Republican Tax Nonsense

So, sat down tonight and watched some Fox News, a little bit of Hannity, a little bit of Gretta.  The GOP talking heads are basically unified in their tax stance.  They will consider raising revenues, but not by raising tax rates because that will hurt the mythical job creators, stifling job growth, etc, etc.  BUT they will consider closing loopholes.  Hmmm.  Think about that.  If you take more money out of peoples pockets via raising tax rates – DOOM!  If you take it out of peoples pockets via closing loopholes, that is just fine and dandy.  This makes no sense whatsoever.  Taking money out of peoples pockets is taking money out of peoples pockets.  This is just another Republican bait and switch.  They have no intention of raising revenues.  The want to reinstate the Bush tax cuts and then … close loopholes? nahhhhhhh.

At the core of their argument is that high taxes inherently stifle economic growth.  Unfortunately this is demonstrably false, and it always confounds me that the Democrats don’t simply pull out some charts and graphs to show this to people.  A recent study from the congressional research service here shows that the tax argument is clearly bogus. So clearly in fact that the Republican congressional leadership squelched the report.

The two graphs from this report that show this most clearly are these,

What do these show?  The graph on the left shows that there is essentially ZERO correlation between the top marginal tax rates and economic growth.  Some of the highest economic growth we had in fact was when the top tax rate hovered about 90%.  The graph on the right shows that there is a (very) weak correlation between the capital gains tax rate and economic growth.  Unfortunately for Republicans, the correlation is positive.  Higher capital gains rates correspond with higher economic growth.

I decided to do a graph of my own.  I found a table of yearly federal deficits and tax rates going back to 1913.  I plotted the yearly federal deficits in inflation adjusted 1983 dollars (not sure why that year was chosen) versus the top marginal tax rate in a given year and this is what I came up with,

Whaddya know, even though it is a weak correlation,  higher tax rates tend to correspond with lower deficits.

All in all the Republican tax argument is … in short … utter bullshit.

 

Three Year Deficit Graph – Fiscal Brakes

It’ll be interesting to hear what kind of spin is put on this information.

From investors.com

U.S. Deficit Shrinking At Fastest Pace Since WWII, Before Fiscal Cliff

By JED GRAHAM

Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.

In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.

If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn’t risk backfiring. That’s why the best way to address the fiscal cliff likely is to postpone it.

While long-term deficit reduction is important and deficits remain very large by historical standards, the reality is that the government already has its foot on the brakes.

In this sense, the “fiscal cliff” metaphor is especially poor. The government doesn’t need to apply the brakes with more force to avoid disaster. Rather the “cliff” is an artificial one that has sprung up because the two parties are able to agree on so little.

Hopefully, they will agree, as they did at the end of 2010, to embrace their disagreement for a bit longer. That seems a reasonably likely outcome of negotiations because the most likely alternative to a punt is a compromise (expiration of the Bush tax cuts for the top and the payroll tax cut, along with modest spending cuts) that could still push the economy into recession.

Rather than applying additional fiscal restraint now, the government needs to make sure it sets the course for steady restraint once the economy emerges further from the deep employment hole that remains. In fact, a number of so-called deficit hawks are calling for short-term tax cuts to spur growth, rather than immediate austerity.

From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.

That’s just a bit faster than the 3.0 percentage point deficit improvement from 1995 to ’98, but at that point, the economy had everything going for it.

Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples include 1937, 1960 and 1969.

President Obama hasn’t gotten much credit for reining in the deficit, probably because a big part of the deficit progress has come from the unwinding of extraordinary government supports that he helped put in place. Stimulus programs have come and mostly gone; the end of stimulus to states led them to enact Medicaid curbs; jobless benefits in recent months have fallen by 50% since early 2010 (due to both job gains and extended benefits being exhausted).

TARP and the bailouts of Fannie Mae and Freddie Mac also make the deficit improvement look better, boosting the fiscal ’09 deficit by about $200 billion more than in fiscal ’12 (though the initial cost of TARP was overstated).

Still, military spending is now on the decline due to fewer troops in Iraq and Afghanistan; Medicare costs rose 3% last year vs. the average 7% growth in recent years; and after the last year’s Budget Control Act, excluding the automatic cuts set to take effect in January, nondefense discretionary spending is already on a path to shrink to 2.7% of GDP, well below the 3.9% average, notes the Center on Budget and Policy Priorities.

 

Ryan Budget in Pictures

Tax breaks to the very wealthy – Check

Gut programs for poor and disadvantage – Check

Deficit Reduction – well this is a little more complicated.  The CBO scored Ryan’s budget using HIS revenue projections.  These projections are based on “closing loopholes” in the tax code.  And what loopholes would he close? He has no idea, hasn’t specified a one, and we have seen how much the Republicans want to go after tax loopholes with the recent Big Oil subsidy fight.  The Tax Policy Center scored the Ryan plan using what is on paper, not what “we’ll get around to doing”, and it don’t look pretty

Obama called the budget “thinly veiled social Darwinism.”  That is indeed what it is.  The whole basis of modern conservative economics is social Darwinism, and many of us have thought that for a long time.  But it has had to become so blatant and egregious for politicians to finally speak it aloud.  And this budget comes from a man who milked the “entitlement society” for all it’s worth … A man who had the balls to tell a student to work three jobs for his education instead of relying on Pell Grants when he himself relied on SSI survivor benefits for his education.

 

50 Economic Numbers From 2011 That Are Almost Too Crazy To Believe

From Business Insider

Here are some of the more choice ones in my opinion:

• A staggering 48 percent of all Americans are either considered to be “low income” or are living in poverty.
• According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
• If you can believe it, the median price of a home in Detroit is now just $6000
• One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt
• The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined

How are tax breaks for the wealthy, the Keystone XL pipeline, gutting environmental regulations, etc, going to help with all this?!? You can believe if you feed a pony a penny it will shit a dime, but that don’t make it so.