Brad DeLong's Semi-Daily Journal (2004)

and they released the news on a Friday when Hurricane Charlie is dominating the news.

Didn't Al Gore and Paul Krugman say this BEFORE the selection?

Is this a tax shift from today's rich to tomorrow's middle class? Or is it a tax shift from today's rich to tomorrow's rich?

Could someone explain how big the stimulus differences between giving money to the rich and giving money to the "middle class" really are? Even if the rich guy just puts his money on the bank account the money (minus minimum reserve) still "works", doesn't it? Are we talking about money leaking to foreign countries?

And of course you can't talk about tax cuts in isolation-you have to consider the price being paid in terms of record deficits. The Federal government is taking in 67-75 cents for every $ paid out. The Most Irresponsible Generation is passing on a horrible burden to those coming.

By the time the kids moved out we had tried to teach them basic money hendling skills. They got jobs, then they got credit cards. Soon the credit cards were all maxed out and the pleasre shopping and the parties stopped. Slowly they learned you just can't pay off the Visa with the Mastercard, nobody else is going to bail you out, and living beyond your means just doesn't work.

Oh, one other thing. It isn't wise to count on your income growing faster than your debt.

The tax cut fanatics seem to be in that immature stage. Do they ever grow out of it? Sometimes. But this seems to be a peculiar fetish that is hard if not impossible for some people to shake.

"There is no evidence that Bush's plan is to finance tax cut with increasing taxes on the middle class."

That was quite shifty. If there is no dispute that the deficit is a result of the "tax cuts" and there is also no argument that it will need to be repaid (perhaps when Greenspan snaps out of his GOP induced deficit-comma) then we are left with the fact that the people will have to pay back the deficit. With the tax burden being shifted to the middle class, I don't see how that isn't really a tax increase on the middle class (and everyone "below" middle class).

Alan...The difference between your kids and the Bush administration is that the lenders stopped lending to your children. Wall Street will continue to lend to Washington because (1) it wants to have bonds to sell, and (2) it assumes that the government will always make good on its debt.

Many have been talking about the need to later fix the deficit. Right now, however, the number of people benefiting from the deficit is large, and all of them assume that when it comes time to distribute the pain, that they can be let out of that part.

The day will come, however, when there is a clear majority that knows, for a fact, they will be among the losers, and that is when the political picture will change.

So I guess Gore's fuzzy math was pretty much right on.

"You haven't heard the governor deny these numbers. He's called them phony and fuzzy. The fact remains almost 30% of his proposed tax cut goes to -- only to Americans that make more than $1 million per year." - Al Gore, The First Gore-Bush Presidential Debate, October 3, 2000

http://www.debates.org/pages/trans2000a.html

To "a" and "walter" -

Robin Hood in reverse, GWBush is a 21st Century Dooh Nibor, stealing from our kids and grandkids and giving to today's rich. The upper-crust 1% is gaining 2/3rds of this record deficit in the form of tax breaks on their investments, and the ability to pass those savings on to their now-royal progeny, estate tax-free.

America's first royalty, in a country who's very raisson d'etre was the abolishment of privilege! 250 years of hard work and free speech before the infestation came back, yet now these nouveau-vampiroyals are hard-wired into our kids' brutal and impoverished future.

You just don't see it because you won't look.

Bush's own TS O'Neil commissioned a study in 2002* (which got him canned) showing there are only four ways out of Dodge for the POTUS's record Fed budget deficits:

1) Raise personal and corporate income taxes by 69%. Yeah, that's gonna happen. Even Democrats are handcuffed on this one. Even the Greens;

2) Raise payroll taxes by 95%. That's already happening, and is bound to ramp up into pay-as-you-go "benefits" that workers pay for, an invisible reduction in wages at a time when the income of the vampiroyals *doubled* since 2002;

3) Cut SS/MC benefits by 56%. GWB's prescription drug for HMO registration scam is one scheme. Why do they call this denial-of-service con a "health maintenance organization" anyway?

4) Cut Fed discretionary spending on health and human services to *zero*.

They're already talking about a flat income tax!
In the meantime, nobody is talking about the huge impact this deficit has on the middle class in the form of pass-down state and local taxes, fees, user charges, all regressive financial punishments, as state and local services are being cutback more and more due to decrease in Federal programs.

Bush spent less on his "no child left behind" than Fed gifts every year to Israel to build their apartheid wall with the offset revenues, an allegorical wall similar to the ones being built right here in America with every gated community on our best estates and waterfronts.

All of this will of course come back in spades on the backs of the rapidly-eroding US middle class, if the -7% decrease in retail spending last month is any indication. Been to the mall lately? The food courts are giving away free samples, and the shops are shuttering early.

The ultimate irony? Bush doesn't care if he gets re-elected! Cheney could care less!! They're both mega-millionaires, and **the damage has been done**. They'll pocket the grift of left-over campaign funds they're now generating for destroying our country, and retire to the royal lifestyle in Kennebunkport and Vail and wherever else the bawcocks go for pleasuring themselves.

Rent and watch the first "Terminator" again. Here, I'll paraphrase it for you.

"You people just don't get it. Elite vampiroyals won't stop. Their sole directive is to transfer all your life savings into their bank accounts, either directly, or by passing future taxes onto your kids' backs. They can't be negotiated with. They can't be stopped. Mammon is all they do!"

* - Gokhale & Smetters

heiko: Money never "works". Only people work, producing actual goods and services, and using tools and technology to amplify the effectiveness of their labor.

Money is "only" a means of exchange, and its proper or improper allocation (which comes down largely to fiscal and monetary policy and aggregate investment choices) determines what varieties of work/labor are being performed, at which volume, and consequently what goods and services are being produced and how much of them.

People have different views and speculations about what happens with the money that "rich" people "take to the bank". Supply siders say it is invested in the economy, creates millions of new jobs, and takes prosperity to levels unparalleled in history. An alternative view is that a large amount of the money is "invested" in various speculative financial instruments, driving up the prices of said instruments, stock, and other assets, and having at best an indirect effect on the real goods-producing economy that is typically mediated through debt creation.

Mass unemployment, unavailability of even the most basic healthcare for many people, working or not, a rising gap in living standards, and questionable military engagements are indicating to me severe funds misallocation. It is not that the nation does not have the physical and human resources to put more people to productive use, but the limiting factor is the allocation of too much money to unproductive uses (and that involves a value judgement on my part of course).

Payments on the debt go to bondholders, who tend to be the wealthy.

It would be nice if a prominent left-leaning economist would calculate something like the present value of the tax shift over the next twenty years.

It would be a nice talking point for Kerry to have on the trail.

The elephant in the living room means a fiscal stimulus could be difficult to gain from Congress just when the economy is faltering and the Federal Reserve still has little room to lower interest rates.

anne, exactly, which was part of my stagflation lite thesis in the first place: that bush had left us without any capacity to react in case things did start to go south. i'm not the first to note that were the country not in such grave danger from four more years, i'd urge kerry to wtihdraw and let bush reap what he has sown....

Increasingly I am alarmed at the slowing of the economy. Interest rates have risen, there is little chance of fiscal stimulus, oil prices have been allowed to reach alarming levels. We could easily slow to dangerous levels.

Wages are fairly stagnant, benefits more costly to employees, middle class debt levels are high. Interest rates are still low enough that older investors who wish to hold bonds have less prospect for income than would be most beneficial. Merrill Lynch is telling investors to expect 5% to 7% stock market returns for a while. I am not pleased!

If I understand the Transversality Condition (on government debt) in macroeconomics, then the basic conclusion is that:

government debt is repaid (ie not just simply refinanced by other debt)

In other words, debt incurred now is a burden on the future.

This seems to be something that is broadly being ignored in the public debate.

http://www.iie.com/publications/papers/summers0304.htm

I am reluctantly convinced that the most serious problem we have faced in the last 50 years is that of low national saving, resulting dependence on foreign capital, and fiscal sustainability, which has far-reaching implications for the US and the global economy. Why do I make such strong statements? Look carefully first at figure 2. It plots the rate of net investment in the United States—that is, the growth in equipment and structures after subtracting depreciation—and the level of net national saving—the resources that Americans are saving net of the amount that the federal government is borrowing. The difference between them, of course, represents US borrowing on the national scale—the current account deficit. Figure 2 shows several things quite clearly. The current account deficit has widened sharply over the past four years, relative to an unprecedented rate of 5 percent of US net national product. More than 100 percent of the deterioration of the current account deficit is accounted for by a drop in the level of national saving, and the US net national saving rate—the savings relative to income that Americans are putting aside for the future—was 1.3 percent of our national income in the latest available data, the lowest level since the postwar period and about 35 percent of the lowest level previously reached in the early 1990s, when inadequate saving and dependence on foreign capital were an economic preoccupation.

Though it does seem we have economic problems to solve, does that mean it is not wise to invest in stocks? There are generally economic problems to solve, but the stock market feeds on optimism about the future. Why should this time be different? We went through a bear market from 2000 through 2003. We have far better values to take advantage of. My sense is hold the course with a defensive portfolio.

Gokhale Smetters wrote: In the meantime, nobody is talking about the huge impact this deficit has on the middle class in the form of pass-down state and local taxes, fees, user charges, all regressive financial punishments, as state and local services are being cutback more and more due to decrease in Federal programs.

I am. I usually refer to it as "trickle-down economics in action", or "trickle-down economics that actually works". My latest example can be seen here: http://liberalhyperbole.blogspot.com/2004/07/further-triumph-of-trickle-down.html
Others were such things as my hometown cranking up its bus fare to one of the highest in the nation, while cutting routes, and other services cut. They've even cut out completely the department that was supposed to be helping the state transition to more Internet services. Welcome back to the 20th century.

Around here, public libraries are already introducing cost-cutting and revenue-boosting measures like:

- cutting staff (but most have self-checkouts now)
- hiking late fees
- shortening circulation periods
- requiring library cards for public internet access and enforcement of time limits
- charging for holds (e.g. 3 free, then $1/each)
- charging for DVD rentals (e.g. $1.50/3 days)

When asking a local library person about the latter, the laconic response was "yeah, but it's still a better deal than Blockbuster".

I can only suspect that procurement of new titles and replacement of worn-out items also suffers.

What is next -- soda vending machines and membership fees?

This is just an isolated example, but if those trends continue, things will become profoundly unpleasant for almost everybody, as the quality of all those small things in life goes down the drain.

I guess that from a campaign perspective, the thing that bugs me the most is seeing cuts of Bush's stump speeches when he claims that he "made the tax cuts for everyone who pays taxes; we didn't pick winners and losers!" But the point of the study is that they _did_ pick winners and losers, and 99% of taxpayers are losers. This fact is not amplified or clarified by the news orgs, and Bush just keeps on making the claim.

And its not just here that Bush is an arbitrary picker 'n' chooser. There's environmental and science policy, in which he chooses whatever small minority of scientists are willing to put their names on his position and puts them on committees to draft policy or advise him (to take his own advice, of course). It's insane!

Why the Democrats seem to be unable to make use of this is beyond me. Couldn't they use Repub methods like "push polls" to ask questions like: "Are you in favor of/against subjecting children to higher mercury levels in drinking water?"

Just to keep us on the same page, and for those posters worried about deficits and fiscal stimulus:

The Elephant in the living room is a problem because Bush's tax cuts are permanent (for all practical purposes until we get a better US admin). And, all in all, they will bring in much less than required to pay for planned federal spending and pay back the SS trust fund for the Baby Boomers' rainy day. Since permanent tax cuts won't do much to increase aggregate supply (outside of the discredited super-Laffer-supply-side fantasy land), they won't generate nearly enough increased economic activity to pay for themselves. And that is where the doomsday scenarios come in.

That is different that issue or whether, as a counter cyclical policy, the tax cuts have improved economic conditions during the recent recession. They haven't done very much because they were so poorly designed for that purpose. In fact they were not designed for that purpose at all, they were (supposedly) designed to liquidate the humungous federal surpluses that were a sure long term bet from late 1999 until Spring 2001. But the recent and current deficits are not an Elephant in the living room problem.

So let's not confuse the two issues.

Don't look now, but the NY Fed's Empire State factory index just registered its 2nd biggest decline ever. Empire is not the be-all and end-all of leading indicators, but it comes at a bad time.

Good news is, June data on foreign capital inflows show that the US can still borrow just about any amount we need.

"According to the new report from the Congressional Budget Office, about two-thirds of the benefits from the tax cuts, enacted in 2001 and 2003, went to households in the top fifth of earnings, with an average income of $203,740...."

And what percentage of total income taxes are paid by those with the top fifth of earnings?

Could it be...oh, maybe a little more than three-quarters?

http://www.taxfoundation.org/prtopincometable.html

In other words, people who paid more than three-quarters of federal income taxes got two-thirds of the tax cut.

What an outrage! ;-)

"Around here, public libraries are already introducing cost-cutting and revenue-boosting measures..."

"This is just an isolated example, but if those trends continue, things will become profoundly unpleasant for almost everybody, as the quality of all those small things in life goes down the drain."

It may go "down the drain" for those people who use the library to a greater extent than they pay taxes for it. But the quality of life will go up for those who pay taxes for the library more than they use it.

Yeah, Mark's right: Instead of investing the money in facilities that benefit and educate our community and our (and others') children, we should take that money and invest it in alarm systems and jails. Let those poor kids buy their own books, 'cause I need taller fences and a big SUV!

It's so much easier to destroy than to create.

Yeah, Mark's right: Instead of investing the money in facilities that benefit and educate our community and our (and others') children, we should take that money and invest it in alarm systems and jails. Let those poor kids buy their own books, 'cause I need taller fences and a big SUV!

It's so much easier to destroy than to create.

Mark Bahner: Be assured that I'm paying quite a bit of taxes. Problem is, they don't go to the library, but to energy and other scams, prison operations, war-related expenses, dealing with "mysterious" state budget shortfalls, etc. I don't get a tax cut compensating for reduced public services or new service "fees".

And what say you about almost doubled business license fees? "It may go "down the drain" for those people who get business licenses to a greater extent than they pay taxes for them."?

"Instead of investing the money in facilities that benefit and educate our community and our (and others') children, we should take that money and invest it in alarm systems and jails."

No one is preventing you from donating to your public library, Pete. So for every penny that is cut from the government funding for your local public library, you and people who feel the same way you do can *add* one penny--or two, or three, or more--to your public library.