Ezra Klein: We have a taxing problem, not just a spending problem

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    Jul 12, 2011 3:59 PM GMT
    As usual, Ezra offers a fair and accurate analysis of what ails our economy:

    Washington PostThe Bush tax cuts were not supposed to last forever. Alan Greenspan, whose oracular endorsement was perhaps the single most decisive event in their passage, made it very clear that they were a temporary solution to a temporary surplus. “Recent data significantly raise the probability that sufficient resources will be available to undertake both debt reduction and surplus-lowering policy initiatives,” Greenspan said in 2001.

    Okay, so maybe he wasn’t so clear. But everyone knew what he meant. And, broadly speaking, they agreed. We had a big surplus. It was time to do something with it. Brad DeLong, a former Clinton administration official and an economist at the University of California at Berkeley, didn’t want to see the surplus spent on tax cuts. He wanted to see it spent on public investments. “Nevertheless,” he wrote in 2001, “it is hard to disagree with Greenspan’s position that — if our future economic growth is as bright as appears likely— it will be time by the middle of this decade to do something to drastically cut the government’s surpluses.”

    Ten years later, there is no surplus. It turned out that our future economic growth wasn’t as bright as had seemed likely in 2001. That, plus $2 trillion in tax cuts and a few trillion more in wars and assorted spending, left us with large and growing deficits.

    The next step, then, is obvious. The Bush tax cuts were scheduled to expire after 10 years. Congress extended them for two years in 2010, as you don’t want a massive tax increase in the middle of a deep recession. But as we look toward our future deficits, it seems we’ll need to let at least some of the tax cuts expire. Indeed, Greenspan now says we should let all of the Bush tax cuts expire.

    But the Republican Party refuses to let any of them expire. And forget admitting that tax cuts meant for surpluses don’t make sense during deficits; they refuse to admit that tax cuts have anything to do with deficits at all.

    It’s this belief that stands in the way of a debt deal. “We have a spending problem, not a taxing problem,” Republicans say. If the federal government defaults on Aug. 2, that sentence will be to blame. What a shame, then, that the sentence is entirely, obviously, wrong.

    It’s this belief that stands in the way of a debt deal. “We have a spending problem, not a taxing problem,” Republicans say. If the federal government defaults on Aug. 2, that sentence will be to blame. What a shame, then, that the sentence is entirely, obviously, wrong.

    “I’m an ‘and’ guy, not an ‘or’ guy,” says Donald Marron, who served as an economist in George W. Bush’s White House and now leads the Brookings/Urban Tax Policy Center. If you look at the numbers, it’s easy to see why economists like Marron think we have both a spending problem and a taxing problem. In 2001, revenues were at 19.5 percent of gross domestic product and spending was at 18.6 percent of GDP. That was our surplus. In 2010, revenues were at 14.9 percent of GDP while spending was at 23.9 percent. That’s our deficit: Revenues are down and spending is up. It’s “and,” not “or.”

    If you’re worried about the deficit, then, the solution is plain: some mix of tax increases and spending cuts. If Democrats are being honest, they’ll tell you they’re worried about the deficit, but that the right time to address the deficit is after a real recovery takes hold, which means we shouldn’t begin serious deficit reduction until 2013 or later. If Republicans are being honest, they’ll tell you they’re worried about the deficit, but resisting tax increases is their top priority, because keeping taxes low means that government will shrink.

    In practice, empirical analyses have found that tax rates do not drive the long-term growth in government. But it is driving Republican strategy on the budget. That’s why the GOP preferred a $2 trillion deficit reduction deal with no taxes to a $4 trillion deficit deal that would have included some taxes, but also, according to reports out of both parties, raised the Medicare eligibility age and cut Social Security benefits.

    In rejecting that deal, which liberals would have loathed, Speaker of the House John Boehner (R-Ohio) might have inadvertently saved President Obama from facing a primary challenge. But more to the point, he might have locked in higher taxes down the road. Few noticed that the White House offer of $1 trillion in revenues in return for $3 trillion of spending cuts would have taken the expiration of the Bush tax cuts off of the table. That would mean the tax debate concluded this year, a time when the debt ceiling gives the GOP leverage, rather than next year, when the Bush tax cuts are set to expire and the White House has most of the leverage.

    In other words: If Republicans could have agreed with Democrats now, taxes would have gone up by $1 trillion. If they can’t agree with Democrats next year, they’ll go up by more than $4 trillion. And Republicans had a better hand this year than they will next year. I expect they’ll come to wish they’d played it.


    cbppdebtchart.jpg?uuid=ri1v_IVGEeCi7vkEd
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    Jul 12, 2011 5:03 PM GMT
    southbeach1500 said
    Christian73 saidAs usual, Ezra offers a fair and accurate analysis of what ails our economy:



    Predictable liberal confusion.



    Predictable conservative obfuscation. Got no analysis, no argument and no plan.


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    Jul 12, 2011 5:07 PM GMT
    Christian - 1
    Southbeach - 0

    Round 2~! *ding ding ding*
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    Jul 12, 2011 5:33 PM GMT
    My old friend from California (I think)

    Do you realize it didn't matter, nor does it matter which party controls the government? They have all royally fucked us.

    Do you realize that no matter which party had control of the White House...that my generation would still be paying for a long time to come?

    Do you realize it wasn't Obama who ultimately got us into this mess...it was all of you "adults".

    I've never said I'm a Democrat, or that I support the Democratic Party...you sure like to come to your own conclusions that more often than not end up being very, very wrong.

    southbeach1500 said
    ConfederateGhost saidChristian - 1
    Southbeach - 0

    Round 2~! *ding ding ding*


    My young friend from Alabama...

    Do you realize that the $5 trillion that Obama and the Democrats have run up in the past 29 months is getting you and the country absolutely nothing?

    Do you realize that you will be paying this off for (if you are fortunate to live that long) decades and decades into the future?

    Do you realize that Obama's "$4 trillion idea of reducing the deficit" would add $12 trillion to the debt in the next 10 years?

    It's not some abstract number out there that doesn't affect you. There is going to be rampant inflation. There is going to be massive tax increases on everyone (even the "lucky" 50% of the population that pays no income tax at the moment - perhaps you are in that group).

    So go ahead, keep supporting Democrats. You're digging your own grave.

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    Jul 12, 2011 5:34 PM GMT
    Oh look at that

    ConfederateGhost - 1
    Southbeach - 0


    Not your day is it SB? lololol
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    Jul 12, 2011 5:57 PM GMT
    Please explain how I'm "supporting" the Democrats, even on this issue? A clear, concise explaination will work.

    Those may be your choices, and you may have chosen...but those aren't the only choices that we as American's can make. If you think it's simply about "the budget" then we obviously have different ideas of what's going on, and what should be going on.

    I understand you may not know what it's like to be under complete and utter control of a Republican agenda...but I do...and it's never just about the budget. So you can keep running your mouth about "budget" this and "Obama" that and I'll maintain my head in the reality of what's truly going on.


    southbeach1500 saidI said "supporting" Democrats, which is what you are doing on this issue.

    And at the moment, the choice is to support Obama and the Democrat's view that the Federal government needs more taxes and $12 trillion in additional debt over 10 years, or support the Republican's view that the Federal government spends too much and needs to live within it's means.

    I've made my choice and apparently you've made yours.



    ConfederateGhost saidMy old friend from California (I think)

    Do you realize it didn't matter, nor does it matter which party controls the government? They have all royally fucked us.

    Do you realize that no matter which party had control of the White House...that my generation would still be paying for a long time to come?

    Do you realize it wasn't Obama who ultimately got us into this mess...it was all of you "adults".

    I've never said I'm a Democrat, or that I support the Democratic Party...you sure like to come to your own conclusions that more often than not end up being very, very wrong.

    southbeach1500 said
    ConfederateGhost saidChristian - 1
    Southbeach - 0

    Round 2~! *ding ding ding*


    My young friend from Alabama...

    Do you realize that the $5 trillion that Obama and the Democrats have run up in the past 29 months is getting you and the country absolutely nothing?

    Do you realize that you will be paying this off for (if you are fortunate to live that long) decades and decades into the future?

    Do you realize that Obama's "$4 trillion idea of reducing the deficit" would add $12 trillion to the debt in the next 10 years?

    It's not some abstract number out there that doesn't affect you. There is going to be rampant inflation. There is going to be massive tax increases on everyone (even the "lucky" 50% of the population that pays no income tax at the moment - perhaps you are in that group).

    So go ahead, keep supporting Democrats. You're digging your own grave.

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    Jul 12, 2011 6:14 PM GMT
    That was it? That's all you could reply with?

    You are a weak-minded individual Southbeach...when I first signed up for the RJ Forums - I took notice how much flack you caught and in my mind I actually thought I was going to appreciate your presence in the forums, especially the politics forums. Good thing I know how to admit when I'm wrong.

    Just for you SB - explanation*


    southbeach1500 saidFirst:

    It's explanation, not "explaination."

    Second:

    Oh, I'm mistaken. You support the third choice on this issue (whatever that is).




    ConfederateGhost saidPlease explain how I'm "supporting" the Democrats, even on this issue? A clear, concise explaination will work.

    Those may be your choices, and you may have chosen...but those aren't the only choices that we as American's can make. If you think it's simply about "the budget" then we obviously have different ideas of what's going on, and what should be going on.

    I understand you may not know what it's like to be under complete and utter control of a Republican agenda...but I do...and it's never just about the budget. So you can keep running your mouth about "budget" this and "Obama" that and I'll maintain my head in the reality of what's truly going on.


    southbeach1500 saidI said "supporting" Democrats, which is what you are doing on this issue.

    And at the moment, the choice is to support Obama and the Democrat's view that the Federal government needs more taxes and $12 trillion in additional debt over 10 years, or support the Republican's view that the Federal government spends too much and needs to live within it's means.

    I've made my choice and apparently you've made yours.



    ConfederateGhost saidMy old friend from California (I think)

    Do you realize it didn't matter, nor does it matter which party controls the government? They have all royally fucked us.

    Do you realize that no matter which party had control of the White House...that my generation would still be paying for a long time to come?

    Do you realize it wasn't Obama who ultimately got us into this mess...it was all of you "adults".

    I've never said I'm a Democrat, or that I support the Democratic Party...you sure like to come to your own conclusions that more often than not end up being very, very wrong.

    southbeach1500 said
    ConfederateGhost saidChristian - 1
    Southbeach - 0

    Round 2~! *ding ding ding*


    My young friend from Alabama...

    Do you realize that the $5 trillion that Obama and the Democrats have run up in the past 29 months is getting you and the country absolutely nothing?

    Do you realize that you will be paying this off for (if you are fortunate to live that long) decades and decades into the future?

    Do you realize that Obama's "$4 trillion idea of reducing the deficit" would add $12 trillion to the debt in the next 10 years?

    It's not some abstract number out there that doesn't affect you. There is going to be rampant inflation. There is going to be massive tax increases on everyone (even the "lucky" 50% of the population that pays no income tax at the moment - perhaps you are in that group).

    So go ahead, keep supporting Democrats. You're digging your own grave.

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    Jul 12, 2011 6:28 PM GMT
    southbeach1500 saidI said "supporting" Democrats, which is what you are doing on this issue.

    And at the moment, the choice is to support Obama and the Democrat's view that the Federal government needs more taxes and $12 trillion in additional debt over 10 years, or support the Republican's view that the Federal government spends too much and needs to live within it's means.

    I've made my choice and apparently you've made yours.


    The choice is between taking responsibility for what the Bush administration has wrought (e.g. paying the $5 trillion in debt he ran up through irresponsible tax cuts during two wars), and needing to pay back stimulus funds, and setting the country up for a sound fiscal future through reforms of Medicare, Medicaid and Social Security, OR continuing to cut taxes in the face of three decades of evidence that they are a) not stimulative, b) have generated unprecedented wealth and income inequality and c) the further erosion of the primary market for American goods and services: our middle class.

    And Americans resoundingly agree (70-80% depending on the poll) that we should do that through increased taxes on the wealth and big business, while preserving the social safety net that makes our country the envy of the world.
  • rnch

    Posts: 11524

    Jul 12, 2011 6:57 PM GMT
    southbeach1500 said
    Christian73 saidAs usual, Ezra offers a fair and accurate analysis of what ails our economy:



    Predictable liberal confusion.






    incorrect





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