.
And again that might be an acceptable argument were it not for the fact that the Democrats and their activists, screamed long and loud about the terrible Bush deficits. Even accepting the vaporous nature of political rhetoric I’d have expected the Democrats to immediately get to work to fix said deficits – with measures including the tax increases they’re now so hot for. They did not and they have not – and the same point must be repeated about the President and the Senate: how long do we allow them to see how the response to the GFC plays out?
To a certain extent I can’t blame them: it’s the mirror image of a GOP that talks tough about cutting spending but then folds at the knees because somebody runs advertisements about pushing grandma off the cliff. But let’s face it, that’s the situation that the left always gleefully proclaimed when they built these systems – that once embedded they could never be touched.
The phrase Phyrrhic victory comes to mind.
Vote:August 8th, 2011 at 1:08 pm
SPC
Vote:You ask American employers (including those who donated big time to Obama and the Democrats) and they’ll tell you why they aren’t hiring: uncertainty over employee costs brought on by the many hidden and yet to be introduced taxes, fees and mandates imposed by Obamacare, the threat of new taxes, the attempts by the Obama Administration to do an end run around Congress who defeated progressive ideologically driven environmental policies such as Cap and Trade by aggressive new job killing regulations, the threat of capricious judicial overreach (eg the Federal judge that ruled that the rights of the delta smelt – a small fish – override the rights of the farmers and the workers of the Central CA Valley to water thus creating a government mandated dust bowl killing businesses and 10,000s of jobs), the new burdens and costs of misguided attempts at controlling Wall Sts excesses under the Dodds Franks Consumer Protection Act – the list goes on and on. To hear the full reasons listen Democrat Senate Majority leader Harry Reid’s largest political donor in Nevada give the reasons for no to low growth: http://www.youtube.com/watch?v=LTbjcKZzrmM
and that’s what DEMOCRAT big business donors are saying.
August 8th, 2011 at 1:42 pm
2. by supply siders who thought the Bush tax cuts would grow the US economy sufficiently to pay off the debt on the wars (caught by surprise by the need to bail out banks and corporates and the cost of high unemployment).
My observation of the data on the Bush tax cuts is that they were pretty netural – in the short term they lead to less tax, but after a time revenue picked up again due to the increased economic activity they generated, and revenue returned to it’s upward trend line.
Second problem with your statement is that the graphs show that the deficit was improving under Bush, and well on the way back to surplus. TARP screwed with his last year’s numbers, but that money has actually been repaid now. (Of course, the Democrats decided to re-spend it…)
The real problem is the stimulus. It created a vast amount of public debt, for basically no gain.
People reading the S&P report are correct – you *can* spin it to blame the tea party. But only if you ignore the fact that the Tea Party was trying to insist that the US balance it’s budget by the most realistic means – spending cuts, which was exactly what would have made S&P happy.
It blows my mind that the left have managed to convince themselves that cutting government spending is a terrible, economy crippling thing, while tax increases aren’t.
Vote:August 8th, 2011 at 2:34 pm
Unbelievably the US still hasn’t reduced low skill immigration despite 10% unemployment. I guess ideology prevails over reason.
Vote:August 8th, 2011 at 2:49 pm
scrubone – part of the reason for the apparent tax revenue success of the Bush tax cuts was the easy credit expansion that created the growth for the tax revenue increases and a lot of the spending in the GFC response was to bail-out banks and corporates (it was not an expansion of government programmes apart from an extension of unemployment cover).
Clearly a balanced tax increase and spending cut programme should occur – simply closing corporate loopholes and reversing some of the Bush tax cuts would alone provide more than a match for any spending cuts planned by the committee.
They should be bolder – make sufficient budget deficit savings to live within a debt cap and also finance investment to modernise their infrastructure/create jobs.
Vote:August 8th, 2011 at 2:55 pm
The scary thing, DPF, is that Paul Krugman believes that the stimulus should have been much much bigger in order to get results. The Keynesians need to get with the plan…
Vote:August 8th, 2011 at 3:11 pm
Of course with all the usual sturm and drang about The Bush Tax Cuts, it should be noted that they are already scheduled to expire in January 2013. If Obama wins they will expire.
That is already written into the CBO forecasts, not as an assumption but because it’s written in as law, with a House-Senate-Presidential signoff needed if it is to be dumped, something the CBO is not allowed to make guesses about.
So any “balanced” tax increases are going to have to be beyond that.
Vote:August 8th, 2011 at 3:11 pm
Krugman was not wrong (depending on the quality of the spending), but the deficit and debt was too big already because Bush and the Fed did not run counter-cyclical policy well enough before the GFC (they were engaged in war with domestic prosperity politics) and so much of the stimulous was delivered for bail-outs to corporates.
Vote:August 8th, 2011 at 3:17 pm
tom, well I would not predict that Republicans with a majority in the House and or Senate would preside over a budget round without an extension of the Bush tax cuts – even if Obama were re-elected President.
It will be interesting how the “committee” deals with that issue and makes its assumptions, or ignores it as a matter it has no control over or wants no comment on.
Will spending cuts be made simply to afford a continuance of the Bush tax cuts and is this the real Republican strategy.
Vote:August 9th, 2011 at 1:10 am
LOLZ!
Yes! It looks like it does!
FYP
Vote: