More on Economics and Taxes from the Candidates

As a follow-up to my post Politics and Your Money, here's a Yahoo piece on each of the presidential candidates and what they'll likely do once elected. The summary:

Obama, the Democrat, seemingly has a traditional liberal outlook of taxing the rich more while having the government help people of more modest means through tax breaks. McCain, the Republican, advocates a classic conservative vision of cutting taxes — many geared toward businesses — to promote competition within a free-market system.

Neither plan is cheap.

All I can say is "heaven help us." Where's the low taxes, low spending, pay off the debt candidate?

Comments

[Todd]

Both are pretty lousy candidates, but Obama's proposals, including punitive taxation of our most productive citizens, raising the capital gains tax and turning social security into a straight welfare program, are lunacy.

[Michael]

Ron Paul is that candidate.

Say what you want to about him. He is the ONLY ONE that advocates true fiscal conservatism.

[David]

Yay, political bickering!

[Kevin]

I have to agree, both of these guys sound pretty out there, economically at least. Of course, this is all talk, so we'll have to wait until one is actually elected to see what changes actually happen.

[whatever]

the media and establishment did not like Huckabee or the FairTax

[Todd]

As a Libertarian, I like many of Ron Paul's positions. Unfortunately, he's a bit nutty himself.

I doubt that any of the impending financial problems in this country (e.g., $100 trillion in unfunded future entitlements) will be addressed until the pain they are causing is greater than the pain of ignoring them. We are not nearly to that point.

[garyatk]

The only real choice change is to support the third party of your choice. I'm voting straight Libertarian this time.

[Michael Blackburn]

Sorry, it's like software projects: better, faster, cheaper; pick any two.

You can have low taxes and low spending, but then you're not making progress on the debt. If you want low spending and pay off the debt, you at least must keep taxes the same.

For my money, give me 2000-era McCain. He was against the Bush tax cuts in a time of war, and rightly so. Sadly, he had to sell his soul for the nomination.

[Michael Blackburn]

Todd, let's start with a few definitions:

Productivity is defined as the value of goods and services produced divided by the LABOR required to produce them.
http://en.wikipedia.org/wiki/Productivity

Capital gains are the profit derived as a result of the sale of capital which exceeds the purchase price.
http://en.wikipedia.org/wiki/Capital_gain

I hope you understand now that despite the frequent repetition of this talking point, it's in fact meaningless. A capital gains tax is NOT a tax on our "most productive" citizens, since a capital gain has nothing to do with labor. It is in fact a tax which is largely borne by our "most wealthy" citizens.

Now, I grant you that a capital gain may be a result of labor, for example the sale of a "fixer-upper" house, purchased below market and renovated for sale at a higher price. That's why there are exemptions in the capital gains taxes to account for the sale of primary residences.

[Thomas]

NPR reported that the non-partisan ?Tax Policy Center? (correct me if wrong) analyzed both candidates "economic plans" (and I use the term loosely). Obama's was ~$3.3 trillion in the red while McCain's was ~$4.5 trillion in the red. The details don't matter anymore, I'm voting Libertarian for the first time. :-/

[payoffourdebts]

At this point, low taxes and paying off the debt are mutually exclusive. When Bush leaves office he will have doubled the debt during his tenure to over $10 trillion; and that assumes the US does not attack Iran in which case the debt could be substantially more. Even slashing military spending and social security by 90% would not be enough to pay off this debt.

I say bring on high taxes and pay off the debt and reinstate PAYGO. Let us end this era of "deficits don't matter" Republicanism. Only then can we begin to talk about maintaining a balanced federal budget and determining the proper trade-offs between taxes and government services.

It would also be wise to remember that maintaining high taxes on the richest individuals mitigates the boom and bust cycles of a capitalist economy.

http://www.thenation.com/special/images/extreme_inequalitychart.jpg

[Todd]

Who said anything about a capital gains tax being a tax on our most productive citizens? I listed three problems with Obama's proposals, one of them his raising taxes on our most productive citizens and another his raising the capital gains tax.

::shaking head::

Now, as to paying off the debt, we don't need to raise taxes to do that. As for the contention that (among other things) slashing social security by 90% wouldn't be enough to pay off the debt, I beg to differ. Doing so would eliminate the deficit immediately and the national debt in about 15 years. Roughly half the federal budget goes to social security, Medicare and welfare.

[Lord]

Oh yes, lets rip off those who have paid into Social Security all their lives. Repudiate the debt as well, then we won't have to worry about paying it off. Then we'll be rolling in money ;-).

[Lord]

The amusing part is the Social Security surplus is currently keeping the deficit down, so the only way this improves the debt is if we still collect the tax for benefits we will never deliver.

At least candidate pandering is easy to understand.

[whatever]

payoffourdebts, please study a little more about economics.

Every time we have had a major tax cut on the upper incomes we have ended up having more revenue come into the federal government.

[Michael Blackburn]

whatever:
Ah yes, the Laffer Curve. The same "theory" debunked by none other than the Congressional Budget Office in 2005.
http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf

Even in the most-generous ten-year growth scenario following a 10% cut in rates across the board, only 28% of the foregone revenue was made up by the growth.

This idea is like telling a guy making $10 an hour that he'll make more at $8/hour because he'll work more overtime.

[Todd]

I don't think anyone is advocating doing away with social security immediately. In fact, Barack Hussein Obama is advocating turning it into a straightforward welfare program.

That's just what we need in this country - more taxes on the productive and more handouts for the lazy and stupid. That should settle all of our problems.

[Matt]

Milton Friedman once said of the Laffer Curve something to the effect that if you cut taxes and it actually raises revenues, you haven't cut taxes enough.

We should be careful when we try to scale up principles from personal finance to macroeconomics, but I think this one works OK: You can't out-earn bad spending habits. So it is with government policy. All this obsession over the candidates' tax plans is a waste of time. The real problem is spending. Every dollar the government spends has to come from taxes now, taxes later (via borrowing), or inflation (really just another tax).

McCain does have a better record than Obama on controlling spending, but only bold constitutional reforms will make any significant difference. We need to take away congress' power to fund anything outside of law and order and public goods. McCain doesn't seem interested in taking that on. McCain is clearly better than Obama on economic issues, but not by enough for it to matter.

As much as I care about economic issues, it's really national security driving my vote this time. Iran must be stopped from obtaining nuclear weapons, even if it requires total war to do so. I think McCain is much more serious about doing that.

[Rick]

Matt:

Why? We have nuclear weapons? Why is it our prerogative to tell another country they can't when we do?

[Matt]

Rick:

It's our prerogative to tell another country they can't have nuclear weapons because we have a right to defend ourselves and more basically, a right to exist. Did you not get the memo that Iran is a terrorist state run by irrational religious fanatics?

[Karen]

I believe his name is Ron Paul, and he recently suspended his campaign. He has refused to endorse fellow Republican John McCain. Unfortunately, Paul was not a true libertarian, since he tended to be conservative on social issues.

[Todd]

The issue about the Laffer Curve is a red herring. Taxes need to be cut for reasons besides just stimulating economic growth.

For one thing, cutting taxes puts more money into the hands of the people who are earning the money in the first place. It's like an immediate raise. It's very pro-freedom, as it allows those who earn the money to decide how best to spend it.

For another, taxes are the lifeblood of government. Without revenues, government must eventually fail. Our bloated welfare state needs to be greatly scaled back, and cutting taxes will help in that goal.

I agree with Matt on McCain. McCain is clearly better than Obama on economic issues (much, much better IMO), but he still fails utterly when it comes to addressing the long-term financial issues facing this country.

My kingdom for a viable third party.

[BobTheHunter]

Matt:

Apparently you haven't gotten the memo that the US is currently run by irrational religious fanatics and is considered a pariah state (amazing what ignoring Geneva Conventions can do for one's reputation).

[BobTheHunter]

Todd:

Do you really want to live in a country with a failed central government? If so, there are several African and Central Asian countries that might be able to fit the bill. Too bad they tend to lack amenities such as internal security for the populace. But on the bright side, you don't have to pay much in taxes and you get to own whatever weapons you can afford!

[rwh]

Todd said regarding tax cuts:

"It's very pro-freedom, as it allows those who earn the money to decide how best to spend it."

And also:

"Without revenues, government must eventually fail."

While I have issues with welfare, high taxes, unbalanced budgets etc. I think you are confusing the concepts of freedom and liberty. When we say we want freedom what we really want is liberty.

If government fails there will be no liberty. Or conversely, if government isn't required to raise revenue by taxation, such as in the oil-rich states of the middle east, Venezuala, Algeria and elsewhere, the government also feels no obligation to its people. The end result is oppression; the opposite of liberty.

It's ironic that the term "Libertarian" as it's used in U.S. politics espouses policies that will reduce liberty rather than increase it.

And as far as budgeting and taxation goes, I think we should all be able to agree on restoring PayGo. It worked pretty well a decade ago and puts some restraint on spending and taxation. But that's a decision for Congress, not the President.

[Matt]

BobTheHunter:

If it's your view that the US is no better than Iran, and in particular no more trustworthy with nuclear weapons, the burden of proof is on you. One needn't be a nuclear proliferation policy wonk to smell the BS there.

[BobTheHunter]

Matt:

Its my view that Iran is no worse than Pakistan or North Korea, two countries who have the bomb and have been quite active in proliferation activities. An all out war against Iran would be both disastrous to the US financially and diplomatically. The Atlantic Monthly did an interesting write up of this 4 years ago entitled "Will Iran be next". I'd suggest you give it a read to see what you are suggesting.

The burden of proof resides with you, the advocate of all out war with Iran.

[Thomas]

Two issues that are relevant here with regards to Iran & the U.S:

How many countries has Iran invaded?
How many countries has the U.S. invaded?

How many countries has Iran provided nuclear weapons technology to?
How many countries has the U.S. provided nuclear weapons technology to?

I'm with Bob on this one.

[Matt]

BobTheHunter:

So now the comparison is with Pakistan and North Korea, not the US? I suppose the easiest way to relieve yourself of this burden of proof we keep hurling back and forth is to abandon the indefensible ground. So be it. I'd rather have an adult conversation anyway.

So on to Pakistan and North Korea. I'm not exactly happy that either of them has the bomb either. I wish more vigorous measures had been taken to stop them too. But frankly, neither of them concern me as much as Iran does. I don't think either has as strong an ideological agenda (i.e. destruction of Israel and US) nor as much willingness to risk their own destruction. I'm not exactly advocating all-out war; in fact it would be my last choice before allowing Iran to become a nuclear power. I just don't think it should be off the table. I'll read that Atlantic article. It looks pretty interesting so far.

Thomas:

How many countries has Iran invaded? Considering only the present, I would count Lebanon and to some extent Iraq, but the question is irrelevant anyway. By itself, it says almost nothing about how well we can trust a country with nuclear weapons.

How many countries has Iran provided nuclear weapons to? None, because they don't have them to provide yet. I want to keep it that way.

So all we can do is speculate. Whom might Iran provide nuclear weapons to if they could? Hezbollah perhaps. More importantly, what might Hezbollah do with such a weapon? One relatively easy option would be to load it into a container and ship it to Baltimore.

Now, on the other hand, the U.S. has shared nuclear weapons and technology with responsible allied democracies who use it as a deterrent.

Since you're such a big fan of Iran and evidently hold the U.S. in such low esteem, maybe you can answer some of my trivia questions:

When is the last time the U.S. stoned people to death for adultry?
When is the last time the Iran stoned people to death for adultry?

When is the last time the U.S. hanged people for homosexual behavior?
When is the last time the Iran hanged people for homosexual behavior?

When is the last time the U.S. executed someone for apostasy?
When is the last time the Iran executed someone for apostasy?

[Todd]

U.S. citizens will see a diminution in their liberties if the size of government is reduced? LOL.

[rwh]

No Todd. But that isn't what you originally said anyway. You said without revenues government would fail. It's when government fails you will have no liberty.

A very good example of this is New Orleans. Lot's of money has been spent since Katrina, but much of it has been wasted or mis-managed. Government has failed its citizens, directly leading to loss of liberty for tens of thousands. Let's see if it does a better job with the current floods in the midwest and lower Mississippi valley.