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America’s credit score

Standard & Poor’s downrated US bonds from AAA to AA+, the first time we have been rated so low. That is a purely financial assessment. But factors include our impotent government, our inability to raise revenue, and our vast and increasing national debt. How humiliating. Just how doomed are we? How can we become a first world nation again?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • macthewife

    We are in a decline that comes from losing a moral base. The Republic can last only as long as the people can hold to the founding principals. I hope we can turn it around, but the corruption runs so deep…..

  • macthewife

    We are in a decline that comes from losing a moral base. The Republic can last only as long as the people can hold to the founding principals. I hope we can turn it around, but the corruption runs so deep…..

  • Jack

    “How can we become a first world nation again?”

    By acting like one.

  • Jack

    “How can we become a first world nation again?”

    By acting like one.

  • SKPeterson

    To a large extent, we still are a top dog first world nation. However, there are two things that have crept in in the last 100 years or so, that says a major, first world nation must also be an empire and a huge welfare state. This has manifested itself in several ways.

    We learned not to do empire the old-fashioned way with the explicit political domination characterized by the British, the French or the Germans, but we’re a military empire nevertheless – evidenced by the last 100 years of foreign intervention, invasion and adventure we have undertaken. This has brought us great national pride – we destroy things better than anyone else, but we’ve forgotten what made us a great nation back in the 19th Century – we used to be very, very good at making and building things.

    At almost the same time (and not entirely by coincidence) we embarked upon a new regulatory and government apparatus that has been largely unchecked, especially since 1930, coupled with a new monetary regime that has bankrolled it. Couple it with the decision to embrace an unfettered, fiat money system and government has exploded in size, scope, regulations, departments and programs in the last 40 years. We’ve also increased our military spending to maintain the empire (actual expenditures for the defense of the physical assets of the U.S. is large, but not even a plurality of our total military spending outlays) to the tune of exceeding the total military spending of the rest of the world combined.

    We have now become wedded to the twin destructive forces of an interventionist state and a blinkered political status quo that doesn’t recognize this reality (or does and thinks it’s good) – our current government has a basic predilection toward intervention. Intervention in the economy and military intervention abroad; the government intervenes in the economy to commandeer resources for itself that it distributes to favored parties and to the military (a most-favored political lobbying group if there ever was one). In turn, the military intervenes abroad to commandeer resources or affect the global economic balance as needed. Not that this is particularly successful, but it is continually attempted. So we have interventionist bureaucrats coming before Congress who say “Yes, we did not achieve what we expected, but if we could just have had more money we would have,” followed by military general staff who come before Congress and say “Yes, we did not achieve what we expected, but if we could just have had more money (or men) we would have.” Lather, rinse, repeat ad nauseam.

    All the while, the real economy – the one that makes things for people, provides services and demands labor and capital resources to be used efficiently – is assumed to be perfectly capable of continuing to pay for all of this through higher taxes and more regulation. We now simply assume that the economic engine that provides the money to the government will continue to prosper while we the people continue to siphon off resources to fund our own favored interventions and are shocked when it doesn’t. So what happens? Demand that the government “fix” it. Which it can’t. But, it will try and try and try, by spending money it doesn’t have and attempting to commandeer even more resources from the economy that is already floundering. Continuing to do this over and over and over again leads us to where we are now.

    The solution can be boiled down to two very simple themes fraught with complexity and devilish details: end the interventionist empire, end the interventionist regulatory state.

  • SKPeterson

    To a large extent, we still are a top dog first world nation. However, there are two things that have crept in in the last 100 years or so, that says a major, first world nation must also be an empire and a huge welfare state. This has manifested itself in several ways.

    We learned not to do empire the old-fashioned way with the explicit political domination characterized by the British, the French or the Germans, but we’re a military empire nevertheless – evidenced by the last 100 years of foreign intervention, invasion and adventure we have undertaken. This has brought us great national pride – we destroy things better than anyone else, but we’ve forgotten what made us a great nation back in the 19th Century – we used to be very, very good at making and building things.

    At almost the same time (and not entirely by coincidence) we embarked upon a new regulatory and government apparatus that has been largely unchecked, especially since 1930, coupled with a new monetary regime that has bankrolled it. Couple it with the decision to embrace an unfettered, fiat money system and government has exploded in size, scope, regulations, departments and programs in the last 40 years. We’ve also increased our military spending to maintain the empire (actual expenditures for the defense of the physical assets of the U.S. is large, but not even a plurality of our total military spending outlays) to the tune of exceeding the total military spending of the rest of the world combined.

    We have now become wedded to the twin destructive forces of an interventionist state and a blinkered political status quo that doesn’t recognize this reality (or does and thinks it’s good) – our current government has a basic predilection toward intervention. Intervention in the economy and military intervention abroad; the government intervenes in the economy to commandeer resources for itself that it distributes to favored parties and to the military (a most-favored political lobbying group if there ever was one). In turn, the military intervenes abroad to commandeer resources or affect the global economic balance as needed. Not that this is particularly successful, but it is continually attempted. So we have interventionist bureaucrats coming before Congress who say “Yes, we did not achieve what we expected, but if we could just have had more money we would have,” followed by military general staff who come before Congress and say “Yes, we did not achieve what we expected, but if we could just have had more money (or men) we would have.” Lather, rinse, repeat ad nauseam.

    All the while, the real economy – the one that makes things for people, provides services and demands labor and capital resources to be used efficiently – is assumed to be perfectly capable of continuing to pay for all of this through higher taxes and more regulation. We now simply assume that the economic engine that provides the money to the government will continue to prosper while we the people continue to siphon off resources to fund our own favored interventions and are shocked when it doesn’t. So what happens? Demand that the government “fix” it. Which it can’t. But, it will try and try and try, by spending money it doesn’t have and attempting to commandeer even more resources from the economy that is already floundering. Continuing to do this over and over and over again leads us to where we are now.

    The solution can be boiled down to two very simple themes fraught with complexity and devilish details: end the interventionist empire, end the interventionist regulatory state.

  • helen

    Third world nations are characterized by:
    *producing raw materials
    *buying manufactured goods from “more developed” nations
    *having a tiny very wealthy “elite” which controls the country
    *having a majority of poor people being made poorer by the waste of their country’s resources for the benefit of the few and a dearth of jobs
    *graft & corruption which profits the elite

    Now, which of the entities which have stripped the US of self sufficiency in manufacturing (and of other decently paying jobs), is interested in making it a “first world nation” again? [Even some on here admit that they have been/are putting their money elsewhere.]

    Could they achieve it if they wanted to do so?

  • helen

    Third world nations are characterized by:
    *producing raw materials
    *buying manufactured goods from “more developed” nations
    *having a tiny very wealthy “elite” which controls the country
    *having a majority of poor people being made poorer by the waste of their country’s resources for the benefit of the few and a dearth of jobs
    *graft & corruption which profits the elite

    Now, which of the entities which have stripped the US of self sufficiency in manufacturing (and of other decently paying jobs), is interested in making it a “first world nation” again? [Even some on here admit that they have been/are putting their money elsewhere.]

    Could they achieve it if they wanted to do so?

  • Pete

    SK @3

    Wow – that needs to show up in an op-ed piece somewhere! Good verbiage for early on a Monday morning.

  • Pete

    SK @3

    Wow – that needs to show up in an op-ed piece somewhere! Good verbiage for early on a Monday morning.

  • http://mark.veenman@gmail.com Mark Veenman

    Get the size of government down. The federal government should spend below 25% of the GDP and should have the nards to stare down the civil service unions, and get involved in fewer international wars.

  • http://mark.veenman@gmail.com Mark Veenman

    Get the size of government down. The federal government should spend below 25% of the GDP and should have the nards to stare down the civil service unions, and get involved in fewer international wars.

  • SKPeterson

    helen @4 – we actually do still make things, while also being a major raw materials provider, as is Canada. Right now, the policies pursued by the Canadian government appear to be working – their major funding issue for now is the parlous situation of their national healthcare system, which is facing increasing costs, but poor service in terms of the range of services provided and the timeliness of delivery, and declining health outcomes resulting from these delays in service provision. The funny thing was how Canada was held out as a model for our recent healthcare legislation (both Bush’s Rx plan and Obamacare), yet they are finding that they have essentially reached the limit on what they are able to do and are beginning to debate how they should pull back. At the same time, they aren’t trying to control the rest of the world. I never thought I’d say this, but the Canadians have a better grasp of limited government at this time than does the United States (maybe if we became the Untied States, we’d have a better chance, but that’s for the “rise of libertarianism” thread ;)).

  • SKPeterson

    helen @4 – we actually do still make things, while also being a major raw materials provider, as is Canada. Right now, the policies pursued by the Canadian government appear to be working – their major funding issue for now is the parlous situation of their national healthcare system, which is facing increasing costs, but poor service in terms of the range of services provided and the timeliness of delivery, and declining health outcomes resulting from these delays in service provision. The funny thing was how Canada was held out as a model for our recent healthcare legislation (both Bush’s Rx plan and Obamacare), yet they are finding that they have essentially reached the limit on what they are able to do and are beginning to debate how they should pull back. At the same time, they aren’t trying to control the rest of the world. I never thought I’d say this, but the Canadians have a better grasp of limited government at this time than does the United States (maybe if we became the Untied States, we’d have a better chance, but that’s for the “rise of libertarianism” thread ;)).

  • JH

    What SK said….

  • JH

    What SK said….

  • Tom Hering

    I read that S&P downgraded Canada’s credit rating at one point, and Canada had to show a budget surplus for nine years before S&P would restore their AAA. (I also read that Canada showed a budget surplus for eleven consecutive years – the longest of any G8 nation. Not bad for a “socialist” state with universal healthcare. :-) )

  • Tom Hering

    I read that S&P downgraded Canada’s credit rating at one point, and Canada had to show a budget surplus for nine years before S&P would restore their AAA. (I also read that Canada showed a budget surplus for eleven consecutive years – the longest of any G8 nation. Not bad for a “socialist” state with universal healthcare. :-) )

  • Michael Z.

    A balanced budget amendment…
    Ronald Reagan approves.

  • Michael Z.

    A balanced budget amendment…
    Ronald Reagan approves.

  • WebMonk

    There are times that I wish there where +1 buttons and -1 buttons we could click.

    SK gets lots and lots of +1′s on this post. When I read it I had a bunch of ideas of things to say. SK just covered most all of them better than I would have and then covered even more.

    Some of the other posts though …..

    macthewife – wow, so if our credit score being downgraded resulted from our moral decline, that must indicate that France, Canada and Australia are all more moral than us?

  • WebMonk

    There are times that I wish there where +1 buttons and -1 buttons we could click.

    SK gets lots and lots of +1′s on this post. When I read it I had a bunch of ideas of things to say. SK just covered most all of them better than I would have and then covered even more.

    Some of the other posts though …..

    macthewife – wow, so if our credit score being downgraded resulted from our moral decline, that must indicate that France, Canada and Australia are all more moral than us?

  • Booklover

    Our small city is doing so-so economically, yet there are two imposing Federal buildings being built in our downtown area. A major part of this building was outsourced to a Canadian company.

    A large percentage of people in our state work for “the government.” These jobs are in demand due to their benefits, yet the average worker who produces something tangible for a living, has had to relinquish several of his benefits over the last several years.

  • Booklover

    Our small city is doing so-so economically, yet there are two imposing Federal buildings being built in our downtown area. A major part of this building was outsourced to a Canadian company.

    A large percentage of people in our state work for “the government.” These jobs are in demand due to their benefits, yet the average worker who produces something tangible for a living, has had to relinquish several of his benefits over the last several years.

  • Cincinnatus

    SK: Great comments. Nothing really to add.

    What amuses me, however, as we grope through the aftermath of the downgrade, is the sheer number of commentators, politicians, and ordinary citizens who are simply asserting that S & P has “no credibility”–perhaps because they were a bit too exuberant about certain toxic assets prior to the financial collapse of 2008. Unfortunately, the stock markets disagree. And S&P is correct: the debt-to-GDP ratio is reaching unsafe levels in the United States for peacetime, and the government has done literally nothing to place spending on a more sustainable path. The utter failure of anything meaningful to come out the debt ceiling debate surprises and disappoints even me.

    And yes, Tom@9, regaining a triple A rating doesn’t happen overnight. It may be years before we get ours back, if we get it back. I suppose we should also be wondering if/when Moody’s and the other agencies will be downgrading our credit.

  • Cincinnatus

    SK: Great comments. Nothing really to add.

    What amuses me, however, as we grope through the aftermath of the downgrade, is the sheer number of commentators, politicians, and ordinary citizens who are simply asserting that S & P has “no credibility”–perhaps because they were a bit too exuberant about certain toxic assets prior to the financial collapse of 2008. Unfortunately, the stock markets disagree. And S&P is correct: the debt-to-GDP ratio is reaching unsafe levels in the United States for peacetime, and the government has done literally nothing to place spending on a more sustainable path. The utter failure of anything meaningful to come out the debt ceiling debate surprises and disappoints even me.

    And yes, Tom@9, regaining a triple A rating doesn’t happen overnight. It may be years before we get ours back, if we get it back. I suppose we should also be wondering if/when Moody’s and the other agencies will be downgrading our credit.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    I thought it would happen during Obama’s first year in office.

    Actually, AA+ is too high.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    I thought it would happen during Obama’s first year in office.

    Actually, AA+ is too high.

  • Cincinnatus

    sg@14: S&P has already indicated that another downgrade could be on the way if we don’t take action to stabilize our debts.

    But I don’t know if we deserve lower, just yet, at least by the perverted metrics employed by our economy. For instance, the UK’s total debts are a staggering 436% of GDP. This is at least twice as high as that of the United States, I believe. Yet the UK maintains its AAA rating primarily because it has, in fact, instituted an austerity program and has at least feigned interest in rendering its economy sustainable.

  • Cincinnatus

    sg@14: S&P has already indicated that another downgrade could be on the way if we don’t take action to stabilize our debts.

    But I don’t know if we deserve lower, just yet, at least by the perverted metrics employed by our economy. For instance, the UK’s total debts are a staggering 436% of GDP. This is at least twice as high as that of the United States, I believe. Yet the UK maintains its AAA rating primarily because it has, in fact, instituted an austerity program and has at least feigned interest in rendering its economy sustainable.

  • Cincinnatus

    Also, Moody’s this morning threatened a downgrade…

  • Cincinnatus

    Also, Moody’s this morning threatened a downgrade…

  • Tom Hering

    Yes, in it August 5 press release, S&P spoke of the need to control spending. But among the reasons for its downgrade, S&P also specifically cited the Republicans’ refusal to increase revenues, and the likelihood that the Bush tax cuts would be continued.

    http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/

  • Tom Hering

    Yes, in it August 5 press release, S&P spoke of the need to control spending. But among the reasons for its downgrade, S&P also specifically cited the Republicans’ refusal to increase revenues, and the likelihood that the Bush tax cuts would be continued.

    http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Get the size of government down. The federal government should spend below 25% of the GDP and should have the nards to stare down the civil service unions, and get involved in fewer international wars.

    Stop and think for a second of all the people doing all this Federal gov’t work and their private sector counter parts who submit all the forms and contract to the government. Who would employ all those folks? What would they do? We already have unemployment. This is the same problem that the USSR and PRC had. Many of the people the government pays to do ‘work’ would not be readily employable in the private sector because there is no real demand for what they do. The labor participation rate right now is only about 58%. We have dug ourselves a really deep hole by allowing the government to be such a large employer.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Get the size of government down. The federal government should spend below 25% of the GDP and should have the nards to stare down the civil service unions, and get involved in fewer international wars.

    Stop and think for a second of all the people doing all this Federal gov’t work and their private sector counter parts who submit all the forms and contract to the government. Who would employ all those folks? What would they do? We already have unemployment. This is the same problem that the USSR and PRC had. Many of the people the government pays to do ‘work’ would not be readily employable in the private sector because there is no real demand for what they do. The labor participation rate right now is only about 58%. We have dug ourselves a really deep hole by allowing the government to be such a large employer.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “But among the reasons for its downgrade, S&P also specifically cited the Republicans’ refusal to increase revenues,”

    Think for a minute. How can Republicans, or Democrats for that matter, raise revenue? The short answer is they can’t. They can increase tax rates, but that may actually reduce revenue. Revenue is the actual dollars collected. Raising tax rates is not magic. It affects people’s behavior. They will change their behavior to reduce their taxes.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “But among the reasons for its downgrade, S&P also specifically cited the Republicans’ refusal to increase revenues,”

    Think for a minute. How can Republicans, or Democrats for that matter, raise revenue? The short answer is they can’t. They can increase tax rates, but that may actually reduce revenue. Revenue is the actual dollars collected. Raising tax rates is not magic. It affects people’s behavior. They will change their behavior to reduce their taxes.

  • Tom Hering

    sg @ 19, okay, so S&P specifically cited the Republicans’ refusal to raise taxes. Now, are you saying there’s no point in raising taxes, because the government can’t successfully collect more dollars from us? Are you serious? Or am I completely misunderstanding you?

  • Tom Hering

    sg @ 19, okay, so S&P specifically cited the Republicans’ refusal to raise taxes. Now, are you saying there’s no point in raising taxes, because the government can’t successfully collect more dollars from us? Are you serious? Or am I completely misunderstanding you?

  • Cincinnatus

    Tom, yes, S&P did cite Congress’s unwillingness to consider tax increases as part of an overall package to reduce debt. But you know what they emphasized even more strongly? Democratic refusal to consider any meaningful cuts to entitlements.

    I agree: tax increases should not be absolutely off the table. But sg is correct. In an economy in which so many are unemployed, in which wages are stagnant, in which uncertainty is already paralyzing future investment, it’s not at all clear that a simple increase in tax rates would translate into an increase in actual revenue. Past a certain point, increased taxes lower revenue rather than raise it, paradoxically enough. Remember how federal revenue actually increased after the Bush tax cuts every year until the crash in 2008? All those graphs showing how much of the deficit was “caused” by Bush tax cuts and how much would be eliminated if they were to expire? Those are pure imaginative constructs. We don’t know that. Revenue is not directly related to tax rates. Every economist knows this. And it’s true: right now, the middle class doesn’t have much left to give. We’re about drained dry from various taxes at local, state, and national levels.

    Again, I’m not facially opposed to any talk of tax increases right now. But the fact is that tax rates are such a ludicrously small portion of the problem. We could confiscate 100% of the income of the wealthiest Americans and not even make a dent in the debt. We could even confiscate 100% of their net worth and still not even be on the way to solving the problem. The real problem, as we insist, is spending. This is why S&P (and now Moody’s) are ultimately concerned. We’ve made no meaningful attempt whatsoever to control spending, which is what actually causes debt. A tax increase would not have satisfied the credit agencies, I can assure you.

  • Cincinnatus

    Tom, yes, S&P did cite Congress’s unwillingness to consider tax increases as part of an overall package to reduce debt. But you know what they emphasized even more strongly? Democratic refusal to consider any meaningful cuts to entitlements.

    I agree: tax increases should not be absolutely off the table. But sg is correct. In an economy in which so many are unemployed, in which wages are stagnant, in which uncertainty is already paralyzing future investment, it’s not at all clear that a simple increase in tax rates would translate into an increase in actual revenue. Past a certain point, increased taxes lower revenue rather than raise it, paradoxically enough. Remember how federal revenue actually increased after the Bush tax cuts every year until the crash in 2008? All those graphs showing how much of the deficit was “caused” by Bush tax cuts and how much would be eliminated if they were to expire? Those are pure imaginative constructs. We don’t know that. Revenue is not directly related to tax rates. Every economist knows this. And it’s true: right now, the middle class doesn’t have much left to give. We’re about drained dry from various taxes at local, state, and national levels.

    Again, I’m not facially opposed to any talk of tax increases right now. But the fact is that tax rates are such a ludicrously small portion of the problem. We could confiscate 100% of the income of the wealthiest Americans and not even make a dent in the debt. We could even confiscate 100% of their net worth and still not even be on the way to solving the problem. The real problem, as we insist, is spending. This is why S&P (and now Moody’s) are ultimately concerned. We’ve made no meaningful attempt whatsoever to control spending, which is what actually causes debt. A tax increase would not have satisfied the credit agencies, I can assure you.

  • SKPeterson

    The only good that would come from increasing taxes would be to impose pain on the American people. Now, people might be willing to endure this pain if there was some sort of tangible gain, i.e. a lower deficit and something approaching sane fiscal and monetary policy. The problem though is that previous episodes of tax increases to address the deficit have almost always been met with increases spending. Our fiscal pattern since 1930 has been increase taxes, increase spending, keep taxes the same, increase spending, lower taxes, increase spending, election year, increase spending, off-year, increase spending, determine one’s legacy as “great” by influencing the opinions of future historians, increase spending a lot.

  • SKPeterson

    The only good that would come from increasing taxes would be to impose pain on the American people. Now, people might be willing to endure this pain if there was some sort of tangible gain, i.e. a lower deficit and something approaching sane fiscal and monetary policy. The problem though is that previous episodes of tax increases to address the deficit have almost always been met with increases spending. Our fiscal pattern since 1930 has been increase taxes, increase spending, keep taxes the same, increase spending, lower taxes, increase spending, election year, increase spending, off-year, increase spending, determine one’s legacy as “great” by influencing the opinions of future historians, increase spending a lot.

  • Tom Hering

    Cincinnatus @ 21, tax increases alone would not have stopped S&P’s downgrade. But neither would more serious spending cuts, alone, have stopped it. It’s clear that S&P sees both as necessary, and that it faults both Democrats and Republicans – including the intransigent Tea Partiers.

  • Tom Hering

    Cincinnatus @ 21, tax increases alone would not have stopped S&P’s downgrade. But neither would more serious spending cuts, alone, have stopped it. It’s clear that S&P sees both as necessary, and that it faults both Democrats and Republicans – including the intransigent Tea Partiers.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Now, are you saying there’s no point in raising taxes, because the government can’t successfully collect more dollars from us?”

    Sort of, yes. There is some point on the continuum of 0-100% tax rate where revenue begins to fall. I think we can agree that no one willingly works to pay 100% of his earnings in taxes. But what about 95%, or 90%, or 80% etc? On the other end, at what point does the guy making $8000 a year start to earn too much for it to be worth it to work anymore because his family will lose public assistance benefits like MedicAid?

    The tax rates do matter.

    Yes, raising rates can lower revenue as folks position themselves to incur as little tax liability as possible.

    There is potential for optimizing productivity and revenue by choosing a tax rate which will encourage earning and paying the tax rather than choosing to be less productive and pay a lower rate. Yes, a tax rate that is too high discourages economic activity.

    Also consider that our economy may actually have reached a terminal GDP level that will not change. We may have hit peak productivity. I don’t know that, but to assume it is not true is just wishful thinking. We need new economic models that are not based on growth but sustainable healthy living.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Now, are you saying there’s no point in raising taxes, because the government can’t successfully collect more dollars from us?”

    Sort of, yes. There is some point on the continuum of 0-100% tax rate where revenue begins to fall. I think we can agree that no one willingly works to pay 100% of his earnings in taxes. But what about 95%, or 90%, or 80% etc? On the other end, at what point does the guy making $8000 a year start to earn too much for it to be worth it to work anymore because his family will lose public assistance benefits like MedicAid?

    The tax rates do matter.

    Yes, raising rates can lower revenue as folks position themselves to incur as little tax liability as possible.

    There is potential for optimizing productivity and revenue by choosing a tax rate which will encourage earning and paying the tax rather than choosing to be less productive and pay a lower rate. Yes, a tax rate that is too high discourages economic activity.

    Also consider that our economy may actually have reached a terminal GDP level that will not change. We may have hit peak productivity. I don’t know that, but to assume it is not true is just wishful thinking. We need new economic models that are not based on growth but sustainable healthy living.

  • Tom Hering

    “Yes, a tax rate that is too high discourages economic activity.” – sg @ 24.

    And the tax cuts created … jobs? A rise for the middle class in … real earnings?

  • Tom Hering

    “Yes, a tax rate that is too high discourages economic activity.” – sg @ 24.

    And the tax cuts created … jobs? A rise for the middle class in … real earnings?

  • Cincinnatus

    Tom@25: Don’t bring those talking points in here. What does that have to do with anything? I suppose it was a justification for cutting the taxes, and we could debate elsewhere whether such a goal was accomplished. We do know that federal revenue increased after the tax cuts! But what we’re debating here is not whether tax cuts lead to greater economic activity, but whether increasing taxes is currently a viable means of taming the deficit/debt and spurring economic recover. I submit that it is not, especially on the latter count. But yeah, I’ll suggest that cutting my tax rates has been good for me. Why would it be bad for me, in terms of personal economic activity, to keep more of my own money?

    In the end, debating the Bush tax cuts is little more than what I accused you of doing: spouting talking points. Like most talking points, they contain a kernel of truth, but they are effectively meaningless. Expiring the Bush tax cuts would do so incredibly little to ameliorate our current financial troubles that it’s barely worth talking about.

    Most economic analysts with any kind of penchant for free markets and growth (i.e., all of them except Paul Krugman, and his hackery has disqualified him from future credibility) generally argue that an austerity package should represent a ratio of 3:1–i.e., for every $1 of revenue increase there should be at least $3 in spending cuts. Our recent debt ceiling debacle didn’t even pretend to achieve such a ratio, ultimately agreeing on something like a 0:0 ratio. Satan sandwich indeed. You’ll recall that Obama assembled a deficit task force that provided a concrete plan for doing exactly what the ratings agencies wanted–cutting $4 trillion from the deficit over a certain number of years…and Obama summarily rejected the plan for whatever reason. Ultimately, I think S&P would have been satisfied with $4 in spending cuts to $0 in revenue increases. Conversely, $4 in revenue increases would be literally impossible, and horribly ill-advised. Either way, tax cuts are barely more than a distraction from the real problem.

  • Cincinnatus

    Tom@25: Don’t bring those talking points in here. What does that have to do with anything? I suppose it was a justification for cutting the taxes, and we could debate elsewhere whether such a goal was accomplished. We do know that federal revenue increased after the tax cuts! But what we’re debating here is not whether tax cuts lead to greater economic activity, but whether increasing taxes is currently a viable means of taming the deficit/debt and spurring economic recover. I submit that it is not, especially on the latter count. But yeah, I’ll suggest that cutting my tax rates has been good for me. Why would it be bad for me, in terms of personal economic activity, to keep more of my own money?

    In the end, debating the Bush tax cuts is little more than what I accused you of doing: spouting talking points. Like most talking points, they contain a kernel of truth, but they are effectively meaningless. Expiring the Bush tax cuts would do so incredibly little to ameliorate our current financial troubles that it’s barely worth talking about.

    Most economic analysts with any kind of penchant for free markets and growth (i.e., all of them except Paul Krugman, and his hackery has disqualified him from future credibility) generally argue that an austerity package should represent a ratio of 3:1–i.e., for every $1 of revenue increase there should be at least $3 in spending cuts. Our recent debt ceiling debacle didn’t even pretend to achieve such a ratio, ultimately agreeing on something like a 0:0 ratio. Satan sandwich indeed. You’ll recall that Obama assembled a deficit task force that provided a concrete plan for doing exactly what the ratings agencies wanted–cutting $4 trillion from the deficit over a certain number of years…and Obama summarily rejected the plan for whatever reason. Ultimately, I think S&P would have been satisfied with $4 in spending cuts to $0 in revenue increases. Conversely, $4 in revenue increases would be literally impossible, and horribly ill-advised. Either way, tax cuts are barely more than a distraction from the real problem.

  • DonS

    SKP, sg, and Cincinnatus have already spoken well and eloquently on this issue.

    This ratings downgrade is old news, and entirely arbitrary in its timing. Any of us with a brain has been able to see for years that the American economy is a train wreck ready to happen, both in the government and private sectors, as every sector is leveraged beyond imagining and the rate of government spending increases is logarithmic and clearly unsustainable. Thankfully, what this S & P action does is perhaps wake up the American people to their peril. At least the taxpayers get it. It’s completely unclear if the tax consumers understand that the golden goose is on life support.

    Tom, raising tax rates at this time would be like putting a band-aid on a severed jugular artery. Or giving the patient a transfusion. It might give the patient another few moments of life, but at the great price of ultimately wasting time and avoiding the real problem. And, in the case of the tax increase, probably costing our economy yet a few more private sector jobs. Obviously, the problem is massive and uncontrolled entitlement spending and until we address that, there is nothing we can do to make the problem meaningfully better.

  • DonS

    SKP, sg, and Cincinnatus have already spoken well and eloquently on this issue.

    This ratings downgrade is old news, and entirely arbitrary in its timing. Any of us with a brain has been able to see for years that the American economy is a train wreck ready to happen, both in the government and private sectors, as every sector is leveraged beyond imagining and the rate of government spending increases is logarithmic and clearly unsustainable. Thankfully, what this S & P action does is perhaps wake up the American people to their peril. At least the taxpayers get it. It’s completely unclear if the tax consumers understand that the golden goose is on life support.

    Tom, raising tax rates at this time would be like putting a band-aid on a severed jugular artery. Or giving the patient a transfusion. It might give the patient another few moments of life, but at the great price of ultimately wasting time and avoiding the real problem. And, in the case of the tax increase, probably costing our economy yet a few more private sector jobs. Obviously, the problem is massive and uncontrolled entitlement spending and until we address that, there is nothing we can do to make the problem meaningfully better.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “And the tax cuts created … jobs?”

    If so, they went to illegals and to build bigger housing than folks need.

    “A rise for the middle class in … real earnings?”

    No, but that may not be possible anyway. I mean if the only folks available to hire are zero marginal productive, why hire?

    Too many things don’t add up. Labor participation is very low. Government expenditures are very high. People aren’t starving, they are obese. No gains can be achieved in education because we are on average over credentialed already. We import too much stuff, etc. The cash economy is growing. Social capital declining. We have high incarceration levels. It goes on an on. The glue that holds folks together is gone. We can all get along only as long as there is prosperity. In hard times people need something besides material to believe in. We don’t have that, which is why the economy is the most important thing. It is the only thing holding us together.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “And the tax cuts created … jobs?”

    If so, they went to illegals and to build bigger housing than folks need.

    “A rise for the middle class in … real earnings?”

    No, but that may not be possible anyway. I mean if the only folks available to hire are zero marginal productive, why hire?

    Too many things don’t add up. Labor participation is very low. Government expenditures are very high. People aren’t starving, they are obese. No gains can be achieved in education because we are on average over credentialed already. We import too much stuff, etc. The cash economy is growing. Social capital declining. We have high incarceration levels. It goes on an on. The glue that holds folks together is gone. We can all get along only as long as there is prosperity. In hard times people need something besides material to believe in. We don’t have that, which is why the economy is the most important thing. It is the only thing holding us together.

  • SKPeterson

    The downside Tom @25 is that the spending didn’t create jobs either, and with the advent of QE2 we’ve eviscerated the value of the dollar, which means real earnings have declined for many people, while also fueling inflation which has not been good for small and medium sized businesses as well as the lower and middle classes. The basic problem is that while lowering tax rates does work to spur investment in real capital, increasing debt and driving interest rates to 0 lowers the value of the dollar and incentivizes firms to send financial assets overseas (or Canada and Mexico, btw) seeking better returns than even the lower tax rates provide. As a result, we have little or no investment and jobs created domestically. The answer isn’t to raise taxes, it is to raise interest rates and provide an incentive for people to save and invest. Obama has mentioned an infrastructure savings bank, but why create another GSE that runs in parallel to already existing private markets? Oh, I know. Political favoritism. A better solution would be to eliminate the double tax on dividend income and interest, raise interest rates, and stop the quantitative easing that is disrupting the pricing signals in the market.

  • SKPeterson

    The downside Tom @25 is that the spending didn’t create jobs either, and with the advent of QE2 we’ve eviscerated the value of the dollar, which means real earnings have declined for many people, while also fueling inflation which has not been good for small and medium sized businesses as well as the lower and middle classes. The basic problem is that while lowering tax rates does work to spur investment in real capital, increasing debt and driving interest rates to 0 lowers the value of the dollar and incentivizes firms to send financial assets overseas (or Canada and Mexico, btw) seeking better returns than even the lower tax rates provide. As a result, we have little or no investment and jobs created domestically. The answer isn’t to raise taxes, it is to raise interest rates and provide an incentive for people to save and invest. Obama has mentioned an infrastructure savings bank, but why create another GSE that runs in parallel to already existing private markets? Oh, I know. Political favoritism. A better solution would be to eliminate the double tax on dividend income and interest, raise interest rates, and stop the quantitative easing that is disrupting the pricing signals in the market.

  • helen

    sg @ 28
    No, but that may not be possible anyway. I mean if the only folks available to hire are zero marginal productive, why hire?

    The people I know who got cut in this “downturn” are not “marginal productive”; they just got the short stick.
    [I'm not saying there are no "marginal productive" people.]

    People aren’t starving, they are obese.
    Obesity is easier to achieve on cheap food. There’s a reason someone said, “You can never be too rich or too thin.” Doctors for various illnesses which contribute to obesity & physical trainers are expensive, and good fresh vegetables/low fat meats cost more than McDonalds!

  • helen

    sg @ 28
    No, but that may not be possible anyway. I mean if the only folks available to hire are zero marginal productive, why hire?

    The people I know who got cut in this “downturn” are not “marginal productive”; they just got the short stick.
    [I'm not saying there are no "marginal productive" people.]

    People aren’t starving, they are obese.
    Obesity is easier to achieve on cheap food. There’s a reason someone said, “You can never be too rich or too thin.” Doctors for various illnesses which contribute to obesity & physical trainers are expensive, and good fresh vegetables/low fat meats cost more than McDonalds!

  • Cincinnatus

    In other news, while I’m not one to indulge in political punditry, I would say a credit downgrade is enough to make Obama’s reelection bid next year extremely difficult.

  • Cincinnatus

    In other news, while I’m not one to indulge in political punditry, I would say a credit downgrade is enough to make Obama’s reelection bid next year extremely difficult.

  • Lou

    Helen’s comments (#4) taps into something I think is absolutely necessary. She wrote: “Now, which of the entities which have stripped the US of self sufficiency in manufacturing (and of other decently paying jobs), is interested in making it a “first world nation” again? [Even some on here admit that they have been/are putting their money elsewhere.]”

    The Congressional Committee can do all they want to address entitlement programs and reforming the tax code, but the underlying problem is the lack of the US’s economic “Self-Sufficiency.” More working people = less demand for entitlement. More manufacturing/sales/earnings/incomes (GDP growth) = more taxes being paid.

    The other Key thing that is missing in this equation is the 2 trillion dollars per year that the U.S. spends in subsidies and sends to aid other countries. It’s ridiculous for a family that is about to be put out on the street to be giving 1/4 of their budget to starving Ethiopians. A lot of the subsidies need to end too, especially those that the we continue to give to businesses that are already uber-profitable (oil and energy), and that are the ones that are actually guilty of sucking all the marrow out of our economy (financials), and the ones that have sent our jobs overseas (yes, our government has been rewarding this behavior). Of course, S&P didn’t ‘recommend’ cuts to subsidies and foreign aid. So, chances are the politicians won’t go there either.

    DonS: I hope that America and Congress wakes up on the S&P downgrade. My fear is that too many will just brush it off. Afterall, S&P is seen as being one of the main players in the mortgage meltdown — and btw – how creditable is a credit rating agency that makes a $2 million error in their calculations. Hopefully, the decision makers will see the urgency of our condition, despite the messenger.

  • Lou

    Helen’s comments (#4) taps into something I think is absolutely necessary. She wrote: “Now, which of the entities which have stripped the US of self sufficiency in manufacturing (and of other decently paying jobs), is interested in making it a “first world nation” again? [Even some on here admit that they have been/are putting their money elsewhere.]”

    The Congressional Committee can do all they want to address entitlement programs and reforming the tax code, but the underlying problem is the lack of the US’s economic “Self-Sufficiency.” More working people = less demand for entitlement. More manufacturing/sales/earnings/incomes (GDP growth) = more taxes being paid.

    The other Key thing that is missing in this equation is the 2 trillion dollars per year that the U.S. spends in subsidies and sends to aid other countries. It’s ridiculous for a family that is about to be put out on the street to be giving 1/4 of their budget to starving Ethiopians. A lot of the subsidies need to end too, especially those that the we continue to give to businesses that are already uber-profitable (oil and energy), and that are the ones that are actually guilty of sucking all the marrow out of our economy (financials), and the ones that have sent our jobs overseas (yes, our government has been rewarding this behavior). Of course, S&P didn’t ‘recommend’ cuts to subsidies and foreign aid. So, chances are the politicians won’t go there either.

    DonS: I hope that America and Congress wakes up on the S&P downgrade. My fear is that too many will just brush it off. Afterall, S&P is seen as being one of the main players in the mortgage meltdown — and btw – how creditable is a credit rating agency that makes a $2 million error in their calculations. Hopefully, the decision makers will see the urgency of our condition, despite the messenger.

  • Lou

    Cincinnatus — “I would say a credit downgrade is enough to make Obama’s reelection bid next year extremely difficult.”
    Maybe. But not so far though, since there hasn’t been an alternative presented that isn’t crazy or milktoast. If a Churchhill kind of leader doesn’t step up, we’re probably doomed either way.

  • Lou

    Cincinnatus — “I would say a credit downgrade is enough to make Obama’s reelection bid next year extremely difficult.”
    Maybe. But not so far though, since there hasn’t been an alternative presented that isn’t crazy or milktoast. If a Churchhill kind of leader doesn’t step up, we’re probably doomed either way.

  • http://www.newreformationpress.com Patrick Kyle

    Two of the largest hurdles I see are the dependency of our economy on government spending, and the bogus accounting rules used by the banks.

    Millions of Americans depend on the government, either through jobs and/or entitlements, that any substantial and meaningful cuts to our budget will greatly increase unemployment and poverty, at least in the relatively short term. Very few of our politicians have the courage to stand up and make the cuts anyway. Even if they tried, they would be voted out of office in the very next election in most cases.

    Allowing banks to count market equity as capital is disastrous ( look at bank stocks today) and is compounded by their ability to value assets (read that as repossessed houses) at ‘mark to fantasy’ rather than their real values. If forced to abide by the same accounting rules that I am held to, these banks would be insolvent.
    In this fashion they prevent assets and bad debt from being priced properly and cleared out of the system. Investors know a lot of this stuff is smoke and mirrors, so the trust and confidence needed to operate the markets in an honest fashion is gone or quickly disappearing.
    This mess will eventually correct itself in spite of our inaction or refusal to deal with it. It will just be a much harsher end than we tell ourselves. The math is unavoidable.

  • http://www.newreformationpress.com Patrick Kyle

    Two of the largest hurdles I see are the dependency of our economy on government spending, and the bogus accounting rules used by the banks.

    Millions of Americans depend on the government, either through jobs and/or entitlements, that any substantial and meaningful cuts to our budget will greatly increase unemployment and poverty, at least in the relatively short term. Very few of our politicians have the courage to stand up and make the cuts anyway. Even if they tried, they would be voted out of office in the very next election in most cases.

    Allowing banks to count market equity as capital is disastrous ( look at bank stocks today) and is compounded by their ability to value assets (read that as repossessed houses) at ‘mark to fantasy’ rather than their real values. If forced to abide by the same accounting rules that I am held to, these banks would be insolvent.
    In this fashion they prevent assets and bad debt from being priced properly and cleared out of the system. Investors know a lot of this stuff is smoke and mirrors, so the trust and confidence needed to operate the markets in an honest fashion is gone or quickly disappearing.
    This mess will eventually correct itself in spite of our inaction or refusal to deal with it. It will just be a much harsher end than we tell ourselves. The math is unavoidable.

  • Cincinnatus

    Lou: Where are you getting the $2 trillion figure for foreign aid? That’s a preposterous number, equal to more than half of our total federal budget. Do you mean $2 billion? In reality, foreign aid represents a tiny, tiny fraction of the budget, and there is some evidence that we actually gain something for these dollars in the form of strategic alliances and goodwill. What are we gaining for each dollar spent on ludicrous weapons programs or welfare entitlements?

    But you’re not alone. In recent polls, the only thing a majority of Americans can agree to cut from the budget is foreign aid:

    http://www.gallup.com/poll/145790/americans-oppose-cuts-education-social-security-defense.aspx

    (this isn’t the most recent poll, but it popped up in Google; recent numbers are actually worse)

    Therein is the real problem. American citizens–and, apparently, their representatives–are patently unwilling to do the hard work of cutting the budget, except when it comes to a minuscule, virtually meaningless portion of our spending.

  • Cincinnatus

    Lou: Where are you getting the $2 trillion figure for foreign aid? That’s a preposterous number, equal to more than half of our total federal budget. Do you mean $2 billion? In reality, foreign aid represents a tiny, tiny fraction of the budget, and there is some evidence that we actually gain something for these dollars in the form of strategic alliances and goodwill. What are we gaining for each dollar spent on ludicrous weapons programs or welfare entitlements?

    But you’re not alone. In recent polls, the only thing a majority of Americans can agree to cut from the budget is foreign aid:

    http://www.gallup.com/poll/145790/americans-oppose-cuts-education-social-security-defense.aspx

    (this isn’t the most recent poll, but it popped up in Google; recent numbers are actually worse)

    Therein is the real problem. American citizens–and, apparently, their representatives–are patently unwilling to do the hard work of cutting the budget, except when it comes to a minuscule, virtually meaningless portion of our spending.

  • Scott Klemsz

    As I left a Lutheran parish in Berlin, Germany last Sunday, an elderly lady pulled me aside and said, “I’m so sorry to see what has happened to your country.”

  • Scott Klemsz

    As I left a Lutheran parish in Berlin, Germany last Sunday, an elderly lady pulled me aside and said, “I’m so sorry to see what has happened to your country.”

  • Cincinnatus

    Yes, Scott@8, Germany has a moment to gloat, as for once their economy is doing somewhat better than ours. Although that might not long be the case once Germany is finished bailing out all of Southern Europe.

  • Cincinnatus

    Yes, Scott@8, Germany has a moment to gloat, as for once their economy is doing somewhat better than ours. Although that might not long be the case once Germany is finished bailing out all of Southern Europe.

  • DonS

    Unfortunately, President Obama just made things worse with another blathering speech about how this problem is “easily solvable” by a little “tax reform” to “make sure people pay their fair share” and by making small tweaks in Medicare. Then he went off on how we need to extend the payroll tax cuts another year. After this show of ignorance, the Dow has plunged another 50 points.

  • DonS

    Unfortunately, President Obama just made things worse with another blathering speech about how this problem is “easily solvable” by a little “tax reform” to “make sure people pay their fair share” and by making small tweaks in Medicare. Then he went off on how we need to extend the payroll tax cuts another year. After this show of ignorance, the Dow has plunged another 50 points.

  • Lou

    Cincinnatus – it’s actually almost 1 trillion. Remember, I said subsidies and foreign aid. We give out hundreds of billions in subsidies to an endless list of private and government entities – I’m not saying to do away with them all, but some are ridiculous and have to be relooked. Also, check the foreign aid -AND- Dept of State numbers, which highlight billions going to countries like Pakistan….

  • Lou

    Cincinnatus – it’s actually almost 1 trillion. Remember, I said subsidies and foreign aid. We give out hundreds of billions in subsidies to an endless list of private and government entities – I’m not saying to do away with them all, but some are ridiculous and have to be relooked. Also, check the foreign aid -AND- Dept of State numbers, which highlight billions going to countries like Pakistan….

  • Cincinnatus

    Lou, oh you mean total subsidies, including things like ethanol subsidies, etc.? And do things like defense contracts count? Are you also using the slightly dirty trick of counting tax loopholes as “subsidies”? If so, I could see where you might be getting something close to $1 trillion.

    But foreign aid is something like $24 billion, a miniscule number in comparison to the whole budget.

    The main point is that a plurality of Americans can’t agree to cut one single thing except reductions to that tiny $24 billion. That’s why we’re doomed.

  • Cincinnatus

    Lou, oh you mean total subsidies, including things like ethanol subsidies, etc.? And do things like defense contracts count? Are you also using the slightly dirty trick of counting tax loopholes as “subsidies”? If so, I could see where you might be getting something close to $1 trillion.

    But foreign aid is something like $24 billion, a miniscule number in comparison to the whole budget.

    The main point is that a plurality of Americans can’t agree to cut one single thing except reductions to that tiny $24 billion. That’s why we’re doomed.

  • Lou

    Cinc – No, Foreign Aid alone is 47,033,444,000 for FY11. That doesn’t include other dept of state functions (like drug interdiction, etc). And No, Defense contracts are not considered subsidies. There is a definition for subsidies; it’s not just whatever you think the government spends on that you don’t like.

  • Lou

    Cinc – No, Foreign Aid alone is 47,033,444,000 for FY11. That doesn’t include other dept of state functions (like drug interdiction, etc). And No, Defense contracts are not considered subsidies. There is a definition for subsidies; it’s not just whatever you think the government spends on that you don’t like.

  • SKPeterson

    Lou – I’m not sure how many subsidies the oil companies get, maybe you’re thinking of tax credits that are specifically targeted to particular industrial sectors? I’m not for abolishing those incentives as much as I would be for extending them to all industries equally – capital investment is capital investment whether it be in oil and gas, chemicals, railroads or agriculture. I don’t really think that allowing firms to use their revenues to reinvest in their companies is a subsidy, however.

    As to why firms are moving abroad – look at the oil and gas companies. We’ve severely restricted oil and gas exploration off both the East and West Coast and in Alaska. Faced with those restrictions it’s not surprising that oil and gas companies are looking elsewhere. Depending on transport costs, refining will also follow. Another example is the dichotomy between PA and NY in exploiting the Marcellus shale gas reserves that straddle the state line. On one side (PA) you have, jobs, economic growth and increasing tax revenue due to minimal legal restrictions on exploration and extraction. On the other side (NY), you find high legal and regulatory cost barriers and almost no investment, jobs or tax revenue growth. I haven’t seen the imagery yet of the NY/PA area, but it probably looks something like this: http://strangemaps.files.wordpress.com/2007/12/1207koreaelectricitygrikf0.jpg

  • SKPeterson

    Lou – I’m not sure how many subsidies the oil companies get, maybe you’re thinking of tax credits that are specifically targeted to particular industrial sectors? I’m not for abolishing those incentives as much as I would be for extending them to all industries equally – capital investment is capital investment whether it be in oil and gas, chemicals, railroads or agriculture. I don’t really think that allowing firms to use their revenues to reinvest in their companies is a subsidy, however.

    As to why firms are moving abroad – look at the oil and gas companies. We’ve severely restricted oil and gas exploration off both the East and West Coast and in Alaska. Faced with those restrictions it’s not surprising that oil and gas companies are looking elsewhere. Depending on transport costs, refining will also follow. Another example is the dichotomy between PA and NY in exploiting the Marcellus shale gas reserves that straddle the state line. On one side (PA) you have, jobs, economic growth and increasing tax revenue due to minimal legal restrictions on exploration and extraction. On the other side (NY), you find high legal and regulatory cost barriers and almost no investment, jobs or tax revenue growth. I haven’t seen the imagery yet of the NY/PA area, but it probably looks something like this: http://strangemaps.files.wordpress.com/2007/12/1207koreaelectricitygrikf0.jpg

  • Cincinnatus

    Lou: I know a subsidy isn’t “whatever the government spends on that I don’t like.” I’m trying to figure out what quirky definition you’re using to come up with the rather absurd figure of $1 trillion. Maybe it’s not a quirky definition, but I don’t know because you haven’t told me.

    Not only have your figures changed (from $2 trillion to $1 trillion), but so have your parameters. Drug interdictions now count? The entire state department budget is now a subsidy? Please clarify.

    Or don’t, because that’s really not that point. Cuts need to happen everywhere, especially entitlements. But neither Congress nor the American people are willing to do so. And as per about ten minutes ago, the President is pretending some minor “tax reform” will fix the problem. Right.

  • Cincinnatus

    Lou: I know a subsidy isn’t “whatever the government spends on that I don’t like.” I’m trying to figure out what quirky definition you’re using to come up with the rather absurd figure of $1 trillion. Maybe it’s not a quirky definition, but I don’t know because you haven’t told me.

    Not only have your figures changed (from $2 trillion to $1 trillion), but so have your parameters. Drug interdictions now count? The entire state department budget is now a subsidy? Please clarify.

    Or don’t, because that’s really not that point. Cuts need to happen everywhere, especially entitlements. But neither Congress nor the American people are willing to do so. And as per about ten minutes ago, the President is pretending some minor “tax reform” will fix the problem. Right.

  • Cincinnatus

    SKPeterson@42: Well, there is a reason that New York, California, and other deeply “blue” states are experiencing net emigration of both businesses and citizens. But North Korea is Best Korea, right?

  • Cincinnatus

    SKPeterson@42: Well, there is a reason that New York, California, and other deeply “blue” states are experiencing net emigration of both businesses and citizens. But North Korea is Best Korea, right?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Obesity is easier to achieve on cheap food.”

    Obesity is caused by eating too many calories. Very simple. Besides life expectancies among the American poor are very very high compared to all folks fifty or a hundred years ago. So, the cheap food argument is just silly.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Obesity is easier to achieve on cheap food.”

    Obesity is caused by eating too many calories. Very simple. Besides life expectancies among the American poor are very very high compared to all folks fifty or a hundred years ago. So, the cheap food argument is just silly.

  • Lou

    SK, there we a bill on the floor to end $36.5 billion in subsidies for oil and gas companies over a 1- year period which would have raised overall costs to the oil companies by only 1%, but it didn’t pass because of the lobbyists. Granted the majority of those subsidies were in the form of tax credits. Some were tax cuts. Some were grants. (Keep in mind, a Tax Credit gets deducted straight off the tax liability, unlike a tax cut which is deducted from the income. So, tax credits are the ones that become really big deals to the revenue stream).

  • Lou

    SK, there we a bill on the floor to end $36.5 billion in subsidies for oil and gas companies over a 1- year period which would have raised overall costs to the oil companies by only 1%, but it didn’t pass because of the lobbyists. Granted the majority of those subsidies were in the form of tax credits. Some were tax cuts. Some were grants. (Keep in mind, a Tax Credit gets deducted straight off the tax liability, unlike a tax cut which is deducted from the income. So, tax credits are the ones that become really big deals to the revenue stream).

  • WebMonk

    Lou 41, your math = epic fail.

    Your “massive” $47 billion dollar figure for Foreign Aid is only 4.7% of a trillion dollars. You’re off by over a factor of 20!

    Where on earth did you get your nonsensical number of two trillion dollars (oops you amended that to “only” a trillion) in subsidies and foreign aid each year? What are included in the “subsidies” part of your number?

    Whatever it is, it must be $0.9953 trillion since foreign aid is only $0.0047 trillion.

  • WebMonk

    Lou 41, your math = epic fail.

    Your “massive” $47 billion dollar figure for Foreign Aid is only 4.7% of a trillion dollars. You’re off by over a factor of 20!

    Where on earth did you get your nonsensical number of two trillion dollars (oops you amended that to “only” a trillion) in subsidies and foreign aid each year? What are included in the “subsidies” part of your number?

    Whatever it is, it must be $0.9953 trillion since foreign aid is only $0.0047 trillion.

  • SKPeterson

    According to this publication http://www.census.gov/compendia/statab/2011/tables/11s1296.pdf
    in 2008 total U.S. foreign aid, including military, was $49.057 billion. Not insubstantial, but paltry compared with say our total military spending outlays in 2008 of approximately $690 billion. My guess is that foreign aid has stayed at about the same level (the 2011 statistical abstract has figures up to 2008 – if anyone can find more current that’d be great), while military spending has increased to over $700 billion in 2011. Now that is just for the DoD. If you add in the military expenditures spread out to Energy (nukes), NASA, the VA, and DHS, you get expenditures in the neighborhood of $900 billion, while adding in the interest we pay on loans for military spending increases the bill to over $1 trillion.

  • SKPeterson

    According to this publication http://www.census.gov/compendia/statab/2011/tables/11s1296.pdf
    in 2008 total U.S. foreign aid, including military, was $49.057 billion. Not insubstantial, but paltry compared with say our total military spending outlays in 2008 of approximately $690 billion. My guess is that foreign aid has stayed at about the same level (the 2011 statistical abstract has figures up to 2008 – if anyone can find more current that’d be great), while military spending has increased to over $700 billion in 2011. Now that is just for the DoD. If you add in the military expenditures spread out to Energy (nukes), NASA, the VA, and DHS, you get expenditures in the neighborhood of $900 billion, while adding in the interest we pay on loans for military spending increases the bill to over $1 trillion.

  • WebMonk

    (wow, I scold Lou for his bad math and then I mis-type the number of zeros!! sorry about that! $47bn = $0.047tr)

    Lou, again, check your math. You said oil subsidies were $36.5 billion over 10 years. So, let’s add that into your $47 billion and see if it adds up to a trillion dollars yet.

    47.0 billion
    + 3.6 billion
    ———————
    $0.0506 trillion dollars

    You’re still off by a factor of 20.

  • WebMonk

    (wow, I scold Lou for his bad math and then I mis-type the number of zeros!! sorry about that! $47bn = $0.047tr)

    Lou, again, check your math. You said oil subsidies were $36.5 billion over 10 years. So, let’s add that into your $47 billion and see if it adds up to a trillion dollars yet.

    47.0 billion
    + 3.6 billion
    ———————
    $0.0506 trillion dollars

    You’re still off by a factor of 20.

  • Lou

    Cincinnatus – you’re right that I corrected myself to 1 trillion, as my post stated. However, I’m not sure why you chose to misread what I said about state department spending. By all accounts, typically Foreign Aid includes both economic and military support to foreign entities. And I was clear about the fact that drug interdiction rolls up under the state department, NOT subsidies. I reread my comment and didn’t see where I wasn’t clear about that….

    “Cuts need to happen everywhere, especially entitlements. ” Yes, cuts need to happen everywhere. However, I would argue that entitlements need to be reformed rather than just “cut”. Things like subsidies and foreign aid can be cut without reform. Taxes and entitlements require ‘reform’ in my opinion.

  • Lou

    Cincinnatus – you’re right that I corrected myself to 1 trillion, as my post stated. However, I’m not sure why you chose to misread what I said about state department spending. By all accounts, typically Foreign Aid includes both economic and military support to foreign entities. And I was clear about the fact that drug interdiction rolls up under the state department, NOT subsidies. I reread my comment and didn’t see where I wasn’t clear about that….

    “Cuts need to happen everywhere, especially entitlements. ” Yes, cuts need to happen everywhere. However, I would argue that entitlements need to be reformed rather than just “cut”. Things like subsidies and foreign aid can be cut without reform. Taxes and entitlements require ‘reform’ in my opinion.

  • Lou

    49 WebMonk – Sure, that would be fine – If oil was the only subsidy that we have (and it is only one of hundreds you should know!!) I will look for the report that I had from last week, where all of the subsidies were itemized by type.

  • Lou

    49 WebMonk – Sure, that would be fine – If oil was the only subsidy that we have (and it is only one of hundreds you should know!!) I will look for the report that I had from last week, where all of the subsidies were itemized by type.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “I would argue that entitlements need to be reformed rather than just “cut”.”

    I don’t really follow this idea. I mean the whole point of reform is to reduce the amount spent. So, in this case reform specifically means cut. Or am I missing something.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “I would argue that entitlements need to be reformed rather than just “cut”.”

    I don’t really follow this idea. I mean the whole point of reform is to reduce the amount spent. So, in this case reform specifically means cut. Or am I missing something.

  • Cincinnatus

    Lou, you’re being intensely confusing and obfuscatory.

    First, please define for us what you mean by subsidies such that we can see how you arrived at the (still absurd) figure of $1 trillion. Tax rebates do not count, as they are little more than an interest free loan to the government until refunds are mailed out.

    Second, reform = cut. To “reform” a program such that it costs less, which is undeniably what needs to happen, it will require measures that effectively amount either to tax increases or spending cuts. For example, “reforming” Social Security would require some combination of raising the cap on salaries (tax increase), raising the retirement age (a cut), or employing means-testing (a cut). There’s really no way around it.

    Don’t make up your own words. Or are you politician? Because if so, that would make sense. Obama just announced that he wants to “reform” taxes. This = raising taxes.

  • Cincinnatus

    Lou, you’re being intensely confusing and obfuscatory.

    First, please define for us what you mean by subsidies such that we can see how you arrived at the (still absurd) figure of $1 trillion. Tax rebates do not count, as they are little more than an interest free loan to the government until refunds are mailed out.

    Second, reform = cut. To “reform” a program such that it costs less, which is undeniably what needs to happen, it will require measures that effectively amount either to tax increases or spending cuts. For example, “reforming” Social Security would require some combination of raising the cap on salaries (tax increase), raising the retirement age (a cut), or employing means-testing (a cut). There’s really no way around it.

    Don’t make up your own words. Or are you politician? Because if so, that would make sense. Obama just announced that he wants to “reform” taxes. This = raising taxes.

  • Lou

    http://www.cato.org/pubs/tbb/tbb_0611-41.pdf
    Okay, this is an old one, but CATO states:
    “Federal outlays to subsidies without interest increased from $1.657 trillion in fiscal 2001 to $2.429 trillion in fiscal 2006.”

  • Lou

    http://www.cato.org/pubs/tbb/tbb_0611-41.pdf
    Okay, this is an old one, but CATO states:
    “Federal outlays to subsidies without interest increased from $1.657 trillion in fiscal 2001 to $2.429 trillion in fiscal 2006.”

  • Cincinnatus

    Wow, that’s a really…odd memo, Lou. The money quote is this:

    “The program count may be affected by factors such as changing judgments about what constitutes a distinct “program.”

    …understatement of the day. Apparently things like aid to state governments counts as a subsidy. I need to see a list or some kind of formulaic definition that prescribes specifically what constitutes a “subsidy” and what doesn’t. It’s not that I disbelieve it, or that I don’t think we spend too much on subsidies, but the study just doesn’t prove much of substance to me.

    But more importantly, you’ve misread the study, or specifically the footnote. In 2006, TOTAL federal outlays increased from $1.657 trillion to 2.429 trillion. This figure includes subsidies AND everything else in the federal budget. Did you intentionally misread/misquote that footnote? Because you not-so-cleverly inserted the words “to subsidies” into the quote–words that are completely non-existent in the original.

    Was that an honest mistake or are you just trolling us now?

  • Cincinnatus

    Wow, that’s a really…odd memo, Lou. The money quote is this:

    “The program count may be affected by factors such as changing judgments about what constitutes a distinct “program.”

    …understatement of the day. Apparently things like aid to state governments counts as a subsidy. I need to see a list or some kind of formulaic definition that prescribes specifically what constitutes a “subsidy” and what doesn’t. It’s not that I disbelieve it, or that I don’t think we spend too much on subsidies, but the study just doesn’t prove much of substance to me.

    But more importantly, you’ve misread the study, or specifically the footnote. In 2006, TOTAL federal outlays increased from $1.657 trillion to 2.429 trillion. This figure includes subsidies AND everything else in the federal budget. Did you intentionally misread/misquote that footnote? Because you not-so-cleverly inserted the words “to subsidies” into the quote–words that are completely non-existent in the original.

    Was that an honest mistake or are you just trolling us now?

  • Cincinnatus

    Also, they include the Medicare drug benefit as a “subsidy,” which is odd, since I’m pretty sure most people would count that as an “entitlement.” That “subsidy,” in any case, is only $70 billion, but it’s the largest they listed. Way to be non-credible, Cato.

  • Cincinnatus

    Also, they include the Medicare drug benefit as a “subsidy,” which is odd, since I’m pretty sure most people would count that as an “entitlement.” That “subsidy,” in any case, is only $70 billion, but it’s the largest they listed. Way to be non-credible, Cato.

  • Lou

    No, Cincinnatus. YOU are the one playing with (and twisting) words.

    A Tax Credit is: a sum deducted from the total amount a taxpayer owes. It may be granted as a subsidy, or to encourage investment or other behaviors. There is no law that states that the tax must be paid first. The tax credit can be taken at the time that the tax liability is owed (for individuals this would be April 15th each yr.).

    A Reform is: the process of changing the way a program is managed by the government. Reformers may have different goals. Some seek to simplify the system. Some try to make the system more understandable, or more accountable. Others propose systems that attempt to deal primarily with externalities.

    A Cut is: an action that decreases income to recipient of the payment and increases the real income of the payer. The system itself is not changed by implementing a ‘cut’.

  • Lou

    No, Cincinnatus. YOU are the one playing with (and twisting) words.

    A Tax Credit is: a sum deducted from the total amount a taxpayer owes. It may be granted as a subsidy, or to encourage investment or other behaviors. There is no law that states that the tax must be paid first. The tax credit can be taken at the time that the tax liability is owed (for individuals this would be April 15th each yr.).

    A Reform is: the process of changing the way a program is managed by the government. Reformers may have different goals. Some seek to simplify the system. Some try to make the system more understandable, or more accountable. Others propose systems that attempt to deal primarily with externalities.

    A Cut is: an action that decreases income to recipient of the payment and increases the real income of the payer. The system itself is not changed by implementing a ‘cut’.

  • WebMonk

    Lou 51 – yes, oil is only one of many subsidies.

    I still think you’re going to have a VERY hard time coming up with a trillion dollars worth of subsidies. Maybe you just aren’t very familiar with federal budget amounts, but the claim that there are a trillion dollars worth of subsidies and foreign aid is absolutely ludicrous.

    You’re going to have an even tougher time trying to explain how a tax cut is the same as a subsidy, as you stated in 46. Tax breaks? Maybe. Tax cuts? Not even close. If I made $10,000 and my tax rate dropped from 20% to 18%, I would pay $200 less in taxes, and you apparently would count that as a $200 “subsidy” since you call “tax cuts” subsidies in @46.

    Finally you need to go find out what is spent on “drug interdiction” since you are (rather bizarrely) including that in your subsidies and foreign aid categories. Go check wikipedia: http://en.wikipedia.org/wiki/War_on_Drugs

    About $44 bn would be saved in law enforcement costs if we made all drugs legal. So, let’s add that to SK’s superior $49bn number and the $3.6bn number you mentioned for oil subsidies. (in fact let’s round that up to $4bn)

    $49bn + $44bn + $4bn = $97bn.

    All that added up is still less than one tenth your crazy trillion dollar claim.

    (and I don’t accept that drug interdiction is substantively in the same category as subsidies and foreign aid but I’m including it in the numbers just to show you that even with it your numbers still don’t add up)

  • WebMonk

    Lou 51 – yes, oil is only one of many subsidies.

    I still think you’re going to have a VERY hard time coming up with a trillion dollars worth of subsidies. Maybe you just aren’t very familiar with federal budget amounts, but the claim that there are a trillion dollars worth of subsidies and foreign aid is absolutely ludicrous.

    You’re going to have an even tougher time trying to explain how a tax cut is the same as a subsidy, as you stated in 46. Tax breaks? Maybe. Tax cuts? Not even close. If I made $10,000 and my tax rate dropped from 20% to 18%, I would pay $200 less in taxes, and you apparently would count that as a $200 “subsidy” since you call “tax cuts” subsidies in @46.

    Finally you need to go find out what is spent on “drug interdiction” since you are (rather bizarrely) including that in your subsidies and foreign aid categories. Go check wikipedia: http://en.wikipedia.org/wiki/War_on_Drugs

    About $44 bn would be saved in law enforcement costs if we made all drugs legal. So, let’s add that to SK’s superior $49bn number and the $3.6bn number you mentioned for oil subsidies. (in fact let’s round that up to $4bn)

    $49bn + $44bn + $4bn = $97bn.

    All that added up is still less than one tenth your crazy trillion dollar claim.

    (and I don’t accept that drug interdiction is substantively in the same category as subsidies and foreign aid but I’m including it in the numbers just to show you that even with it your numbers still don’t add up)

  • SKPeterson

    Cincinnatus – I think they marked it as a subsidy in that almost all government benefits or entitlements are actually some form of subsidy. Social Security and Medicare benefits have not been paid for by the recipients – they are paid for by current workers, who have money transferred from their paychecks to the accounts of SS or Medicare recipients. Thus, the subsidy is from the working to the non-working. My guess is that Cato is trying to deobfuscate the budget and call spades spades. Labeling things as entitlements or benefits does not change the fact that a financial transfer is occurring that subsidizes the consumption of one class (the beneficiaries) at the expense of another (current workers and firms).

  • SKPeterson

    Cincinnatus – I think they marked it as a subsidy in that almost all government benefits or entitlements are actually some form of subsidy. Social Security and Medicare benefits have not been paid for by the recipients – they are paid for by current workers, who have money transferred from their paychecks to the accounts of SS or Medicare recipients. Thus, the subsidy is from the working to the non-working. My guess is that Cato is trying to deobfuscate the budget and call spades spades. Labeling things as entitlements or benefits does not change the fact that a financial transfer is occurring that subsidizes the consumption of one class (the beneficiaries) at the expense of another (current workers and firms).

  • WebMonk

    Oh, whoops. Lou put up an explanation for his numbers.

    I’ll summarize Cin @55 – you’ve totally and completely misread and misunderstood that paper.

  • WebMonk

    Oh, whoops. Lou put up an explanation for his numbers.

    I’ll summarize Cin @55 – you’ve totally and completely misread and misunderstood that paper.

  • Lou

    Cincinnatus, The CATO report (dated 2006) states that “There are 1,696 subsidy programs in the federal budget, which dispense hundreds of billions of dollars annually to state governments, businesses, nonprofit groups, and individuals. The number of subsidy programs is rising rapidly, with a 44 percent increase since 1990.” As I searched for a dollar figure, I found the one in the footnote, “increased from $1.657 trillion in fiscal 2001 to $2.429 trillion in fiscal 2006″ — Yes, I assumed that these numbers referred to what the actual report was about. If I had read the introduction, I could have seen that this was all federal outlays, not only subsidies. But yet, the report does say hundreds of billions of dollars are spent annually by subsidy programs. So, back to the drawing board, to find the budget pie chart that with the 1 trillion in subsidies. You’ve got to admit though, it’s not all that hard to imagine – 1,696 subsidy programs!

  • Lou

    Cincinnatus, The CATO report (dated 2006) states that “There are 1,696 subsidy programs in the federal budget, which dispense hundreds of billions of dollars annually to state governments, businesses, nonprofit groups, and individuals. The number of subsidy programs is rising rapidly, with a 44 percent increase since 1990.” As I searched for a dollar figure, I found the one in the footnote, “increased from $1.657 trillion in fiscal 2001 to $2.429 trillion in fiscal 2006″ — Yes, I assumed that these numbers referred to what the actual report was about. If I had read the introduction, I could have seen that this was all federal outlays, not only subsidies. But yet, the report does say hundreds of billions of dollars are spent annually by subsidy programs. So, back to the drawing board, to find the budget pie chart that with the 1 trillion in subsidies. You’ve got to admit though, it’s not all that hard to imagine – 1,696 subsidy programs!

  • WebMonk

    SK @59 – I get your point in what Cato is doing, but what Cato is doing in their paper is WILDLY different than what Lou is talking about.

    Lou – 1) what are you calling a “subsidy”? and 2) where are you getting your numbers?

    Are Medicare, Social Security, Medicaid “subsidies” in your definition?

  • WebMonk

    SK @59 – I get your point in what Cato is doing, but what Cato is doing in their paper is WILDLY different than what Lou is talking about.

    Lou – 1) what are you calling a “subsidy”? and 2) where are you getting your numbers?

    Are Medicare, Social Security, Medicaid “subsidies” in your definition?

  • WebMonk

    Sheesh but I need to learn to type faster!! :-D

  • WebMonk

    Sheesh but I need to learn to type faster!! :-D

  • http://theoldadam.wordpress.com Steve Martin

    “How can we become a first world nation again?”

    A great start would be to get rid of the food stamp- President. And then the tax and spend idiots in Congress.

  • http://theoldadam.wordpress.com Steve Martin

    “How can we become a first world nation again?”

    A great start would be to get rid of the food stamp- President. And then the tax and spend idiots in Congress.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “How can we become a first world nation again?”

    The short answer is we can’t.

    We no longer have the values that work. Sure a certain percentage do, but they are too small a minority to change things.

    It probably isn’t possible to have universal suffrage and first world status for very long. If you let folks vote themselves other people’s money, society just cannibalizes, which is what we are seeing.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “How can we become a first world nation again?”

    The short answer is we can’t.

    We no longer have the values that work. Sure a certain percentage do, but they are too small a minority to change things.

    It probably isn’t possible to have universal suffrage and first world status for very long. If you let folks vote themselves other people’s money, society just cannibalizes, which is what we are seeing.

  • J.R.

    Wow. It’s tough to read all these comments. One thing that stood out to me is the 1 trillion in subsidies. Whether that is the actual number or not, how about this instead?
    Obamacare.
    According to USA Today, a liberal paper, Obamacare is going to cost over 1 trillion the next 10 years. Repeal that, and boom. We’re half way there.
    http://www.usatoday.com/news/washington/2009-07-14-trillion-dollars-for-health-care_N.htm

  • J.R.

    Wow. It’s tough to read all these comments. One thing that stood out to me is the 1 trillion in subsidies. Whether that is the actual number or not, how about this instead?
    Obamacare.
    According to USA Today, a liberal paper, Obamacare is going to cost over 1 trillion the next 10 years. Repeal that, and boom. We’re half way there.
    http://www.usatoday.com/news/washington/2009-07-14-trillion-dollars-for-health-care_N.htm

  • helen

    sg @ 65
    If you let folks vote themselves other people’s money, society just cannibalizes, which is what we are seeing.

    I would guess you mean to apply that “downward” to people who receive “subsidies” (even if they’ve worked and contributed 40 years payments for them).
    It applies as well “upward”, to billionaires who manage to pay taxes at a lower rate than their secretaries… or “forget” to pay them at all… or hide their money off shore.
    But that’s what lobbyists and lawyers are for, isn’t it.

  • helen

    sg @ 65
    If you let folks vote themselves other people’s money, society just cannibalizes, which is what we are seeing.

    I would guess you mean to apply that “downward” to people who receive “subsidies” (even if they’ve worked and contributed 40 years payments for them).
    It applies as well “upward”, to billionaires who manage to pay taxes at a lower rate than their secretaries… or “forget” to pay them at all… or hide their money off shore.
    But that’s what lobbyists and lawyers are for, isn’t it.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “I would guess you mean to apply that “downward” to people who receive “subsidies” (even if they’ve worked and contributed 40 years payments for them).”

    Not exactly. The problem is when everyone expects something for nothing, or its cousin, a guaranteed return.

    It has already been noted that government funnels monies to all sorts of folks and picks the winners and losers to some extent. However, the fact that we have debt is proof that the government promises more than it can deliver.

    Here is an example. A guy makes $50K starting out and retires making $150K. So, we’ll say his average earnings over his 40 year working life are about $100k per year and his average FICA over the 40 years was $10K. Now that comes out to a $400K contribution. The guy in this example earned fairly well, certainly higher than average. Does it seem reasonable that he and his wife can live out the rest of their lives including medical expenses for only $400K?

    The expectation of guaranteed return presupposes growth aka it is a pyramid scheme. By definition, it is unsustainable. We would need to double the size of our economy over the next 40 years. That would probably mean doubling our population. Does that sound plausible or desirable?

    We need a new paradigm, and we needed it like yesterday.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “I would guess you mean to apply that “downward” to people who receive “subsidies” (even if they’ve worked and contributed 40 years payments for them).”

    Not exactly. The problem is when everyone expects something for nothing, or its cousin, a guaranteed return.

    It has already been noted that government funnels monies to all sorts of folks and picks the winners and losers to some extent. However, the fact that we have debt is proof that the government promises more than it can deliver.

    Here is an example. A guy makes $50K starting out and retires making $150K. So, we’ll say his average earnings over his 40 year working life are about $100k per year and his average FICA over the 40 years was $10K. Now that comes out to a $400K contribution. The guy in this example earned fairly well, certainly higher than average. Does it seem reasonable that he and his wife can live out the rest of their lives including medical expenses for only $400K?

    The expectation of guaranteed return presupposes growth aka it is a pyramid scheme. By definition, it is unsustainable. We would need to double the size of our economy over the next 40 years. That would probably mean doubling our population. Does that sound plausible or desirable?

    We need a new paradigm, and we needed it like yesterday.

  • SKPeterson

    helen @67 I think the CEO v. secretary thing is something of a myth perpetuated by Warren Buffet. A good investor, but really lousy at prescribing economic or tax policy. If he’s so concerned, why doesn’t he pay his tax lawyers to shelter his secretary’s income in the same manner as him? Or, he could easily change her compensation structure so she would get more income from dividends and only pay the 15% rate.

  • SKPeterson

    helen @67 I think the CEO v. secretary thing is something of a myth perpetuated by Warren Buffet. A good investor, but really lousy at prescribing economic or tax policy. If he’s so concerned, why doesn’t he pay his tax lawyers to shelter his secretary’s income in the same manner as him? Or, he could easily change her compensation structure so she would get more income from dividends and only pay the 15% rate.

  • Lou

    SG: “It probably isn’t possible to have universal suffrage and first world status for very long.” HUH? That makes no sense. I’m sure you have some bizarro worldview that explains what this means, — and I’m sure I’ll disagree.

  • Lou

    SG: “It probably isn’t possible to have universal suffrage and first world status for very long.” HUH? That makes no sense. I’m sure you have some bizarro worldview that explains what this means, — and I’m sure I’ll disagree.

  • Cincinnatus

    Lou@70:

    I’ll be bold and support SG on this one. I’ll first note that I think democracy is vastly overrated, and is a profoundly dangerous political constitution if the citizen body is not responsible (like ours?). Anyway, a vast body of political theory, including volumes from our own Founding Fathers, exists demonstrating that the institution of universal suffrage is always attended by a tremendous and usually unstable growth in the welfare state as the “poor” classes, always a majority, vote themselves more and more benefits from the public treasury (while simultaneously lowering their own taxes: 40% of American taxpayers pay no federal income tax). Combine this fact with the slightly elitist but nonetheless plausible claim that the lower classes are often less experienced in matters political, for a variety of reasons, and we have a wonderful recipe for third world status. Now, I won’t go so far as to assert with sg that we are certainly doomed to lose “first world” status (whatever that means), but it will be an uphill battle to maintain a civilization worth loving. A debt-fueled economy sustained by a population utterly unwilling to curb its appetites does not a strong democracy make.

    Also, you’re wrong when you claim that I am wrong about terms. Tax rebates/breaks/refunds are, at best, an indirect subsidy, but many economists would disagree. Also, derp: any reform that cuts costs by definition cuts spending. Not all “cuts” are explicit, basic cuts to spending across the board. As I noted, “reforming” Social Security by raising the retirement age would be a huge cut.

  • Cincinnatus

    Lou@70:

    I’ll be bold and support SG on this one. I’ll first note that I think democracy is vastly overrated, and is a profoundly dangerous political constitution if the citizen body is not responsible (like ours?). Anyway, a vast body of political theory, including volumes from our own Founding Fathers, exists demonstrating that the institution of universal suffrage is always attended by a tremendous and usually unstable growth in the welfare state as the “poor” classes, always a majority, vote themselves more and more benefits from the public treasury (while simultaneously lowering their own taxes: 40% of American taxpayers pay no federal income tax). Combine this fact with the slightly elitist but nonetheless plausible claim that the lower classes are often less experienced in matters political, for a variety of reasons, and we have a wonderful recipe for third world status. Now, I won’t go so far as to assert with sg that we are certainly doomed to lose “first world” status (whatever that means), but it will be an uphill battle to maintain a civilization worth loving. A debt-fueled economy sustained by a population utterly unwilling to curb its appetites does not a strong democracy make.

    Also, you’re wrong when you claim that I am wrong about terms. Tax rebates/breaks/refunds are, at best, an indirect subsidy, but many economists would disagree. Also, derp: any reform that cuts costs by definition cuts spending. Not all “cuts” are explicit, basic cuts to spending across the board. As I noted, “reforming” Social Security by raising the retirement age would be a huge cut.

  • DonS

    I’ll go with Cincinnatus and sg on this one as well. As long as we are going to have an income tax, everyone with any income at all, regardless of its source, should pay something, and have some “skin in the game”. We cannot afford to have a whole host of voters who contribute nothing and consequently see the government as a vast goodie bag, financed on the backs of the productive people. The earned income tax credit, where people receive tax “refunds” in excess of any amounts paid in, is a particular abomination. And, there is no reason why government benefits are not taxable, while earned income is. That is perverse in the message it sends.

  • DonS

    I’ll go with Cincinnatus and sg on this one as well. As long as we are going to have an income tax, everyone with any income at all, regardless of its source, should pay something, and have some “skin in the game”. We cannot afford to have a whole host of voters who contribute nothing and consequently see the government as a vast goodie bag, financed on the backs of the productive people. The earned income tax credit, where people receive tax “refunds” in excess of any amounts paid in, is a particular abomination. And, there is no reason why government benefits are not taxable, while earned income is. That is perverse in the message it sends.

  • Lou

    Okay interesting explanation about the universal suffrage thing. I think I’ve heard something similar, but instead replacing the poor with the ignorant or some such thing. I’ll admit the pattern seems to be inherent.

    Also, I’m gonna have to call you — you’re wrong about me being wrong about you being wrong about terms. You’re going by *your* own definition. Whereas, I’m going by actual definitions. (see above).

    A tax credit is like the gov’t putting cash in my pocket. Example – My furnace went out last year and I had to get it replaced. So, I purchased and had installed a piece of equipment that had to be bought. When I did my taxes in April of 2011, I would have been required to pay $3,500 in taxes, but I got to take a Tax Credit on and only owed a total of $2,000 for the entire year. Since I had already paid the $3,500 tax liability throughout the year, I was able to received a payment of $1,500 in my savings account by the IRS.
    That is a direct payment. Nothing indirect about it.

  • Lou

    Okay interesting explanation about the universal suffrage thing. I think I’ve heard something similar, but instead replacing the poor with the ignorant or some such thing. I’ll admit the pattern seems to be inherent.

    Also, I’m gonna have to call you — you’re wrong about me being wrong about you being wrong about terms. You’re going by *your* own definition. Whereas, I’m going by actual definitions. (see above).

    A tax credit is like the gov’t putting cash in my pocket. Example – My furnace went out last year and I had to get it replaced. So, I purchased and had installed a piece of equipment that had to be bought. When I did my taxes in April of 2011, I would have been required to pay $3,500 in taxes, but I got to take a Tax Credit on and only owed a total of $2,000 for the entire year. Since I had already paid the $3,500 tax liability throughout the year, I was able to received a payment of $1,500 in my savings account by the IRS.
    That is a direct payment. Nothing indirect about it.

  • Cincinnatus

    Lou: My mistake; you’re correct about tax credits of that nature. I’m talking about the sort of “tax breaks” and loopholes oil companies get. Most of those do not qualify as subsidies, especially direct subsidies. And really, whining about them is yet another fairly meaningless rhetorical flourish: they amount to another, tiny, tiny, tiny fraction of the budget. I suppose eliminating those loopholes would have some populist appeal, but the problem with populist appeal is that it seldom accomplishes anything meaningful.

  • Cincinnatus

    Lou: My mistake; you’re correct about tax credits of that nature. I’m talking about the sort of “tax breaks” and loopholes oil companies get. Most of those do not qualify as subsidies, especially direct subsidies. And really, whining about them is yet another fairly meaningless rhetorical flourish: they amount to another, tiny, tiny, tiny fraction of the budget. I suppose eliminating those loopholes would have some populist appeal, but the problem with populist appeal is that it seldom accomplishes anything meaningful.

  • Joe

    Lou – my problem with your definition is that is assumes the gov’t was morally entitled to all $3,5o0 in the first instance. I have a hard time labeling not taking money by force (i.e. taxes) a subsidy.

  • Joe

    Lou – my problem with your definition is that is assumes the gov’t was morally entitled to all $3,5o0 in the first instance. I have a hard time labeling not taking money by force (i.e. taxes) a subsidy.

  • http://www.toddstadler.com/ tODD

    Crap. The UN just downgraded our nation’s status from first-world to second-plus-world.

  • http://www.toddstadler.com/ tODD

    Crap. The UN just downgraded our nation’s status from first-world to second-plus-world.

  • http://acroamaticus.blogspot.com Pr Mark Henderson

    The same thing happened to Australia in the 1980s and it took us 17 years to get our AAA back. It was a different time and context, but basically you need to cut spending and/or increase revenue and use the proceeds to pay off government debt and produce surplus budgets. It ain’t ‘rocket science’, but in the US’s case politics seems to be getting in the way of having the will to do this. We were fortunate in that both major parties put the country ahead of their own agendas as far as economic policy was concerned, to the extent that the difference between them was one of degrees rather than substance. In fact, the most economically reformist, pro-free market government we had was a Labor Party govt (roughly equivalent to your Democrats). On the basis of their reforms, their successor govt (Liberal Party, roughly equivalent to your Republicans) actually paid off every last cent of government debt. Notably, there was also a consensus among electors that economic reforms had to be made, and an agreement that the pain ought to be shared across the spectrum of society proportionately. You don’t seem to have that consensus in the US; perhaps the downgrade is the catalyst you need to effect change?

  • http://acroamaticus.blogspot.com Pr Mark Henderson

    The same thing happened to Australia in the 1980s and it took us 17 years to get our AAA back. It was a different time and context, but basically you need to cut spending and/or increase revenue and use the proceeds to pay off government debt and produce surplus budgets. It ain’t ‘rocket science’, but in the US’s case politics seems to be getting in the way of having the will to do this. We were fortunate in that both major parties put the country ahead of their own agendas as far as economic policy was concerned, to the extent that the difference between them was one of degrees rather than substance. In fact, the most economically reformist, pro-free market government we had was a Labor Party govt (roughly equivalent to your Democrats). On the basis of their reforms, their successor govt (Liberal Party, roughly equivalent to your Republicans) actually paid off every last cent of government debt. Notably, there was also a consensus among electors that economic reforms had to be made, and an agreement that the pain ought to be shared across the spectrum of society proportionately. You don’t seem to have that consensus in the US; perhaps the downgrade is the catalyst you need to effect change?

  • Lou

    Joe, sorry, but I take a traditional understanding of Matthew 22:15-22, and see nothing immoral about the government requiring taxes of its subjects.

  • Lou

    Joe, sorry, but I take a traditional understanding of Matthew 22:15-22, and see nothing immoral about the government requiring taxes of its subjects.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    FWIW, my husband decided to go ahead and get a hybrid car before the tax credit went away or was reduced. So, the government is subsidizing these purchases by people who can afford to buy the stuff anyway. I don’t know if the furnace and hybrid credit are refundable tax credits like earned income credit.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    FWIW, my husband decided to go ahead and get a hybrid car before the tax credit went away or was reduced. So, the government is subsidizing these purchases by people who can afford to buy the stuff anyway. I don’t know if the furnace and hybrid credit are refundable tax credits like earned income credit.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Joe, sorry, but I take a traditional understanding of Matthew 22:15-22, and see nothing immoral about the government requiring taxes of its subjects.”

    Due to the structure of our system, government consists in the people getting together and mutually agreeing what they want to pay for and then assessing themselves the tax. In such a system, step one is figure out what we want to pay for in public goods and then assessing the tax. It is immoral to tax people just because they have money and the rest of us feel they should share it with us.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Joe, sorry, but I take a traditional understanding of Matthew 22:15-22, and see nothing immoral about the government requiring taxes of its subjects.”

    Due to the structure of our system, government consists in the people getting together and mutually agreeing what they want to pay for and then assessing themselves the tax. In such a system, step one is figure out what we want to pay for in public goods and then assessing the tax. It is immoral to tax people just because they have money and the rest of us feel they should share it with us.

  • Joe

    Lou – but at what level? That is the question. Is it moral for gov’t to take 100% of ones wealth, income and/or assets in taxes? That is the starting premise that is required to understand the decision to not tax as a subsidy.

  • Joe

    Lou – but at what level? That is the question. Is it moral for gov’t to take 100% of ones wealth, income and/or assets in taxes? That is the starting premise that is required to understand the decision to not tax as a subsidy.

  • Cincinnatus

    Oops, it seems Lou has distracted us from the actual point again: that only spending cuts–oops, I’m sorry: “reforms”–will save us, not mere tax increases.

    No one said taxes are prima facie immoral. Not even remotely. The problem is that you are assuming mere tax breaks and cuts constitute “subsidies”; i.e., money to which the government was entitled in the first place but decided to give away. More populist drivel that will do almost nothing to solve our current problems.

  • Cincinnatus

    Oops, it seems Lou has distracted us from the actual point again: that only spending cuts–oops, I’m sorry: “reforms”–will save us, not mere tax increases.

    No one said taxes are prima facie immoral. Not even remotely. The problem is that you are assuming mere tax breaks and cuts constitute “subsidies”; i.e., money to which the government was entitled in the first place but decided to give away. More populist drivel that will do almost nothing to solve our current problems.

  • J.R.

    Cincinnatus, I notice how you read very selectively. Joe did actually say “that is assumes the gov’t was morally entitled to all $3,5o0 in the first instance.” I think most of the trouble you have with Lou comes from your tainted reading glasses.

    But I do take notice that no one has engaged with my proposal that we end Obamacare #66 above. This would save a ton o’money.

  • J.R.

    Cincinnatus, I notice how you read very selectively. Joe did actually say “that is assumes the gov’t was morally entitled to all $3,5o0 in the first instance.” I think most of the trouble you have with Lou comes from your tainted reading glasses.

    But I do take notice that no one has engaged with my proposal that we end Obamacare #66 above. This would save a ton o’money.

  • Cincinnatus

    J.R.: No doubt I am guilty of selective reading, but where exactly in this discussion? I have no idea what you’re referencing. Lou was arguing that tax breaks (like those given to oil companies) constitute a subsidy, but using such rhetoric implies that the government was morally entitled to that money in the first place and, whether out of the goodness of its heart or out of injustice to poor people or whatever, merely decided to “give it” to the companies. But in fact it belonged to the oil companies first, and the government is not entitled to a certain fixed portion of our money. Taxes themselves are not immoral, but claiming that all taxes are moral and justified is silly. To my eye, that was what Joe was pointing out.

    Where did I go wrong?

    Ending Obamacare would hypothetically save money over time, but it would only begin the scratch the surface of the problem. Our single-year deficit is over 1.5 trillion dollars. Good luck ending the deficit by subtracting a maximum of 1 trillion over ten years. It’s kind of a moot point anyway: Republicans have already passed a bill redacting Obamacare; I suspect if they were in full control of government, they would do their best to finish the job.

  • Cincinnatus

    J.R.: No doubt I am guilty of selective reading, but where exactly in this discussion? I have no idea what you’re referencing. Lou was arguing that tax breaks (like those given to oil companies) constitute a subsidy, but using such rhetoric implies that the government was morally entitled to that money in the first place and, whether out of the goodness of its heart or out of injustice to poor people or whatever, merely decided to “give it” to the companies. But in fact it belonged to the oil companies first, and the government is not entitled to a certain fixed portion of our money. Taxes themselves are not immoral, but claiming that all taxes are moral and justified is silly. To my eye, that was what Joe was pointing out.

    Where did I go wrong?

    Ending Obamacare would hypothetically save money over time, but it would only begin the scratch the surface of the problem. Our single-year deficit is over 1.5 trillion dollars. Good luck ending the deficit by subtracting a maximum of 1 trillion over ten years. It’s kind of a moot point anyway: Republicans have already passed a bill redacting Obamacare; I suspect if they were in full control of government, they would do their best to finish the job.

  • J.R.

    “Lou was arguing that tax breaks (like those given to oil companies) constitute a subsidy”
    Since that is exactly what a subsidy is by the government’s definition, I’d say that’s exactly where you went wrong.

    And whether the goverment is “morally entitled” to the taxes that we are legally bound to pay makes absolutely no difference in this discussion. If you want to argue that taxes are immoral, that is a totally different thread.

  • J.R.

    “Lou was arguing that tax breaks (like those given to oil companies) constitute a subsidy”
    Since that is exactly what a subsidy is by the government’s definition, I’d say that’s exactly where you went wrong.

    And whether the goverment is “morally entitled” to the taxes that we are legally bound to pay makes absolutely no difference in this discussion. If you want to argue that taxes are immoral, that is a totally different thread.

  • Cincinnatus

    Whenever did I even begin to argue that taxes are immoral?

    And no, tax breaks/loopholes are not direct subsidies. Tax rebates of the sort Lou mentioned with respect to hybrid cars, etc., are subsidies, but mere tax breaks.

    But as I’ve noted countless times, this is a distraction. Tax breaks for oil companies hypothetically amount to a few dozen billion dollars. So sure, repeal the loopholes. See where that gets us.

  • Cincinnatus

    Whenever did I even begin to argue that taxes are immoral?

    And no, tax breaks/loopholes are not direct subsidies. Tax rebates of the sort Lou mentioned with respect to hybrid cars, etc., are subsidies, but mere tax breaks.

    But as I’ve noted countless times, this is a distraction. Tax breaks for oil companies hypothetically amount to a few dozen billion dollars. So sure, repeal the loopholes. See where that gets us.

  • Cincinnatus

    mere tax breaks are not.*

  • Cincinnatus

    mere tax breaks are not.*

  • Scott Klemsz

    Just to note. The women wasn’t gloating, she was sad about the decline of the United States, which has always represented strength and security to Germany.

  • Scott Klemsz

    Just to note. The women wasn’t gloating, she was sad about the decline of the United States, which has always represented strength and security to Germany.

  • fws

    The salient facts are these:

    there is alot of investment money out there chasing after a safe place to be parked. where is it gonna be parked? US Treasury Bonds. What are the alternatives?

    China has inflation. they need to shrink circulating cash. So they need to have their treasury spend their surplus by investing it somewhere. So where is the safest place to do that, that will also have the effect of increasing exports? yup. you guessed it. Treasury Bonds.

  • fws

    The salient facts are these:

    there is alot of investment money out there chasing after a safe place to be parked. where is it gonna be parked? US Treasury Bonds. What are the alternatives?

    China has inflation. they need to shrink circulating cash. So they need to have their treasury spend their surplus by investing it somewhere. So where is the safest place to do that, that will also have the effect of increasing exports? yup. you guessed it. Treasury Bonds.

  • J.R.

    86 Cincinnatus – then you tell us.
    By your definition then what exactly is a subsidy?
    Of course, that will be just your own definition, but I’d like to hear it.

  • J.R.

    86 Cincinnatus – then you tell us.
    By your definition then what exactly is a subsidy?
    Of course, that will be just your own definition, but I’d like to hear it.

  • Cincinnatus

    Yes, I’ll just pull a definition out of my posterior.

    Will the OED do? The first politically relevant definition: “Financial aid furnished by a state or a public corporation in furtherance of an undertaking or the upkeep of a thing.”

    Wikipedia, if you prefer, clarifies:

    “A subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production.”

    For economists, a subsidy, properly speaking, refers to an actual transfer of funds (or other goods) from one entity (i.e., the government) to another (i.e., an oil company). To be as clear as possible, a subsidy happens when the government writes a check and gives some of its own money to an oil company. Oil companies, true, do receive some subsidies of this type. But most of what they “receive” comes in the form of tax loopholes and write-offs. I.e., most of these so-called “subsidies” involve the government saying that the oil company can simply keep more of its own money. See the difference? At best, you can claim that such a policy behaves like a subsidy by encouraging profitability and investment. But it’s absolutely not the same thing, strictly speaking, as a subsidy.

    Boy, my imagination is tired now from concocting that purely idiosyncratic definition that no one else in the world condones.

  • Cincinnatus

    Yes, I’ll just pull a definition out of my posterior.

    Will the OED do? The first politically relevant definition: “Financial aid furnished by a state or a public corporation in furtherance of an undertaking or the upkeep of a thing.”

    Wikipedia, if you prefer, clarifies:

    “A subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production.”

    For economists, a subsidy, properly speaking, refers to an actual transfer of funds (or other goods) from one entity (i.e., the government) to another (i.e., an oil company). To be as clear as possible, a subsidy happens when the government writes a check and gives some of its own money to an oil company. Oil companies, true, do receive some subsidies of this type. But most of what they “receive” comes in the form of tax loopholes and write-offs. I.e., most of these so-called “subsidies” involve the government saying that the oil company can simply keep more of its own money. See the difference? At best, you can claim that such a policy behaves like a subsidy by encouraging profitability and investment. But it’s absolutely not the same thing, strictly speaking, as a subsidy.

    Boy, my imagination is tired now from concocting that purely idiosyncratic definition that no one else in the world condones.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “there is alot of investment money out there chasing after a safe place to be parked”

    but what really makes an investment “safe”?

    I would say that the integrity of the one offering the investment vehicle is part of the equation.

    Now, the average voter in an election in the USA.

    It is his integrity on which the safety of US treasuries ultimately rests.

    Will he vote for sound fiscal policy?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “there is alot of investment money out there chasing after a safe place to be parked”

    but what really makes an investment “safe”?

    I would say that the integrity of the one offering the investment vehicle is part of the equation.

    Now, the average voter in an election in the USA.

    It is his integrity on which the safety of US treasuries ultimately rests.

    Will he vote for sound fiscal policy?

  • J.R.

    It’s really boring to try to discuss a topic of any depth with someone who is defined only by what what he is against — and who will twist and redefine terms just to support his own pet theories. Yes, that goes for both sides.

  • J.R.

    It’s really boring to try to discuss a topic of any depth with someone who is defined only by what what he is against — and who will twist and redefine terms just to support his own pet theories. Yes, that goes for both sides.

  • Cincinnatus

    J.R., since when did I “twist and redefine terms just to support [my] own pet theories”? I’m quoting from the OED, ferchrissakes. And I haven’t even articulated a “pet theory” in this thread. My definition of direct subsidy is the one accepted by public economists (would you like me to recommend a textbook or two?) and the Oxford English Dictionary! Lou is the one quoting the Democratic talking point that any kind of tax loophole or tax deduction actually constitutes a subsidy to which the government is originally entitled.

    My points are these: 1) This is an improper notion of “subsidy.” 2) Even if you end these “subsidies,” you’ve only “saved” the government at most a few dozen billion dollars–out of many trillions. So all you’ll accomplish is a minor populist victory which really only harms the oil companies and might even raise gas prices. Congratulations? Such a populist appeal does literally nothing to address our structural economic problems.

  • Cincinnatus

    J.R., since when did I “twist and redefine terms just to support [my] own pet theories”? I’m quoting from the OED, ferchrissakes. And I haven’t even articulated a “pet theory” in this thread. My definition of direct subsidy is the one accepted by public economists (would you like me to recommend a textbook or two?) and the Oxford English Dictionary! Lou is the one quoting the Democratic talking point that any kind of tax loophole or tax deduction actually constitutes a subsidy to which the government is originally entitled.

    My points are these: 1) This is an improper notion of “subsidy.” 2) Even if you end these “subsidies,” you’ve only “saved” the government at most a few dozen billion dollars–out of many trillions. So all you’ll accomplish is a minor populist victory which really only harms the oil companies and might even raise gas prices. Congratulations? Such a populist appeal does literally nothing to address our structural economic problems.

  • J.R.

    ad nauseum. now, your numbers are the ones that don’t add up (for the record, I’m necessarily a fan of doing away with the majority of oil subsidies).
    Look, if you’re going to save 36 billion on oil subsidies alone, as Lou showed, and there are over 2,000 different subsidies in the budget, clearly you’re going to save the gov’t more that a mere few dozen billions.
    Come on. You and Lou have already gone around and around on this before. But you ignore anyone else’s point of view…
    ad nauseum, ad nauseum, ad nauseum .. boring.

  • J.R.

    ad nauseum. now, your numbers are the ones that don’t add up (for the record, I’m necessarily a fan of doing away with the majority of oil subsidies).
    Look, if you’re going to save 36 billion on oil subsidies alone, as Lou showed, and there are over 2,000 different subsidies in the budget, clearly you’re going to save the gov’t more that a mere few dozen billions.
    Come on. You and Lou have already gone around and around on this before. But you ignore anyone else’s point of view…
    ad nauseum, ad nauseum, ad nauseum .. boring.

  • J.R.

    … I’m NOT necessarily a fan …

  • J.R.

    … I’m NOT necessarily a fan …

  • Cincinnatus

    What am I ignoring? As Lou and I already discussed, that Cato study is flawed. It’s definition of subsidy is incorrect. The “biggest” subsidy it includes is the Medicare Drug Benefit (70 billion), which isn’t even a study. It also counts things like “aid to states” as subsidies, which is probably inappropriate. Either way, subsidies are a small, small fraction of the budget.

    Look, I’m in favor of ending subsidies too. I never claimed that it’s not. But marching in here and proclaiming, “Hey guys, instead of cutting entitlements and addressing structural economic problems, let’s end some subsidies and eliminate tax loopholes for oil companies”–is rather pointless. I think most people on this blog are not in favor of subsidies. But they are such a microscopic portion of the budget. S&P wouldn’t be satisfied with a fairly meaningless gesture like that, and neither should we. Anyway, the vast majority of subsidies are counted in millions, not billions, much less trillions. And we have a multi-trillion dollar problem.

    What exactly do you want from me, JR?

  • Cincinnatus

    What am I ignoring? As Lou and I already discussed, that Cato study is flawed. It’s definition of subsidy is incorrect. The “biggest” subsidy it includes is the Medicare Drug Benefit (70 billion), which isn’t even a study. It also counts things like “aid to states” as subsidies, which is probably inappropriate. Either way, subsidies are a small, small fraction of the budget.

    Look, I’m in favor of ending subsidies too. I never claimed that it’s not. But marching in here and proclaiming, “Hey guys, instead of cutting entitlements and addressing structural economic problems, let’s end some subsidies and eliminate tax loopholes for oil companies”–is rather pointless. I think most people on this blog are not in favor of subsidies. But they are such a microscopic portion of the budget. S&P wouldn’t be satisfied with a fairly meaningless gesture like that, and neither should we. Anyway, the vast majority of subsidies are counted in millions, not billions, much less trillions. And we have a multi-trillion dollar problem.

    What exactly do you want from me, JR?

  • helen

    So all you’ll accomplish is a minor populist victory which really only harms the oil companies and might even raise gas prices.

    Did anyone else notice that, while we were getting robbed by Wall Street, et al., (and buying $4 gas as well) ExxonMobil posted the largest quarterly profits in their history?
    There have been times in the past when this sort of extortion was practiced. It was stopped by what they called (back then) “jawboning” by the President or someone else high up, i.e., a moral lecture designed to give the greedy a public black eye if they didn’t consider the public welfare.
    Now, of course, the President, with his cabinet full of tax cheats and GS employees, would have a hard time establishing credibility sufficient to pull that off.

  • helen

    So all you’ll accomplish is a minor populist victory which really only harms the oil companies and might even raise gas prices.

    Did anyone else notice that, while we were getting robbed by Wall Street, et al., (and buying $4 gas as well) ExxonMobil posted the largest quarterly profits in their history?
    There have been times in the past when this sort of extortion was practiced. It was stopped by what they called (back then) “jawboning” by the President or someone else high up, i.e., a moral lecture designed to give the greedy a public black eye if they didn’t consider the public welfare.
    Now, of course, the President, with his cabinet full of tax cheats and GS employees, would have a hard time establishing credibility sufficient to pull that off.

  • Cincinnatus

    helen@98,

    More populist fluff. Oil companies in 2010 made about two cents ($.02) in profit for every gallon of gas sold. Meanwhile, state gas taxes averaged 48.1 cents/gallon, and federal taxes are 18.4 cents per gallon. So yeah: this is an outrage! We could have been paying $3.98/gallon instead of $4.00!

    /and none of those profits are used for future oil exploration, innovation, investment in alternative fuels, etc. none of them.
    //while we were getting robbed by Wall Street, we were still buying gas. The joke’s on us, I guess. No gas companies were bailed out.

  • Cincinnatus

    helen@98,

    More populist fluff. Oil companies in 2010 made about two cents ($.02) in profit for every gallon of gas sold. Meanwhile, state gas taxes averaged 48.1 cents/gallon, and federal taxes are 18.4 cents per gallon. So yeah: this is an outrage! We could have been paying $3.98/gallon instead of $4.00!

    /and none of those profits are used for future oil exploration, innovation, investment in alternative fuels, etc. none of them.
    //while we were getting robbed by Wall Street, we were still buying gas. The joke’s on us, I guess. No gas companies were bailed out.

  • SKPeterson

    WSJ reported that the most rapacious and evil company in the world right now is Apple – they unseated Exxon as the most valuable company in the world for a few hours yesterday. Exxon did make $10.7 billion last quarter, while Apple only made $7.3 billion, but Apple shares have gained in value compared to Exxon.

  • SKPeterson

    WSJ reported that the most rapacious and evil company in the world right now is Apple – they unseated Exxon as the most valuable company in the world for a few hours yesterday. Exxon did make $10.7 billion last quarter, while Apple only made $7.3 billion, but Apple shares have gained in value compared to Exxon.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Yes, but Apple has much bigger margins than Exxon Mobil and much lower risks. Exxon Mobil has to invest far more to get the same profit. How many people died making Apple products last year? How many died drilling oil? If all the Apple and Wall Street folks didn’t show up for work tomorrow, the world would keep right on going. You can’t say that about the folks working for Exxon Mobil. I have a great deal of respect for all the folks doing the thankless jobs that keep us all going. As for those who, uh, grease the skids, they are fine, but sometimes too arrogant and assuming.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Yes, but Apple has much bigger margins than Exxon Mobil and much lower risks. Exxon Mobil has to invest far more to get the same profit. How many people died making Apple products last year? How many died drilling oil? If all the Apple and Wall Street folks didn’t show up for work tomorrow, the world would keep right on going. You can’t say that about the folks working for Exxon Mobil. I have a great deal of respect for all the folks doing the thankless jobs that keep us all going. As for those who, uh, grease the skids, they are fine, but sometimes too arrogant and assuming.


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