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Tax Cuts: Politics and Reality

Politicians say they can cut taxes and cut the deficit. Ronald Reagan’s budget director David Stockman now says that’s a big lie. We hear him out.

House Republican Leader John Boehner, who wants to extend tax cuts for all, including upper incomes; and President Obama, who wants cuts extended for the middle class. (AP)

Big politics over taxes and tax cuts right now. President Obama says he wants to make George Bush’s tax cuts permanent for the middle class. Republicans say no way unless the richest Americans keep their cuts, too.

Everybody claims they want the right thing for the economy, the deficit. Do they?

Ronald Reagan’s famous former budget director David Stockman says not at all. The Republican plan, says Reagan’s man, is a “big lie.” And the president, he says, is being way more generous than we can honestly afford with the middle class.

We’re looking for truth on taxes.

-Tom Ashbrook

Guests:

Greg Ip, U.S. economics editor for the The Economist, and author of the new book, “The Little Book of Economics: How the Economy Works in the Real World.” You can read an excerpt.

David Stockman, former Director of the Office of Management and Budget under President Reagan and former U.S. congressman from Michigan.

Alan Auerbach, professor of economics and law – and director of the Burch Center for Tax Policy and Public Finance – at U.C. Berkeley. He served as deputy chief-of-staff of the U.S. Joint Committee on Taxation in 1992.

Gerald Seib, executive Washington editor and “Capital Journal” columnist for the Wall Street Journal. He’s co-author of “Pennsylvania Avenue: Profiles in Backroom Power.”

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  • onni

    The Bush tax cuts for the wealthiest Americans are still on the books and yet we are still losing jobs. It doesn’t look to me as though the well-to-do are re-investing those tax savings and creating new jobs.

  • michael

    “Politicians say they can cut taxes and cut the deficit. Ronald Reagan’s budget director David Stockman now says that’s a big lie. We hear him out. ”

    no way our politicians would lie to use? next where hear that our media is doing the same.

    kidding aside, I’m interested in what David has to say, another one of Reagan advise came out a year or two ago about the same thing.

  • michael

    also for shady donations and donors check this out about NPR and it’s donors

    “Mathes recently worked with Vivian Schiller to co-host a meeting with a major WAMU donor at NPR’s downtown headquarters. They met for a lunch of wrap sandwiches and salad in Schiller’s office and then Ellen Weiss, the head of news, took the donor on a tour of NPR, being careful to point out production teams that were covering issues the donor cared about. “This person has a lot of personal savvy about the media and wanted to see the sausage getting made,” said Mathews. “I came away from that experience thinking that it should have always been like this.”

    If Schiller gets her way, perhaps now it will be.”

    http://www.gfem.org/node/1019

    http://www.npr.org/blogs/ombudsman/2010/03/npr_amps_up_1.html

    These donors are undisclosed yet donating large sums of money and getting connections for such donation to reporter/journalist who may or may not be writing about them or there company all without the public knowing whose it is. Say apple CFO decides to donate a large chunk of change than gets to meet the reporters/journalist days/weeks later npr reports on the IPAD/IPHONE on multiple shows like TOLT,ATC,ME,even days devoted to such or hourly news cast of the IPAD/IPHONE the public would be unaware of such a meeting beforehand and donations ahead of the sudden spike in reporting. Atleast this could be seen as an conflict of interest.(if this happen)

  • michael

    Also,

    An undocumented immigrant who worked for California Republican candidate for governor Meg Whitman for nine years claimed on Wednesday that she was fired in 2009 when she became politically inconvenient to the billionaire.

    The woman, Nicandra Diaz, who said she was a housekeeper and nanny for the Whitman family, made her charges public at a news conference with — wait for it — lawyer Gloria Allred.

    http://www.npr.org/blogs/itsallpolitics/2010/09/29/130217698/meg-whitman-has-undocumented-housekeeper-eruption

  • JP

    This should be good…

    I can only hope Republicans are called out again and again on the obvious lies and hypocrisy between now and November.

    … too bad all of America won’t be listening in.

  • http://www.richardsnotes.org Richard

    Stockman is a very bright guy who’s finally seeing the light (in his older age).

    I hope Tom asks him about the deregulation that happened on his (Reagan admin) watch that we’re still feeling the effects of today.

  • jeffe

    The reality is, and they all know it, that to lower the national debt you have to cut spending and raise taxes.

    The thing that gets me is that throughout the great recession the tax cuts have been in place and all I hear about is layoffs and people hurting. So the question is if these cuts work why are we seeing such a dismal recovery?

  • William Maher

    Can someone explain to me why anyone thinks rich people owe you something? Has anyone ever explained to you that your life is your responsibility? Did you have parents who taught you it was ethical to confiscate other people’s earnings and property as long as they had more of it than you? Or better yet, is it o.k. to rob other people of their earnings because you have such wonderful utopian ideas in store for other people’s earnings? (Don’t worry, I won’t hold my breath waiting for a straightforward answer) By the way, has O’Bama yet appointed a cabinet member, etc, who hasn’t been charged with tax evasion? Can you believe a convicted tax evader like Tim Geithner is overseeing the IRS? I presume the NPR lefties are shocked and appalled. Well, anyway, I won’t hold my breath waiting for Nancy Pelosi to drain the swamp.

  • jeffe

    It’s not that rich people owe anyone anything. The Bush tax cuts failed to anything for the middle class and did everything for the wealthy. It’s a part of the price for living in a civil society. Do you think that people like hedge fund managers should only pay 15% income tax while the rest of us pay 30%?

    This is the typical right wing answer to everything, fend yourself. Life is more complicated that these simple through away slogans. If the fed cuts it you will see it raised in other areas such as property taxes or local services cut to the bone. Good luck William, I hope you live in a rich gated community with it’s own private police and fire department. If not when your house burns down due to fire stations closings you should remember what you said.

  • Zeno

    William – Nice try at obfuscation and polarizing spin.
    Now lets examine what the REAL issue is. Proportionally overtaxing the poor to give taxpayer funds to the rich.

    Everyone knew during the eighties that the absurd trickle down was a complete con game. So let me clarify by asking your questions from another perspective:

    Can someone explain to me why anyone thinks POOR people owe the RICH something? Has anyone ever explained to you that your life is your responsibility? Did you have parents who taught you it was ethical to confiscate other people’s earnings and property as long as they had less of it than you? Or better yet, is it o.k. to rob other people of their earnings because you have such wonderful utopian ideas in store for other people’s earnings?

  • Nick

    The last time the distance between the wealthy and the middle class was this large was 1928……

  • John

    Refusing to believe science wasn’t enough for the Republicans. Now they are challenging math.

  • cory

    Hey Billy (aka William Maher),

    Since the wealthy have tilted things soooo far in their favor since Reagan, and you’ve created so many poor and working poor, and we live in a democracy……

    I’d say the rich owe the poor whatever the hell the poor decide to vote for themselves. Oh and how the wealthy will rue the day that the impoverished and ignorant masses figure it out!

    Eat the rich! Dare them to move somewhere with a more favorable economic climate! Pull them down from the ivory towers and tear their silken frocks from their pale and fat bodies! Squeeze the lemon of wealth until the pip squeaks!

  • Ellen Dibble

    When Stockman came on the scene, the watchwords were these: “A rising tide lifts all boats,” which was quite enlightened, since evolution has tended to teach us, lo these millions of years, that beating out the other guy (or the other team or race or whatever) was the best way to thrive — among your kind.
    So that Reagan theme was that if I thrive, you thrive, ipso facto. If Stockman has figured out the leakiness of the theory, or the boats, shall we say, has he applied his new insights to the global situation, since the economy is now really a global entity? And furthermore, since both global warming and pollution are forcing us to think of ourselves as one team, without winners or losers, in the long run?
    Success of an economy may ruin the planet. Success of the maximum boats may be catastrophic? The dynamics internationally as this begins to sink in might be extraordinary.
    We could use a neat watchword. A rising tide SINKS all boats seems to be the closest to reality, again taking a longish view (say a century).

  • Ellen Dibble

    Last night on the NewsHour, Robert Reich was saying that the Bush tax cuts for those over $250,000 apply only to 2 or 3 percent of businesses, and those, he said, are mostly doctors and lawyers, who are not big creators of employees. Those, he says, tend to file as individuals. Well, the lawyers I know of I believe morph into LLC’s or S corporations or something like that? There is probably a tax reason for it.
    So it seems to me someone bumping up against $250,000 – if they didn’t find a way to boost their business by hiring someone and thus get back below the limit – they would check with their accountant and start filing as a corporate entity. HOW HARD IS THAT?
    Robert Reich did say something about it, but I don’t know WHY 2 or 3 percent would feel stuck as filers of individual 1040s, if that’s the issue. Maybe Obama could issue free accountant consultation credits to those businesses in that bracket and nudge them in that direction.

  • Zeno

    “Eat the rich! Dare them to move somewhere with a more favorable economic climate! Pull them down from the ivory towers …” -cory

    You will have to travel outside the USA to extract your revenge, because the rich who deride socialism and government control are actually living in France, Spain, Greece, Brazil, Costa Rica, Bolivia, etc. Their plan is to drain every source of wealth from the US and then retreat. I heard that Rush Limbaugh will go to Costa Rica, and the Bush family has purchased millions of acres in Bolivia.

    They desperately want to rape the social security funds by giving them over to Wall St. Its just like the conversion from protected pension plans to 401K plans, where they got it all.

  • Ellen Dibble

    Zeno, “where they got it all” meaning the push of Social Security pulled out of incomes by the FICA taxes being steered into private Wall Street funds gives that money “to Wall Street,” hence to the rich and their steering of it. It’s like increasing the power of Wall Street.
    Besides that, it pushes more “interests” (voter interests) into the basket of voters who vote to protect Wall Street. If you think the baby boomers as retirees are going to be Tea Party-type Republicans voting “against their own interests” and in favor of the rich (i.e., Wall Street), a lot of that may be due to their 401k’s, and that “voter interest” count will skyrocket if ALL who have Social Security deposits (all who work) are “in the pocket” of Wall Street.
    No one will have to pay for campaign advertisements. The corporate world can just pick their pawn.

  • Alex

    Are there possibly other factors that cause the economic growth or collapse? Perhaps, innovations in information technology like in the 80s? Oil prices like in the 70s? End of a war and government spending for civilian needs like in the 50s? Influx of women into workforce in the 70s and 80s doubling the workforce and thus production? Internet explosion like in the 90s? Real estate explosion like in the early 2000s?

    Tax rates fluctuated since WWII between low 30s% and low 90%s without any series correlation to growth or slowdowns. Conclusion, if we need to tax let’s tax. We need to do whatever works.

  • Alex

    “series” should be “serious” in my post of 9:40am

  • Ellen Dibble

    Sorry for my almost unreadable post answering Zeno. Try reading it backwards. I think it makes sense, enough sense to make up for its awkwardness.

  • Zeno

    …and while we are discussing what the rich believe is outrageously unfair lets REALLY discuss the tax rates for mega corporations. http://abcnews.go.com/Business/Tax/ge-exxon-paid-us-income-taxes-09/story?id=10300167

    If we are to believe that a HIGHLY taxpayer subsidized corporation like Exxon/Mobil should pay no taxes, then the UNSUBSIDIZED individual should pay no taxes.

    Why are conservatives and the wealthy in general against bailouts, but are wholeheartedly in favor of taxpayer subsidies to mega corporations.

    A bailout is taxpayer funds given to a failing corporation and subsidies are taxpayer funds given to successful corporations.

  • Rob

    This should be an interesting show as several of the guests will provide a different prespective. Supply side economics and a Laffer Curve in some form is common sense to me. Here is very simple example. The Government will collect $0 revenue at a tax rate of 0 percent, but it will also collect close to $0 revenue if they set a tax rate at 100%. The question is at what rate does the tax revenue start to fall as tax rates climb closer to confiscatory levels, such as 100%. I believe supply siders have a point when they argue that high tax rates can discourage work and economic activity. However, many exaggerate the extent to which some tax cuts impact tax revenues when they claim they can cut taxes and balance the budget without ANY spending cuts because tax revenue will always increase. While I do not believe cutting taxes results in a dollar to dollar loss to the Treasury, it is wishful thinking to claim you do not have to reduce any spending when cutting tax rates (especially because in the US we are not yet dealing with 0% vs. 100% we are talking about federal rates of 40% vs 35%, etc…).

    Please do not get me wrong as I am not arguing for higher taxes. I believe the combined marginal rate, including federal and state/local, is getting dangerously close to confiscatory levels and may even start approaching the “Laffer Curve” in certain states . Rather, I am asking for intellectual honesty as proponents of lower taxes should concede that we need to control government spending as well.

  • LinP

    I am, and always have been, insulted by Republican policies that tell me I will get a “trickle down” of prosperity. What is that? A drop for me here and there as the top 2% of this country rake in nearly 25% of ALL income?! I don’t want a TRICKLE! I want a fire hose of prosperity aimed right at me, just as the top earners have enjoyed for so long with their tax cuts et al. Trickle, indeed.

  • Ellen Dibble

    Zeno posts: “Why are conservatives and the wealthy in general against bailouts, but are wholeheartedly in favor of taxpayer subsidies to mega corporations.”
    It is news to me that “conservatives and the wealthy” think this or that. I had the impression they were in favor of bailing out THEM, since they are “too big to fail,” and because in other circumstances they can point out that for a large corporation to fail, many many jobs would be lost, and taxes from those incomes would evaporate, and voters would be tossed to the wolves.
    This is why I say we need to GET AWAY FROM A JOB-FOCUSED economy, and start back up where a household representing a location where a set of skills is needed in and by that community. Get away from dependence on Corporate Employment. Employ yourself.
    In Massachusetts, candidate for governor Jill Stein (Green Party) is pointing out huge state subsidies for Raytheon and other large companies which had promised jobs for this state, and which have instead outsourced those jobs, out of state, if not overseas. The other candidates have effectively squelched her since she fell short by $3,000 in donations and can’t get a financial boost from public funds. But there are a few good points she has raised, I think, and instead of answering them, she gets squelched by inadequate donations. Hmm.

  • Ellen Dibble

    Apparently the billionaire Chinese have told Bill Gates and Warren Buffett, as our billionaires tried to enlist them to give their fortunes to charity, that this is a selfish approach because diverting a fortune to charity effectively removes it from taxability, and thus instead of that money being used in ways approved by a democratic Congress, representing the actual interests of the People, that money is diverted to the particular interests of the billionaires.
    The Chinese billionaires are point this out. Hmm.

  • Ken

    What’s missing is the understanding that certain policies, such as those followed by Dem presidents since WWII to support the middle class, can raise the income of ALL Americans, while Repub policies raise the income of the rich far more than others, as shown here:

    http://voices.washingtonpost.com/ezra-klein/2010/09/why_elections_matter_in_one_gr.html

    This is also why the stock market does much better under Dem presidents than Repubs, by a 2-1 margin (i.e. it’s not even close) since the 1920s. So, if the rich didn’t have such a penny-wise, pound-foolish understanding of their own income sources, they would see that Dem policies are better in the long-run for themselves, as well as for everyone else (and the country).

    Many also don’t seem to understand that those in the upper income brackets above $250,000 (couple) will still have reduced tax payments even if the top two rates return to the pre-Bush levels. All their income up to $250,000 will be taxed at the extended lower rates; only income above that level will be taxed at the prior, higher rate. So, they will get every dime of tax cut as that of a couple making $250,000.

    Warren E. Buffett: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

  • Zeno

    Ellen – Yes, I worded that poorly. I should have been they say one thing but believe the complete opposite. They actually don’t care how or where the money comes from, even if it meant starving children to death.

    Their avarice knows no bounds.

  • Ellen Dibble

    Good point, Ken. Robert Reich pointed that out last night too, and I forgot. He says “marginal tax rates” are defined as higher taxes ONLY on income over 250,000; so if you earn more, don’t earn too much more, if you are that much of a penny-pincher.

  • brandstad

    Don’t raise Taxes on anyone!

    Cut Spending to keep the budget defecit neutral.

    48 Democrats agree!

  • Larry

    The rich have taken our money, taken our jobs, and taken our homes.

    I don’t see what option the people have left but to eat the rich.

  • Larry

    Don’t raise Taxes on anyone!

    Cut Spending to keep the budget defecit neutral.

    48 Democrats agree!
    Posted by brandstad

    Oh brandstad, shilling for the millionaires and billionaires.

  • Lawrence

    “Did you have parents who taught you it was ethical to confiscate other people’s earnings and property as long as they had more of it than you? Or better yet, is it o.k. to rob other people of their earnings because you have such wonderful utopian ideas in store for other people’s earnings?” William Maher

    Did your parents teach you that it is ethical to confiscate the wealth created by workers as long as they have enough sustenance to keep body and soul together (barely)?

    Or better yet, is it okay to rob workers of the wealth they create because you have such wonderful personal ideas for using that wealth for your own ends. (a few more mansions, yachts, expensive cars, and other extravagances.)

    Workers, not money, create wealth. Of course the financial industry creates wealth with paper, but it is only paper wealth, not real wealth.

    Want to know what happens when that paper wealth meets reality? Just look at the last few years and any other bubble/collapse cycle in history.

  • Brandstad

    Isn’t the Democrats arguments for tax increases the same as the republicans arguments against the Obama Stimulus program of deficit spending to research cocaine effects on Monkeys and research exotic ants!

  • Bruce

    I have said it before and I will say it again; when did the rich become families earning > $250,000?

    So, non-rich (middle-class?) are those make <$250,000?

    I would be very happy to scrape along on $20,000/month.

  • http://reinventing-america.blogspot.com/ ulTRAX

    We The People have benefited in one way or another from $12 TRILLION in spending these last 30 years for which WE HAVE NOT PAID FOR!! We were told by the Orwellian Right that tax cuts were a Free Lunch… they could even pay for themselves. It was all a lie.

    It’s one thing to have tax cuts if there’s not just a annual budget surplus but NO DEBT… and quite another to pass tax cuts when We The People are $13 TRILLION in debt. ALL the tax cut proposals from both the Dems and GOP are FISCALLY IRRESPONSIBLE.

  • Larry

    The rich in America hide their money in off-shore tax havens (UBS anyone?), get lawyers to make sure they don’t pay anything under the tax laws that are written for them, yet make money off of this country and it’s workers.

    The rich are blood suckers on society. Parasites. Criminals as witnessed by Wall Street.

    The rich wage class war on Americans everyday. Time for Americans to fight back.

  • yar

    What effects do the bush tax cuts have on the solvency of Social Security?
    My logic is federal borrowing leaves a results of devalued dollar. That increases the costs of Social Security.
    No one is talking about inflation, but any spending that isn’t funded through tax or fees is inflationary.

    Jobs are the way out of the economic malaise. I would start a two year draft of youth in public service. A new version of the CCC.
    Without a jobs program for our youth we are in for civil unrest or anarchy. Kill the American dream, undermine national security. We need leadership, not partisanship.

  • Mark Mayton

    I keep hearing that the tax cuts for the “rich” need to be made permanent so that they can be confident and invest in their companies and provide more jobs. Many of these same people want to repeal the health care bill. What about the person that is flipping burgers or working at Walmart and can not leave his job and start a business because he can not afford to lose health insurance?

  • dan dunn

    Jobs will not come back in the volume needed until the price of the United States labor force reaches some sort of parity globally. In regards to deficit reduction, the tax cuts enacted by the Bush adminstration and the republican congress and which have had ten years to work, obviously, didn’t. A gradual return to the tax rates of the Clinton administration is appropriate and needed. Note to congress, idiotic tax cuts and massive deficit spending only increase the pain the of the common man.

  • Brandstad

    Leave Tax Rates alone!

    The Federal Government should stop SPENDING!

    Why can’t our elected officials take the lead of the rest of the world and STOP SPENDING!

    Look to Ireland, Spain, and Greece… We are going to be in the same position as these countries within a few years unless we act now!

  • Newton

    Can someone explain to me why anyone thinks rich people owe you something? Has anyone ever explained to you that your life is your responsibility?
    ————————————–
    Rich people drive on my roads, use my police and fire department, benefit from the security provided by my military, pollute my air and water, build their wealth on the backs of an educated and law abiding workforce. And, because they have so much property, they use all these public services at a vastly greater rate than the rest of us.

    The Meg Whitman’s of the world would not have made their fortunes but for the fact that they live in a society that is stable, relatively prosperous and educated.

    Your comment is typical conservative nonsense: socialize the costs of doing business and privatize the profits.

  • BHA

    Ken: “All their income up to $250,000 will be taxed at the extended lower rates; only income above that level will be taxed at the prior, higher rate. So, they will get every dime of tax cut as that of a couple making $250,000.”

    Good point, though it isn’t really a middle class tax cut. It is a “no middle class tax hike” which is what would happen if the Bush tax cuts expire for all. BUT, the point is, the first $250K would not be taxed higher next year than it was this year.

    Let’s also not forget that of those VERY FEW >$250K earners who MIGHT create jobs will NOT create any jobs if there is no market for their goods/services even if you didn’t tax them AT ALL.

    Trickle UP works since the poor and middle class will SPEND THE MONEY on goods and services sold by the rich. The really rich can’t buy any more goods. There really IS such a thing as having too much money. Trickle down only makes the rich REALLY rich.

    If the >$250K earners don’t want to make more tax, they don’t HAVE to – take a pay cut to $250K. OR: Try living on the average “after tax” income for the other 98% of the population. I suspect the decision will be easy if the option is living on $40K or less after taxes or living on $195K or MORE after taxes.

  • http://www.venturacommenter.org F. William Bracy

    The wealthy do well in ALL economies and in ALL markets, whether rising or falling. Warren Buffet is on record as having said that he made more money as a result of the “great recession” than in any time in his career. This was not unique to Buffet. Those who “know money” (and who does if not the rich) don’t give it up easily. They hedge, they dodge and they even “create” down markets in order to cash in on their own “predictions.” (What do you think “After Hours Trading” is all about?)

    The rich are not hurting, and they couldn’t care less whether we are, or not. Do the rich need tax breaks? C’mon. Give me a break.

  • Ellen Dibble

    How much exactly are the middle class Bush tax cuts? I believe Obama gave everybody back about $100 last year. I think the middle class tax cut Stockton thinks needs to be allowed to lapse is fairly small, compared to the costs in indebtedness to our grandchildren and to China and to inflation and so on. In other words, pay now or pay a LOT in ALL SORTS OF WAYS later. And don’t count on the cost being in dollars. It could be in police, teachers, nursing homes…

  • Newton

    Glad to see Stockman has seen the light. But he was frankly dishonest when he was Reagan’s Director of OMB, which makes me wonder what his hidden agenda is today:

    Stockman was quoted as referring to the Reagan Revolution’s legacy tax act as: “I mean, Kemp-Roth [Reagan's 1981 tax cut] was always a Trojan horse to bring down the top rate…. It’s kind of hard to sell ‘trickle down.’ So the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.”

  • Ellen Dibble

    Fiscal responsibility might be a valid point for any upstart party. Unfunded drugs for seniors — maybe it relied on specific pharmaceutical companies providing free prescriptions for those earning less than $100,000 (which I believe I read in my AARP journal). Or unfunded mandates for No Child Left Behind.
    Or unfunded wars.
    This sometimes works (unfunded spending) if you are a startup business, or trying to get a degree as a physician or dentist, for example. But if it’s paper profits you are betting on, the bubble may burst first.

  • Dan McCauley

    If we are talking about federally borrowed funds to finance the tax breaks, why not keep the breaks in place and then means-test who can get them. If someone in the top tax bracket truly is using the tax break to create jobs in this economy, then they can continue to get the tax break. Otherwise, they can be assessed a federal loan payback fee (please note — not a tax).

    Middle income taxes should be continued on a year-by-year basis, and people should eventually be willing to do our share and pay up.

  • Bruce

    John Stockman,
    The tax cuts under Reagan were on corporate taxes and the taxes that were required later under Reagan to keep his budget from blowing up were on payroll taxes.

    So, under Reagan, the tax burden was shifted from corporations to the work force.

  • Ev

    The argument, even on NPR, misrepresents the fact that ALL taxpayers get a tax cut on the first 250K, a outlined by Obama. Only income in excess reverts to higher rate.

    Tax breaks should be targeted for job creation and on shore investment.

  • Bruce

    Sorry….DAVID Stockman…

  • Ellen Dibble

    Instead of issuing bonds and selling them to OPEC or China, couldn’t we plain print money and deal with inflation? Would that lift all boats in a way, cost everybody equally?
    Isn’t that essentially an effective tax?

  • Chris in Boston

    I agree that the Republicans are “faking it” with rhetoric about fiscal responsibility. These Tea Party candidates sweep into office on a wave of smaller government fiscal responsibility mantra, but the truth is they will quickly be whipped into lockstep with the current Republicans’ allegiance to corporate interests. With the fiscal responsibility idea wiped away, all we will be left with is just their extreme right wing social agenda. This is what is truly scary about the Tea Party.

  • http://www.onpointradio.org/2010/09/candor-tax-cuts Beth

    Is now the time for a flat tax, to be effected immediately?

  • Dave

    “Can someone explain to me why anyone thinks rich people owe you something? Has anyone ever explained to you that your life is your responsibility?”

    Let’s see…. You are born into a millionare family. You use your capital, between leisure trips, for shrewed investing. Becomes a billion. Great crash comes, but you were lucky to have moved alot to cash when you hedge fund friends gave you heads up that the latest bubble was done. Then while the working people become unemployed and real estate plunges, you buy it all up on the cheap. Repeat a few times… Oh, suddenly a very few people control all the property and wealth of a country of millions.

    Too bad you say? What will you say when they riot and burn down your mansion? Call in the army for yourself?

    The point is when you can explain how you the political-economic system has checks and balances to prevent this clearly merit-less disparity of wealth and power, don’t ask why people think the rich owe them something.

    I’m all for free markets within a legislative framework that prevents the above kind of problems. Lets figure out the framework.

    I would be fine with a giant tax increase for personal wealth over say $5 million. We can flat tax, whatever up till then, but once people become super wealthy – obviously never have to work again, can buy whatever they want etc, tax them to keep the money in the general economy and give others a chance to get free markets, competition and personal ambition/creativity to work for them.

    If you want to let people get infinitely wealthy, you will never have a stable system, as obviously, with great wealth comes great power and with great power comes unaccountable authoritative power, and corruption.

    If your not happy with 5 million….

  • Arturo

    Are the Republicans who liten to this program listening to Mr. Stockman? Wake up, this nanny story that your leaders have change is a big lie. They will cut takes ans get loans from the Chumese and the Gulf Emirates and sink the nation deeper into debt.

  • Robert

    When will Americans -and their “leaders”- GROW UP ?!!!

    The discourse in this country about taxes and fiscal policy is so often a selfish, childish, and delusional argument that ignores even common sense!

    It’s ridiculous and shameful that we can’t manage our affairs with honesty and responsibility.

  • Ellen Dibble

    Who will object to fiscal responsibility?
    The banks. The banks who get rich when people buy mortgages. The banks of China when they collect interest from the United States.
    The lobbies for those who profit from all sorts of fiscal overspending are mighty powerful.

  • Mariah

    Ron Paul is constantly correct.

  • Marc

    First of all, don’t assume everyone agrees that trickle down doesn’t work. In B schools they still teach it, but have changed the name. And Reich as a source is a bit suspect. In his recent book, he says it’s not the fault of people who bought houses, cars or whatever, that they couldn’t afford. It’s the evil corporations. He’s completely blinded by his biases.

    And can we be specific about who the evil rich are. I think the gulf between rich and poor is terrible. That CEOs make so much more than the workers is just wrong. But there’s a huge gulf between them and someone like a friend who mortgaged his house, lost his family, barely scraped by for 4 years before his business took off. Now his business supports 80 families. Would he have done this if the tax rate were a bit higher – probably. But add to his burden higher costs for worker’s comp, insurance, stupid regulations and a pile of bureaucracy of the state he had to leave, and yes, he probably wouldn’t have done this. Inotherwords, as you add burdens to the person who’s risking everything, you will shut down many of those who would help build jobs.

    And finally, why are we falling over ourselves to give the people who created the problem more of our money? I understand that there’s a deficit created by Bush, then exploded by Obama. And I disagree with, but respect those who say taxes have to go up. But it astounds me how enthusiastic people are to give more money to these nit wits.

  • ron

    It sounds like our country has been on a drunken spree and have become addicted to the point were we are in serious denial, and would rather die than face facts.

    Funny, I was told about this while in school in the 1970s. We were told the world post WWII was changing and the rest of the world would not be satisfied living in ashes.

    Did we really think the Chinese would want to be farming rice for the rest of time?

    It is belt tightening time. Now, who has the guts (no pun intended) to accept facts and get on with serious business?

  • k rousseau

    Be sure to get an answer to the question about Social Security. The questioner does not seem to know how the money contributed relates to the money taken out at retirement.

  • Mark

    “Don’t raise Taxes on anyone! Cut Spending to keep the budget defecit neutral.
    48 Democrats agree!” Posted by brandstad

    brandstad, now tell us what to cut. This is the same old right wing rhetoric. You’re proposal sounds good on paper, but once you start trying to determine what to cut, IT ALL FALLS APART.

    I’m so tired of hearing this same rant without any details.

  • Dave

    “I work for a rich guy and thank him every day for being rich. I want to be him in 10 years, not a looser like you!”
    Posted by Brandstad

    That’s awesome Brandstad, I can’t wait til all the billions of people are all multi-billionares! That’ll be awesome!

    What? there’s not enough to go around? We can’t all be multibillionares?

    How thick are we?

    Whatever, let there be millionares, let people who are smart, lucky, hard working, get rich. But to live in a fantasy that we can let people become mega-rich and that we all have a shot at it is childish.

    There are plenty of entrepreneurial people who want to build companies and employ people and become well rewarded, and that’s great. Too fall for the notion that we need to let people be multi, multi multi millionares, or billionares in order for there to be jobs is nonsense.

    We DO need to debate, What is Rich

  • Mark

    The Federal Government should stop SPENDING! – posted by brandstad

    So no military, no infrastructure, no oversight on Wall St., etc.? Ridiculous. Sounds grand, but not feasible. It takes money to run a democracy, and if left to the private sector, we may as well throw out the Constitution.

  • http://www.richardsnotes.org Richard

    F. William Bracy: Funny you should cite Warren Buffet, who, along with Bill Gates is in favor of getting rid of the Bush tax cuts on the rich and keeping an inheritance tax in place.

    But, those of you who say eat the rich: Buffet and Gates are using their considerable money to do good in the world and the kind of leverage they have because of their considerable money is significant.

    Who, other than people like these, has the resources to attempt to rid the world of polio?

    There are “rich” people who do good things with their money and are in favor of a fairer tax code.

  • ulTRAX

    Exhibiting the typical Orwellian Right one-variable approach to budgets… Bradsted wrote:

    “Leave Tax Rates alone! The Federal Government should stop SPENDING!”

    OK… Einstein, you get your wish and ALL spending stops. How do YOU intend to pay down that $13.5 TRILLION in debt?

    Debt can NOT be paid down with spending cuts.

    DEBT CAN ONLY BE PAID DOWN WITH REVENUE!!!

  • David Simpson

    I agree with the Ron Paul statement.

    Someone mentioned being scared of the TEA Party for their social agenda – that is not the TEA Party agenda at all. THE TEA PARTY DOES NOT HAVE A CONSERVATIVE SOCIAL AGENDA.

    I have helped to organized these events, and there are a ton of libertarians in this movement. The movement would not exist without libertarians, and it started with Ron Paul & other libertarian types, and against the NeoCon / Religious Right groups. It stands for Taxed Enough Already, and that is all it is about.

    There are some who have tried to jump on the bandwagon, who are on the old side of the Republican Party, but that is not what the TEA Party is about smaller government and lower taxes.

  • Dave

    UNDERSTAND BANKING, UNDERSTAND THE CORRUPT 2 PARTY SYSTEM

    Ron Paul types and honest Libertarians, from Hayek to Chomsky, are trying to tell you something!

    http://video.google.com/videoplay?docid=5352106773770802849#

  • Jean Smith

    Spending bills originate in the House. Temporarily the government in providing cash to Main Street in the absence of banks fulfilling their role in the community. The White House has not had success with cuts to questionable spending even now. We should reduce our military spending to slightly more than Russia and China, rather than the whole world including our allies.

    Here are talking about a few per cent on income above $250,000. This will be less for those who pay it than during the Clinton years.

  • Nathan Sledge

    Ten years ago the Bush tax cuts were passed because of the federal budget surpluses “belong(ed) to the American people.” Well, the federal debt belongs to the American people and it’s now time for us to start paying it.

  • http://www.tonyconner.com Tony Conner

    When we talk about future spending cuts, why has no one mentioned military spending. It’s the real third rail of politics – untouchable. We spend on the order of $700billion on our military every year – the rest of the world COMBINED spends the same. Something about that seems seriously out of balance.

  • Patrick

    When will we stop speaking of “Non-defense” discretionary spending and realize that defense is discretionary spending and a huge part of it. For some reason defense spending is always left out of budget cut discussions and this needs to change.

  • Bob Reardon

    The top 2% took advocated for and advantage of lax policies the helped create the banking failures that have been a recent scourge of the economy. To reward them with a tax cut while the middle class is paying for their profligacy is unconscionable.

  • Larry

    The rich have more of the income because they get the bailouts and the handouts from the government. ie welfare

    They pay for the politicians who write the laws that give them the advantage at every turn.

  • Ellen Dibble

    One thing the Obama-care debate in Congress did define is what is not rich. If you earn about $42,000 a year as an individual, or less, your health care tax break disappears right about there (which I believe is right about average for the USA), and if you earn about $42,000 a year as an individual and are living in “affordable” housing (i.e., non-property-tax paying, tax-exempt-to-the-developer housing), your rental “break” disappears right about there. Up to that level, the government in effect forces you to pay a third of your income for housing right up to $42,000 and collects a certain percentage of your income for health care up to $42,000.
    After that level, you’re totally free to keep a greater share of your profits — except for income taxes, which continue to chip away.
    So now we need an angle on what is too rich. At what level, should you start paying more?

  • Bruce Pershke

    We need to listen to Senitor Bob Corker and start with setting a cap on the percent of GDP that can be spent (and include all expenditures of government not all the “off books” junk currently going on). Once the cap is set (historically 18-23%)then it forces priorities to be set for expenses. Check out Senitor Corker’s discussion at http://corker.senate.gov/public/ and watch the video.

    This would force the Congress to make spending decisions based on priorities and GDP growth. If they want to spend more then GDP must also grow.

    As long as Congress can just print money and sell debt they will never control spending.

  • http://taxcuts ruth heller

    Items never mentioned:
    Licenses to corp. to import employees, instead of hiring Americans.
    Low interest to banks so they can make a lot of money but the rest of Americans get nothing for their savings.
    Tax rates should be progressive all the way up to top earners.
    Who can prove that tax cuts produce investment for the purpose of jobs?

  • Larry

    Cut the military spending and the “homeland defense” spending or we will collapse as a country like the old Soviet Union.

    The rich would love that because they will be there to take everything and the rest of us will be their serfs.

  • Steven

    In Haynes Johnson’s book “Sleepwalking Through History: America in the Reagan Years” I remember reading that David Stockman was a key advocate for the Laffer curve/supply side BS and personally sold Ronnie Reagan on that bogus theory. He also admitted – can’t remember but I think perhaps to the author himself or someone the author interviewed – that the whole thing was part of the right’s attempt to gut social programs. Many of them believed that the only way to kill “entitlement” programs like Medicare and Medicaid was to dry up the funds. And the way to do that was to reduce government revenues by cutting taxes.

    The supply side theory – the Laffer curve – was based on a very faulty, simplistic assumption about where the maximal tax rate actually is. Assuming the rate is already above the maximal rate, then raising taxes will reduce total revenues. The problem is nobody knows where that rate is, but Stockman helped convince people we were already at too high a rate. That book says he knew it was a bad theory even back then.

  • john from danvers

    Wow, what sheer idiocy from Gerald Seib. Repeat after me, “A country is not a company, it’s finances do no function the same way and is not subject to the same restraints.”

    Tom, to put your finger on what the problem, begin asking questions about public investments, often called infrastructure, but also include public ed, public health, public pensions, public R&D, all of which is on the wane, all of which generates returns (call them profits if you must) for all of us together, not just the few.

    Basically, we no longer tax the people who have the money.

  • Newton

    Ron Paul is constantly correct.

    Posted by Mariah
    —————-
    “The notion of a rigid separation between church and state has no basis in either the text of the Constitution or the writings of our Founding Fathers. On the contrary, our Founders’ political views were strongly informed by their religious beliefs. The Founding Fathers envisioned a robustly Christian yet religiously tolerant America, with churches serving as vital institutions that would eclipse the state in importance.”

    — Ron Paul

    “the Government of the United States of America is not, in any sense, founded on the Christian religion”

    - Founding Father and Pres. John Adams, Treaty of Tripoli June 10, 1797

  • tom

    Just a curious thought. If there were massive tax cuts made for all then initially there would be extra money for all but, over time businesses newly hired employees could then be hired for LESS salary since their money would then buy more. Over time this hiring cycle would cause salarys to decrease to a point that they are very near the level prior to major tax cuts.
    Businesses will only pay a salary which will keep people alive not get rich.
    If everyones salary suddenly suddenly increased strange things would happen in the economy and inflation would go nuts. Just my 2 cents.

  • Abel

    We need to start thinking outside of the box. We are stuck talking about the distribution of income, because we think an ‘income tax’ is the only way to raise revenues. The problem is that incomes have been out of whack for so long that all the wealth has been concentrated in the hands of the richest 5% of the population. That wealth is not touched by income taxes. What we need is to repeal the income tax which is inherently regressive and replace it with a wealth tax.

  • Leslie

    Isn’t this discussion about broad based tax policy premature? Isn’t that what the bipartisan commission appointed by Obama supposed to address? The report of the commission on how to address the deficit is not due until later this year. I

  • Ellen Dibble

    I think Social Security and medical costs (the whole system) need to be addressed, and I don’t think anyone running for Congress is up to it. Obama is realistic enough not to make them run on it. Put it like that.

  • Brandstad

    Let’s hope when the deficit problems start making headline news here in the states that the center-right Social Democrats of Portugal send up a case of whatever they are drinking to U.S. Congressional Democrats.

    In Portugal, with a severe budget crisis, Social Democrats are calling for smaller government and spending cuts, as opposed to higher taxes.

    Roubini Global Economics reports:

    Portugal’s center-right opposition has refused to back the 2011 budget. After a meeting with President Anibal Cavaco Silva, leaders of the Social Democrats said they were open to talks if the minority Socialist government agreed to cut spending rather than raise taxes. Opposition head Pedro Passos Coelho said he would support the budget under certain conditions, including an emphasis on spending cuts.

  • Larry

    The problem is nobody knows where that rate is, but Stockman helped convince people we were already at too high a rate. That book says he knew it was a bad theory even back then.
    Posted by Steven

    Thanks for that info. We know their goal is to destroy all “entitlements” but it helps to have the facts to back up our belief that that is their game plan.

  • Kyle

    For too long we’ve been putting the horse before the cart. When will our leadership conduct a complete top to bottom review of expenditures. Everything should be on the table hard questions should be asked:

    1. What is the purpose of this funding?
    So in the case of the Army, national defense. In the case of the Education department, to oversee education, etc.

    2. Are there other agencies that do the same thing?
    The Army Corp of Engineers and the Bureau of Land Management both do work managing water (as do some other federal organizations). Can we reduce redundancy and combine or eliminate agencies and there-by reduce costs?

    3. Does the agency accomplish its mission(s)?
    If it doesn’t, get rid of it or mandate that it does and generate metrics to measure success.

    4. Is the missions necessary?
    Let’s be honest, there are things that all governments at all levels do because it makes someone money, not because it really needs to be done by the government. Of course, these are the hardest things to cut because the benefit a small vocal group and the pain is spread so widely that it can be ignored (see farm subsidies).

    5. Are the costs of the agency tied to its funding?
    The DoT is responsible for highways. How much of the funding is tied to highway use? OK, there’s a gas tax, but that is per gallon of gas, not a percent of the money spent on gas. So even as the cost of gas and maintaining highways has risen, the money coming in has fallen as vehicles become more fuel efficient.

    6. Is the program a long term or short term gain?
    It is ease to spend money on a road program that puts cash in someone’s pocket this year, but the societal pay off for the project is small compared to money spent to educate our populace. We must spend money that will benefit society in the long term.

    7. Divorce emotion from the decision.
    This is math, people. we have finite resources and need to get the most for our money. Instead of arguing about how much money we need to bring in, let’s look at how much money we need to provide the services that people can’t provide to themselves, like national defense, a legal system, federal education standards so that Arkansas and Maine are both educating students to be skilled, or whatever else we deem is needed at the federal level. And maybe we decide that we don’t need the Feds to do some of it. Maybe we decide that in today’s world each state with a militia and the feds with a navy will suffice. But lets look at it.

    Until we assess where we are and what we really need to spend money on, how can we ask anyone to pay any taxes?

    Personally, I think there are lots of great federal programs and I served in the Army for 13 years on active duty and 2 in the reserves. We need a federal government, but we need it to honestly ask what it really needs to spend money on.

  • brian

    I’m 31 years old. My parents’ generation ran up a massive national debt and are about to retire and stick my generation with the tab. On top of that, we’re fighting two major wars. As a matter of responsibility and patriotism, the whole country needs to dig in and start paying the money back.

  • Dave A

    Let me start by saying that I an very much a coservative. That said i have to agree that it is time to scale back on defence spending. The cold war is over it’s time to close our European military bases and turn NATO over to the Europeans. That in itself should save a lot of money and won’t hurt local economies.
    Who pays for the TSA people at the airports, I hope its the airlines and not everyone of us whether we fly of not.
    Just a few thoughts

  • Dennis.in.Omaha

    I would like to ask a question.

    How big are import tax deductions and oil tax credits compared to:

    1. Our Deficit

    2. Our GDP

    3. Our expenses related to

    a) war

    b) entitlements

    c) education.

    If taxes are allowed to be skipped for exporting jobs, and we don’t have those jobs to pay the taxes, what does that do to our tax structure?

    I would like to have some perspective on this because I suspect this is the root of our problems. Does anyone have a place to look this up?

  • Larry

    As a matter of responsibility and patriotism, the whole country needs to dig in and start paying the money back.
    Posted by brian

    There is no way to pay it back. None.

  • Rob

    Many of the liberal comments above do not differentiate between income and wealth. These two concepts are NOT the same. A person who borrowed a large amount of money to either start a business, get an MBA, law degree, medical degree, etc… and then earns an income of $250k (or higher) several years later is not necessarily wealthy. High marginal tax rates on income actually prevent those with the skill to earn higher incomes who were not born into wealth from accumulating wealth slowly over working lifetime.

    Warren Buffet is a very poor example to use when arguing for higher income tax rates because raising the federal income tax rate from 35% to 40% will have almost no impact on Mr. Buffet. The reason is quite obvious. A very small percentage of Mr. Buffet’s income will be subject to the federal income tax rate of 36% (or 40%) as the overwhelming majority of Mr. Buffet’s income is in the form of either capital gains or dividend income.

    One question I have is why should there be such a large difference between income tax rates (at 40%) and capital gains rates (at 15%). I would argue in favor of something similar to the 1986 Tax Reform Act. There should be people on both sides of the political aisle who can support a revenue neutral tax reform act with lower but still progressive rates, but far fewer deductions, credits, etc… As I previously stated, I would like to get Congress out of the business of social engineering through the tax code.

  • Ellen Dibble

    Brian, I am 63 years old and had my retirement savings gutted by the bursting of the bubble, plus the skyrocketing of health insurance for the last 20 years has meant that I’ve had to use a lot of those assets to keep my business and myself afloat, and will end up working until I die. It’s nice to know that Social Security could kick in some money if I have a stroke or something like that, but I expect to be paying taxes as long as I live.
    To me, the issue of aging baby boomers is largely an issue of how can they best be employed, especially considering robots are more or less taking over all the jobs that are not send to India and the Philippines.
    You can’t just blame one generation. We were the ones who suffered from the favor-the-rich policies that started right about the time David Stockman and Reagan started the bandwagon of reward for greed, manipulation of workers (however you want to put it). To be fair, there had been a vicious and depressing depression leading up to their dreamwork financial approach. Between the Cold War, the hostages in Iran, the cars waiting in line to buy any gas that OPEC let through, and the recession (inflation plus joblessness), things were bleak and required an illusion.

  • Dave

    Ron Paul and like minded want to cut Military spending greatly, by stopping our interventionist neocon military policies. Thats ALOT of money. Chomsky is at least on board with that.

    Lets find the common ground and DO SOMETHING!

    Urge Libertarians to be honest and keep social conservatism (authoritarianism) out of their politics, Urge them to be sure a legal framework is in place to allow Competition to work fairly, and lets give it a try!

    Cannot be worse than Dems who are happy to hide behind Keynsian economic fallacies and print money forever to pay for Utopian government provided equality, or modern Republicans who are truly soul-less shells who are just corrupt puppets for the corrupt rich, not the honest free-market worker.

    I want to figure out how to square Hayek (Austrian Economics) and Chomsky (Libertarian Socialist). They both at least have Libertarian principles as part of the vision. Our current 2 party/banking system does not.

    I propose true Libertarian attempt, without social conservatism, behind a Ron Paul type figure who can unite those of a more Tea Party ilk.

    Then, the challenge is to be sure that we have an honest legal framework that lets free markets and competition work WITHIN those limits (as Intended by Hayek) to allow individuals make decisions of where to put their labor and their money, as free individuals making decisions based on the facts relevant to them will be more efficient and fair than Centralized decision making.

    Chomsky support more anarchic, decentralize worker coops and syndicates. At least they are DE-Centralized, and thus don’t invite Centralized coercion and authoritative rule.

    Recall the Political test we were talking about, showing how so many of todays figures are so authoritarian. At least Hayek and Chomsky are not, and believe in freedom, arguing about whether capitalism can do it.

    But is todays America going to go Chomskian? No way, we have Tea party’s etc. I can see them going for Ron Paul.

    Then we can try and figure out how to develop a Ron Paul/Noam Chomsky vision, after we all at least agree that the current system is broken, and that we are working to change it, while preserving the American Liberty that everyone can agree is a very valuable gift from our founders and the Constitution.

  • Ellen Dibble

    Dennis in Omaha, if the debt collector (OPEC and China) came knocking on the door asking us to pay up now, would America’s billionaires have enough in resources to pay them back, right then and there?

    Are there Americans with resources enough to make good on our debts?

    Second question: If our billionaires are living in Bolivia and France and Switzerland and so forth (see Zeno’s post way before 10:00 a.m.), then maybe they don’t care about bailing out the United States in case our debts are called in.

    Maybe they’d rather declare themselves members of a new international nation called The Haves.

  • Ernie Tartaglia

    David Stockman just danced on the fringes of a solution but declined to “man up” & address 40 years of neglect. Now I’m listening to some over-educated opinion that refuses to attach the over spending issue.

    Stockman says that the military budget is off everyone’s table while saying that we need to get out of the “world cop” business. What a contradiction IMHO. If we want to be the world police, have those countries / interests who want it foot the bill. Israel & the Arab nations should be PAYING for us to interfere in their affairs. Same for any place we are policing outside our borders.

    Here’s a partial list of my proposed cuts / changes

    * end war on drugs
    * end affirmative action
    * eliminate education dept (send it back to HEW where it belongs)
    * get rid of USA Patriot Act
    * eliminate dept of homeland security
    * end war on terror
    * model tax rates/policy to those < fy 1970
    * end no child left behind
    * remove ALL extensions & liberalization of patents & copyrights and return to a strong "fair use" policy
    * reinstate glass-steagall

    please add your own – I know I've forgotten quite a few

  • Jim in Omaha

    Investment itself does not create jobs. Demand creates jobs. This is why, despite record corporate profits and income gains by the investment class, there is no job creation. Investment follows demand, and responding to it can result in more jobs. No one with money to invest ever said “I’m not concerned with how much money I make on my investment, I just want to create more jobs in the U.S.A.” If an investment dollar gets better return by moving a local job overseas, that’s what the market will dictate.

    Proponents of supply-side or trickle-down economics are like someone with an extremely detailed map who believe that the sun rises in the West. No matter how carefully and rationally they follow their map, they will NEVER get to where they want. In their world, the aphorism “necessity is the mother of invention” whould be changed to “a lower tax rate and excess capital is the mother of invention”.

    And of all the comments above, that of Bruce is the most cogent. Under Reagan, the largest middle and lower class tax increases ever were implemented, along with the greatest decrease in the tax burden on highest incomes. That 40% recapture of tax revenues Mr. Stockman referred to was from tripling your (and my) payroll taxes.

  • Dennis.in.Omaha

    Hi Ellen,

    I am simply asking a question to gain perspective. Your questions seem to infer that I am against rich people.

    For your information, I am against protectionism. And, I have absolutely no problem with rich people enjoying themselves with cleverly gained money in a truly competitive system.

    I would like our guests to explain, and help me gain perspective on how much taxes are skipped by organizations like China, Wal-Mart, Exxon-Mobile, etc…

    Exporting jobs and using tax credits to centralize the economy is not a good enough excuse for me for rich people to skip taxes.

    Is it relatively modest compared to the scale of problems we are talking about? Or, is it a significant hole in the bottom of the ship?

    I honestly don’t know these things and if somebody has an authoritative source for me to know, and possibly quote, I would like it.

    So let the rich be rich. Just don’t make us who had our jobs sold away have to pick up their tab.

  • Sam

    Lets restore the Taxes to the 2% to Clinton era, for now. And if the companies want to do business somewhere else, they are more than welcome to go.. where? China? India? Europe? Australia? Brazil?

    I really want to see, where on earth they will go and do business? Hmmmm… may be Mars?

    England just increased the taxes for businesess, and all of them cried fox, and threatened to leave London, wait a minute.. they are still in London…

  • Dennis.in.Omaha

    This show should be moved to KIOS FM in Omaha.

    Your cost of living / producing is lower, and a good chunk of your fan base is here.

    Just think about it…

  • Steven

    Larry, I don’t even think Arthur Laffer believed his own theory. There’s never been any clear evidence that in our economy tax cuts would have a stimulative effect. It’s Republican chicanery in the interest of robbing the poor. The only good thing David Stockman ever did for this country that I know of is admit openly that supply side economics was a cynical BS theory invented to justify cuts in social spending. Thanks to him though, Ronald Reagan became a believer shortly before he took office and then proceeded to implement policies based on that. I think Stockman felt guilty afterwards and decided to come clean.

    But any interviewer – ehem, Tom – should grill Stockman on why he did what he did. I’m sick and tired of seeing people that have caused our problems, been lousy public servants, take a little time off and then get paraded in front of us as wise elders. Give me a break. I need a lot of contrition from these folks before I care to listen.

  • ulTRAX

    While I do thank Stockman for calling out the Right as irresponsible, I could not help but notice he was still being disingenuous. He seemed to avoid taking much responsibility for the mess HE helped start. Several times he said government’s fiscal problems started FORTY years ago when the debt numbers just don’t bare that out. But at one point, in a Freudian slip, he said 30 years… ie, the beginning of the Reagan era.

  • yar

    I don’t think many people understand national debt. When our creditors show up to be paid, we simply move numbers on a computer screen. We are borrowing in US dollars, it isn’t like we have to go dig gold or collect shells to cover the debt. Our debt dilutes the value of our currency. Our debt may be the most progressive tax we have. I heard the comment again on today’s show that 47 percent of Americans who don’t pay tax.
    The tax justice issue is misunderstood. Much of health-care is really a tax. Our fees and insurance payments subsidize those who seek medical treatment and can’t pay. Just like we pay for loss from shoplifting. If one looks at where all the money goes, the working poor and lower middle class may actually have the largest part of their income supporting our society. This class war over income tax is selective and intended to divide and suppress voting.
    Both parties will change their politics if we can get 80 percent voting participation. That would tell congress we are watching.
    Voting matters, so what do you plan to do?

  • Dave

    “But any interviewer – ehem, Tom – should grill Stockman on why he did what he did. I’m sick and tired of seeing people that have caused our problems, been lousy public servants, take a little time off and then get paraded in front of us as wise elders. Give me a break. I need a lot of contrition from these folks before I care to listen.”

    Well said!

    Just wait til Bernanke, Paulson and Summers are on the wise elder circuit, trying with smiles and “who could’ve forseen…” nonsense, to gently push our heads back up our a—-!

  • http://www.venturacommenter.org F. William Bracy
    : Funny you should cite Warren Buffet, who, along with Bill Gates is in favor of getting rid of the Bush tax cuts on the rich [...] Posted by Richard, on September 30th

    It isn’t “funny” that I should quote Warren Buffet — speaking as a progressive there is a very good reason for quoting him. As the second richest man in America, he’s obviously concerned over the “prosperity gap” that is ruining this country. He wants to keep his billions, but he clearly realizes that in a capitalist system, unless everyone prospers, no one will prosper.

    Put that in your pipe and light up whatever it is that you’re smoking.

  • Dennis.in.Omaha

    The best economic argument for progressive taxes is that it is a gentle tool to help de-centralize the economy. (it feels more fair, but that is not an economic arguement)

    Currently our economy is being centralized by large retailers like wal-mart. They take tax deductions on imports on a world-class wholesale level.

    So if we are stuck with slave labor imports from China, lets offer progressive tax deductions for their expense. At least the tide will be decentralized from a few of the largest importers.

    That means, if a ma&pa store imports 1000 minibikes, then I can deduct the expense. But if a super-store imports 100,000 minibikes to crowd out ma&pa stores, they would progressively get less as they import more.

    Currently it seems like it is against the law for anyone who wants to make a living outside of the superstore supply chain.

  • Steven

    …which isn’t to say I’m not happy for *anyone* to speak the truth on tax policy now. But to have Stockman doing it? Maybe next week GW Bush can lecture about the importance of civil liberties and judicious use of the armed forces.

  • BHA

    Posted by Brandstad, on September 30th, 2010 at 10:57 AM

    Same old, same old.

    As Mark asked at 10:41
    WHAT SPENDING WILL YOU CUT?

    First: The rich will NEVER allow cuts to the programs they use even though they could well afford to pay the costs out of their deep pockets if the programs didn’t exist.

    Second: The programs not used by the rich are needed by the poor and middle class.

    Thus, the ONLY thing that would get cut are programs providing services to people who CAN NOT afford to pay ‘out of pocket’.

    Plus (and this should be no surprise) every cut you make will cost some number of “NOT RICH” people their jobs. They will no longer buy things nor pay taxes because they have no job.

    I’m not saying that every dollar of government spending is well spent but a blanket “spend less, tax less” is a big ZERO of a “plan”.

  • Ellen Dibble

    I hope someone runs with that question, Dennis. Why indeed? Except that Walmart has a lot of employees.
    I’ll have to think about moving to Omaha. I didn’t mean to imply your position on wealth. Just picking your brain, that’s all.

  • Dennis.in.Omaha

    Good point Brandstad,

    Usually I disagree with most of your posts, but you laid out a solid argument this time.

    My neighbor who used to work for social services lost a job. That neighbor now does not have her state income to pay taxes and puts her more at risk of using the public assistance she used to means test others for.

    I wanted to work my way through college. But my state college has eliminated any job a student might theoretically pay for his own education with. If I had been allowed to do that, I would have finished a degree there and paid more taxes overall.

    Even the sports gear of our college system is licensed through a manufacturer in China. It is against the law for anyone in Nebraska to have a job making pro-Nebraska sweaters!! IT IS AGAINST THE LAW TO HAVE A JOB!!

  • Steven

    Posted by Dave: “Just wait til Bernanke, Paulson and Summers are on the wise elder circuit, trying with smiles and “who could’ve forseen…” nonsense, to gently push our heads back up our a—-!”

    Agreed. I keep thinking of how Nixon would be going on the tube to talk about foreign policy. “The Chinese are not stupid people”, he’d say. Umm, thanks Dick. I especially love it when the ex-offenders have some new role where they or their company benefit from the policy they are now advocating. George Schultz comes to mind. And of course the media often don’t disclose those little tidbits.

  • Dave

    “The best economic argument for progressive taxes is that it is a gentle tool to help de-centralize the economy. (it feels more fair, but that is not an economic arguement)”

    But the question is what to do with the taxes? Instead of keeping them in a centralized government, lets get the money back to the people, so they can make wise, local, economic decisions with them. The very act of redistributing the wealth to the lower wealth people, should reduce the need for centralized social services.

    Direct Redistribution + Free markets

    Sounds nuts, but why won’t it work? Your not giving lower income people enough to become wealthy, so still an incentive to work, plus if you really want a better, more interesting life, you will work harder. But it does keep the money in the economy, with continuous chances for people to do better if they want. But skipping, except for National Defense, Infrastructure, Fire, Police Basics, keep the government small, and the taxes go back mostly to Individuals.

    Small Government people, Free market people and Progressive taxation people could all agree. Even Tax Reform. Flat Tax up to certain “Wealthy” level, then Progressive Tax on up the Wealth ladder. Maybe the Flat tax funds Small Government, and the Progressive Tax supplies the redistribution to individuals.

  • Dennis.in.Omaha

    Hi Ellen,

    Yes walmart has alot of employees here in Nebraska too. Walmart and the drug meth are competing hard to be the one who kills our community first.

    Our main streets in many smaller towns near walmarts are empty ghost towns. This is the exact same problem of the soviet union. Russia centralized their economy with slave labor from other communist countries. Now we are centralizing our economy around slave labor from other communist countries. Ironically, this makes capitalism look just as bad as communism.

    One interesting thing revealed in the movie, Wal-mart: The high cost of low prices, was that many of their full time employees still are on public assistance. That means that large super stores get tax deductions for their products, then get tax subsidies for their employees.

    So as a person who believes in capitalism, as a moral method of respecting the property, investment and labor of a person, it is all very frustrating to see what is going on.

  • Dennis.in.Omaha

    Hi Dave, the libertarian,

    Once in awhile I see a true believer the libertarian way like you. Nice to meet you.

    The problem is that right behind you are the evil ones who want to use libertarianism as an excuse for getting rid of government’s oversight of their particular industry.

    It is often difficult to discuss things with libertarians because some of their sincere beliefs are tainted with the spins of the various industrial twists.

    The oil spills in Alaska and Florida are perfect examples. De-regulation and reduced government oversight allowed the same industry – which supports the Tea Party (oil) – to go loosey goosey with safety. And that is the problem with specific de-regulation. I don’t want to imagine it on the wholesale level that libertarians are suggesting.

  • http://www.richardsnotes.org Richard

    F. William Bracy:

    “The rich are not hurting, and they couldn’t care less whether we are, or not. ”

    I think maybe you meant they could care less, right? Buffett does seem to care, note his feelings about progressive tax rates and reinstating the inheritance tax.

    “but he clearly realizes that in a capitalist system, unless everyone prospers, no one will prosper.”

    So, we agree on Buffett? He’s one of the good guys, or not?

    I’m attempting to make another category for some of these rich folks and take them out of the blanket “eat the rich” statements some here seem to be making. I include Gates in that category as well. He’s done more with his foundation than many NGOs have to eradicate polio from the face of the earth.

    People who do good with their money and support fairer tax policy ought to be differentiated from people who rake it in and complain about higher taxes. Don’t you think?

    “Put that in your pipe and light up whatever it is that you’re smoking.”

    Take it easy, why so angry?

  • Dave

    “The problem is that right behind you are the evil ones who want to use libertarianism as an excuse for getting rid of government’s oversight of their particular industry.

    It is often difficult to discuss things with libertarians because some of their sincere beliefs are tainted with the spins of the various industrial twists.” -Dennis

    Yep.

    I think alot of people feel that way. I’ve also heard people who like the ideas but then see the real-life people as “A holes who just want to get rich, get high and have prostitutes.”

    I can’t deny that any of that is not true.

    I’m just trying to come at today’s problems and corruption and debts, in an intellectually honest, rational way, with an open mind. So its hard for me to “throw the baby out with the bathwater” on some of these ideas.

    Unfortunately nobody seems to throw out the Democrat/Republican/Banker/Government baby OR bathwater.

    I just hope people can put down some of our defensive dogma, and think, and rethink some of our political/economic notions and models.

    Heck knows our patchwork, bloated, intellectually-irrational and financially-bankrupt/corrupt system needs a retooling.

    Thanks for the discussion.

  • Dennis.in.Omaha

    Hi again Dave,

    to quote so far,

    It is often difficult to discuss things with libertarians because some of their sincere beliefs are tainted with the spins of the various industrial twists.” -Dennis

    Yep.

    I think alot of people feel that way. I’ve also heard people who like the ideas but then see the real-life people as “A holes who just want to get rich, get high and have prostitutes.”

    I can’t deny that any of that is not true.

    —–

    Here is another thing, if a rich person wants to be a prodigal son and go vegas and go gambling and then visit prostitutes, then fly to maybe Amersterdam? and get high, that is one thing… But, deduct it from your fed and state taxes and make local government pick up the tab is a completely different thing.

    So the big problem I see with libertarianism is that -by definition- puts harmful things in the same bucket as helpful things.

    The greeks created the good underpinnings of democracy and capitalism with this principle: Wealth is only created in a society (a whole community), therefore – To the degree that individuals become wealthy from the community, they are morally obligated to protect it.

    So one way to encourage those things that protect a community is to have tax deductions and credits for them. Some things are discovered to work better (and sometimes forgotten too) as a public service paid from taxes.

    Some things that are harmful to a community are simply illegal. And those questionable things, while not encouraged, must pay their full weight.

    Libertarianism, as has been presented to me, seems to be against those reasonable principles.

  • Grady Lee Howard

    Richard:
    If one were extremely wealthy, that is an extremely simple problem to correct.
    I don’t think the current crop of billionaires is correcting it any more than Andrew Carnegie did.

  • Justin

    I agree with what David Stockham is saying (that we need to increase taxes and cut the budget), but would like to know more about what he thinks should be cut from the budget.

    On CNN, an article written by Jeanne Sahadi called “Death to deficits by ‘a thousand cuts’” uses a report filed by the Center for American Progress which demonstrates the magnitudes in cuts needed to get the American budget on track:
    http://money.cnn.com/2010/09/21/news/economy/spending_cuts_budget/index.htm

    I found this article highlights the challenges that politicians face when cutting the budget and think anyone concerned about our budgeting problem should read through this article. At the end of the article, CNN posts a link to a “Budget Simulator” game created by The Committee for a Responsible Federal Budget where participants get to go through the budget and can cut spending in order to balance the budget (a must play to again understand the magnitude and challenges our nation’s leaders face).

  • Grady Lee Howard from Omaha

    Dave: You’re making a glaring error: Noam Chomsky is not a Libertarian in the American sense. His label is based on 19th century European politics. They called anarchic socialists libertarians. Chomsky’s utopianism and Paul,s he-man survivalism are irreconcilible.

    The label: I thought Dennis might like me as a neighbor.

  • http://www.richardsnotes.org Richard

    Grady:

    “If one were extremely wealthy, that is an extremely simple problem to correct.”

    Are you saying that being wealthy is a problem, the tax code is a problem, or what?

    “I don’t think the current crop of billionaires is correcting it any more than Andrew Carnegie did.”

    Correcting what? Being wealthy? How much tax they pay?

    Let’s say we assume that being wealthy is a problem (I don’t), how do you suggest that people “correct” it?

    Or, let’s say we assume the tax code is a problem (I do), how do you suggest that people correct it?

    What Gates and Buffet are doing is speaking out to reinstate the capital gains tax and at the same time, they’re doing something positive with their considerable wealth.

    What would you like them to do that they’re not doing? Pay more taxes, right? Fine, change the law and they’ll be paying more taxes.

    What am I missing? Do you hold it against these guys that they made a lot of money?

  • http://www.richardsnotes.org Richard

    “speaking out to reinstate the capital gains tax ”

    Sorry, mistake, reinstate the inheritance tax.

  • Robyn Ramsay

    My husband and I have been very responsible with our money. We purchased a modist home and have been able to save 75% of our house payment toward our retirement. We contribute to social security and I would be very angry if I was told that because I had been fiscally responsible in my 30′s and 40′s that I would not be able to recieve social security because I don’t have financial need. I have no problem with the program being adjusted so that benefits start later in life or something like that but don’t punish me for having done the right thing all my life.

  • Ellen Dibble

    Spelled a little differently, Branstadt was the longest-serving governor of Iowa, a Republican, and is running again, for governor there now. I checked it out because there was a Brandstadt mentioned on some public radio program who was a moral catastrophe of some sort or other, and I was wondering who would try to use that name where they had a choice. I mean, I sometimes wonder about my own name, but…

  • Tom Cantlon

    During the New Deal we had big public works projects, labor friendly policies, very progressive income taxes, and the biggest middle class ever. Many of the safety net costs would dwindle in a worker oriented economy with plenty of good jobs. It can be done, it has been done, it just isn’t being done now.

  • Rob

    Below is a summary of the top 2 percent of income earners based on Treasury statistics. I am posting this summary because so many of you appear to have such a distorted view of the “rich”, which I am temporarily defining as those with income over the Obama threshold. The Obama threshold refers to those single tax returns with incomes exceeding $200,000, married returns with incomes exceeding $250,000 and head of household returns with incomes exceeding $225,000.

    * Average age is 49 years old (not much different than the 47 years old for other filers)

    * 77% are married vs. 41% who are not part of this group

    * 45.7% are have two income earners in household vs. only 17% for those not in this group (e.g. partially due to marriage levels noted above)

    * Worked an average of 46.1 hours (or 85.1 hours per week for 2 income households), compared to 38.1 hours (or 78.6 hours 2 income households), respectively, for those not in this group.

    * Education level is much higher among those with higher incomes. 79.8% have a four year college degree or higher (compared to 34.5% for those not in this group)

    * Despite the liberal above implying they are all Warren Buffett or hedge fund managers, only 15% of these people are employed in Finance. Here is listing by profession:
    – Not in Labor Force or Unemployed: 5.6%
    – Agriculture: 0.8%
    – Mining: 0.8%
    – Construction: 3.6%
    – Manufacturing: 9.5%
    – Wholesale and retail trade: 8.7%
    – Transportation and utilities: 2.9%
    – Information: 3.7%
    – Finance: 15.3%
    – Professional/business services: 20.0%
    – Educational and health services: 22.1%
    – Leisure and hospitality: 1.9%
    – Other services: 1.6%
    – Public administration: 3.4%

    There are some lessons here for the younger professionals who want to increase the likelihood you will be part of this income group:
    1) Marry someone who also has career ambitions:
    2) Work harder; and
    3) Get as much relevant education in your profession/field as possible. I would also add that you need to commit youself to becoming a life long learner.

    However, whining that the government should provide you with more assistance is not on this list.

  • William

    I have to agree. It was a bad idea by President Bush to take 5 million people off the federal tax rolls. That 46 percent of Americans that don’t pay any federal income tax need start paying their fair share.

  • Terry

    So it all basically boils down to the fact that the governing elite know that most Americans are paycheck to paycheck, hand to mouth, and barely hanging on (and have been for decades), and they fear telling them that, THAT, was the good life, and it’s going to get much harder now. Because the Banking Industry and “Too Big To Fail’s” were in fact Usury Institutions, and Monopolies, and instead of enacting Trust Busting Laws, Prosecuting Usury Banking Practices, and sending them to jail, the Government decided to make the little people buckle down and take it up the tail-pipe. They really don’t want to say that, because they’re afraid Americans might get real, real mad, and possibly react violently. I see. I see what they did there! ;)

  • JP

    Following is an argument for why the wealthy owe everyone else:

    Every dollar earned by the wealthy consumes at least some of the limited resources of this planet, or what one might call “planetary legacy.”

    Whether in paper resources, rubber, asphalt, petroleum, water, LAND (which is highly limited), food for workers, etc…, resources of some sort are consumed for every dollar earned. Also, some degree of pollution is likely produced.

    Since this is the case and we live on a planet of limited resources, our society is allowing the wealthy to use up a disproprtional amount of “planetary legacy” for their own personal benefit.

    In other words, a very few are costing the vast majority of the current and futre generations quite a bit of their planetary legacy.

    They have no right to do this, other than that our society never gave much thought to what the wealthy really cost the rest of the world and future generations.

    My contention is thus that the wealthy owe the rest of us something due to the very fact that our society allows these few to amass so much unto themselves, for their own private and selfish benefit.

    If they are forced to pay back this debt to society in the form of increased taxes to benefit the rest and future generations, so be it.

    They SHOULD be forced to pay restitution for the disproportionate amount of limited resources they are allowed to consume, and tax is the easiest, most equitable way for them to do it.

    Even when paying increased taxes, the wealthy in our society are still able to become filthy rich and enjoy the benefits of their wealth beyond the wildest dreams of the vast majority of us… they have nothing legitimate to complain about, since it’s not like the U.S. will deny them any wealth at all, as though we lived in the ex-Soviet Union.

    The wealthy in America will still have the best of all worlds, despite being forced to PAY THEIR FAIR SHARE, as per the argument above.

  • Dave

    “Dave: You’re making a glaring error: Noam Chomsky is not a Libertarian in the American sense. His label is based on 19th century European politics. They called anarchic socialists libertarians. Chomsky’s utopianism and Paul,s he-man survivalism are irreconcilable.”

    Sorry I wasn’t clear, I was trying to make that point in my post, and to concentrate on the common ground.

    I am still trying to reconcile the 2 myself, as I find both compelling. I am not ready to give up private property rights, as I do feel that people acting in their self interest often take better care of things than public things we take for granted. I think there is some human nature there. I still have not been dissuaded that given fair legislative framing, with real accountability to those who break the rules (something I feel is absent today), that letting individual make their own choices as far as they don’t hinder other peoples ability to do the same, is not an effective system that both encourages productivity and preserves liberty and the diversity of ideas that necessary in a healthy, free, democracy,

    I don’t buy the idea that one persons wealth (value they have created through education, commitment, and work) is automatically a hinderance to another persons liberty. However as I suggested earlier today, I would not necessarily be against a progressive, re-distributive wealth tax on the very wealthy, in an effort to keep wealth hoarding from spiraling out of control, and threatening the very fabric of the society. I think is compatible with free-market ideas within those bounds, and also can be compatible with a small-government (essential services) model which keeps the state out of all affairs it is not clearly necessary for.

    So, small government, liberty, but some limits on ultra-wealth, to encourage some sense of fairness/decency and self-preservation of the system. I like the idea of direct redistribution back down the income ladder from some of the uber-wealthy taxes, so that those individuals, not the Federal Government, can make their own decisions on how to spend it as they see fit, for better or worse (individual responsibility)

  • Alex

    “I don’t buy the idea that one persons wealth (value they have created through education, commitment, and work) is automatically a hinderance to another persons liberty.”

    This argument keeps coming up. “Automatically?” No. But can it be such a hindrance? You bet. I don’t buy the idea that a person’s wealth is necessarily created via education, commitment and work. How about you finance right candidates to get them to Washington and getting all sorts of wasteful contracts paid by the taxpayer or better yet starting wars that pay a lot of money? That hinders the country a lot. Or paying lobbyists to get the laws through that are great for the special interest but harmful for the country as a whole? Or how about gambling with other people’s money on Wall Street till the whole economy lies in shambles? I think that one’s wealth may well hinder us all.

  • Dave

    Hi Alex,

    Yes those examples are true, but they are almost all corrupt examples, or examples that are easily identified as gaming the system, that should be illegal by the framework that establishes the free market rules beforehand.

    So while I abhor those practices as much as you, I don’t see it as necessarily a case against what I have been talking about. To me its a case for more accountability, and for developing fair rules to play by. Not a case for dumping Liberty and Free Enterprise.

    Any system will have those who try to game or corrupt it. I can’t argue with that.

  • Dave

    “I don’t buy the idea that a person’s wealth is necessarily created via education, commitment and work.” -Alex

    In what percentage of the population? A significant part?

    Do you really not think that is the main driver? Are the majority of people who create wealth (I’m not talking the mega wealth, I’m talking even 50K a year) doing it corruptly?

    If not, what is wealth, or value, created from? Certainly not out of thin air from the Government, or the Fed printing press? :)

    I’m all for figuring out how to stop corrupt wealth (Fractional Reserve Banking anyone?).

  • Jim in Omaha

    Dave, didn’t we have “Liberty” and “Free Enterprise” in the 40′s, 50′s, 60′s and 70′s when marginal income tax and capital gains and dividend tax rates were significantly higher? Equating raising tax rates a couple percent on high incomes with taking away liberty and free enterprise seems awful extreme to me, although hedge fund exec Steven Schwarzman compared it to Hitler invading Poland. He, of course, is both crazy and fabulously wealthy, not mutually exclusive qualities.

  • Rob

    @Jim in Omaha,
    The statutory income tax rates referenced of 80% and higher that were enacted starting the early 1930s were largely symbolic in that few if any people actually paid these rates because the income limits were so high and there were so many deductions and exemptions. These rates were enacted by Congress largely for political reasons and contained far more in the way of exemptions, deductions, credits, etc… than we have today. For example, the top marginal tax rates of 80% to 90% in the mid 1930s applied only to income over $5 million (e.g. in 1930s purchasing power, try adjusting that for inflation)!!! These income limits were reduced to about $500k in the 1950s (again, not adjusted for inflation), but the deductions and exemptions were also increased to the point where in certain years the only people taxed at this level were a handful of Hollywood producers targeted by Senator McCarthy and his political allies. This would be similar to setting an income tax rate of 80% on income over $100 million today, but exempting all capital gains, dividends,etc… You would be setting a tax rate that no one would be paying!!

    I would also add the global economy was very different in the early post WWII years of the late 1940-1960s. From an investment perspective, the US was effectively the only game in town. Most of the world was either decimated by WWII and/or living under the incompetence of the Soviet regime. I am not arguing for no social safety net, but I believe our Federal Government should be able to live within the historical spending limits of 17% to 21% of GDP that prevailed during the post WWII era.

  • Bill

    The following was published in the June 7, 2010 issue of Accounting Today in the LETTERS section:

    Our system of taxation may explain the current political situation. Our transition in the past 30 years from a country with a progressive system of taxation to a country with a regressive one has political consequences.
    A progressive taxation system promotes a strong democracy. Without progressive taxation, wealth concentrates. Wealthy individuals, corporations and special interests take ownership of the political process. A good example of this is the recent Supreme Court decision on campaign finance.
    According to the Federal Reserve Board, the top 400 families now control more wealth than the bottom 50 percent of the population.
    We can see the damage to our democracy. Our voice in our own self rule has diminished quantitatively.
    The shift in our country’s tax policy over the past 30 years, starting with President Reagan, has contributed to if not caused, the current state of affairs.
    We keep a copy of each year’s CCH Master Tax Guide in our firm library. I consulted a copy from 1981, covering the 1980 tax season, the year before Reagan took office. The marginal tax rate for joint filers was 70 percent of taxable income over $215, 400. Forty percent of capital gains were subject to tax in 1980, which worked out to a tax rate on capital gains of 28 percent for the highest bracket taxpayers
    Through a series of tax acts, the Reagan administration cut the maximum tax rate on ordinary income to 28 percent. Subsequent administrations reduced the capital gains rate to 15 percent. The second Bush administration reduced the tax rate on dividends to 15 percent.
    Slashing taxes on the wealthy precipitated increased taxes on the middle class. In order to replace the tax revenues lost to lower income tax brackets for the rich, Republicans increased self-employment tax and social security tax and imposed an income tax on social security benefits.
    According to the 1981 edition of CCH Master Tax Guide, the self employment was 8.1 percent in 1980 and it applied only to the first $25,900 earned (adjusted for inflation, the $25,900 converts to $68,109). Today the self-employment tax rate has climbed to 15.1 percent and applies to the first $106,800 earned. Republicans, who claim to support small business, have more than doubled the tax burden on small business. In the past 30 years, payroll taxes have also increased. In 1980, the FICA and Medicare tax was 6.13 percent on the first $25,800 of earnings. In 2009, the FICA and Medicare tax is 7.65 percent on the first $106,800 of earnings.
    After increasing the taxes on the working middle class, the Reagan administration turned to the retired middle class. On page 35 of the 1981 guide is a checklist of “Item Which Are Not Taxable.” Included in this list is Social Security. Today middle class retirees pay federal income tax on 85 percent of their Social Security benefits. Just as the Alternative Minimum Tax applies to more and more Americans because the exemption amount is not indexed to inflation, the threshold for determining taxable of Social Security has been frozen at $32,000 for joint filers since 1984.
    We need a return to a progressive income tax system, with corresponding reductions in payroll taxes that are crippling the middle class. A progressive tax system will return the political process to the people.
    We need a return of the income tax brackets in effect during the Nixon administration, when the highest tax bracket was 70 percent. We should consider restoring the tax brackets in effect during the Eisenhower administration, when the top rate was 90 percent. With the higher tax brackets in place, wealthy interests will have less money to spend on lobbyists and campaign contributions. After these corrupting influences have moderated, a functioning democracy will be restored.

    The letter was written by Harry Bose, CPA, Read & Bose, PC

    Submitted to On Point by Bill

  • Dave

    “Equating raising tax rates a couple percent on high incomes with taking away liberty and free enterprise seems awful extreme to me”

    Agreed. I think to be more in line with libertarian principles, though, it just becomes a question of what to do with the tax money- grow a government, support limited government, or give it back to individuals. I think a combo of the latter 2 seems reasonable, and do think it is extreme to equate any tax as incompatible with Libertarianism or Austrian Economics.

  • twenty-niner

    “They SHOULD be forced to pay restitution for the disproportionate amount of limited resources they are allowed to consume, and tax is the easiest, most equitable way for them to do it.”

    OK, let’s talk actual numbers. What marginal rates would you prefer to see for the following income brackets (for simplicity combine state and federal):

    0-25 K
    25-50 K
    50-100 K
    100-200 K
    200-500 K
    500-1000 K
    1000 K+

  • Alex

    15% flat for all income levels with no deductions or credits. Period.

  • Janet

    I think it is more fair for all of us to pay some federal income tax, but no one should pay more than 25 percent.

  • Alex

    “although hedge fund exec Steven Schwarzman compared it to Hitler invading Poland.”

    That was funny. I think it was Bill Maher who noted that with the last name like that, if Obama were Hitler tax rates would be the least of Mr. Schwartzman’s worries.

  • Rob

    @Alex,
    Amen I agree entirely with your approach, but I think the rates need to be set at levels where the government would generate enough revenue to support its required expenditures. I am ok with a rate of 15%, but significant spending cuts would probably be required. I would even allow for a slightly progressive system with no no deductions, exemptions, etc……

    On another note, as someone with a CPA and an MBA that DOES NOT prepare tax returns, it does not surpise me that a tax accountant would choose to return to the 1970s tax system. This was referred to as the “Golden Age for TAx Shelters”

  • Alex

    “Do you really not think that is the main driver? Are the majority of people who create wealth (I’m not talking the mega wealth, I’m talking even 50K a year) doing it corruptly?”

    As Gordon Gecko pointed out he did not create anything. He just moved money from one place to another creating a lot of wealth for himself. His opinion on “hard work” was not very respectful, either. Maybe I misread your meaning of the word “wealth.” I am saying rich people do not necessarily create value.

  • Dave

    ” Maybe I misread your meaning of the word “wealth.” I am saying rich people do not necessarily create value.”

    Again I am sympathetic to the example you give. I was trying to say wealth/value in the producing-something, earning something way. I agree that alot of capital appreciation Gordon Gecko-style is not the same. I have no problem with the stock market per se, if folks want to participate and maybe make some money that way, but again, as this conversation started, its’ when people get super rich by whatever means that we should have no qualms about taxing/redistributing back into the economic system, in sort of a Give someone else a chance now, kind of way.

    But I still think up to some wealth level we would have to define, we can have flat taxes, free markets etc, as long as the ground rules against corruption etc are there, and use that money for limited government, keeping as much $ in individual hands as possible. After the level is reached, I propose progressive taxation on super wealth, to be refunded back to the mere mortals. So you can still get rich, still be free, but you can’t game the system, and you don’t destroy the system by concentrating the wealth in a few hands breeding deserved rage from the populace.

    Just a thought.

  • Dave

    Not sure the above is anywhere near a true Hayek-Chomsky hybrid, but best I can do tonight! Enjoy the discussions here. Thanks On Point.

  • Joseph

    What I find most annoying about Republicans and other favor-the-rich economists and pundits is how disingenuous they are when who pays what in taxes. They are quick to state that the top 10% income level in the U.S. pays a disproportionate share of income tax (it being true that the bottom 33% pay no federal income tax), but do not include the payroll tax in this accounting. The payroll tax of 7.65% (which funds S.S. and Medicare) applies to 100% of wage income but only up to [currently] $106,800 with no tax on income above that level. The payroll tax does not apply at all to income from capital gains, dividends, or interest income. These three sources of income make up a large share of the income for the top 5% of Americans. One example these hedge fund managers who have been making $100s of billions a year in income actually pay only the 15% capital gain tax rate and no payroll tax since all of their income is classified as capital gains.

    The disingenuous part is when the aforementioned Republicans, and others talk about where spending cuts must be made to balance the budget. Here they focus on S.S. and Medicare suddenly treating these programs as just another part of the budget. But when it comes to the regressive payroll tax say that is fair since it is only meant to fund S,S. and Medicare. In the conversation with David Stockman when one woman called to note that the S.S. System has been running a surplus, currently at approximately $3 trillion, he chose not to comment on that. If the money collected for S.S. and Medicare through the payroll tax is just part of the general revenue of the government there is no longer any justification for only applying that tax to wage income nor for a cap on the income subject to the tax.

    Finally on the idea that removing the tax cuts for the top few percent will kill job creation the last 10 years have given lie to that. The extra money these people get from the tax cuts just flows into the ether of the world capital market without necessarily creating employment in the U.S. or increasing wages. Job growth has been anemic and wages in real terms have fallen for all but the top 10% over the 10 years of the Bush tax cuts.

  • TomK

    We’ve heard about the wonders of tax cuts since the voodoo economists took over in 1980. We’ve tried tax cuts (and their partner, deregulation). The results are in. It’s time to stop arguing about theories and look at what actually happened, and…..the results stink for the middle class, but are excellent for the elite. OTOH, the middle class was getting richer every year in the 50s and 60s when top marginal rates were over 90%.

    There is not one good argument that tax cuts are good for the middle class. The rich and the corporations are simply taking more and more, and trying to confuse everyone else with trickle-down smoke. It’s a con! How hard is it to recognize, “give us more, and it will really be better for you”?

    For one examples, state universities that used to be almost free have gone up by thousands of dollars/yr, because states don’t have the tax revenue to fund them. Does anyone believe that the chump change tax cuts the average Joe has gotten equal the increased cost of sending a kid or two to state U? No way! Want a worse one? Imagine seniors paying medical bills out of pocket if Medicare is cut for lack of tax revenue. Fat chance their tax cuts would cover that bill!

    Taxes are extremely low by our historical norms for most of the 20′th century. All taxes are low, federal, state, local. Why is the right still asking for MORE tax cuts? To hear them, you wouldn’t know we’ve been trying their schemes since 1980.

  • phil hannuksela

    How can we even pretend to discuss the budget or to evaluate what measures are successful if we run away from the fact that banks have to lend before any recovery
    can occur? That gets us face-to-face with what we have allowed the banking and
    financial to oblige us all to as we subsidized their risk. TARP is a tiny amount compared to the notional and non exchange-traded “assets” that hold down
    lending while we all talk babytalk about the deficit, which itself is nowhere the magnitude of the asset overhang.

    How,furthermore, can we promote prosperity if we are so passive-minded as to ignore
    the stunning infrastructure that China,South Korea, and many European governments have managed with a supposedly inferior economic system? The list of technological companies that were successfully developed with government seeding, only to have to go abroad because our country has too pure and unimaginative to create needed markets that create jobs and address to preserve our most precious resources is quite long already.

    It’s no use shortening the list of vital questions just to make the some panelist’s
    pronouncements seem impressively concise.

  • John M

    Stop calling is a bubble. The U.S. is *BANKRUPT*!

    Nobody is talking about the quick obvious solution… liquidate and pay off our debts.

    Sell Alaska to Russia, Hawaii to Japan, California to China, Texas to Mexico, Florida to Cuba…

    Take your pick.

  • Patrick Herlihy

    The rich aren’t all bad. The middle-class aren’t all good.

    I was glad to hear Stockman saying what I have felt all along. We have maxed out our credit cards and somehow we think we can live this way ad infinitum.

    Try doing that in your own life. It’s a case of an epic fail. America, either has to suck it up and balance its budget (and lower our currently outrageous standard of living) OR America will collapse, probably taking down many other nations in the process. We aren’t too big to fail, nor too blind to see the bubble is about to burst. We are just putting on rose colored glasses so we don’t have to deal with reality.

    We talk about being independent, especially energy-wise, but we aren’t even financially independent.

    I find it funny that we think we can improve the world outside of our borders when we are dysfunctional and corrupt as a nation ourselves.

    The entertainment arena is so central to our lives because, just as the coliseum for the Roman Empire, America is on the decline. WWII is way past over and we aren’t the center of the world anymore.

    We can turn things around, but only if we face reality. But boy, this nation doesn’t even way to deal with the fact of how ignorant it is acting.

    Our focus on short-term gains will be our undoing.

  • Rob

    These constant references to historical marginal tax rates of 80 percent to 90 percent in the 1930s to 1960s by liberals is laughable and intellectually dishonest. You are being intellectually dishonest in the same manner as the pure supply siders, who claim that reducing tax rates will always increase tax revenue to the point where no government spending reductions are necessary.

    As noted above, these marginal tax rates were implemented for largely political purposes. The income levels subject to these confiscatory rates were intentionally set so high to the point where NOBODY PAID THESE RATES. As an example, the 81 percent marginal income tax rate in 1940 applied to income over $5 million (in 1940 purchasing dollars). Based on historical CPI using Inflation calculator.com, this would be equivalent to income of $62 million per year in 2010 dollars. The income limits were lowered to $400,000 in the 1950s (e.g. equivalent to $3.6 million in 2010 dollars), but exemptions and deductions were expanded to the point where capital gains was excluded in many cases and only a few movie Hollywood studio owners paid these rates in several years.

  • Jonathan

    I’m disapointed that this program skirted the solution, then ran away from it. It was stated that 50% of american households pay no income tax. But what you failed to mention is that more than 2/3 of corporations pay no tax at all.

    If you raise the top tax rate to something closer to post WWII levels it will have the opposite effect than what you proposed. The rich know how to protect their money, and what they cannot hide they will INVEST in our economy (to avoid claiming it as income) which is exactly what we need to spur job growth. This worked to grow our middle class after the great depression along with the accidental Keynsian solution in the form of a major world war. The last great republican president even supported the 91% top tax rate and if we are going to just focus on cutting spending then let’s hear what he had to say about it.

    “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes that you can do these things. Among them are a few Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid.”

    President Dwight D. Eisenhower, l952

  • http://asymptosis Steve Roth

    What Stockman said.

    If taxes had been only 6% higher from ’81 to ’09 — 17.7% of GDP instead of 16.6%, just one penny on the dollar — we would not have added a single nickel to our federal debt over those 38 years.

    Another few fractions, and we’d be debt free by now.

    They really, really effed us.

    I admire him for resigning, but he before that he was The Great Enabler to the so-called Great Communicator.

  • TomK

    Sorry, Rob, but pointing out that almost nobody actually paid the top tax rates in the past fails to disguise the reality that taxes used to be a lot higher, and that the middle class has seen nothing but losses as they have come down.

    The tax cut chorus is driven by nothing but the rich and the corporations wanting, and getting, more for themselves, a fig leaf of far right voodoo economics to cover it up, and a con game to fool the victims, namely, us.

  • Alex

    Rob – the problem is there is no conclusive scientific proof of the direct connection between tax rates and the success or failure of the economy. Certainly, the historical record does not contain such proof. The record is not even persuasive, let alone conclusive. There are theories, to be sure, but it has not been proven yet. Republicans have had their chance to buid the record, but failed. Hence, a large part of the population does not buy it.

  • Ellen Dibble

    Mathematics favors those who make more than the basic cost of living. Those who make more can take advantage of compound interest, investing to reel in some of the accrual that comes, say, from those who are paying for homes through mortgages, or from those starting businesses with loans. Or they can invest less profitably, so to speak, by putting money in tax shelters, charities of various sorts.
    Mathematics has the exact opposite effect on those whose income is less than the cost of their living, those who must try to find their way by borrowing. The same mathematical “laws” of compound interest work directly against them.
    The banks are right dead center in the middle of this mathematical mess, and do they loan at higher rates to people who are well-to-do? No, they loan at higher rates the more they view you as struggling.
    So the banks are not equalizing the scene, the mathematical scene (compound benefits to those earning more than what life here costs; compound drag on those who are earning less at present.
    Taxes should be a way of empowering people to contribute the most, not a way of fiscally disabling the greatest number while feather-bedding those already in clover. IMHO. (Not everybody who is struggling is bent on becoming a subsidized welfare recipient, regardless of what corporations may think.)

  • Dave

    “accidental Keynsian solution in the form of a major world war”

    Bubbles and Wars. Strange how they happen over and over with a very small class of people who benefit from both.

    http://video.google.com/videoplay?docid=5352106773770802849#

    http://video.google.com/videoplay?docid=6507136891691870450&hl=en#

    Can’t vote out the private Federal Reserve.

  • Dave

    “If taxes had been only 6% higher from ‘81 to ‘09 — 17.7% of GDP instead of 16.6%, just one penny on the dollar — we would not have added a single nickel to our federal debt over those 38 years.”

    True on paper, but as with many individuals, make more, spend more. Do we think they would have put the extra penny on the dollar in a piggy bank?

    Maybe we should raise rates and legislate that they never go into the general fund and can be used only for direct debt reduction.

  • Dave

    “Mathematics has the exact opposite effect on those whose income is less than the cost of their living, those who must try to find their way by borrowing. The same mathematical “laws” of compound interest work directly against them.
    The banks are right dead center in the middle of this mathematical mess, and do they loan at higher rates to people who are well-to-do? No, they loan at higher rates the more they view you as struggling.”

    I find it hard to rule out completely the concept of interest on loans. I think there are genuine people who want a loan to do productive, thought out things, and that people who give a loan do need to be compensated for the risk of default. ( Ie 1 in 10 people default, and hopefully your interest on the other 9 covers you.)

    But our banking system, and Fractional Reserve Banking is whole other kettle of fish. When we revisit the history of Banking and Fractional Reserve Banking, and see how it is involved in the corrupt affairs of both big Bankers and the Government, it really does help to see things in a new light. Hence the links I just posted above.

    This one a long watch but very interesting.
    http://video.google.com/videoplay?docid=-515319560256183936#

    These videos don’t all agree on the ultimate solution, but they really open your eyes to our problems.

  • TomK

    I’m outraged by the whole tax cut scam. Because of tax cutting, tuition at State U is skyrocketing, we know that if the GoP ever gets into power they will “reform” (translation: “reform” = screw the middle class) SS and Medicare, our infrastructure is a joke compared to asia, municipalities are eliminating services that we used to take for granted, etc etc. The extra cash that any middle class family got from these policies does not even come close to making up for the extra expenses and poor performance of the economy, with all the wealth either stagnant at the top or being used to play games in the wall st casino.

    Tax cutting is class warfare. If you asked me in 1980 for a plan to steer the wealth of our prosperous middle class to the elite I would have said “cut taxes and deregulate”. We now have the greatest income inequality in the developed world. It is a result of far right tax policy.

  • Ellen Dibble

    Dave, investments at their best are loans for productive entities, those that create opportunity and improved prospects for us all. Investments on Wall Street I see as loans to established corporations, but a loan to an 18-year-old might be a loan for a college education, or to a young dentist to set up a practice, or something more creative. The problem being that the more creative things often have to be self-financed because (a) many fail, (b) it can take decades (or generations) for certain investments to really come to fruition. Fluidity of resources (banking) is not in itself bad. It’s warping our democracy that banking so favors the rich. (We even say the rich are the creators of jobs, right?) A poor immigrant may have a fantastic idea for improving the circumstances of those in his or her purview, but the banks are not competing for the opportunity to launch his plan. Where are his assets, his track record, his friends and relations? No wonder he is not the first to hire a team of helpers.
    So I see interest rates (and investment in general) as tending to bring out the worst in capitalism. And right now the tax situation is in some position to bring out the best in capitalism, but will it?

  • Dave

    I like the idea of micro-finance for helping the small person with their ideas. That has shown some promise if I’m not mistaken.

    If people want to choose to give more resources to a corporation to help them do more of what they are trying to do, and share in the profits or losses if they are wrong, they should be free to do that. If the corporation is doing something illegal, they should be punished. If they are doing something legal that most people agree should be illegal, we should make it illegal.

    What I get concerned about, RE those videos I posted, is how whole populations are manipulated and milked by Fractional Reserve Banking policies and related government spending/inflation, that have nothing to do with creating true value or productivity as we would see it. Can it be argued that the Federal Reserve, with its interest rate setting policies that can drive bubbles and busts that savvy wall streeters use to rake in the general wealth of the population every half generation or so, is not the most powerful force in our system? The Federal Reserve is Private. It is not accountable to democratic forces. Its incredible! When would we as Rule of Law, Constitution bound, freedom loving Americans of any political background ever agree to simply, “Trust” the most powerful institution on earth?

  • Ann Tiplady

    I was riveted to the conversation with David Stockman, and when you asked him what his suggested plan would be I turned the car radio way up. He was making his second point when you cut him off. What would he have said if you’d let him continue? We desperately need to hear what experts like him have to say. Why, oh why, didn’t you let him continue?

  • Dave

    Hayek Interview:
    http://vimeo.com/4063439

  • Dave
  • Dave

    The Mises video speaks to the ideas of Austrian Economics, particularly those concerning currency/debt/credit policies that bring on bubbles and crashes like the one we are suffering now. This is the critical relevance to our debate and exploration of ideas, as the modern, corrupt 2-party/Banking/Finance system and Keynsian orthodoxy never address these things. Thus you hear the non-sense of pundits and politicians; “We couldn’t see this coming”.

    http://vimeo.com/4062081

  • Dave

    Around the 11th minute if you don’t want to watch the whole thing.

  • Dave

    Austrian Economics vs. Bernanke’s Economics

    http://mises.org/daily/2781

  • Will H

    Posted by Bill, on September 30th, 2010 at 7:18 PM

    ————-

    Thank you Bill for share this letter. It explains precisely why American democracy today is on the verge of collapse. Everyone concerned about politics and public policy (ie, every responsible American voter!!) should read it.

  • TomK

    There’s no reason to argue about theories when the results are in. We’ve tried the tax cut approach and out future policies should be based on the results.

    from Yahoo tech ticker;

    “The percent of income garnered by the wealthiest 10% of U.S. households hit 48.2% in 2008, up from 34.6% in 1980, according to a recent report on income equality by the Congressional Joint Economic Committee. “Much of the spike was driven by the share of total income accrued by the richest 1% of households. Between 1980 and 2008, their share rose from 10% to 21%, making the United States as one of the most unequal countries in the world.”

    Perhaps most important is what’s happening in the middle. The inflation-adjusted income of the median U.S. household fell 4.8% between 2000 and 2009, The WSJ reports, citing Census Bureau data. Between 2007 and 2009, median incomes fell 4.2%.”

    Can anyone really not figure out that these disastrous results for the middle class are due to tax cuts at the top? The other big contributor is bogus free trade that rewards offshoring, another pet scheme of the far right. If it helps the corporations and their aristocrats and hurts the middle class, you can be sure the class war generals of the right will be for it. Follow the money!

    Similarly, just before the Bush crash, the financial sector accounted for 40% of GDP! Imagine! That is horrifying! Our economy is dominated by the wall st casino, with computer traders making up ever more complicated scams that provide absolutely no benefit to the USA.

  • Rob

    @TomK,

    Ok. Lets go back to an 80% or 90% statutory marginal rate, but we will once again make sure there are enough deductions, exemptions, loopholes, etc… that NOBODY actually pays this tax rate as was largely case from the mid 1930s through the 1960s referenced earlier. This rate will apply to income in excess of $62 million (e.g. inflation adjusted amount from 1935 law that enacted an 80% marginal rate). However, we will exempt capital gains from this rate. Due to their “societal contributions”, we will also exempt all salaries and wages from professional athletes, musicians, actors, and ____(any other profession where someone might be subject to this rate).

    There is a name for this kind of politics. It is called populism. Yes the government needs tax revenue to function. However,I prefer an intellectually honest approach such as a mildly progressive tax system without deductions and tax shelters SO EVERYONE pays a share of the tax burden.

  • TomK

    Rob, as I pointed out the first time, arguing about the number who actually pay the top rate is just a distraction from the reality that taxes used to be a lot higher, and the middle class used to be a lot better off.

    We’re not having this discussion in a vacuum, y’know. It’s not about economic theories. We have been following the reaganomics approach for 30 years: cut taxes, deregulate, free trade, “government is the problem”, “the free market always finds the best solution” etc etc. It’s not GoP vs Dems either, as Clinton was a huge deregulator.

    We’ve done the experiment and the results have been horrible, so it’s time to stop talking about reaganomics as if we didn’t know what it has already done to the USA. It’s not 1980 anymore. It’s bizarre to me that with taxes very low after 30 years of cutting and bad results, I’m still hearing about tax cuts. How one trick pony can you get? Actually, I think those responsible for these economic policies need to apologize and go away.

    Tax structure needs to follow the money. Reaganomics has produced soaring inequality, as I posted above, and so rates need to be adjusted for a society where a tiny elite has a good chunk of the income. It’s ridiculous that the rate maxes out at a few $100 K. The rate should keep increasing into the stratosphere, so someone making $10 mil pays a higher rate that someone making $1 mil, with no need to impose the top rate at a few $100 K.

  • twenty-niner

    “Can anyone really not figure out that these disastrous results for the middle class are due to tax cuts at the top?”

    Explain how raising taxes on Daniel Akerson is going to increase worker pay at GM? What has really been driving down wages is global labor arbitrage:

    http://en.wikipedia.org/wiki/Global_labor_arbitrage

    Increase the cost of slave labor through tariffs, and prevailing wages will go up. And no, I’m not advocating a return to Smoot-Hawley – keep first-world trade free.

  • twenty-niner

    “Reaganomics has produced soaring inequality, as I posted above, and so rates need to be adjusted for a society where a tiny elite has a good chunk of the income.”

    Income inequality actually accelerated under Clinton, but not because of tax policy, but because of a huge stock market bubble fueled by cheap money from the Fed and the tech boom. The wealthy do better during bubbles because they simply have more money to invest. Further, the wealthy know how to hedge their investments against downturns and tend to cash out before bubbles collapse, leaving retail investors holding the bag. Joe Kennedy famously cashed out all of his stock holdings before the ’29 crash. Moreover, once you attain a certain asset level you can invest directly in start ups (via venture capital), and hedge funds, gaining huge leverage well beyond what the average retail investor has access to.

    Of course cheap money from the Fed turned a stock bubble into a real estate bubble, once again giving wealthy investors another powerful earning opportunity.

    I’ve seen a few post about the Austrian School of economics here, which is strongly critical of cheap central-bank money precisely because it tends to fuel the sorts of highly destructive bubbles we’ve seen in recent years.

  • Dave
  • JP

    Republican lies, double-talk, hypocrisy are outed again… and by a Reagan conservative, no less.

    Good show.

  • Dave

    Of course NYTimes denigrating hayek and Austrian ideas, that threaten the status quo, by lumping them in with the Tea Party and calling them “Dusty old texts”.

    http://www.nytimes.com/2010/10/02/us/politics/02teaparty.html?hp

  • Dave

    Just as Frank Rich of the Times smears Ron Paul….

    http://www.lewrockwell.com/sabrin/sabrin11.1.html

    These are the kind of things that make independent minded people exploring other ideas, sympathize with the overall Tea Party Movement, even when they don’t share the nuttier elements.

  • TomK

    twenty-niner, Clinton practiced reaganomics. He was one of the worst deregulators, as I said above.

    Sure the internet stock bubble contributed to inequality during the Clinton administration, along with low taxes at the top. However, you seem to think that the bubble is unrelated to reaganomics, that perhaps it is a separate issue. NO! All aspects of the economy are related. Low taxes, deregulation, cheap money from alan greenspan’s fed based on his childish belief in “self regulating markets” etc etc are what caused the bubble. reganomics has many, many ways to screw the middle class.

  • Dave

    “cheap money from alan greenspan’s fed based on his childish belief in “self regulating markets” etc etc are what caused the bubble.”

    The unelected Fed, holding interest rates incredibly low to pump up a bubble of MALINESTMENT, in NOT a free-market principle. This is the difference between Libertarian/Austrian economics and the Dem/Republican- Printing Press/Keynsian/Government Spending “Washington Party” status quo.

    The Federal Reserve with its unaccountable powers, IS Centralized Planning in our economy. Free money (Fed policy) encourages MAL-investment, investing in things that free choosing individuals otherwise would not choose in their economic decisions. Inevitably, the malinvested sectors fail, and everyone suffers, except of course the well-connected leeches that a fully aware of the 2 Party-Fed Banker playbook.

    People who like to think of themselves as Democrats, or anti-Republicans, should stop confusing Republican Keynsians, with Libertarian Austrian types. There is a big difference! There is an alternative!

  • TomK

    Yes, the Fed is a problem in itself, but the rest of reaganomics makes the problem much worse. Cheap money plus “tax cuts ‘n deregulation” is a lethal combination.

  • Dave

    Sound Money, not a fiat currency. A fair, transparent regulatory environment that doesn’t discriminate against any individuals, and that is constant and predictable. And maximum opportunities for individuals to exercise economic decision making, not the central state authority. Oh, and did I mention anti-imperialism?

    We should try it for once.

    When people shoot back that we have already tried it, and equate limited government Austrian-influenced economic models with Reagan-Clinton-Greenspanomics, they are being intellectually lazy, dishonest, and holding off real change.

    Just because traditional Republicans throw around libertarian names and sound-bytes, just as Dems do to the left, is a Red Herring.

    Throwing out the baby with the bath-water is just a tragic as the cliche sounds.

  • TomK

    We tried high taxes and strong regulation following WW2 and it produced a middle class that was the wonder of the world. Single-worker households were sending kids to college, and with no reaganomic “student loan debt”, either.

    We should try it, once again.

  • Dave

    “But we all knew this until the followers of Aynd Rand and some crazy economists of the so-called Austrian School decided to destroy all economic and social institutions.
    Now, they have a television platform -Fox News-, millions and millions of dollars, a political party -the Tea Party- and have been finally able to infiltrate the GOP.”

    That’s a good one!
    The reason the corrupt Democratic/Repuplican establishment has run this country into the ground, is precisely the mix of an unelected Federal Reserve supporting Keynsian-based debt bubbles, that are exploited by the well connected on Wall Street/Washington crowd; A situation that is precisely NOT a following of an Austrian Economic Model that abhores currency manipulation and centralized corruption of the market.
    Its really a very easy situation to understand, if you try.
    Just because Republicans throw around a few Libertarian buzzwords now and then to pick up some voters shouldn’t fool you into thinking we have had ANYTHING like a truly free, uncorrupted economy reflecting unbiased decisions of all the individual citizens. The Democrat/Republican/Fed Banker model only serves to produce centrally planned, MALINVESTMENT bubbles, that take all the rest of us (except the corrupted/connected) down through loss of jobs, property and through the undemocratic inflation tax.
    Libertarians/Austrians want NO favoring of anyone in the market. Your precious Democrats and Republicans have been building a massive government framework that rigs the system for their special interest string-pullers. That you should now be bamboozled into blaming an economic model (Austrian type) which has never been in plays, just demonstrates that along with Washington, the minds of the populace have been thoroughly corrupted.
    Just read The Road to Serfdom already, hold your nose already and read it to understand there are other ways of thinking than our corrupt 2-party status quo! Just try and keep your mind a tiny bit open, and see the bigger picture of what is happening around here.

  • Dave

    Murry Rothbard, Libertarian/Austrian, making a case against banks.

    http://www.lewrockwell.com/rothbard/rothbard66.html

    Similarly, making a case against Milton Friedman

    “The chaos and the unbridled economic warfare of the 1930s points up an important lesson: the grievous political flaw (apart from the economic problems) in the Milton Friedman-Chicago School monetary scheme for freely-fluctuating fiat currencies. For what the Friedmanites would do — in the name of the free market — is to cut all ties to gold completely, leave the absolute control of each national currency in the hands of its central government issuing fiat paper as legal tender — and then advise each government to allow its currency to fluctuate freely with respect to all other fiat currencies, as well as to refrain from inflating its currency too outrageously. The grave political flaw is to hand total control of the money supply to the Nation-State, and then to hope and expect that the State will refrain from using that power. And since power always tends to be used, including the power to counterfeit legally, the naivete, as well as the statist nature, of this type of program should be starkly evident.”

    http://mises.org/daily/4728

    Can we agree we should stop lumping in Libertarians and Austrian-style proponents with the Repulican, Neoconservative Party? And once we do that, put the ideas out there to be debated against the current Republican/Democrat status quo?

  • Dave

    “5 Key Principles that Unite Populist Progressives and Tea-Party Libertarians”

    http://www.activistpost.com/2010/10/5-key-principles-that-unite-populist.html#more

    I think this would be a great topic for a show.

  • Slipstream

    Bless David Stockman. It is great to hear an honest man from time to time. We really need more people like him.

  • P90321p

    In the last half century, Congress has made its job that much more difficult by encouraging the taxless would be taxpayer, and burdening the taxing taxpayer setting up a system of unfairness bound to fail by hitting the wall where no more taxes are advisable but more taxes are needed for sustainability.

    First, Congress should never be permitted to view income tax and property tax in the same breath because they are not fungible taxes though it may appear to Congress as if “all taxes are equal” under the law. Pay them or else!

    This tax dumping philosophy into the same pot is exactly the same problem that got social security and medicare into hot water because Congress failed to consider the purpose of raising those taxes, and decided it was ok to use them for anything.

    This is a peculiar flaw of Congress and all government where looking for money in all the wrong places is a frequent mishap, and inevitably ends up badly.

    Infrastructure taxes that derive from property taxes are not expected to be used for welfare, employment pensions, or faith based initiatives, or even for the military. Like any business where expenses must be matched and managed for the purpose intended rather than commingled with other purposes, Congress writes good laws, then breaks them.

    Income tax and property tax are two different entities, a.k.a., different species even though they are paid with the same currently, using the same number system to calculate them. They are philosophically distinct for the taxpayer and for most think tanks. They are meant to be treated differently because they are different, based upon local property values rather than income earnings. Nonprofits, institutions and churches & religious organizations may be income tax favored by being tax exempt, but not property tax exempt because they share the benefits of the property tax purpose, the creation and maintenance of infrastructure that all rely upon.

    If landlords are willing to give them taxfree rent, it is the landlords who should be receiving the credit, not the tax exempt entity who receives the expense for income tax purposes because otherwise the credit is lost because tax exempts pay no income tax.

    Under the theory of for every action, a reaction occurs, once created, the item must be allocated somewhere or there is siphoning.

    Income tax exempts who rent property are in the same business as developers and property managers who rent property, and have income regardless of the fact that they may, themselves, be income tax exempt. It is the activity, not the source of income that makes the difference. The same may be said to be of sales taxes, to a point. If tax exempts purchase for others who are not tax exempt (in essence, selling their exemption), tax embezzlement occurs, in a technical sense. Whether tax exempt need sales tax exempt is a matter altogether similar with that of property tax considerations, and the purpose of the sales tax (beyond the need for tax, or the method of obtaining it).

    Driven by the desire to tax fairly, not arbitrarily, government needs the clarity of why they tax, for what purpose they tax, and the appropriate vehicle for taxing – not simply to secure taxation any way they can, the worst possible approach to taxation at all because it becomes the overreaching of unlimited taxation, especially upon some while favoring others.

    If others are favored, it might be considered to be those most in need; poverty stricken, disabled, and seniors, not churches, and institutions. That they thrive while others fail is mostly impudent of the entire concept of necessary taxation.

  • fredlinskip

    Reagan believed that you could have tax cuts for wealthy, increase peacetime military spending at a greater rate than any time in history, and that the result would be a balanced budget and a decrease in unemployment. Magic! Shazaam!! His advisors said he was dreaming. And amazingly enough after 30 years of experiment there are still those that believe that line? Incredible.
    The opposite occurred- deficit rose to higher level than ever before, a recession occurred, unemployment rising to over 10%.
    It was only AFTER Raygun administration allowed largest tax increase in American history several years later that economy and unemployment began to turn around.
    But he did it all with a smile and charisma and that counts for something.
    That’s history folks and it’s undeniable, although those who have benefited from misguided “supply side” economics (and there are many) will attempt to argue otherwise.
    These are probably the same folks that believe Obama was born in Timbuktu. Facts don’t matter.

  • Fredlinskip

    There are those that seem to believe the dotcom “bubble” under Clinton was of somewhat equal magnitude to the mortgage /credit bubble under W. That’s absolutely ridiculous, in my humble opinion. But let’s say they were equal. Clinton helped leverage his economy in such a way as to eliminate the deficit and left the country on sound footing. “Deficits don’t matter” W did the opposite.
    Let’s see- average income for wealthy for last 30 years skyrocketed, while majority of folks wealth effectively stagnated. Wealthy corps and individuals now have unprecedented reserves. Yet if we just give them some more tax breaks, somehow this is going to improve situation?
    I believe people that believe this must be getting some good deals on some good prescription drugs.

  • Anonymous

    David Stockman you are my hero. Way to give us some strait talk about the budget.

    Politicians write checks to the public that the government and the country can’t cash because they’re afraid to be voted out of office if they dont tell us what we want to hear. They’re right to be afraid, because they will. The American electorate is fundamentally irresponsible. It will never voluntarily give up all this largesse. It will have to be forcefully taken from them by an end to cheap and easy credit. Then, when the crisis comes and our AAA rating is a thing of the past, the electorate will start to take the problem seriously. Ofcourse all the politicians who got us here will have retired by then, but they aren’t really the problem. We the people are the problem.

  • Anonymous

    This is an interesting article. Turns out that teachers pensions, at least in California, are the lowest of all public employees. We need to ask ourselves what kind of nation we want here. Do we value education and are we willing to pay people a decant salary to do one of the hardest jobs out there.

    http://www.nytimes.com/2011/05/06/business/06pension.html?hp

ONPOINT
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Apr 24, 2014
Senate President Pro Tem Darrell Steinberg, D-Sacramento, left, talks with Sen. Ed Hernandez, D-Covina at the Capitol in Sacramento, Calif., Monday, April 21, 2014. Hernandez proposed a constitutional amendment that would ask voters to again allow public colleges to use race and ethnicity when considering college applicants. The proposal stalled this year after backlash from Asian Americans. (AP)

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