This just in: The Obama Deficit Reduction Plan

[John-in-KC]

I think I'd write that check for myself and my son as well...

 

Too bad...

[Lisabob]

Eamonn, John, tell you what, you write that check and maybe the gov't can cancel out your part of the debt. But under your plan, no future taxes = no future services. Don't you guys both work for government entities (state prison and military)?

 

About that mortgage deduction: I did the "smart" thing earlier in the decade and decided not to buy a house I couldn't afford, in a market where now large numbers of people are "under water" and/or in foreclosure. How come I don't get any sort of tax reward for my carefully considered economic behavior? In the bigger picture I suppose I'm glad I didn't buy, because in this market I'm not sure I'd ever be able to sell at a reasonable price and I don't want to stay here for ever. But I resent the fact that my taxes subsidize others who either were less careful and now find themselves in piles of house debt or who are comfortable enough that they wouldn't have really needed that mortgage deduction in the first place.

 

I say, level the playing field - get rid of the darn mortgage deduction. It just further perpetuates income inequality in this country and rewards greedy, short-sighted economic behavior. Bah. (feeling cranky, these days)

 

 

 

 

[packsaddle]

Lisa, feeling cranky is one entitlement that you're, well, entitled to these days.

[Eagle92]

Lisa

To be honest, my mortgage interest isn't enough to make me itemize as the wife and I did buy a house within our means. Problem is it's value has gone down due to rezoning ( from residential to residential and light commercial) and converting neighboring properties to rentals. So you probably did the right thing.

 

As for lowering the tax base to increase tax revenues, wasn't it proven that when folks have money in their pocket to spend on goods, business sell more goods, which causes productivity to go up, casueing more people to get jobs and/or higher paying jobs, so incomes rise, and income tax revenue, although at a lower percentage rate, does increase? Why yes it has been shown.

[Lisabob]

Well no Eagle, it hasn't "been shown." It has been asserted, though. That's "trickle down economics" for ya.

 

Thing is, people of relatively modest means already spend pretty much all they have left in the pockets and seat cushions, once they pay their monthly bills. Yet, that's not really the point of trickle down because the absolute volume of "additional" money (from tax cuts) that gets spent by lower income folks is just not going to be that much. And in fact, at the lowest end of the scale it is "zero" because people below a certain income level pay practically no federal income tax to begin with.

 

Wealthier people tend to pocket the tax savings and put it into some plummy investment accounts. It has not been definitely shown at all that these folks go and spend more or open new businesses, etc, thus stimulating the economy. That's more in the realm of conjecture and assertion.

 

Now the middle class - maybe THEY'LL be the ones who make enough additional (tax cut) spending to really keep things cooking in the economy. But wait - isn't the middle class shrinking? Oh, yeah. Probably a bad thing. So much for that.

 

And anyway, we all know that if you have 3 economists in the room, you'll get 5 different answers to any question about the economy. So I think it is healthy enough to be skeptical whenever someone says that some economic theory has been shown (to do much of anything).

 

 

[packsaddle]

That trickle down argument was one made quite a while back by Reagan. It resulted in....big deficits. It is the argument made by the Bush administration when he chose to cut taxes rather than pay down debt and it resulted in....big deficits. Now we're hearing the refrain again. If the trickle down idea works (and it actually did for JFK) then we should derive maximum benefit under the scheme by cutting taxes to practically nothing. Just think how much revenue would be generated then...all our problems would just go away....

 

What seems more obvious about those plummy investments that Lisa mentioned is that they likely DO create jobs...overseas...by those huge multinationals which derive profit for those plummy investors (who don't have to pay as much tax) by selling the cheaper imported goods at the WalMart or the Scout shop to the lower income groups who choose them over slightly-more-expensive domestic products in order to make ends meet, thus contributing even more to job losses. It's a pretty smooth system, I have to admit.

[Eagle92]

Well folks, I'm not an economist, just took 1 course in macro in undergrad and 2 courses for grad, and one of those was more an economic history than pure economics.

 

My understandind is that the late 1940s to 1960s wa the best example of low tax rates and high productivity. Folks immediately after WWII had money saved up via war bonds and savings b/c of the rationing going on. When industry switched form wartime production ot peacetime production,it oped the floodgatee so to speak and industry for the most part continued on, creating jobs for returnign vets.

[BrentAllen]

Both the JFK and Reagan tax cuts did what they were supposed to do - increase tax revenue. The deficits grew from increased SPENDING, not loss of tax revenue.

[John-in-KC]

OK, I'll amend, Lisa...

 

I'll write those checks, and I'll keep paying my taxes, but then the US Government has to operate like I do: One dollar in, one dollar out.

 

Fair?

[Lisabob]

John, I think pay-go is a great idea. My recollection is that this was in place through most of the Clinton administration. A certain later president who chose to fund 2 wars without paying for them, while also pushing big tax cuts, seems to have abandoned pay-go. Not that the current admin has been a strong and vocal advocate for it, either though. In most circumstances, I wish we would go back to it, although I admit I'm more of a Keynesian in certain situations.

 

 

[GernBlansten]

I propose we return to the tax rates under Reagan.

[scoutingagain]

Here's an article with more details of the proposed plan from the bi-partisan deficit commission:

 

http://online.wsj.com/article/SB10001424052748703805004575607691377554472.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsSecond

 

Yes, it's set up under Obama's watch so for the sake of argument call it the Obama plan. Does mean the loyal opposition has it's usual plan of No? If so I'll give the President credit for at least putting a plan on the table. More than the opposition has done. It's easy to pick away at a plan, but much tougher to come up with an alternative.

 

Some basic provision as I understand them:

 

Elimination of the mortgage interest tax deduction for mortgages > $250K

 

Increase in the gas tax by $0.15

 

Increase the retirement age to 69.

 

Decreases in the rate of increase of Soc. Security benifits.

 

Graduated soc. security benefits based on means. (wealthy get less benefits)

 

Cutting the federal workforce by 10%.

 

Cutting defense spending by $100 billion.

 

Major changes to the tax code. Basically lower rates and eliminating deductions.

 

There's a lot more. The plan cuts spending by $3 for every dollar of increased taxes.

 

All this over 10 years and all we do in decrease the rate of deficit spending by $4 trillion. We don't even begin to pay down the debt. That's how bad our fiscal situation is. As far as I'm concerned there's not much in the plan anyone serious about fiscal responsibility should object to. If you really want a ballanced budget, a plan coming up with nearly 2 times the savings and revenue increases would need to be proposed. Where else do folks propose that come from?

 

We havn't seen anything yet.

 

None of this will happen though. Our political "leaders" on both sides of the aisle lack the courage to lead. As Beavah noted somewhere the only way our current political system(Republicans and Democrats) can deal with the debt is to force inflation. Pay the debt down with inflated dollars.

 

SA

[Beavah]

Hmmm...

 

All those sound pretty reasonable.

 

Except the gas tax. I'd make da gas tax go up by 10 or 15 cents each year... forever.

 

Nothin' damages our national security and economy more than our foreign oil dependence, and da capital markets need some reliable price projections to justify investments in alternatives and other technologies. Most of our foreign oil trade funds scum and villains that we have to then spend military hardware, foreign aid, and American lives dealin' with.

 

Once we've started chewin' some holes in the debt and made sure we can pay for our military expenditures and veterans services we could start refunding da gas tax in the form of a permanent "cash for clunkers" program and buildin' the infrastructure to support alternatives. After that, we can cut da corporate income tax on companies developing domestic jobs.

 

Then we start exportin' our newly developed technology and do even better, eh? And just imagine the various Arab oil regimes and that nutter in Venezuela havin' a conniption.

 

Gas went up 15 cents just in the last week, eh? We can handle gradual increases of that sort. It'd do more to enhance our national security than every war we've fought in da mideast.

 

Beavah

 

(This message has been edited by Beavah)

[John-in-KC]

Lisa,

 

One of my comments to my co-workers has been and continues to be that the people of the United States are not sacrificing for the current wars. The burden has fallen on far too few.

 

So I will agree violently with you that Bush deserves a schwacking for that. The American people need to have some skin in the game. Far too many of them think lining up for a funeral of a fallen warrior is skin in the game.

 

Forgive me, but if I go further this will be a full-scale OT rant.

[GernBlansten]

I agree Beavah. We should pay the true cost of energy.

But marketing is key.

Instead of calling it a gas tax, call it a war tax. Its being used to pay for our access to oilfields in unstable areas of our world. Or better yet, call it a Freedom tax. What TeaParty would attack that?