Brad DeLong's Semi-Daily Journal (2004)

Health care cost containment. At least some of the Democrats are talking about it. The GOP wants sweetheart crony deals for the drug companies and the HMOs.

The question is, "Do Arnold Kling and Bruce Bartlett have 'Paul Krugman's Army' t-shirts?"

Maybe the beginning of an alliance.

Tax increases are but one option. Don't forget inflate (stealth tax), steal (Iraq), borrow, and repudiate (default on promises).

Tax increases are a canard in these arguments. It's going to be inflate and repudiate. DeLong is correct that Dem or Republican in 2004 and beyond doesn't matter. The academic arguments aside, protect your capital, diversify out of the dollar.

"We'll see. We Democratic economist-deficit-hawks haven't yet gotten out the rubber hose."

I think we need to pull it out soon. I have to say I'm not that hopeful that a position that says keep the tax cuts for everyone except the richest (200K +) is gonna do much to stem the red ink.

When W says make the cuts permanent...it looks like our guy is gonna have to say yes go ahead (except for 200K +). So our guy will stop maybe 20 to 30 percent of this red ink. See my post on this:

http://econ4dean.typepad.com/econ4dean/2004/01/dean_and_making.html

Krugman's idea (recent op ed) of just keeping the cuts for the bottom brackets is a much better way to go. That helps keep a "middle class cut" but is more fiscally responsible. Unfortunately that's not the position of our leading candidate right now...of course if he does the right thing and ends up changing his postion after taking office its not going to be pretty.

Good post over there, Lerxst. I agree with you that the hoses are going to have to come out. The endgame is not going to be fundamentally altered if our guy gets in.

Watch for the wedge. The obvious counter will be to drive a manufactured difference between the newly shrill and the prematurely shrill.

(Recently I got to see the good cop, bad cop routine in action. Everyone involved knew what it was; and yet, it still worked. My faith in human nature was restored. It's a negative faith.)

C.

Public perception on federal expenditures is quite a bit different than the reality. Well, in the sense that there's a lot of spending on "social programs", those being social security and medicare, they're right. Except that it's not those two programs they oppose.

If you look at the total budgets for the most hated (by conservatives), "wasteful" programs like EPA, OSHA, and the other regulatory agencies, they're insignificant. Welfare is substantial, but it's really the exception.

What amazes me is that conservatives don't realize that cutting spending is simply not an sufficient option for getting this budget out of deficit. There's not that much-not even close-there to cut.

I exchanged several emails last week with an old friend, a conservative, who wanted me to explain to him the liberal position on Bush. He complained that liberals are emotional and not rational, and yet his core objections to liberals were all far more heartfelt than they were rational. Taxation is extraordinarily high, the dems want to take the middle-class's money and give it to the poor, terrorists would have overrun the US were it not for Bush's militarism. All these things are essentially about fear, and the fear looms large enough to distort thinking.

And, I submit, one can see this on the left. It's possible that BushCo is as demonic and insidious as some leftists fear and claim; but it's also possible that they're not. And the problem is that fear and anger driven politics creates a large propensity for confirmation bias. All my friend sees are the things that confirm his viewpoint. And just so with many leftists.

It's weird and disheartening that when everything else is so uncertain and nebulous, people won't actually look at hard numbers when they're available. But they don't, you see, because they're afraid of what they might find.

Point of clarification: I am not advocating tax increases, I am simply resigned to their inevitability. When that day comes--shortly after the election, I believe--I want it to be clear that the Bush Administration's budgetary profligacy is to blame.

"Since Congress will never reduce benefits to retirees, the only way to make the trends sustainable is by raising taxes significantly."

This is precisely the radical-conservative issue. We must slash Social Security and Medicare. We must put to rest the legacy of Franklin Roosevelt. These folks are making the case for slashing social benefit programs that middle and low income women and men have supported with their work and taxes for decades and truly deserve to have preserved.

"Point of clarification: I am not advocating tax increases, I am simply resigned to their inevitability."

There will surely have to be more tax relief for the middle class. The Alternative Minimum Tax must not be allowed to gobble up middle class income.

There may well be no need for tax increases, but for understanding why corporate tax collection has fallen so much and how broad tax avoidance by the wealthiest individuals has become.

"Transfer program problems." Rubbish!

Middle and low income women and men have paid for our social benefit programs over and over. Social Security was my mother's and father's right after my mother worked for 32 years and my father worked for 47 years. Radical-conservatives twerps who preach against Social Security and Medicare do not care a fig for our parents.

"Bring on the crisis, baby."

Trollish idiocy.

Revenues
Individual income taxes
2000: $1004 Billion 2003: $794 Billion

Corporate Income taxes
2000: $207 Billion 2003: $132 Billion

Social Security
2000 $652 Billion 2003 $713 Billion

Total
2000 $2025 Billion 2003 $1782 billion

Conclusion- Deficit cannot be fixed without recovering lost revenues. data source = CBO

Bakho

Well done. The question is to carefully identify the sources of lost revenue. Sure sure sure is not the payroll tax!

Anne

Hi Bernard!

Problem is, neither drowning the transfer programs, nor early euthanasia centers for retirees, are politically plausible.

I'm a little shocked that you prefer the Leninist solution here -- let things get so bad that revolution *must* come! -- even if it is a limited revolution in transfer payments.

Remember, it's usually not a good idea to listen to the little man with the goatee on your shoulder; even if his suit isn't red, it's a safe bet something else is.

C.

I have difficulty believing the government is incapable of fulfilling its constitutional duties on 1.742 trillion dollars per year. At least in peacetime.

And the cost of the regulatory state isn't how much it costs the government, it is how much it costs corporate America to comply, and how much production it deters. Reduce the regulatory state and you increase GDP and tax revenues. Convert most environmental regulation to taxes - instead of "thou shalt not...", use "if you want to do it, the price is..." increases revenues without dangerously increasing pollution. (with correctly sized taxes - THIS I don't trust the Republicans to do right, but neither do I trust the Dems. Only a mixed government is likely to get it right.)

Alright folks, since we seem to have a Democratic Administration coming up, repeat after me:

1.) A Value Added Tax is more progressive than the present Pay Cheque Tax based system: rich folks don't get paycheques, but they do consume goods, and disproprtionately they both produce and consume services.

2.) The Moynihan Plan for fixing Social Security is gentle, arithmetically sound, and contains no injustices that aren't already built into the present system.

3.) AARP has now exposed itself as a tool of the insurance companies, so we can run it out of town on a rail. Democratic Policy is to support children. Old folks are disproportionately high income, so fuck 'em. (Disclosure: I'm 60, and have three chilldren and two-step children, four of them Americans. My girl-friend wants another. Yes, I know how to spell amniocentesis. She's already practicing my proposed "fuck the old folks" policy.)

rvman --

Reduce the regulatory rate and increase the cancers, lethal respiratory problems, heavy metal poisoning, infertility, birth defects, and ecolocial instability especially including endemic diseases in the food supply.

The problem with "the price is" approaches rests very firmly on "you can't afford to do that"; the corporates don't have enough money to pay for poisoning everybody.

You can't set sensible prices anyway, becuase of the rate of change and the stuff you don't know about. You tax on emissions as a way to force the emissions down over longish time spans -- which means steady increase to 'stop or go bankrupt' rates -- not to set a 'fair price' for pollution.

Industry shouldn't poison everybody in the first place. If they actually get behind that, instead of kicking and screaming and flailing about the injustice of it all, costs go down -- no cleanup for the unncessarily dead people, or the unnecessarily destroyed land, better process costs less money to run, there are a pile of good, sound, money saving results.

The idea that it's more expensive to be ecologically responsible is just nonsense, there's no dichotomy there.

Cancer production is especially tolerable when it seems most likely to happen to someone else. To tax me, or to force me to pay higher prices for a product, in order to prevent other people's cancers is an infringement of my God-given property rights for the sake of a solicitude about the lives of people who are not myself that I may not feel.

If I voluntarily choose to care about other people's cancers, I will show that by buying products which are produced by non-carcinogenic processes, and I will cease activities which seem likely to cause cancer in others.

But if The State forces me to care about the lives of people I don't even know, that's the first step to Fascism, and ironically will lead to the deaths of millions in the gas chambers -- a far worse outcome than the one those intrusive laws were designed to prevent!

It's almost impossible to talk about these things with people governed by sentimentality and prejudice rather than reason.

Hi Bernard,

(Hey, shwi is taking over Brad DeLong's comments! Bitchen. Maybe BDL will migrate over there to retaliate.)

"Better to force the issue now."

I think you're making a mistake in your analysis. The voting group in favor of continuing SSI will not only be composed of SSI retirees, but also those people who, for whatever reason, will feel a crunch if it disappears regardless. Caring family members who nevertheless still don't want to see their *total* costs go up 250%. Sunbelt state governments. And so on.

So that battle has already been lost, and you're tilting at windmills, and discrediting the concept of drowning something more attainable, like agricultural subsidies, in the process.

Here's an idea *my* little man with the goatee whispered to me: put the tax burden on the childless. Hey, they're not replenishing the workforce.

"Europa, europa..."

More like Japan, IMO; but not really like either.

C.

"Either way, I refuse to pay any more than I already am. I don't even _like_ the Boom. Bring on the crisis, baby."

Fine, Bernard. While we're at it, we'll bring on the prison sentence.

This is where spin becomes necessary. But it's a lot easier to spin "family tax break" than "drowning the elderly".

C. -- hey, these horns look kinda good on me.

After we get rid of the regulatory state, we can reform torts, get the price of a human life down to a couple of hundred thousand dollars, and move indiscriminate murder over into marketing costs, where it belongs!

"We Democratic economist-deficit-hawks..."

Don't you mean we Democratic economist-deficit hawk....

;)

Ok that was trollish. Honestly I despair whenever I think of the deficit. As a nation we aren't willing to even look at Social Security or Medicare. Hell, we can't even cut obvious economic evils like the farm subsidies. BTW, how can Democrats be against 'corporate welfare' and for farm subsidies. Same issue, different name.

Visit my website to find out more about me.

Eric Wright o

Requiescat in pace - Let him/her rest in peace. (May he/she rest in peace)

Unum necessarium - The one necessary

Per aspera ad astra - Through the thorns to the stars

Ex cearulo - Out of the blue

In dentibus anticis frustrum magnum spiniciae habes - You have a big piece of spinach in your front teeth