It's The Tax Policy, Stupid

If you care about deficits, you have raise taxes, particularly on the well off. Paul Krugman writes:

The current Obama budget calls for defense spending of 3.4% of GDP by 2016; you can make the case that the number should be closer to 2%. But thatís not enough to avoid hard choices about health care and revenue. If you canít see how itís possible both to believe that we waste a lot of money on the military, and to believe that ending that waste would make only a modest contribution to our fiscal problem, I canít help you.

While I generally agree with Krugman's point, by the same token, a hundred billion here and a hundred billion there and all of sudden you are talking about real money. But the point stands, the biggest impediment to addressing the deficit remains our tax policy. When Democrats give up on tax policy, as President Obama did when he made The Deal, what's left is Grover Norquist's dream, drowning government in a bathtub.

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    Considering that they have shipped (5.00 / 1) (#2)
    by Militarytracy on Sun Feb 20, 2011 at 10:10:56 AM EST
    all of our manufacturing overseas, and everyone is supposed to now make a living off the stock market that magically is no longer based upon economic fundamentals and nominal wealth, as soon as we lose our AAA rating due to this deficit with no taxation on the filthy rich they will have drowned all of us in a bathtub.  I suppose the rich will float their way out of it, but the rest of us will not.

    And Obama did it! (5.00 / 0) (#3)
    by Militarytracy on Sun Feb 20, 2011 at 10:12:29 AM EST
    He will have played a very distinct role in the nation losing our AAA rating and getting us there by agreeing to "the deal".

    He'll be a billionaire by (5.00 / 1) (#5)
    by observed on Sun Feb 20, 2011 at 10:14:25 AM EST
    2020, if WJC's example means anything.

    The filthy rich are nationless (5.00 / 1) (#12)
    by pluege2 on Sun Feb 20, 2011 at 11:36:15 AM EST
    their riches are derived from exploiting people world-wide. They could care less what happens to the US, and are in fact are hell bent on driving the living standards of the American worker down to that of 3rd world poverty levels. (Its interesting that they don't seem to realize that by gutting the purchasing power of the average American, they undermine a key source of their riches.)

    Maybe they're figuring (5.00 / 1) (#19)
    by Zorba on Sun Feb 20, 2011 at 12:43:39 PM EST
    on selling all their stuff to the Chinese and the Indians (who might not pay as much, but there are a whole lot of them).  And maybe they were figuring that all the wealthy sheiks in the Middle East will buy their more expensive products, but given current conditions over there, they may want to rethink that plan.  All snarkiness aside, I agree with you.  A poor American is not a very big consumer.  For all his faults (and there were many), Henry Ford angered the other manufacturers because he paid his workers more than the "prevailing wage."  He said it was because he wanted his workers to be able to afford to buy his cars.

    80 plus nations in revolt (5.00 / 0) (#23)
    by Militarytracy on Sun Feb 20, 2011 at 01:48:58 PM EST
    and experiencing social unrest and we haven't even come near to the end of the quantitative easing yet.  Wall Street and high finance likes to brag that they have gone global now and that is how they have decoupled from the American economy and I'm just gonna laugh my ass off at that. The rich really are about to be nationless.  Every nation will want their greedy robber baron head on a pike.  Hope someplace safe survives that they can all go hide in, but just like my husband says when all the Apaches all fly huddled in a group.....you make a beautiful huge target and one shot is bound to hit something!

    I hope so, Tracy (5.00 / 1) (#27)
    by Zorba on Sun Feb 20, 2011 at 03:17:09 PM EST
    But I have a sinking feeling that the US is going to be one of the last bastions of the robber barons.  It will take a whole he!! of a lot to make most Americans wake up from their Fox News/radio talk show induced dreams and see how the wool has been pulled over their eyes.  (Maybe, just maybe, the protesters in Wisconsin can open a whole lot of eyes in this country.)

    Have you ever considered (5.00 / 4) (#4)
    by observed on Sun Feb 20, 2011 at 10:13:04 AM EST
    that maybe it's just the stupid, no matter the issue?

    I don't know (none / 0) (#10)
    by Warren Terrer on Sun Feb 20, 2011 at 11:24:21 AM EST
    how to explain it. No Republican president has balanced the budget since Eisenhower, and that was during the gold standard era. Why are Democrats always ready to quake in terror at the idea of being labeled 'fiscally irresponsible'? Republicans never gave a rat's a$$ about the deficit during the Bush years and even voted for a completely open-ended medicare drug benefit, but Democrats never mention this.

    The only explanation I can believe is that Republicans simply do not care about the deficit except as a cudgel with which to beat a Democratic president, and Democrats don't know any better than to think deficit matters. Except that they don't think it matters or they wouldn't give massive tax breaks to the richest of the rich. So I really don't know what drives Democrats on this issue.


    Well, that cudgel wielded by (none / 0) (#15)
    by KeysDan on Sun Feb 20, 2011 at 12:01:46 PM EST
    the Republicans has worked for charges that Democrats are weak on national defense.  Democrats appoint a Republican as Secretary of Defense, may be opposed to "dumb" wars (e.g. Iraq), but make up for it with smart wars (e.g. Afghanistan), and carry-on and enhance, once deplored Bush-era 'anti-terror" measures.

    considered, and concluded (none / 0) (#20)
    by ruffian on Sun Feb 20, 2011 at 12:46:16 PM EST
    I don't think that the blinders-on (5.00 / 0) (#7)
    by Anne on Sun Feb 20, 2011 at 11:07:20 AM EST
    focus on the deficit is the answer to what's ailing the economy, but that's exactly what's going on right now, with members of Congress on both sides of the aisle, and the president, shouting so loud about deficits that it's drowning out any possibility of attacking the economy from any other direction.  And the media, is, of course, just lapping it up, fairly wetting their pants over the prospects of a government shutdown.

    It just seems to me that putting all of the eggs in the reduce-the-deficit basket and beating the drum that doing so is the magic economic potion we've been waiting for is really, really bad strategy - especially when there are some relatively painless ways to act that will get the economy moving.

    Sad to say, I don't think there are any brakes on this runaway train, and no one seems to be able to see the concrete wall that is at the end of the ride.

    Yes, and the media is particularly (5.00 / 0) (#9)
    by KeysDan on Sun Feb 20, 2011 at 11:23:46 AM EST
    lapping up the "given" that Medicare and Medicaid must be cut. Little or no mention is given to how that might occur and absolutely no comment given to the fact that the health insurance act has already impacted Medicare, squeezing out, in still undefined ways (excluding those already underway prior to enactment and, of course, fraud--cf. Florida Governor Scott for more details), about $500 billion over ten years, which is about one-half the total cost of the entire Act.

    How can you hand giant tax breaks to the (none / 0) (#30)
    by Militarytracy on Sun Feb 20, 2011 at 05:24:20 PM EST
    rich AGAIN only weeks ago and now run around screaming that we all must sacrifice or we are doomed.  How weren't we doomed via the deficit last month?  And we deserve this raping because we went to the wrong bar wearing the wrong dress.

    Pay No Attention To The (5.00 / 2) (#32)
    by Anne on Sun Feb 20, 2011 at 05:46:21 PM EST
    Giveaways to the Rich!  Uh, no, don't look over there - look here - at the BIG GIANT VAT OF RED INK!  Be afraid of THAT!  Scary, very scary!

    BOO!!!  [Is it working yet?]

    What?  [Damn it - it's not working!]  What do you mean, "what about the poor?"  Good Lord, do you not understand that people are sick to death of supporting their sorry asses?  I mean, this is America, where you can be anything you want to be, so, it's time we realized that these people WANT TO BE POOR!!!  Well, fine - we're just D-O-N-E done using precious tax dollars that the rest of us earned by WORKING to improve the living conditions of people who don't want a better life.

    Social Security?  Come on, now.  We got this brand-new health care thing coming, so all this health care people are gonna have, shoot, there's just no reason why people can't work until it's time to take the old dirt nap.  Die right in the saddle - or cubicle.  What do you mean, what if they can't?  Isn't that why people have kids?  So, they can pick up the slack?  Look, if you can't work, that's your problem, not mine.  Also, see "poor people who like being poor" above.

    And, listen, missy - stop all that talk about ending the wars - that's just crazy talk.  Crazy.  We've got defense contractors that have to be paid, you know?  You want to collapse the military-industrial complex?  Bad move.  Thank god people stopped talking about pulling aid out of Egypt - a HUGE chunk of that money comes right back here to buy good old made-in-America weapons and equipment.


    Crazy talk.  

    Forget the rich - they are OFF THE TABLE.  Got that?  OFF THE TABLE.  No, they aren't ever going under the bus with the poor people and the old people, so just get over it, would you?


    Is This the Same Krugman (5.00 / 1) (#16)
    by The Maven on Sun Feb 20, 2011 at 12:22:10 PM EST
    who -- somewhat bizarrely for him -- basically showed a selective blindness with regard to tax policy in his last regular column on Friday?  There, he said that Obama "has done more to rein in long-run deficits than any previous president," rather conveniently writing the Clinton 1993 tax increases out of history.  Yes, he also made clear a few sentences later that in order to be serious about closing the deficit, one needs to consider increasing taxes, but it would be even better if Krugman pointed to the results of the most recent example of this policy.

    I'm not disagreeing with Krugman's argument here, only noting that he's being a less effective advocate by leaving some of the strongest evidence in his briefcase.

    Yep (5.00 / 1) (#18)
    by Big Tent Democrat on Sun Feb 20, 2011 at 12:36:04 PM EST
    Therein lies my constant upset with the ignoring of the importance of tax policy.

    Nobody (none / 0) (#1)
    by Warren Terrer on Sun Feb 20, 2011 at 09:42:12 AM EST
    cares about deficits.

    The "Deal" demonstrated (none / 0) (#6)
    by KeysDan on Sun Feb 20, 2011 at 11:01:02 AM EST
    a deficit of responsibility and a surplus of hypocrisy. And, the Deal seems to be a gift that keeps on giving with little mention any more that it  was to be a temporary extension of the Bush tax cuts through 2012 or  preparatory reminders by the president of how restoration  of the tax code to that of the Clinton years at the end of the two-year period would go a long way toward addressing the federal and state budget problems.  

    Even the estate tax bonanza goes through Dec 31, 2012 but is on the way to becoming entrenched with any discussion of changes to be labeled as a tax increase rather than, with a big stretch,  a temporary step at a time of  economic troubles.  

    Wow (none / 0) (#8)
    by Warren Terrer on Sun Feb 20, 2011 at 11:17:56 AM EST
    You're back and dailykos? Was there some sort of DK4 amnesty?

    "at" not 'and' (none / 0) (#14)
    by Warren Terrer on Sun Feb 20, 2011 at 11:44:32 AM EST
    One of these days I will take up the art of proof reading. Until then ...

    Krugman is flatout WRONG on this one (none / 0) (#11)
    by pluege2 on Sun Feb 20, 2011 at 11:28:26 AM EST
    Here's what I wrote the good Doctor (which he hasn't posted yet - maybe never):

    I'm sorry Dr. Krugman, if you can't see that a $300 billion cut in ANNUAL defense spending [reallocated to other needs] would have given you in just 2 years the $600 billion you said was missing from the too-small obama stimulus to cover the output gap, and that year on-end, $300 billion NOT-SPENT on the massively wasteful and destructive US military would in a very short time give us all the infrastructure improvements, high speed rail, improved education, research, universal single payer healthcare, shored-up social security, etc. that we could ever need or dream of, and GROW us out of the current economic sink-hole, then I'm afraid I can't help you.

    Growing out of the current economic malaise by putting people to work would both raise government revenue and reduce its costs. So its not clear if taxes need to be raised on not. It is likely that some increase of taxes on the wealthy is warranted to pay down debt, which should be done anyway just on the basis of human decency.

    Krugman is correct that rising healthcare costs need to be stopped and put on a sane growth track. But the only way to do that is to cut out for-profit insurance companies and Doctor financial connections to procedures, i.e., government run, universal single-payer healthcare, a.k.a. medicare for all.

    But (none / 0) (#13)
    by Warren Terrer on Sun Feb 20, 2011 at 11:41:07 AM EST
    if you move spending from one item to another, i.e. from defence to something else, the net spending increase is zero and no stimulus is achieved.

    I'm all for a $300 billion cut in defence spending, but that would create a $900 billion spending gap under Krugman's reckoning.


    While it's true that shifting (none / 0) (#17)
    by Radix on Sun Feb 20, 2011 at 12:22:22 PM EST
    money from one to another, as it were, doesn't increase total output, not all spending is created equal. While spending 300B on the military may give us a spiffy military and defense jobs that go with it; shifting such spending to upgrading our electrical grid would provided jobs building said grid, along with, the added societal benefit of having a more efficient grid.

    Yes (none / 0) (#22)
    by Warren Terrer on Sun Feb 20, 2011 at 12:54:31 PM EST
    but that doesn't respond to the complaint about Krugman.

    As I Said (none / 0) (#24)
    by pluege2 on Sun Feb 20, 2011 at 02:49:19 PM EST
    if $300 billion is reallocated from wasteful military spending to put people to work, more people working decreases government spending on unemployment and increases government revenue.

    All dollars do not have the same affect (none / 0) (#26)
    by pluege2 on Sun Feb 20, 2011 at 02:51:47 PM EST
    It is completely different from a jobs creation perspective spending $800 on one hammer for the military, than producing 400 $20 hammers for consumers.

    It is completely different wasting billions in foreign lands painting schools then spending the same money on construction jobs in the US.

    You can put at least 2 teachers to work for every cold war era weapons specialist.

    The money spent on the US military hasn't nearly the benefit to the economy that money spent in non-military activity.


    Can It Be Possible That You're Both Right? (none / 0) (#25)
    by john horse on Sun Feb 20, 2011 at 02:51:36 PM EST
    Paul Krugman is right that we need to reduce spending on the military. If you want to save money you need to go to where the waste is and there is plenty of wasteful spending in the military.  If you want to see specific examples, go to Tom Engelhardt's blog and read Andrew Bacevich, Tom Engelhardt, Nick Turse, and the late Chalmers Johnson.  

    BTD is also right.  The rich need to pay more in taxes.  He didn't say anything about corporations, but, in my opinion, we need to tax them more too.

    Where I disagree with BTD is that he looks at tax policy in terms of the deficit.  While the deficit is important, at this time, what is more important is jobs and increasing economic demand.  But why quibble about these differences since our solutions are the same. Taxing the rich will reduce inequality by ending and reversing the transfer of wealth from the middle class to the rich and the large corporations.    

    I think he is framing it in terms of (none / 0) (#29)
    by ruffian on Sun Feb 20, 2011 at 04:50:32 PM EST
    the deficit because others have made the deficit the main topic of debate, in some cases ignoring the possibility (fact, IMO) that we don't have a serious spending problem, we have a revenue problem.

    Of course there is waste in defense and elsewhere, but getting rid of waste does not solve the  problem.


    democracy and capitalism (none / 0) (#28)
    by bocajeff on Sun Feb 20, 2011 at 04:05:08 PM EST
    Did the city of Sacramento end up making money on the Kings and the arena or did they lose money?