DescentBB

I found this article by Ben Stein in the New York Times. I don’t really have any commentary on it other than I thought it was interesting. I thought I would share.

If I posted a similar story that I found a few months ago, I would have been called either biased or a kook.

Two things jump out at me from that.
First, the statement that:

\"Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay, or as a percentage of what the government needs to close the deficit gap.\"

First look at the part I put in bold, the idea that whatever the government needs to collect to make up the gap is somehow a legitimate request is ludicrous! Should everyones boss increase their paycheck every time they find themselves wanting to get rid of the debt they ran up spending on frivolous things or because they managed their money very poorly?!?
Of course not! So remove that from the statement because it is poor logic that would make that a criteria for deciding how much revenue they government should confiscate!

So we are left with:

\"Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay.\"

Now, should your boss be compelled by law to pay you more simply because he can afford to pay you more?
Of course not, that would be quite un-american!
So you have to be willing to decide how much does the government really need vs. how much does it want! You have to make spending a part of any solution!

So this brings us to the other thing that jumped out at me, the way he reacted to the claim:

\"“Don’t raise taxes. Cut spending.”
The sad fact is that spending rises every year, no matter what people want or say they want. Every president and every member of Congress promises to cut “needless” spending. But spending has risen every year since 1940 except for a few years after World War II and a brief period after the Korean War.
The imperatives for spending are built into the system, and now, with entitlements expanding rapidly, increased spending is locked in. Medicare, Social Security, interest on the debt — all are growing like mad, and how they will ever be stopped or slowed is beyond imagining......\"

\"Waaa, Waaaa, you can't stop spending!\" Ben Stein cried. Well there is a big difference between stopping it and controlling it and he abandoned the distinction completely!

His complete surrender of common sense (which is rare for Ben Stein) when he for some reason becomes an apologist for government spending excesses by lumping the inevitable spending increases that can easily be justified with all other pork barrel created spending!

Basically I think he's feeling sorry for the middle class and poor when he compares their budget to that of the wealthy but his kneejerk reaction won't do anything to bridge the gap!
You could let the government tax the wealthy until the budget was balanced or even until all debt was repaid as well and only two things will come of it.
One, the rich will retreat and hide their wealth using their government lackeys to create hiding places for them. Democrat lackeys accept campaign bribes just like republican lackeys do so don't fool yourself by thinking parties matter either!
And two, government will increase the spending even more so that the extra tax revenue soon becomes insufficient to maintain the balanced budget and the debt will once again creep up!

It's fine to seek ways to bridge the gap but he hasn't offered a solution by suggesting the govenment start confiscating greater ammounts of money! He's merely raised the bar to a new high and the spending will rise up to meet the new benchmarks in no time!

You have to address the spending if you want to close the gap on any kind of permanent basis! There is no way around it. By all means go ahead and create your wealth tax to transfer the wealth but if you don't put the spending beast on a diet you have done nothing but assign him a new eating schedule with an open ended supply of calories!
The beast doesn't care that twenty hands each carried him twenty pounds of meat last week while twenty hands stood by with nothing to feed him.... and this week forty hands carried him ten pounds each.... he only knows he will eat continuously until there is no food and then he growls for more!
If the solution is to bring him more food every time he growls eventually even the poor will be crying the taxman blues...

so tell Ben Stein he needs to think a little deeper if he wants to do more than just buy himself a little temporary feel good.

Good Post Will.

One thing which amazed me recently; I downloaded some bull★■◆● movie about how federal tax in the USA is actually illegal. They interviewed a LOT of Americans, and every single one of them simpyl said that if they had a choice, they would not pay any tax at all.

That really surprised me: these idiots are so greedy and so small minded that they think theiur society would continue to function without any taxation at all. That is plainly ridiculous, and I was shocked by how many people believe that.

It seems \"Tax is Unamerican\" is a common cry over there, and yet, tax is necessary to run the services the population requires, unless the government is to turn socialist and monopolise quite a few businesses to fund its own operations. I think you already rejected that method of government pretty strongly.

I would say that \"unfair and excessive tax is Unamerican.\"

or: show them what they're paying for in terms of government services and they would likely pay into it.

The whole reason people don't want to pay taxes is because they don't feel they are getting their money's worth.

Will.. nice post and all. but this time, I think i'd side with the economists on this one.

Ferno wrote:I think i'd side with the economists on this one.

Which economists? You'll find they don't all agree.

Mobius wrote: It seems "Tax is Unamerican" is a common cry over there, and yet, tax is necessary to run the services the population requires, unless the government is to turn socialist and monopolise quite a few businesses to fund its own operations.

Hrm, I'm going to assume you haven't taken any American History over there in sheepland. IIRC, the United States was founded by a bunch of aristocratic, slave-owning, white males who didn't want to pay their taxes.

Correct me if I'm wrong.

Also, it has been a while since I've gone through the US Constitution, but I don't think it has anything in there allowing the FEDERAL government to tax, only local/state governments.

Nevermind, read Article I, Section 8.

Keep in mind, the founders of the United States wanted very much to maximize personal freedoms and state freedoms while minimizing Federal powers, evidence of this can be found in the last Amendment of the Bill of Rights.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

The 16th Amendment, the one that specifically allows Congress to tax incomes, was not ratified until 1913.

Ferno wrote:Will.. nice post and all. but this time, I think i'd side with the economists on this one.

I'll side with the ones who's economic plan recognizes the fact that tax revenue doesn't flow from an inexhaustable magic faucet that just needs to be opened a little more every time the government spends itself into debt or a political party needs to buy some more votes.

Hmm. At first skimming the article, I started writing an angry reply at Mr. stein. But now I think I get his article: He's a republican who has finally seen through the bull★■◆● policies the republicans have been spewing for years: that supply-side economics is a farce, and we need to return to fiscal discipline. I just disagree with his methods, specifically the idea we can't cut spending.

The third argument that kind, well-meaning people made in response to the idea of rolling back the tax cuts was this: “Don’t raise taxes. Cut spending.”

The sad fact is that spending rises every year, no matter what people want or say they want.

Comments like his are the most detrimental towards progress and change I can think of. He's basically giving up. He refuses to attempt to change something negative just because it has a long history of existing.

I'm sure in the 1830s nobody thought 40 years later slavery would be abolished.

Yeah, let's just let the govenment continue to waste money, and not even try!

The fourth argument in response to my suggestion was that “deficits don’t matter.”

There is something to this. One would think that big deficits would be highly inflationary, according to Keynesian economics.

LOL! It's true we would expect inflation from running constant deficits, but there are so many other factors that could offset the inflation introduced by deficit spending! One obvious example is the devaluation of the dollar as a result of said deficit spending! This guy doens't know a thing about economics, I'm sorry.

Plus the fact that Keynsian economics has NEVER been properly instituted. Keynsian economics calls for savings in time of boom, so we can afford to deficit spend while in times of bust. This smooths out the business cycle, which is the whole point of Keynsian economics.

THIS brings me back to Mr. Buffett. If, in fact, it’s all just a giveaway to the rich masquerading as a new way of stimulating the economy and balancing the budget, please, Mr. Bush, let’s rethink it

That's EXACTLY what supply side economics was. A theory that Mr. Laffer may have originally thought had merit, but later has shown to have absolutely no empirical basis, as shown by the Reagan and Bush tax cuts. The rich well to do republicans in the 80s jumped on Laffer's bandwagon so they could stuff more money in their pockets. It was one of those fun ideas that we all want to beleive, that somehow cutting taxes would increase tax revenue. But it's as wrong in the obvious way you think it's wrong. How can reducing revenue increase it? It's amazing what you can fool the public with! Heck, I wouldn't be surprised if the basis for makign up all the WMD crap was after they realized the wool they pulled over half the countries' eyes in regards to supply side economics.

Heck, Bush's own chief of economic staff wrote a section in his college textbook called \"Charletons and Cranks\" which was all about debunking supply side economics, but \"surprisingly\" this section disappeared from his book when Bush hired him as his economic advisor! Oh, then there is the fact Bush Sr. called Reagan's supply side econ \"voodoo economics\" in the 1980 republican primary.

Go Mr Stein! Finally a republican seeing the light, able to see that his party is not perfect. While I disagree on some of his points, I applaud his spirit and general direction.

Mobius,

Federal income tax is not illegal, it is simply voluntary. There is no illegality in not paying it, unless you are a corporation.

No tax at all..well that would be dumb. Public utilities need to work on tax money. However, I would bet that the people who answered that question assumed income and sales tax, gas tax, etc, not taxes that fund munincipalities.

(People are still dumb, tho' )

Birdseye wrote:Plus the fact that Keynsian economics has NEVER been properly instituted. Keynsian economics calls for savings in time of boom, so we can afford to deficit spend while in times of bust. This smooths out the business cycle, which is the whole point of Keynsian economics.

Hmm, plenty of interesting info for me to read here, seeing as I have studied precious little macroeconomics.
http://en.wikipedia.org/wiki/Keynesian_economics
and
http://en.wikipedia.org/wiki/Austrian_economics

Aww c'mon Birds; give the Keynesian dissenters a little bit of credit , won't you. Seems the Nobel committee thought enough of some of these ideas to give the prize to both Hayek and Friedman in recent years.

Certainly can't argue with your point about fiscal discipline. I have an idea. Let's force the folks who vote for spending have to run an extended gauntlet of informed taxpayers before their bills can be considered. Perhaps then we can uncover the strength of their resolve to spend the public dime.

Aww c'mon Birds; give the Keynesian dissenters a little bit of credit , won't you. Seems the Nobel committee thought enough of some of these ideas to give the prize to both Hayek and Friedman in recent years.

Which dissenters? There are many different groups.

Also, I don't think you get the argument here. The article wasn't about Keynsians vs. Keynsian dissenters. All presidents since Keynes' theory came out have subscribed to Keynsian economics in theory (its most core theory makes no specific reccomendations of policy, so two Keynsians usually disagree on something but agree in core philosophy), but not all have agreed on policy.

Keynes' basic contribution was that the government has the ability to positively impact the economy via smoothing out the business cycle.

That Wikidpedia article is poorly written. One would think Keynsians are against any laissez-faire policies. To the contrary, you could be a Keynsian and prefer government stays out of business regulations. They should have used the word Monetarist, which is what Milton Friedman is. LF usually isn't thought of as a 99% blanket approach in econonmic policy, it's usually used in a conversation to denote that one prefers a hands off approach in that specific situation, not in almost all econonmic situations. There's a word for that: Monetarist. http://en.wikipedia.org/wiki/Monetarism

Also, Friedman largely accepts Keynsian Economics, he just had some valuable criticisms towards the implementation of it at the time, which I largely agree with.

I haven't studied the Austrian School of economics, that may indeed have some interesting points. But I doubt you know any of them, you just pasted some stuff at me as a devil's advocate without any real knowledge.

Birdseye wrote:But I doubt you know any of them, you just pasted some stuff at me as a devil's advocate without any real knowledge.

I believe I admitted as much in the first line of my post.

dissent wrote:... seeing as I have studied precious little macroeconomics.

Just linked a few things that I thought would be interesting.

Birdseye wrote:

The fourth argument in response to my suggestion was that “deficits don’t matter.”

There is something to this. One would think that big deficits would be highly inflationary, according to Keynesian economics.

LOL! It's true we would expect inflation from running constant deficits, but there are so many other factors that could offset the inflation introduced by deficit spending! One obvious example is the devaluation of the dollar as a result of said deficit spending! This guy doens't know a thing about economics, I'm sorry.

He graduated with honors from Columbia with a B.B.A. in Economics. He was a poverty lawyer for years, and was then a trial lawyer for the FTC. I'd say he knows a little bit about economics.

Plus the fact that Keynsian economics has NEVER been properly instituted. Keynsian economics calls for savings in time of boom, so we can afford to deficit spend while in times of bust. This smooths out the business cycle, which is the whole point of Keynsian economics.

Keynesian economics doesn't call for "savings" during a boom as much as it calls for increased taxes during a boom and decreased taxes during a bust, which we do have thanks to our progressive tax system. Well, at least for individuals, not so much for corporations. But yeah, smoothing out the business cycle is always a good thing, and we definitely don't have much Keynesian thinking going on right now. It also doesn't help that Greenspan's Fed kept trying to "make the pie higher" (yay Bushisms!) for years without abandon, exascerbating the radical swings in the economy. If they'd just have stuck to micromanaging short-term monetary policy to maintain a stable growth rate (which despite what Greenspan said is NOT what he was attempting to achieve), I think we'd be in a much different position today.

THIS brings me back to Mr. Buffett. If, in fact, it’s all just a giveaway to the rich masquerading as a new way of stimulating the economy and balancing the budget, please, Mr. Bush, let’s rethink it

That's EXACTLY what supply side economics was. A theory that Mr. Laffer may have originally thought had merit, but later has shown to have absolutely no empirical basis, as shown by the Reagan and Bush tax cuts. The rich well to do republicans in the 80s jumped on Laffer's bandwagon so they could stuff more money in their pockets. It was one of those fun ideas that we all want to beleive, that somehow cutting taxes would increase tax revenue. But it's as wrong in the obvious way you think it's wrong. How can reducing revenue increase it? It's amazing what you can fool the public with! Heck, I wouldn't be surprised if the basis for makign up all the WMD crap was after they realized the wool they pulled over half the countries' eyes in regards to supply side economics.

Heck, Bush's own chief of economic staff wrote a section in his college textbook called "Charletons and Cranks" which was all about debunking supply side economics, but "surprisingly" this section disappeared from his book when Bush hired him as his economic advisor! Oh, then there is the fact Bush Sr. called Reagan's supply side econ "voodoo economics" in the 1980 republican primary.

Decrease the effective tax rate across the board, and you see increased spending as people have more disposable income, which until a point leads to higher tax revenue. You can actually prove the Laffer curve's validity mathematically, but it is most certainly not the panacea it was made out to be. I think that its effects, if significantly measurable at all, are trumped by a lot more powerful economic factors.

He graduated with honors from Columbia with a B.B.A. in Economics. He was a poverty lawyer for years, and was then a trial lawyer for the FTC. I'd say he knows a little bit about economics.

He missed a class, or has forgotten. Deficit spending inflation can be offset by devaluation in currency (which is what we see right now, and it's not really something economists are having a heated debate about).

Keynesian economics doesn't call for \"savings\" during a boom as much as it calls for increased taxes during a boom and decreased taxes during a bust, which we do have thanks to our progressive tax system. Well, at least for individuals, not so much for corporations. But yeah, smoothing out the business cycle is always a good thing, and we definitely don't have much Keynesian thinking going on right now. It also doesn't help that Greenspan's Fed kept trying to \"make the pie higher\" (yay Bushisms!) for years without abandon, exascerbating the radical swings in the economy. If they'd just have stuck to micromanaging short-term monetary policy to maintain a stable growth rate (which despite what Greenspan said is NOT what he was attempting to achieve), I think we'd be in a much different position today.

This is not an accurate portrayal of Keynesian economics. Taxes are but one mechanism for the government to use in trying to positively affect the economy.

I haven't been paying attention to Greenspans' comments much, but I agreed with all his moves in terms of the interest rate. He seemed to lower it at the correct time (bust), and raise it when needed to be raised (during boom). This is also considered a Keynesian mechanism (affecting the supply of money). One could decide to not change budget or taxes, and concentrate solely on changing the money supply (amount printed and the prime interest rate) and they would still be considered to be using Keynesian economics.

In the time of bust, a temporary across the board tax credit (everyone getting the same amount) would be a useful mechanism to keep the economy going because of the poor's high MPC (Read up on Keynesian Multiplier effect). But I don't think of this as constantly raising or lowerign the \"permanent\" tax scheme. and I don't advocate raising taxes in times of boom, I'd rather raise the interest rate and save/invest the budget surplus.

Decrease the effective tax rate across the board, and you see increased spending as people have more disposable income, which until a point leads to higher tax revenue. You can actually prove the Laffer curve's validity mathematically, but it is most certainly not the panacea it was made out to be. I think that its effects, if significantly measurable at all, are trumped by a lot more powerful economic factors.

You can make a lot of fanciful, optimistic predictions using math, but Economics is not a purely mathmatical science -- it's about empirical results. In the case of Supply Side Economics, it's been proven as a farce. The empirical results are in, and it's not even a debate.

Birdseye wrote:This is not an accurate portrayal of Keynesian economics. Taxes are but one mechanism for the government to use in trying to positively affect the economy.

I haven't been paying attention to Greenspans' comments much, but I agreed with all his moves in terms of the interest rate. He seemed to lower it at the correct time (bust), and raise it when needed to be raised (during boom). This is also considered a Keynesian mechanism (affecting the supply of money). One could decide to not change budget or taxes, and concentrate solely on changing the money supply (amount printed and the prime interest rate) and they would still be considered to be using Keynesian economics.

My point was more that Greenspan was attempting to nudge the economy's growth up a notch every time the Fed changed interest rates. I didn't say whether that was good or bad (in fact, I liked Greenspan's policies), just that his interests weren't solely in minimizing cyclical damage.

In the time of bust, a temporary across the board tax credit (everyone getting the same amount) would be a useful mechanism to keep the economy going because of the poor's high MPC (Read up on Keynesian Multiplier effect). But I don't think of this as constantly raising or lowerign the "permanent" tax scheme. and I don't advocate raising taxes in times of boom, I'd rather raise the interest rate and save/invest the budget surplus.

I do know what an MPC is. The truth is that the MPC curve isn't a decreasing function, though; you do have to admit, regardless of your derision for supply-side economics' plentiful hand-waving, that there's an inflection point in the curve about where the upper class begins. It's more of a parabola, although heavily skewed right.

What I'm saying is that rich people have a higher MPC than middle class people, as do poor people. But the contrast between the poor's MPC and the middle class's MPC is much more pronounced than that of the difference between the middle and upper classes'.

Decrease the effective tax rate across the board, and you see increased spending as people have more disposable income, which until a point leads to higher tax revenue. You can actually prove the Laffer curve's validity mathematically, but it is most certainly not the panacea it was made out to be. I think that its effects, if significantly measurable at all, are trumped by a lot more powerful economic factors.

You can make a lot of fanciful, optimistic predictions using math, but Economics is not a purely mathmatical science -- it's about empirical results. In the case of Supply Side Economics, it's been proven as a farce. The empirical results are in, and it's not even a debate.

I'll address this later.

What specific policy are you advocating?

I'm not... I'm more of a positive type. I leave the normative stuff up to politicos.

I'm not comfortable taking complete sides yet. I'm just arguing that Ben Stein does have a clue what he's talking about, and Keynesian economics does not explain all (stagflation, anyone?).

yeah, nobody said keynesian econ solved all. it would have been helpful if you made yourself a bit clearer earlier you prolly needed to make new threads, as your points ended up being pretty unrelated to the threads at hand

Testiculese wrote:No tax at all..well that would be dumb. Public utilities need to work on tax money. However, I would bet that the people who answered that question assumed income and sales tax, gas tax, etc, not taxes that fund munincipalities.

Hmm... I was under the impression that they're just people that would prefer to just not pay any taxes, if they had a choice.
Them, natural of induhviduals, would think 'let the other guys pay taxes; I have my own problems'.
So no Mobius, I wouldn't suspect the public of thinking that their government wouldn't function without tax. I purely suspect them of being immensely greedy or idiotic.

Testiculese wrote:People are still dumb, tho'

Now there's something that we can all agree on!