Semi-Daily Journal

http://www.wws.princeton.edu/~pkrugman/ssm.html

SOCIAL SECURITY AND MEDICARE, ONCE AGAIN (8/9/03)
Payl Krugman

Just one bit more. I said : "[T]he revenue that will be sacrificed because of those tax cuts is not a minor concern. On the contrary, that revenue would have been more than enough to "top up" Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

Here's what Bill Gale said : "These prospective revenue losses [from the Bush tax cuts] are huge. They are more than three times as large as the 75-year actuarial deficit in social security, expressed as a share of GDP. They exceed the 75-year actuarial deficit in the Social Security and Medicare Trust Funds... These facts imply that the aggressive tax-cutting agenda that the Administration has pursued the last few years deserves equal billing with Social Security and Medicare as "the real fiscal danger." "

We are saying the same thing. The only issue one could raise is Medicare Part B. But that has always been funded out of general revenue, and is not counted against the trust fund. When people talk about the financial crisis facing "Medicare", they are talking about the trust fund, i.e., Medicare part A.

Now it's true that part B represents a drain on the general budget, as does Medicaid. So? Neither Gale nor I was suggesting that everything would be hunky-dory if we didn't have the Bush tax cuts. Our point was and is that the tax cuts are big bucks, comparable to other stuff that tax-cut advocates insist is much more important.

Oh, and are people still using the line that Social Security surpluses don't count, but SS deficits do? I thought I dealt with that 2 years ago.

Bottom line: anyone who accused me of dishonesty on this subject owes me an abject apology. Hey, we can always fantasize.

'Fiscal Trainwreck' is a very poor metaphor. Something better is needed.

"The problem is not this year's deficit or next year's deficit--big deficits in a time of near-recession and falling employment are a good idea."

Many people reading this may think that you believe "big deficits in a time of near-recession and falling employment are a good idea."

I suspect that what you believe is more complex and whether a deficit is good or bad would depend upon why there is a deficit and where the money leading to deficit is being spent?

To use the analogy of a household budget, if I lose my job and spend money I do not have, then it is deficit spending. If that money is spent on training to get another job it could be beneficial deficit spending. However, if I spend that money on booze and drugs then that would not be beneficial deficit spending.

Tax cuts don't cause deficits?

TAX CUTS DON'T CAUSE DEFICITS?

/head explodes

There is an "interesting" article on Stephen Moore and supply-side economics nuttiness in the NYTimes Magazine.

http://www.nytimes.com/2003/08/10/magazine/10CLUB.html

The problem for radical right Republicans is that tax cuts have been too timid and not enough damage has been done to social benefit programs from Social Security to Medicaid to public schooling. Slash taxes for the wealthy, since the wealthy are in the best position to pay taxes, starve public benefit programs or privatize, and wait for the economic boom. Them cats is nutty, but are they ever an influence in this Congress and Administration.

New to this web site and its comments-forum --- my first post only about a week old --- I would like to say two things: first, DeLong's posts and his own commentary are unusually stimulating, reinforced by his uncommon background in economic history. Second, the comments-forum is also unusually good too . . . but, well the width of this comment page is way too narrow, so that the NY Times article linked to above doesn't show up well; and it's hard at first to tell when a comment is actually recorded, what with the way the address-bar at the bottom works.

Two queries prompt themselves:

1) Is there any way DeLong or someone else can widen the page here, in the way the comments-page opens full-tilt at Arnold Kling's site http://econlog.econlib.org/ or, for that matter, starts full-tilt at my site, http://www.thebuggyprofessor.org (It uses a Greymatter web-program: see http://noahgrey.com/greysoft/ ) ?

2. Is there any way to speed up the pace at which a comment is published on the web-site?

Agreed: secondary matters, compared to the uniformly high quality of DeLong's site and the comments; but not necessarily insignificant if you use the comments even a little as I've started doing.

--- Michael Gordon

Wow, so much about taxes and so little talk about spending. According to the numbers here (http://www.whitehouse.gov/omb/budget/fy2004/tables.html), social security, medicare, and medicaid were responsible for 41% of federal outlays in 2002. Two-fifths of government spending is redistributive! Doesn't anyone else think these programs have *already* gotten out of hand and that we have a problem *today*, not just decades in the future?

JD, you're absolutely right that not enough damage has been done to social benefit programs.

Kyle's post was what we on the left have been waiting for. First the body blows with the tax cuts for the wealthy to let down the guard, then the sucker punch to the social programs that have been an essential part of american life for 50 years.

First of all, if the Bush admin (or anyone in conservative America for that matter) had one iota of honesty, they would have tried to balance the budget with tax cuts AND budget cuts, which of course would have to be across the board. Noone ever did that, no they wanted us to go bankrupt first and then be forced to cut programs (except defense of course, the other major expenditure, and a rising one...)

Secondly, Medicaid and Medicare certainly could use a lot of reform, a lot of it would be at the level of federal regulations on insurance companies and the better rationing of healthcare in this country, two things which the conservatives have been dead set against. It's amazing how conservatives can claim to be for family and morality yet be so dishonest and hypocritical when it suits their ideological agenda.

Interesting comment. Now that we have lowered taxes significantly and taken away the progression and insured a gaping budget deficit no matter the strength of the economy, now we must slice social benefit programs.

Not to worry though, we are not going to slice defense spending. Just social benefit programs. Social Security just brings to mind all the old folks who having worked 40 years and even cared for a few of us youngsters are now busily sopping up what should rightfully be ours. Slice slice slice. Medicare? Please, shut up Mom and put on some chicken soup. Chicken soup, who needs medicine. Medicaid? Even worse. Who cares if it's not your kids haing to go without medical insurance because your employer offers no coverage and you can't afford your own coverage? Slice slice slice.

What are we thinking?

JD, the same figures put defense spending at only 17% of outlays. Ever heard of Amhdal's law?

non economist, don't ever accuse me of being a conservative. I'm a radical. I think we should phase out social security, medicare, and medicaid and replace them with nothing. How's that for honesty?

Sounds like a good way to cut taxes and spending at the same time.

Those programs were enacted for a reason, Kyle. Assuming that you get your way and that the federal government drops all of those programs completely, what do you have in mind to replace them? What would fill the need that got those programs passed in the first place?

michael gordon wrote:

"Is there any way DeLong or someone else can widen the page here..."

I'd suggest one of two things:
(1) Instead of clicking on the "Comments" link, click on the "Permanent Link" link, or
(2) Depending on your browser, you can possibly open a linked page in a new window. On many browsers, you can do this by right-clicking on the link, and picking a "new window" option from the menu.

"2. Is there any way to speed up the pace at which a comment is published on the web-site?"

Sigh...

Kyle Markley wrote, "Two-fifths of government spending is redistributive!"

That's highly simplistic. Given that SS and the (currently) larger part of Medicare are funded by highly regressive payroll taxes, those programs are far less redistributive (between classes, if not generations) than they appear.

You also fail to take into account that government, in abstract, redistributes a nontrivial chunk of GDP towards landowners, especially wealthy ones, in the form of land rents. Some people put this as much as 30% of GDP per year; 5% is probably a conservative figure. So the notion that government simply redistributes wealth in a downwards direction is naive.

Kyle proposes to replace all social programs with the Ayn Rand institute of social justice. If you have enough money, you can just buy what you need. If you don't, you're screwed. Welcome back to the Dark Ages. Feudalism, anyone?

http://www.techcentralstation.com/1051/techwrapper.jsp?PID=1051-250&CID=1051-061903C

When another country -- say, Argentina -- builds up a large foreign debt, that debt is denominated in dollars. Therefore, when the crunch comes and Argentina's peso declines in value, the cost of the debt increases. Argentina's borrowers, who can no longer afford to pay in dollars when their earnings come in pesos, are screwed.

On the other hand, when the United States suffers a currency decline, it does not affect the domestic value of our debt. We can still afford to pay in dollars. Foreign lenders, who find that they have lost purchasing power when they convert our payments to local currency, are screwed.

The beauty of having dollar-denominated debts in a world of currency fluctuations is that the United States is fairly insulated. If the foreign currency crashes, foreign borrowers take the hit. If the dollar crashes, foreign lenders take the hit. Foreigners are screwed either way.

http://dominionpaper.ca/features/2003/the_conceited_empire.html

As a historian, the dollar represents a "mentality indicator" to me. It reflects the awareness of international trade and business leaders of the realities of the American economy. The weakness of the dollar is indicative of their assessment that the situation is much worse than is openly acknowledged. The fact is that troops destined for the war in Iraq, which has been represented as a simple mission, are still not totally prepared. After a year of back and forth, the diplomatic heavyweights of France and Germany are trying to prevent this war, and the balance of the allies are participating mostly verbally, not financially. There is an immense risk in engaging in a war on the opposite side of the globe while fettered by a $500 billion trade deficit, a weak dollar and supported only by friends who are unwilling to share the costs.

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=3235

First, the markets are concerned that the Bush Administration's fiscal policy could boost the federal budget deficit to $400-500 billion — and create a domestic savings imbalance that will expand the current account deficit to $600 billion. Second, the markets are alarmed that the United States is embarking upon an imperialist foreign policy that will have unknown consequences for its fiscal position, foreign trade and relationships with other countries. In the heyday of empire, the United Kingdom ran large current account surpluses. There is no precedent for a country playing the role of global superpower with a large external payments deficit. With the United States pursuing a more unilateralist foreign policy, it will have to absorb all of the costs without help from traditional allies.

Well except for anyone who has any dollar denominated assets. So all bond holders are affected, not just foreign ones. There is a reason why its called the inflation tax...

Stephen, those payroll taxes take money out of my wallet and put it into someone else's. That's redistribution, plain and simple. It doesn't matter at all what "class" it's being sent to.

Could you be more specific concerning how government redistributes 5-30% of GDP to landowners? I'm a landowner and last time I checked they tax me for it. So naturally I'm a little surprised by your statement and I'd like to know how I can get my share of the loot - thanks!

Brilliant, Kyle! By your reasoning, the richest and poorest American should pay exactly the same total amount in taxes -- after all, they get exactly the same amount of benefits from all the government activities carried out in a libertarian paradise (the military, law enforcement, road-building, etc.) And surely they can pay their taxes just as easily...

To anyone outside padded-cell country, of course, it DOES matter who the money is being redistributed to. Almost every human being has the elementary intelligence to realize that we taax the rich more than the poor because they can make money more easily and so pay their taxes more easily -- the only question is the extent to which we should carry this out, and the extent to which we should provide actual income supplementation to those people who have an especially hard time making a living. Of course, there are a few flat-out sociopaths out there who haven't figured this out yet. Some of them are even landowners.

Krugman's latest message may be a direct response to my latest two E-mails to him. Jim Glass' heart will be warmed that I am indeed grilling PK very seriously on his statements on this subject. He sent a reply to my first E-mail which seemed to me highly unsatisfactory; I sent him another very detailed one, to which I've received no reply yet (or direct reply, anyway).

Compare his above statement, though, with his actual statements in his March 21 column, in which he does NOT say that the Bush tax cuts are adequate to cover the costs of Social Security and "Medicare Part A" -- he says they're adequate to cover the costs of Social Security and "Medicare", period. Seven times he says this in the column!

And certainly, when the GAO -- and Gale -- talk at great length about this country's coming fiscal crisis, they are NOT excluding Medicare Part B from this problem (or Medicaid). See both the 2000 GAO report (www.gao.gov/new.items/d01385t.pdf) and Gale's Congressional testimony and articles on the subject (www.house.gov/budget_democrats/hearings/gale.pdf ) for repeated proof of this. And note that Krugman himself quotes Gale as saying that the Bush tax cuts deserve "EQUAL [emphasis mine] billing with SS and Medicare as 'the real fiscal danger'. "

In short, I'm regretfully forced to agree with Glass that -- unless I'm very seriously overlooking something -- PK really did engage in incredibly sloppy and misleading language on this subject to ascribe even more blame to Bush than he deserves. And -- as Gale keeps emphasizing -- Bush deserves a hell of a lot; his tax cuts just pump still more gasoline on the fire. But you don't fight dishonesty with more dishonesty.

Krugman's original column can be found at www.pkarchive.org/column/032103.html. As I say, compare it for yourselves with Gale's and the GAO's very extensive comments on the subject. Prof. DeLong, we badly need to hear from you on this.

Kyle Markley wrote, "Could you be more specific concerning how government redistributes 5-30% of GDP to landowners? I'm a landowner and last time I checked they tax me for it. So naturally I'm a little surprised by your statement and I'd like to know how I can get my share of the loot - thanks!"

You *are* getting *a* share of the loot, though not necessarily a fair share: government defines and enforces to ownership of land, through which landowners collect (economic) rent. In many situations, the value of this rent far exceeds the property taxes. (Property taxes often fall on land improvements like buildings, instead of the value of the unimproved land itself, which isn't a wise policy idea.)

The *unimproved portion* of land increases in value, even though the landowner does nothing to create this value---it's created by government and the surrounding community. In a fair system, this value would be taxed away by the government and thus returned to the community at large.

If you want to educate yourself, see
http://members.aol.com/_ht_a/tma68/geo-faq.htm
for a discussion of these ideas (in this case, from a more libertarian perspective). You can also google on "Henry George" and "land value taxation."

Kyle, how many government actions don't redistribute wealth? Why exactly are we only supposed to look at those instances of redistribution that involve explicit taxes?

For instance how do local zoning laws work? (Land use determinations are inherently redistributive so not having zoning laws won't change it. When your neighbor builds a dump on his property, your property values will be impacted.) What happens to wages when we allow immigration? What happens to individual business prospects when we choose a defense contractor? Any thoughts of the redistributive aspects of spectrum allocation? Ever heard of the inflation tax?

Are all of these redistributive decisions happening in a vacuum? What is so special about explicit tax redistribution when there is much more hidden tax redistribution?

Bruce-

The real debate should be on how to honor the commitments to SS in light of the mismanagement of the SS trust fund. It is beyond argument that Mr Bush and the GOP have been entirely dishonest in their presentation of the tax cuts as something that was affordable, that could be done while still protecting SS and making room for new spending programs. Rubbish. That argument was always rubbish from the beginning. Extending the Bush tax cuts indefinately would be a huge revenue loss of gigantic proportions. To claim that the Bush tax cuts are small, but that SS needs to be privatized because it is going broke is disingenuous. SS is not going broke anytime soon because the government has borrowed several trillion dollars of the SS trust fund in liew of selling bonds. Yet the Bush administration persists with the fiction that SS is going bankrupt, it is unaffordable, etc. The PK article specifically addresses the Bush administration claims that have been forwarded as reasons to alter SS and Medicare. Pouring cold water on the SS is too expensive argument is in no way dishonest. Pointing out that the SS and Medicare shortfalls (that will not appear until 2040) are actually smaller than the revenue loss from Bush tax cuts presents the clear idea that the part of the future budget problem of SS and Medicare is not insurmountable and can be simply addressed by reversing the Bush tax cuts. Duh. This argument is entirely truthful. It is not intended to mislead. Does it address the whole budget picture? No, but it never pretended to do so.

Are there other potential problems with budgets in the future. Sure. Medicaid is only one of them. One could do the same analysis for the rate of increase in defense spending and argue that it is not sustainable either. However, that is a different issue and a different argument.

Is the Bush administration arguing that Medicaid is broke and we need to fix it? Is there an administration argument over Medicaid? No. This is a different subject that could be addressed in a variety of ways including changes in technology and delivery of health care. Is it a problem? Yes. Is it the problem that PK is talking about in his column? No. Is it the problem that Mr. Bush and his SS commission have been addressing? No. This is a different argument and I am sure that PK would be willing to engage in an honest discussion of the numbers if this were the issue on the table. It is not. You are pretending that it is. Therefore, you think PK is not being entirely honest. PK is saying that oranges are orange and you are complaining that apples are not orange.

Unfortunately Kyle is representative of the thinking in the current administration.

I wonder if he might answer a question -- What would be the effect on the economy of cutting of Social Security, Medicare, welfare, unemployment compensation and the other redistributive social programs?

You remind me of something an honest conservative wrote recently at http://www.lawandpolitics.com/minnesota/default.asp?section=ARTICLES&module=ITEM&id=156. He wrote, "...libertarians, a pert little faction composed mostly of people who, when told about something going on in the world, reply, "Yes, but how would it work in theory?"

Kyle - here's a redistribution for you: The government separates the owners of corporations from responsibility for the debts of the corporations!

Here's another redistribution for you: With a bidding process similar to Haliburton's in Iraq, Koch Oil recently was awarded the contract to supply all the oil to the Strategic Petroleum Reserve, at the current high price. Koch Oil happens to be the company that generates the money that keeps the Libertarians operating, as well as Cato Institute, Reason Magazine, etc. See http://www.mediatransparency.org/funders/koch_family_foundations.htm and http://www.mediatransparency.org/funders/koch_family_foundations.htm

I didn't mean to appear to be two people posting. IssuesGuy is a previous name I used. I can't get the comments to forget that one, since I started using my name...

Christ, now Krugman's after ME (at the same time that about 2 million conservative E-mailers are, and at the same time that I sent Glenn Reynolds an indignant E-mail defending Krugman against Dan Luskin's latest attack). You can't win.

The whole argument -- and his self-defense -- boil down to one point: was it an important misstatement for him to say repeatedly that a repeal of the Bush tax cuts, by itself, is enough to fix "Medicare" when it can really only fix "Medicare Part A". I think it's a damned important misstatement on his part, and should definitely not be casually shrugged off. But it also shouldn't be allowed to distract us from the fact that he, Gale, and I all agree that the Bush tax cuts are a horrible idea.

Yikes, I go to work and get inundated while I'm earning a living. I'll be brief.

Bruce (August 10, 2003 11:06 PM): Don't presume how I would finance government. And since when does being an unapologetic capitalist make one a sociopath?

Stephen (August 11, 2003 05:17 AM): I'm intrigued enough to read about it at some length (this weekend!), but from what I've skimmed so far I don't think LVT is a good idea. I doubt this will still be front-page by then, so I'll respond by e-mail.

Stan (August 11, 2003 09:01 AM): All government action is redistributive (in a very loose sense of the term) to the extent the collections process is involuntary. Clearly I'm talking about direct redistribution where money leaves my wallet and goes right into someone else's. The "special" facts about explicit redistribution in this context are that it's 41% of the federal budget and that I think it's ethically the worst kind of redistribution -- it's open, and proud, socialism.

Dave (August 11, 2003 04:05 PM): The short-run effect would be millions of furious people. The long-run effect would be higher real living standards. I specifically said these programs should be phased out; I agree there would be great trauma if they were suddenly stopped. I'm willing to be one of the people who pays in but who never collects, provided the pay-in steadily decreases.

Dave (August 11, 2003 04:16 PM): What's wrong with separating the stockholders from the debts? If you don't like it, don't loan that company money. As for Koch Oil, I don't even care to investigate it because you sound like a conspiracy theorist.

Kyle: since when is being an pure Social Darwinist the same thing as an "unrepentant capitalist"? And a pure Social Darwinist -- that is, an Ayn Randian -- is indeed a sociopath (Rand, lest we forget, tried to define the proper morality itself as "selfishness").

As for "presuming how you would finance government", I repeat: by your own reasoning, there is obviously nothing at all immoral about taxing the poorest American and the richest American the same dollar amount in taxes, since of course they can both earn money just as easily. So: if you really DON'T think so, how WOULD you finance government? How much WOULD you vary total taxation amounts for various income groups (after all, by doing so at all you're "redistributing" the benefits of government from people who pay lots of taxes to people who pay relatively little, and we can't have that!)? And if you do favor such variations in taxes, what's the moral difference between allowing that and providing some actual income supplementation to those people who find it particularly hard to make a living?

More relevant question: why am I wasting time asking these questions of a nitwit?

Kyle: "The short-run effect [of completely ending all income redistribution for everyone] would be millions of furious people. The long-run effect would be higher real living standards."

For everyone? Right. I'm sure the disabled would respond immediately by leaping out of their wheelchairs or their retarded wards and going busily to work. And of course wealthy people work twice as hard and produce twice as much if they get to keep two million a year after taxes than if they only get to keep one million.

As I said, a nitwit. And apparently one who's never even heard of the Laffer Curve and its limitations.

Bruce,

I haven't said I'm a Social Darwinist. My sister is disabled, and that doesn't affect my conclusions about socialist redistribution programs.

You would be much more interesting to talk to if you weren't so deliberately abusive and you brushed up on your logic. Here are a few helpful links.

http://www.infidels.org/news/atheism/logic.html#generalization
http://www.infidels.org/news/atheism/logic.html#hominem
http://www.infidels.org/news/atheism/logic.html#herring

Kyle, when you say that massive hidden redistribution is morally superior to open redistribution because open distribution has an acknowledged attempt at equity, we obviously do not share the same moral standards. You are obviously not basing your ethics on the U.S. Constitution.

The U.S. government is charged with providing "for the common Defence and general Welfare of the United States" in the Constitution. With its reliance on open democratic decision-making and charge to provide for the general welfare, the Constitution stands totally opposed to the ethics you have expressed above.

I personally couldn't care less about anybody's aversion to the term "socialism". After the past century of human history, I would hope that there weren't any dumb enough to "believe" in any economic system. Since we've shown serious flaws in every known economic system, I'll simply assume that you are aware that the U.S. is a welfare state and that you aren't trying to pawn some type of economic utopia.

Some questions.

I was always lead to believe that SS became bankrupt when the government began borrowing against it. From a practical standpoint, US bonds are still a government IOU and can hardly be counted as a real SS asset. The tax payer is still required to pay new income into the system when the IOU's become due.

Is SS a truly regressive tax? The poor pay a greater percentage of SS tax vs. real income. Someone at the middle class income level will not see an equal payout to the amount they have paid into SS. Those at the poor income level see a greater payout vs. amount paid in, thus a net gain. Is there some additional breakdown of payments out vs. payments in that I am missing?

James, I believe you are more or less correct. The U.S. government will have to decrease spending, increase taxes, or sell assets to begin redeeming the SS IOU bonds per your assessment. Also, SS is progressive in the manner you describe for poorer participants, although its phase out for wealthier Americans means most of its finances are shouldered by the middle of the U.S. income distribution.

Kent Smetters has an interesting working paper on the NBER entitled "Is the Social Security Trust Fund Worth Anything?" http://papers.nber.org/papers/W9845

Per the abstract:

With over $1 trillion in assets, the U.S. Social Security trust fund is the largest pension reserve in the world, and potentially a model for other developed countries facing future financing problems. But are those assets actually worth anything?' This question has generated a heated debate in the U.S. as policymakers debate options for Social Security reform, with the understanding that the characterization of the trust fund influences these decisions. Some observers claim that the trust fund is not worth anything while others argue that it is valuable. However, different reasons are given for the same position. This paper provides a unified conceptual framework for thinking rigorously about the assets accumulated in the trust fund. Multiple perspectives of the trust fund are identified and are summarized under two categories: (I) storage technology arguments and (II) ownership arguments. Storage technology arguments focuses on whether the trust fund surpluses actually reduce the level of debt held by the public or, alternatively, are used to hide' smaller on-budget surpluses. Ownership arguments focus on property rights, i.e., how trust fund credits should be allocated regardless of whether they reduce the debt held by the public. Only the storage technology argument can be empirically tested, as we do herein. We find that there is no empirical evidence supporting the claim that trust fund assets have reduced the level of debt held by the public. In fact, the evidence suggests just the opposite: trust fund assets have probably increased the level of debt held by the public. Moreover, the adoption of a unified budget' framework in the late 1960s appears to play a statistically significant role in this result. We show how this counterintuitive result can be explained by a simple split the dollar game' where competition between two political parties exploits the ignorance of voters who don't understand that the government's reported budget surplus actually includes the off-budget' Social Security surplus. To be sure based on a limited annual time series (1949 2002) and so the results should be interpreted with caution. But the empirical tests are, if anything, biased toward finding a reduction in the level of debt held by the public, and not the increase that we find.

Thanks Stan.

To truely protect Social security, the funds need to be seperated from general fund usage. Perhaps a law limiting borrowing only in the case of National Emergency.

With tax cuts, I have always wondered why the Republicans/Democrats never propose a bottom only tax cut? Since those who can not afford to save will spend the additional income, it seems like a guaranteed method to stimulate the economy.

Kyle: Anyone who favors totally eliminating taxation of even the wealthiest people to assist even the most desperate is a Randian -- that is, a sociopath. Can I safely assume that, if someone was drowning and someone else had a life perserver but refused to throw it for some petty reason, you would assume no one had any moral right to take it away from him by force and throw it themselves? Or that, if some parents are deliberately letting their child starve, no one has any right to force them to provide him with food?

As for your sister, I'm sure she's immensely glad that you oppose taxing, say, Bill Gates any money whatsoever merely to provide her with any needed assistance. The family dynamics must be interesting.

James- " I have always wondered why the Republicans/Democrats never propose a bottom only tax cut." This statement is naive about the intentions of the GOP. The intentions of the GOP are to cut taxes on the wealthy and special interests that control the GOP.

Why would Joe Sixpack want to cut taxes for his wealthy bosses and pay as high a percentage of taxes as his wealthy bosses? Enlightened self interest tells us he won't support that.

This is where the GOP bait and switch strategy comes into play. The GOP wants and needs to keep taxes high on the middle class and working poor. By keeping taxes high, they can maintain widespread support for tax cuts and spending caps. This is precisely why Mr. Bush is cutting income tax and dividend tax and estate tax (paid mostly by the wealthiest individuals) and is not cutting payroll taxes (paid mostly by the poor and middle class workers).

The GOP always run on CUTTING TAXES. You have to understand that CUTTING TAXES is a sort of code. CUTTING TAXES really means cutting the taxes of rich white people while leaving the poor and middle class with the same tax burden (OK so they throw in a few crumbs once in a while.) Then the GOP blames the Democrats and spending for poor and middle class taxes being too high. This is how the scam works. Make people think that the GOP are going to cut their taxes and the opposition wants to raise them. Once the GOP get elected, they cut taxes mostly for the wealthy and special interersts. Then they proclaim loudly how much taxes they have cut. This is why Bush pioneers can donate thousands of dollars to his campaign and still come out ahead on investment while the rest of us are wondering why with all the tax cutting we are still paying about the same amount of taxes.

Of course, we are not stupid and this is why Mr. Bush41 got thrown out of office. Mr. Clinton raised taxes only on the wealthy and we never heard the end of the GOP whining about the largest tax increase in history. Well, the working poor got a tax cut from Clinton because of the EITC. Who said the Democrats never proposed a bottom only tax cut????? Where have you been? Again you are missing the forest for the trees. Of course the working poor are not stupid and they re-elected Mr. Clinton and more people voted for Al Gore than George W Bush.

Did I mention that under Bill Clinton unemployment for blacks went under 10% for the first time in ages and under Mr. Bush it has gone back over 10%. Have you ever heard political pundits wonder why blacks overwelmingly voted for Clinton and Gore? We are not stupid.

Bruce, thanks for proving my point. Anyone who disagrees with you is insane, gotcha. *plonk*

Stan (August 12, 2003 08:44 AM): The choice between hidden vs. explicit redistribution is a choice between the lesser of two evils. At least with many kinds of hidden redistribution something valuable _might_ happen (such as the construction of a dam).

We obviously don't share the same moral standards, but I'm astonished that you think I'm at odds with the U.S. Constitution. The Constitution is the world standard for limited government, carefully defining the scope of federal power. The Bill of Rights is essentially [don't nitpick] a list of negative rights -- note that there's no "right to health care" or "right to education" or "right to food" -- and the Tenth amendment declares that the federal government has no powers other than those explicitly granted to it by the Constitution. The federal government couldn't even tax income without a Constitutional amendment!

The socialist plague of pervasive redistribution is a recent phenomenon in this country. If the Constitution was really as you say, and indeed what the framers had in mind all along, why wasn't the U.S. government behaving this way two hundred years ago?

I'm certainly aware that the U.S. is a welfare state. I'm reminded of it with every paycheck. To put it lightly, I just happen to prefer capitalism to our current system. I do believe that capitalism works, and that socialism can't.

Sociopaths aren't insane, Kyle. Just amoral. That's why they're called "sociopaths".

And, by the way -- since you seem unaware of this little fact -- the choice is hardly between "pure capitalism" and "pure socialism"; there's a whole gigantic spectrum of varying levels of income redistribution in between. Very few rightists are totally opposed to ALL government income redistribution -- with the exception, as I sy, of a very small sprinkling of Randian sociopaths.

Kyle, the lessor of two evils? Hardly! Your two economic policy world is NOT reality. We could scrap social security, medicare, medicaid and all other social programs and simply transfer wealth to the poorest 25% via the tax system. We could do a lot of other things that may in fact be more efficient and make everybody better off. Just because you assume a search for equity equals socialism doesn't make it so.

I too prefer a more market-based approach. I believe less government intervention generally affords greater liberty and will tend to provide for greater economic growth. A more market-based approach can very well lead to less liberty if it allows elitest hidden taxation combined with denials of a Constitutional charge for the general welfare.

In addition, there is no support whatesoever for any contention that totally unregulated capitalism even approaches the efficiency of our current system. Market ineffeciencies are way too common and easily demonstrated. Totally unregulated markets tend to be captured and stagnate. Capitalism works no better than socialism. Both have serious flaws. Your capitalist economic utopia does not exist.

There is no Constitutional cover for BS morality that denies a requirement that we seek equity. Limited government does not mean that the only transfers that should be made are those that are hidden. Arguing that hidden transfers are better for any reason is flat out against the democratic principals of the U.S. Constitution. Yes, the ethics you have posited above are totally at odds with the U.S. Constitution.

Kyle wrote, "I do believe that capitalism works, and that socialism can't."
It would help if you actually knew the definitions of "socialism" and "capitalism".

Webster's 7th New Collegiate Dictionary:
"Capitalism: an economic system characterized by private or corporation ownership of capital goods, by investments that are determined by private decision rather than by state control, and by prices, production, and the distribution of goods that are determined mainly in a free market."

Not a word for or against redistribution of income or wealth (it refers to distribution of *goods*, which is a different issue).

As *Stan* alludes, you're all for redistribution of wealth in "hidden" ways. I already posted the point that there is an enormous transfer of wealth to landowners, probably more than 5% of GDP, and you couldn't respond to that. So who's the real socialist here? Besides ownership of land---which is defined and enforced by THE STATE---there's also the issues of state-granted monopolies on so-called intellectual property, state-granted privileges in the form of limited liability for certain corporate entities, and so forth.

Like most so-called libertarian positions, the problem here is one of grave inconsistency.

Stephen,

I'm surprised at you. I told you right away that I was intrigued but that I wouldn't have time to appropriately research the LVT topic until this weekend. I have a full-time job and a busy life; if you can't be patient, that isn't my problem. It is intellectually dishonest for you to accuse me of being unable to respond. And I am not interested in debating with people who are intellectually dishonest.

I flatly deny that I'm "all for" hidden redistribution. I said it's the "lesser of two evils", which given even a basic grasp of the English language is a statement that doesn't indicate support. Again, you're being intellectually dishonest.

Am I the only person here who isn't trying to put words into others' mouths? I had expected something better than playground debate tactics. I am very disappointed.

Testing, testing... are comments still active?

Testing, testing... are comments still active?

Kyle, you are all for hidden taxes. You consider them the lessor of two evils thus you support them over open taxes. The irony of you calling Stephen intellectually dishonest after you've been pawning a two economy world is numbing.

Kyle, you are all for hidden taxes. You consider them the lessor of two evils thus you support them over open taxes. The irony of you calling Stephen intellectually dishonest after you've been pawning a two economy world is numbing.

Stan,

An analogy: If you ask me if I'd rather live with the Unabomber or Charles Manson, and I pick one, that doesn't mean I _support_ the guy. It only means I think the other one is _worse_. Got it? This should be simple enough that I don't need to explain it! I can dislike both alternatives while still preferring one. And so it is for hidden taxes.

And I have absolutely no idea what you mean by the assertion that I'm "pawning a two economy world".