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Author Topic: Republicans and Taxes
velcro
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Here are some facts:

John Boehner has explicitly refused to raise tax rates.

President Obama called for raising some taxes, along with spending cuts.

President Obama got 7 million more votes than all House Republicans combined.

A study by CRS shows that raising taxes on the wealthy does not discourage growth.. Republicans have suppressed that study.

Spending has already been cut significantly in earlier negotiations, but raising taxes has not been tried.

In previous negotiations, Republicans refused to continue middle class tax cuts unless tax cuts for the wealthy were continued too.

When Kennedy lowered taxes and spurred the economy, he lowered them from 91% to 77% (Actually, it didn't happen until Johnson)

The majority of Americans approve raising taxes on the wealthy.

"Raising taxes" would bring the rates back to what they were under Clinton, with some additional taxes on investment income (3.8% on certain transactions).

Does anyone dispute these facts?

Can anyone explain the compete intransigence on the part of the Republicans?

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TCB
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All of those things are true. The only additions I'd add are 1) Boehner may have signaled recently that he's willing to raise taxes (although his language was so hedged that it wasn't clear), and 2) I haven't heard any explicit criticisms of the CRS study yet, but conservative think tanks are certain to find flaws (real or imagined) with its methodology.

Republican intransigence is explained by two things. First, Republicans in Congress deeply believe that raising taxes on the wealthy will have a catastrophic impact on economic growth. It's not a feigned belief or a negotiating position - it's one of their core principles. Second, conservative activists who vote in primaries, bundle donations, and control Super PACs deeply believe in the same idea. They'll withhold support from Republicans who don't fight for low taxes on the wealthy.

It's one thing to risk your job fighting for something you believe in. It's another to risk your job fighting for an idea you despise. Is it any wonder Republicans in Congress refuse to compromise?

Boehner might be able to cobble together a few dozen Republicans willing to fall on their swords to get a deal done, but in doing so he'll be risking his own job as Speaker. I don't know anything about Boehner's personal life, but he might even risk becoming a social pariah in conservative circles, a la David Frum.

In short, Republican incentives are almost all against compromising. Obama can't cave, either, without becoming politically irrelevant before his re-inauguration. I wouldn't expect to see a deal before Jan. 1.

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DonaldD
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Yee-ees. But it is also a given that Democrats deeply believe that reducing the funding and scope of certain social problems will lead directly to worsening poverty effects and indirectly to increased and earlier mortality among the poor.

That's why it's a compromise: it isn't just about balancing Republican "catastrophic effects" against Obama's political relevance.
quote:
In short, Republican incentives are almost all against compromising
That ignores sequestration, of course. And it's the reason why sequestration has a chance to work - the results of sequestration are really, really unsatisfactory for both sides. My guess is that both sides hoped they would pick up enough leverage in the legislature and the presidency that they would now be in a more powerful position (following the Nov 2012 election), and thus be able to force a 'better' compromise.
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D.W.
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quote:
In short, Republican incentives are almost all against compromising
I’ve made this point before but if the driver of a car is heading north and his passenger wants to head south, compromise is NOT slowing down yet continuing north.
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Pete at Home
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quote:
Originally posted by velcro:
President Obama got 7 million more votes than all House Republicans combined.

[Eek!] [DOH] [Crying]
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AI Wessex
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"I’ve made this point before but if the driver of a car is heading north and his passenger wants to head south, compromise is NOT slowing down yet continuing north."

And the driver is in control of the car, so the passenger has to accommodate themselves. They shouldn't throw a filibuster out the window like an anchor to stop the car from moving.

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D.W.
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quote:
And the driver is in control of the car, so the passenger has to accommodate themselves. They shouldn't throw a filibuster out the window like an anchor to stop the car from moving.
Why not?

I don't like it but it does make sense to me. Not moving at all IS the middle ground between two opposing directions.

Taking a stab at answering my own question.

Both passengers are brothers and their mother is sick in the hospital with heart trouble. To the north is a very respected doctor the driver wants to convince to consult on their mother's case. To the south is a company doing pharmasutical trials on a new medicine that may help and the passenger wants to get her signed up there. If they stand still arguing going in neither direction nobody can help their mother.

In that case one of the brothers needs to relent. There is no compromise, they can't do both or half ass either effort.

[ November 09, 2012, 12:37 PM: Message edited by: D.W. ]

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TomDavidson
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quote:
Not moving at all IS the middle ground between two opposing directions.
No, not necessarily.
A ship is sinking. One man remembers that the lifeboats are aft; the other man is equally certain that the lifeboats are to the fore. Compromise in this scenario -- as with your sick mother scenario -- does not mean "let's stand in the middle until the ship sinks."

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scifibum
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Fortunately something like taxation doesn't map very well to that analogy. We all agree there have to be taxes, it's just a matter of who pays them and how much they pay. Bob says nobody should have to pay over 5%, and Jim says we need some people to pay 30% while others pay 5%. Compromise is definitely possible.
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DonaldD
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A binary choice with no inherent magnitude makes a really bad analogy when it comes to compromise.

Thankfully, there are many variables associated to government budgetting - not just "exactly an increase of 'x' dollars of taxation, specifically on population 'y' " vs "no increased taxes on anyone, whatsover"

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KidTokyo
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Fun with mixed metaphors!

This is a classic example of why the question is too narrow. The problem not that one side won't raise taxes -- it's the programs they want to protect while not raising taxes, versus they programs they're happy to cut. Republicans are immensely manipulative in their use of the term "entitlement program."

[ November 09, 2012, 03:08 PM: Message edited by: KidTokyo ]

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starLisa
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quote:
Originally posted by AI Wessex:
"I’ve made this point before but if the driver of a car is heading north and his passenger wants to head south, compromise is NOT slowing down yet continuing north."

And the driver is in control of the car, so the passenger has to accommodate themselves. They shouldn't throw a filibuster out the window like an anchor to stop the car from moving.

I agree. But I think you're misidentifying who the driver is. When it comes to legislation, it is not the president. His job is to execute the law. It's Congress's job to make the law. That means that he has to learn how to compromise and work with the other side, something he's not shown any capacity for up until now.
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AI Wessex
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I think that's harsh (you knew I would, I suppose). The President has a leading role in proposing overall policy and specific legislation, but doesn't have sole responsibility. The power of the veto does give him the edge on deciding whether a closely passed piece of legislation will survive. Congress has to appease him as much as he does them.
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AI Wessex
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"Bob says nobody should have to pay over 5%, and Jim says we need some people to pay 30% while others pay 5%. Compromise is definitely possible."

Only if BOTH Bob and Jim are willing to compromise.

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D.W.
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quote:
I agree. But I think you're misidentifying who the driver is.
In my mind it was the majority vs. the minority...
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velcro
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quote:
It's not a feigned belief or a negotiating position - it's one of their core principles.
The problem I indicated above is that it is not based on any facts. It is an ideological tautology.

If one side has facts, and the other side has only "beliefs", what rational unbiased actor would base policy on a compromise between those positions?

The only reason would be extortion on the part of one of the sides.

(I am not claiming Obama is unbiased. Just that an unbiased person would laugh at the "belief" asking for compromise)

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TCB
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DonaldD said:
quote:
That ignores sequestration, of course. And it's the reason why sequestration has a chance to work - the results of sequestration are really, really unsatisfactory for both sides. My guess is that both sides hoped they would pick up enough leverage in the legislature and the presidency that they would now be in a more powerful position (following the Nov 2012 election), and thus be able to force a 'better' compromise.
That's a fair point, and it does give Obama a bit of leverage, but I'd note that the sequester doesn't include any tax increases. Congressional Republicans who negotiated the sequester could live with the possibility of defense cuts, but not with tax increases.

Velcro said:
quote:
If one side has facts, and the other side has only "beliefs", what rational unbiased actor would base policy on a compromise between those positions?
You'll get no argument from me that Republicans in Congress are unreasonable. They're point of view seems to be that the difference between a top marginal rate of 35% and 39% is the difference between a thriving free market economy and a socialist hell-hole. And taxing people who do nothing to earn a living except pay accountants to increase their investment income at the same rate we tax people who actually work for a paycheck is apparently downright Stalinist. [Smile]

But we're governed by the Congress we have, not the one we wish we had. Many or most Congressional Republicans really do think tax increases on the wealthy really is the same as driving north when we need to go south. I don't think they'd accept raising the top marginal rate from 35% to 35.1%, let alone 39%.

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DonaldD
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quote:
Originally posted by TCB:
DonaldD said:
quote:
That ignores sequestration, of course. And it's the reason why sequestration has a chance to work - the results of sequestration are really, really unsatisfactory for both sides. My guess is that both sides hoped they would pick up enough leverage in the legislature and the presidency that they would now be in a more powerful position (following the Nov 2012 election), and thus be able to force a 'better' compromise.
That's a fair point, and it does give Obama a bit of leverage, but I'd note that the sequester doesn't include any tax increases. Congressional Republicans who negotiated the sequester could live with the possibility of defense cuts, but not with tax increases.
I would tend to disagree - because there is little debate that the sequestration cuts, if implemented, would lead to an almost immediate contraction in the economy. And that 'belief' I would argue, is actually much stronger than the belief that increasing taxes would immediately hurt the economy in an equivalently negative way. Not to mention the blind evisceration of the military may be much more concerning to these same folks.

On the other hand, I also disagree that many if not most non-Tea Party Republicans actually do believe that increases in marginal tax rates for the most wealthy will have a catastrophic impact on economic growth - after all, most of these people already were politically aware and active in the 1980s and 1990s.

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EDanaII
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quote:
A ship is sinking. One man remembers that the lifeboats are aft; the other man is equally certain that the lifeboats are to the fore. Compromise in this scenario -- as with your sick mother scenario -- does not mean "let's stand in the middle until the ship sinks."
An excellent metaphor... so, why are we as a Nation standing in the middle waiting for the boat to sink?

The problem is, the boat is sinking (spending) and the Democrats want to continue bailing (taxes) while the Republicans want to fix the leak... Common Sense, it appears, was the first to abandon ship.

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DonaldD
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quote:
Originally posted by EDanaII:
quote:
A ship is sinking. One man remembers that the lifeboats are aft; the other man is equally certain that the lifeboats are to the fore. Compromise in this scenario -- as with your sick mother scenario -- does not mean "let's stand in the middle until the ship sinks."
An excellent metaphor... so, why are we as a Nation standing in the middle waiting for the boat to sink?

The problem is, the boat is sinking (spending) and the Democrats want to continue bailing (taxes) while the Republicans want to fix the leak... Common Sense, it appears, was the first to abandon ship.

It would appear so - otherwise, you wouldn't have suggested the equivalency between sinking and spending.

I could see someone making the mistaken equivalence between any level of debt/deficit and sinking, but comparing sinking to spending is silly.

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LinuxFreakus
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I think what it boils down to is a communication problem. By far the most visible/unflappable republican supporters are poor, white, and under-educated and it is hard to understand why these people continue to vote against their own interest, but I think it comes down to communication. I think these people in aggregate feel infantilised and marginalized, or somehow offended at the notion that democrats think they know what is best for them.

I can't really put my finger on it exactly, but as long as these folks feel this way, I don't really see the situation changing no matter how mind boggling it may seem.

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edgmatt
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Article. It's from June 2010, so some of the info on specific countries might be outdated, but it's a good counter point to those who insist that lowering taxes doesn't help the economy.

quote:
Tax cuts, when used properly, have stimulated the economy. Many credit President George W. Bush's tax cuts for moving the economy out of recession. Similarly, in 1964, Congress enacted an 18% cut in personal taxes to spur growth. The legislation was designed to encourage consumer spending - many believe that it succeeded admirably as consumers delivered a textbook reaction.

According to a December 2004 article in Celtia.info, a magazine distributed in Celtic countries, tax cuts have also shown positive results in other countries as well. Ireland's recent tax cuts are believed to have improved living standards significantly. For years, the Irish were faced with high unemployment, budget deficits and high taxes. In 1986, Ireland faced a fiscal crisis. After reducing government spending, the government lowered taxes on both individuals and corporations. Over the next 13 years, Ireland's per capita income went from only 63% of the United Kingdom's average to besting it in 2000. Ireland now enjoys one of the highest standards of living in Europe.

According to a May 2007 article in the Herald Tribune, tax cuts in Poland, Slovakia and Hungary before their entry in the EU have spurred economic growth in those countries.

The Optics and Emotions of a Tax Cut
Reducing taxes becomes emotional because, in simple dollar terms, people who pay the most in taxes also benefit most. If you cut the sales tax by 1%, a person buying a Hyundai may save $200, while a person buying a Mercedes may save $1,000. Although the percentage benefit is the same, in simple dollar terms, the Mercedes buyer benefits more.

Cutting income taxes is more emotional because of the progressive nature of the tax. Reducing taxes 25% on a family with an adjusted gross income (AGI) of $60,000 will save them approximately $2,042. But a smaller 10% tax cut for a family with a taxable income of $150,000 would save them $3,333.

It seems that every politician who opposes tax cuts uses this imbalance to fight the cut. Tax cutters are always open to the rich versus the poor argument. Even when tax cut proposals eliminate the taxes altogether for lower income individuals, some critics still maintain the cuts support the rich. This is true, in a sense, but if a tax cut generates broad-based increases in disposable income, it is likely that people who pay the most in tax dollars will save the most. In other words, those who do not pay taxes cannot benefit from a tax cut.


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D.W.
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The following has zero basis in surveys, studies, or quantitative data what so ever. It is based purely on my own observations. Feel free to rip it to shreds. [Big Grin]

People who live in more rural areas are use to fending for themselves. They don’t wait for the government to solve a problem they solve it themselves or cope with the problem not being solved if it’s beyond them.

People in urban areas accept that to keep things running smoothly for everyone they give up responsibility to others to act in their best interest.

I think this difference in mindset is every bit as important as level of income when determining how the average American relates to the message of one spectrum or the other in politics.

There is also that religion and church has a much more significant role in what makes up “community” in more rural areas. In a large city socializing can occur in a lot more situations just because of how many people are in a condensed space. So “family values” issues are almost a side effect of the Republican leanings of more rural areas where shared religion is a disproportionate amount of one’s social experience.

Disproportionate seems to have negative connotations that I do not indend. At a loss how to phrase it better.

[ November 11, 2012, 02:39 PM: Message edited by: D.W. ]

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LinuxFreakus
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quote:
Originally posted by edgmatt:
It's from June 2010, so some of the info on specific countries might be outdated, but it's a good counter point to those who insist that lowering taxes doesn't help the economy.

I think what happened in Ireland is that they cut corporate taxes so low that they pretty much made themselves into a tax haven. It did little to actually help irish companies, but instead attracted large amounts of foreign capital when international companies declared their "headquarters" there in order to avoid paying higher taxes elsewhere. Now ireland is mired in debt and deathly afraid to raise taxes because that may be thing only thing keeping these companies there.

So yeah there can be cases where tax cuts lead to increased revenue for a while, but this dogma cannot be applied in all situations. It is a hopeful gamble with an immediate and large cost. I don't know much about gambling, but when you are already $16 trillion in the hole, that probably isn't the best time to double down, usually people who think that way are problem gamblers [Exploding]

[ November 11, 2012, 03:03 PM: Message edited by: LinuxFreakus ]

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yossarian22c
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Ireland is really the example you came up with for how great low taxes are?

Ireland made up for having tax haven low corporate tax rates by taxing property sales. They had an even bigger housing bubble than we did in the US. The result is when the bubble popped and people quit buying homes their government revenue plummeted. Because they don't have their own currency they needed a bailout from the IMF and EU. The government hasn't been able to spend to stimulate the economy and Ireland's unemployment rate went from below 5% in 2007 to over 14% for the last 3 years. Shouldn't their super low tax rates have fixed things by now?

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cherrypoptart
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> President Obama got 7 million more votes than all House Republicans combined.

> Canyone explain the compete intransigence on the part of the Republicans?

Maybe the people who voted for the Republicans are different ones than those who voted for Obama and the Republicans are doing what the people who voted for them want them to do.

The thing about the way Obama uses tax money is that he hurts those who oppose his agenda by using their own taxes against them. He funnels it to the unions and special interests, uses it for bailouts and sqanders it out green companies that donate to Democrat coffers with our tax money and then go bankrupt. The more that's taxed, the more government cheese Obama hands out in return for votes. Why would any Republicans want taxes raised when that means not only the harder they work, the more Obama takes but also means that working harder is effectively just hammering the nails in their own coffins and digging their own graves faster and deeper?

There is no indication so far based on how tax revenues have been spent that any of it will be used to reduce the deficit. So far, all we've seen it used for is to keep and get Democrats in power by buying voters.

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TomDavidson
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quote:
he hurts those who oppose his agenda by using their own taxes against them
Which is why, of course, the majority of federal taxes go to Republican areas.
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cherrypoptart
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I notice you specify Republican areas, not Republican voters.
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Pyrtolin
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quote:
Originally posted by EDanaII:
quote:
A ship is sinking. One man remembers that the lifeboats are aft; the other man is equally certain that the lifeboats are to the fore. Compromise in this scenario -- as with your sick mother scenario -- does not mean "let's stand in the middle until the ship sinks."
An excellent metaphor... so, why are we as a Nation standing in the middle waiting for the boat to sink?

The problem is, the boat is sinking (spending) and the Democrats want to continue bailing (taxes) while the Republicans want to fix the leak... Common Sense, it appears, was the first to abandon ship.

Only in opposite world, given that spending is the base measure for just about all indicators of economic health.

The ship is sinking because there's not enough spending, not too much.

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TomDavidson
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I'm actually intrigued by the flat-out rejection of the idea that simply raising taxes on the rich would not be sufficient to solve our existing financial problems. Why do so many Republicans feel that way, when the numbers (and historical precedent) would seem to suggest otherwise?

Just off the top of my head, the following would completely fix the deficit and the Social Security mess:

1) Create a new top marginal tax bracket of 40% at $300,000.

2) Re-instate the estate tax at $3M.

3) Bump up capital gains taxes by half a point.

4) Remove the cap on SS taxes.

I don't think this is going to cause anyone to suddenly start struggling. And yet it solves every single economic problem we currently face, for the foreseeable future.

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AI Wessex
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"I notice you specify Republican areas, not Republican voters."

Care to explain why you think that is an important distinction? Do you think that the government should be funneling money to people who belong to a particular voting group or party?

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KidTokyo
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quote:
I'm actually intrigued by the flat-out rejection of the idea that simply raising taxes on the rich would not be sufficient to solve our existing financial problems. Why do so many Republicans feel that way, when the numbers (and historical precedent) would seem to suggest otherwise?
They've drawn a line in the sand. I'm certain that "fixing the economy" is only a secondary or parallel concern.
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cherrypoptart
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> Do you think that the government should be funneling money to people who belong to a particular voting group or party?

No, but that's what I see Obama doing.

If he raises taxes on the rich and actually pays off the debt with that money that wouldn't really be so bad but so far all I've seen him doing with tax money is using it to pay off the people who vote for him.

I also subscribe to the usual Republican view that it's a spending problem more than anything else. By spending as much as he has, Obama has basically guaranteed higher taxes for the future. He already spent the tax payers' money before he even took it in, and did it by the trillions. And in my view and many others, he completely wasted it. Worse than threw it away in our view because he used it to solidify his power base so he can do more of the same.

We'll just see where the debt is in another four years. That will be a number we can all look at as the determination of failure or victory. If it isn't lower by the end of this administration could we all agree that that would be a big Obama failure?

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D.W.
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quote:
We'll just see where the debt is in another four years. That will be a number we can all look at as the determination of failure or victory. If it isn't lower by the end of this administration could we all agree that that would be a big Obama failure?
There are a lot of other things that in combination would lead me to consider his administration a success if they were met yet our debt remained exactly where it is. It is certainly a number that WILL be pointed out as a determination of failure by some. But it’s only one factor for me.
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yossarian22c
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The debt will be higher in 4 years. As will the debt of every sovereign nation with their own currency. This isn't even a bad thing (I'll let pyrtolin explain why if you are interested he does it better than me).

Now it would probably be good for the deficit to be lower in 4 years (and it is lower now than when Obama took office). I expect that it will be lower in 4 years than it is today. Would you like to redefine what you think failure is or is total debt your criterion?

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cherrypoptart
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I wouldn't. But I will anyway just to be sporting. I would say success is for Obama to get the debt down to what it was when he took office. Okay, I realize that's not going to happen. I'll give him a success rating if he just reduces the debt by one trillion. Failure is if the debt goes higher, but I'll throw out a bone and call it absolute failure if it's another four trillion dollars higher in a few years than it is right now. A marginal failure is if it's somewhat higher, one or two trillion. I'd be willing to call it a draw if it's about the same. I think that's pretty reasonable.

I didn't see Obama running on maintaining the debt at its current levels or increasing it. If he doesn't reduce it, then he's not really living up to the expectations he set. But I figure he's going to jack it by several trillion dollars so feel comfortable providing him a wide margin for failure.

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Pyrtolin
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quote:
Originally posted by cherrypoptart:
> Do you think that the government should be funneling money to people who belong to a particular voting group or party?


The federal government should be injecting money where ever demand can't be adequately expressed to productively employ people and available resources to meet it.


quote:
If he raises taxes on the rich and actually pays off the debt with that money that wouldn't really be so bad but so far all I've seen him doing with tax money is using it to pay off the people who vote for him.
"Paying off the debt" would basically mean destroying the ability of the public to save money on net- the government's debt is your (and everyone else's) savings. (Given your past suggestions that you have an savings preference toward municipal bonds, I'm surprised that you don't have a better understanding of that point. How you'd you put your money in those bonds if there weren't any being issued? How would it affect you projected savings if those government entities suddenly decided to pay them off tomorrow at current value rather than allowing you to earn interest on them over the expected lifetime?)

Every form of savings corresponds to a debt bey some other party. Those that are private sector or otherwise non-federal debts mean that the private entities that own them have to subtract from their revenues, imputing their own abilities to invest and save to service them. Those that are issued by the federal government are simply guarantees to produce the money as promised since the federal government issues the money by fiat.

The point of taxes is not to generate revenue, but to adjust economic behavior. Imputing high incomes means that companies get less utility from offering high executive salaries to fight over top level employees and comparatively more utility per dollar spend on improving low end compensation to attract more productive workers.

Similarly imputing high profit margins and capital gain returns means there's less pressure for companies to reserve large portions of their revenue for immediate profits and dividend payouts and more pressure to reinvest (and thus be able to deduct) that revenue into long term, stable returns under the marginal limits.

High top marginal rates have nothing to do with generating revenue and everything to do with making short term profiteering less profitable than long term productive investment.

quote:
I also subscribe to the usual Republican view that it's a spending problem more than anything else.

Which is complete nonsense, because our economic problems stem directly from a lack of spending. The symptoms of overspending are labor and critical resource shortages, with the private sector being forced to outbid the public sector above and beyond what's needed to set a reasonably profitable baseline for any given industry. Our current unemployment levels and idle production capacity point to a extreme lack of spending, not excess.

quote:
By spending as much as he has, Obama has basically guaranteed higher taxes for the future. He already spent the tax payers' money before he even took it in, and did it by the trillions.

That's complete nonsense. The current spending has helped ensure that many more people have an income at all than would have otherwise; it's provided the difference between the freefall decline that he inherited and a slowly goring economy. If tax receipts are what you care about then, even there, it's created the potential for growing future receipts as opposed to a decline in proportion to the rate of economic collapse that was occurring.

[/quote][/qb]We'll just see where the debt is in another four years. That will be a number we can all look at as the determination of failure or victory. If it isn't lower by the end of this administration could we all agree that that would be a big Obama failure? [/QB][/QUOTE]
Not even remotely. Rather, there will be a problem if he hasn't managed to get federal debt (net non-federal savings) and the federal deficit (net non-federal profit potential) up to health enough levels to sustain growth.

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Pyrtolin
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quote:
Originally posted by cherrypoptart:
I wouldn't. But I will anyway just to be sporting. I would say success is for Obama to get the debt down to what it was when he took office. Okay, I realize that's not going to happen. I'll give him a success rating if he just reduces the debt by one trillion. Failure is if the debt goes higher, but I'll throw out a bone and call it absolute failure if it's another four trillion dollars higher in a few years than it is right now. A marginal failure is if it's somewhat higher, one or two trillion. I'd be willing to call it a draw if it's about the same. I think that's pretty reasonable.

Cherry, how much in net savings (that is, how much money should a person have saved in excess of any debts (credit card, mortgage, etc...) that they have) do you feel that the average US citizen should have?
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NobleHunter
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This may be a stupid question, but I want to make sure I understand things.

Does the US gov't still issue bonds when it's running a surplus? If it doesn't, what products serve the same role? Or are US bonds not as significant a factor as I believe?

Cherry, will you apply the same metrics of success to the legislative branch?

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cherrypoptart
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I get what you're saying about municipal bonds and that's one of the things I like about them is it's kind of like a circle of life or circle of money thing where I pay my property taxes and those taxes are used to pay me back with interest on municipal bonds. That's a big question you ask there about what people who wanted safe investments would do if there wasn't government debt to buy. I suppose they'd buy bank cds, but of course those don't go out 30 years and they are taxed so there are differences. I'm not sure I have the complete answer but if I had to guess I'd say that some level of debt probably helps promote efficiency but of course if it gets too high, having to pay the interest on it can cripple other worthy uses for that tax money, and it's also largely a transfer of wealth to the rich who probably own most of those types of debt, many of which require minimum investments of 5k or more.

> Pyrtolin

> Cherry, how much in net savings (that is, how much money should a person have saved in excess of any debts (credit card, mortgage, etc...) that they have) do you feel that the average US citizen should have?

I like the Dave Ramsey school of debt. Now the answer will largely depend on their age and other circumstances but the minimum they need to start with in savings is an emergency fund of a two or three thousand dollars or so in order to avoid late fees and the like on utility, rent, car payments and so forth when you need an emergency car repair. From there you just save as much as you possibly can.

When you say average that makes me get realistic a bit. How much should the average person have saved? At least that emergency fund seems like a reasonable answer.

---------------------------------------------

Now I hear what you're saying and I've seen you make these points many times but...

My dream economy, and one which according to the theories you espouse would probably result in the total collapse of civilization as we know it... but my dream economy would be run completely debt free, just like a good household. Now of course this is going to be very simplified but it provides the basic premise.

For ten years our government would provide less in services than it takes in with taxes to pay down the debt completely, and then after that it would keep the same tax and service level for another ten years until we accumulated a tax payer owned surplus account of ten trillion dollars. Our government would invest that in the most secure available foreign bonds, in the stock market, in real estate development both domestic and international, some in commodities, etc. just basically get a balanced portfolio of tax payer owned investments that are earning interest, paying dividends, collecting rents, and accumulating value.

Half of that interest would just continue to accumulate in the fund and be used to continue to expand it and the other half would be used to reduce the taxpayer burden until over the course of many years we didn't have to pay taxes at all because the taxpayer fund was self sustaining.

Yes, I have a dream.

-------------------------------------------

Now this may seem crazy, but what does China do? I keep hearing about how they have bought up a lot of our debt, so aren't they basically making my dream come true?

We should do what they are doing in that regard.

Also, look at the difference between the Mormon Church and the Catholic Church. Now if I'm wrong about this someone can slap me but my understanding is that the Mormon Church uses my approach and they take their tithes and invest them so they may be rich enough by now to be completely self sustaining but of course they continue to take in tithes to build even more on that wealth for the good of their members. The Catholic Church, on the other hand, doesn't do this nearly as much and so is much more dependent on tithing to carry out its operations. I'd prefer our government lean more toward the Mormon approach which makes a lot more sense.

I might also mention the state of Alaska which has an economy something along these lines, with a surplus every year because of oil revenues which they can refund to state residents. They could use up all of this surplus and then borrow money to provide more services or increase welfare checks or whatever, and then instead of getting a check every year the taxpayers could be paying interest on that debt as a portion of their higher tax bill, but I'm not seeing how that's an improvement over what they have now.

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