The Party of Fiscal Responsibility?

I've done several pieces over the past year+ showing how absurd it is to consider the REPUBLICANS "fiscally responsible."  Whether it's showing what portion of our debt they're responsible for, or going year by year and showing the trends in deficit spending or even just recognizing the fact that they have been, in fact, actively trying to bankrupt the government in order to force an end to programs that they know they could never get away with, politically, cutting or eliminating.  And that last bit, while seemingly a bit paranoid, is on full display right now in the ongoing farce about trimming the deficit. And to understand just how big a farce this is, realize that you could take ALL of Obama's proposed cuts, ALL of the Republican's proposed cuts, and none of the Republican's propsed tax cuts (yeah - they're "serious" about the deficit, and yet they're STILL proposing tax cuts! That's liek getting "serious" about your credit card debt by working fewer hours!) and even wth all of that, you wouldn't even be HALFWAY to a balanced budget!
And what do we already see will be the result of all these cuts? Hospitals closing, schools closing, tens of thousands out of their jobs, no funduing for public broadcasting (the Right has to LOVE that one!) and the list goes on, and on, and on.

And on.

And for all that pain?  We're not even HALFWAY to a balanced budget?  You gotta be fucking kidding me!

And do you know what's not on the table? RAISING TAXES. Of course.  And there cannot be one person anywhere in the world with two brain cells to bounce together who thinks you can balance the budget on spending cuts alone.  But... this was the Republican's plan all along!  And Speaker Boehner can cry "We're broke!" all he wants, that doesn't make it true.  We're not broke.  That's a bald-faced lie.  We're in the RED, yes.  And that's not good, long-term.  (Although that being the case one has to wonder why the Republicans PUT US in the red every single one of the last 20 years in a row when they held the White House!)  But see... they don't want to raise taxes for two reasons and two reasons only, and neither of them has ANYTHING to do with harming the economy, or creating jobs - botho fwhich are pretty much bullshit.  In fact the same economic model that gives their tax-cut multipliers? (That would be KEYNES.)  Demonstrates that spending changes have a larger effect! (IOW: Those spending cuts will do more harm to the economy than the same level of tax increase. So says the model that gives them the tax-cut multiplier!) And I'm not going to debate that here, but it's a bullshit, nonsense point anyway.  If you want the details, email me or take a goddamned economics course.

The two reasons they don't want to raise taxes is:

1) The American public has grown so stupid and so greedy and so so shortsighted and lacks so much perspective that we're probably to the point where the fools WOULD actually lose their jobs if they did it.  Not that I care about the Republicans losing their jobs, but the bulk of America has grown so spoiled that they just have no clue. No clue at all.  I'll get to what I'd do with taxes in a moment, but the Right has dumbed down America so much, that it probably IS the political reality that raisign taxes is political suicide.  Even though it's needed.  Kind of like... REAL LEADERHSIP.

2) (And this is the important one) Raising taxes would LITERALLY FIX EVERYTHING.  Seriously.  And... they don't want that!  They've been trying to kill these progams for DECADES and they have finally CREATED an environment where they can claim that we have to! (In some cases, IN ORDER TO SAVE THEM!  Figure THAT ONE out!)  But finally, after 30+ years of crippling our governments finances, they finally have enough people fooled into believing that these things have to go. (Persoanlly, I'd say these idiotic Republicans are the ones that have to go, but the people have spoken.) The LAST thing they want at this point is a solvent federal government!

Think about it: How many times have your heard one of these fools, Democrat or Republican, claim, "We just can't afford it anymore?"  I hear it almost every day.  And while they're right, from a certain point of view, it's utterly shocking why no one ever asked about raising taxes back to the levels they were at when the country and its finances were doing just fine!  It's not like we've had these tax rates etched in stone since time immemoriam!  GEORGE W. BUSH created the current tax table, less than a decade ago! And, at least for the past two years, Obama's lowered taxes EVEN MORE!  It's hardly like were tapped here, folks!  It's like we're dying of thirst sitting in our kitchen, and yet refuse to turn on the tap!  It's psychotic!  And if they wanted to lower taxes repsonsibly, all these many long years, they'd have cut the spending FIRST thus keeping the taxes6 cuts deficit neutral.  But since the American people would never go for that, they had to plunge us into debt, creating this artificial crisis in order to confuse the public and get them on board! (And despite being 30 years in the making, with 20 of those years under Reagan, Bush and Bush, somehow this is all OBAMA'S fault!)

Now, I would like to take a look at some of the tax tables of recent past administrations, just to show you how "painful" (hah!) this would be.  As two examples, I'm going to use a household that makes $500,000 per year and my own (approximate) household income.  I'm not going to STATE my income, but I will be honest about what it would cost or save me if we were taxed at some of these older rates.  If you can calculate my income from that information? Congratulations. You pass basic Algebra.  And I'm also assuming that I don't have to explain to any of you how a MARGINAL SYSTEM OF TAXATION works.  So if you don't know where I'm getting my figures, try wikipedia.  One last thing, you can check my tax bracket info aginst the info available at the U.S. Tax Foundation, and my inflation calculatuions HERE.  One last thing: It's worth noting that, starting in 1984, the tax brackets were adjusted each year for inflation automatically.  I happen think this is a good thing, and would automatically adjust ALL fixed numbers in the tax code - including all maximums and minimums - the same way.  So for simplicity's sake, I'm using the last year that the given rates were in effect.

The current tax table is a legacy of the Bush'43 administration:
(Sorry, these run over.  If they were any smaller, you wouldn't be able to read them!)

This is the tax table that resulted in eight years of record deficits (record at elast when compared to any that came before him) under Bush, and another under Obama, and likely another one next year.  Now you hear a lot about eliminating the Bush tax cuts for the wealthy, but I'm on record many times as saying that we should eliminate them accross the board!  Clinton had two budget surplues at the end of his term.  And this was the tax table that created those:

If we adjust for inflation, and move the brackets into 2011 dollars, we get:

So what would all this bed-wetting about the Bush tax cuts cost the rich? Well, that family who's pulling in $500,000 would onlyhave to kick in an extra $12,33.64 a year.  That sounds like a lot, to be sure, but think about it: $500,000 a year!  Think about what you make, what you live on, and ask yourself how hard it would be to find an extra grand or so per month in your budget if you made that many times more than you make now!  You know what I say? Boo-fucking-hoo for the rich.  What would this cost ME?  An extra $1755 a year.  Now that would affect my lifestyle and spendign decisions far more that the $12-large would affect that other familiy's, but I'll be honest with you: $147 less a month?  I could afford it.  Actually? It wouldn't change by budget at all, nor would it impact my retirement savings. I'd still even have some decent cash going into my short-termsavings account. So it really wouldn't change much of anything.  (I guess it must just be good to be me!)  But whatever.  If that's all it cost to REALLY eliminate the defict and KEEP most of our social safety nets? FUCKING DO IT ALREADY!

Now, I will admit that Boehner & Co. may have a point when it comes to tax hikes.  After all, check out the table that got George "Read My Lips" Bush voted out of office in 1992:

adjusted for inflation:

Oh, my fucking god!  His top-rate is still less than his son's!  And he got kicked out of office for that!  Apparently we've been spoiled little cry-babies about taxes longer than I thought, the Clinton years not withstanding!

Now this will illustrate why the whole flat tax thing (and the arguments about top-tier rates) are utter bullshit.  This tax table? Would cost me another $1089 over the Clinton table. (and $2845 over the current table.) That's right: Bill Clinton LOWERED my taxes! (Hint: It was those extra brackets!)  Meanwhile, in all his generosity, Bush'41would give a $13,583 CUT to that family making $500K per year as compared to the Clinton table. (And $1250 less than than what his son's table taxes them at!) Talk about "rob from the poor and give to the rich!"

But how bad was that, anyway?  Why'd he get voted out over that? Well... it was replacing this absurd tax table from Reagan's second term:

Look at that!  A top-tier rate that's actually LESS than what he's taxing the middle class at! Can you believe it!  This is the Right's great hero, folks: Rob from the poor and give to the rich, and don't even try to hide it! Adjusted for inflation, it would look like this:

OK. Under this monstrosity, I'd be paying $3004 more than I'm paying now.  (And $1249 more than the Clinton table!)  Wait... I though Reagan was this great tax-cutter?!  Well... he was, if you were rich enough to afford him:  That family of $500K? Pays $4,872 less than they do now, and $17,205 less that they would owe under Clinton!  The middle class gets soaked for 3-large, so that some making $500K can have an extra 17-GRAND?!  What. the. fuck?  I'm liking Geroge W. Buch better all the time!  At least with him there was SOMETHING in it for me!  As far as I'm concerned Reagan and Bush were a bunch of working-class-people-hating cock-munchers!

There is one thing, however, about Reagan that his current cult-following will not tell you about.  In his first term, he actually signed a top tier tax rate of 50% into law.  It was a CUT at the time but still, let me say that again: Ronald Reagn signed a 50% tax rate into law!  And it was in place until 1986.  Here's what it looked like:

Adjust for inflation and you get...

Looks complicated, no?  Well... complicated can be GOOD sometimes.  Under this table I would owe $2566 more than I owe today, and just $810 more than I would under Clinton.  And those rich folks at $500K?  Would owe $64,798 more than the do now. Wow. And that's under a RONALD WILSON REAGAN CONSTRUCTED Tax Table!  Fuck Clinton! For an extra $810 a year?  I say: let's bring back the first REAGAN tax table!  Let's bring back that $64K tax hike that this great socialist would ask of the rich!

I mentioned that this was actually a reduction, and I've gone so far recently as to call for pre-REAGAN tax rates.  This was the last table under Carter:

Adjusted for inflation:

Do you notice how that top tier rate doesn't even kick in until well after $500K? Remember that the next time someone's making fun of that 70% tax rate.  Now... I'll admit that I could be pursuaded that 70% is too high.  We can argue it.  I'd be perfectly happy with a top tier rate of 50% - with that 1982-86 Reagan Table.

But just for shits and giggles, under Carter, I'd owe $4355 more than I'd owe today.  ($2600 more than with the Clinton table, and $1789 more than with the earlier Reagan table.) That's... a bit much, actually.  I could still swing it, without changing my budget, or my retirement investments, but... there wouldn't be ANYTHIGN left for short-term savings or emergencies. Nothing. Nada. Zilch.  So... yeah, bvioulsy that would eventually impact my budget.  And thus I might just have to back off from my calls of Carter-levels of taxation, even if it would squeeze an extra $117,708 out of those rich bastards down the street, over what they'd owe now. (LOL!) As much as I'd love to seem them pay that... We're getting into T.E.A. territory for me with with what I'd owe.  So, yeah, I'll admit this is excessive.

I'll bet you never thought you'd here me say this: BRING BACK THE REAGAN TAX TABLES!

(Just remember: I mean the 1982-1986 tables, not the 1987-1989 tables!)

What do my libral readers think?  Time to revisit Reagan's great tax policy?

Lies du Jour, Part One

There are two particularly annoying meme’s being pushed right now by the Right about Obama and the Democrats:

1. That Obama created the deficit
2. That Obama raised taxes.
3. There are both true and both bad and thus both are reasons to vote Republican.

First things last: neither is true. And we'll get to that in part two.

But let me put that aside for the moment, and first point out the absurdity of the idea that the deficit can be your #1 issue when you’re calling for TAX CUTS! Now… am I saying tax cuts are BAD? No. Not at all. They stimulate the economy. That’s right. You read that right. They DO. In fact the idea that cutting taxes can stimulate the economy if every bit as much part of the Keynsian economic model as the fact that increasing spending stimulates the economy is. And both work the same way: The multiplier. If you cut taxes, or increase spending you increase the income of America by [some multiplier, greater than 1] times the amount of the change. And like wise raising taxes and cutting spending will have the same negative effect: the income of America will change by [some negative multipler, greater than -1] times the amount fo the change. Conservatives are more than happy to accept the tax half of the Keynsian model, but for some reason they can never seem to swallow the spending side of it. And the real kicker is that the multiplier ofr spending are GREATER than the multipliers for taxes. The end results is that a balanced budget always has a multiplier of “1.” If you raise taxes AND raise spending by [X] collective income will INCREASE by [X]. If you cut taxes AND cut spending by [X] collective income will DECREASE by [X]. They never buy it, but if you take an economics course, regardless of the ideology of the professor, you will learn this. It’s a FACT.

BUT… that’s all about the effect on the ECONOMY. If you’re concerned about the ECONOMY? Fine, cut taxes. (Or increase spending, whatever.) But you can’t be expected to be taken seriously if you’re talking about cutting taxes to decrease the DEFICIT. (Well, OK, yeah you CAN, only because there are a lot of real idiots in this country. In any case you SHOULDN’T BE taken seriously by ANYONE.) Because that’s like saying, “My credit card debt is getting too high, so I better quit my job.” The deficit is SPENDING minus TAXES. So… if you lower taxes, you can ONLY increase the deficit!

Duh!

Now… some will argue that the multiplier effect I mentioned earlier can fix this. That if we cut taxes (for example) the resulting growth will result in more tax revenue. (Or at least as much as we had before.) That’s the idea behind the now widely discredited Laffer Curve. Personally I think Laffer had a legitimate point, but he his partisanship caused him err when trying to figure out where exactly on the curve we were, as well as what the exact shape (slope) of the curve is, and where the center of it is. In any case, let me demonstrate why tax cuts (or spending icreases, for that matter) will never “pay for themselves,” why they will ALWAYS contribute to the deficit, unless offset by spending cuts (or tax increases):

  

Let say you’ve got a company with $100 in taxable income (profit) and we’re taxing them at 30%. (That a bit higher than most US corporations pay, but it makes the math easier.) SO you get $30 in tax revenue from them.  How much growth would they need to see for a 5% reduction in taxation to “pay for itself.” (Meaning: for it to be deficit neutral.) Well… to get that same $30 at just a 25% rate of taxation, they’d need to make $120 in pre-tax profit. IOW: they’d have to see 20% growth! Note: Few companies EVER see 20% growth, and a 5% tax cut on it's opwn just ain’t going to do it! How do I know this? First of all, most companies require a Return on Investment of just 10%, 15%, 20%... something on that order. To turn that $5 of tax savings into $20 of income would require a 300% return! And if a company had a way to get a 300% return on their money? They’d do it. Period. Right now. They’d find a way to beg, borrow or steal that $5 they needed. But guess what? There are not a whole lot of projects out there with a 300% ROI. None really. At 20%, that company would made $101 in taxable income from that $5 investment and pay $25.25 in taxes. IWO – we added $4.75 to the deficit by doing this.

Even IF one considered the multiplier effect, the results are still nowhere near where they need to be. To turn a $5 tax cut into $20 of taxable income requires a multiplier of FOUR. And no legitimate economist goes throwing numbers like THAT around lightly. I'm not saying it's impossible, just that your going WAAAY out on a limb to assume it.  Here, for example, is a graph by Mark Zandi of Moody’s showing the benefit of each dollar spent on various parts of the stimulus package in 2008:

(And yes, I know that looks like crap bleeding over like that, but it look worse shrunk down. So just deal.)

Now, granted one could claim this is “just some liberal rubbish,” but do you notice how the highest multiplier is still under TWO? (~1.7) Even for the “liberal” stuff that he'd be trying to sell?! Nothing ANYWHERE NEAR the four that we'd need.

Now, that 300% return (multipler of 4) only applies to a 5% cut from a 30% base tax rate. Here’s a chart I worked up, showing how much growth you’d need (and the required multiplier) for a given tax cut to pay for itself. Feel free to go in there and monkey with the numbers if you want. The point still stands.  You can see that unless you’re talking about very small tax decreases, from very large rates, you’re talking about growth rates that are only ever talked about in classroom examples. They have no place in business projections (indeed any business would go broke VERY FAST if it relied on this kind of growth assumption) and should have no place in policy discussions.

"Part Two" will show why, in addition to being assinine when taken together, both a flat out FALSE individually as well.