The Obama Tax cuts for the rich

[billcoe]

http://www.huffingtonpost.com/al-franken/the-hardest-vote-ive-take_b_796716.html

 

Same-same as it ever was.

 

Short version if you don't want to read it, this is all Obama's fault. Al Franken on why he voted for the Obama Tax Cuts for the rich (Franken say's it's all Obama's fault, which is a change from it being Bush's fault at least = progress!). Of course, government spending is out of control with no end in sight and not a word on that either from Al. What respect I did have for the man has diminished dramatically. Looks like George Soros, the Kocks and and all the rich folks will give Big Al the Christmas reach around he so desperately seems to need. The demsolibs seem to know which side their bread is buttered, maybe they learned that from the Rebublifucks? Hey, it's only money, keep sending yours right in there so they can continue to spend it irresponsibly for you.

 

How your senators voted: http://s.wsj.net/public/resources/documents/st_senatevotetax1210a_20101204.html

 

Short version: all 4 senators in Wa/Or voted (drum roll here) "YES! Those poor rich folks need a break and we can worry about balancing the budget just before the next election."

 

Fortunately, this graphic will help us know where all that money will be going. As you can see, I'll be investing porn whereas Pat Gallager will be loading up on mayonnaise. Maybe this will "trickle down" and I can eventually afford a butler for my butler next go round.

[Jim]

Pretty dismal. The figgin' Repubs just kept fighting this from reaching the floor during this past year and the Dems were too chickeship to fight for it. Thanks everyone. Amazing how when things get balled up the upper 2% still, somehow, manage to come out ahead.

[JayB]

http://www.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf

 

"...we find that a one percent increase in the net of tax share is associated with an 0.7 percent reduction in incomes earned by people in the top 0.1 percent of the income distribution, which would imply that if we were to raise top marginal tax rates further on these taxpayers, the increase in deadweight loss would be substantially larger than the increase in revenue raised [emphasis added]. However, we find essentially no evidence at all of any responsiveness of people below the top 0.1 percent..."

[PeakChaser]

The subject of economics has been covered intensively by the world press over the past decade. At first glance economics may seem unenchanting, however its study is a necessity for any one wishing to intellectually advance beyond their childhood. While it is becoming a hot topic for debate, economics is not given the credit if deserves for inspiring many of the worlds famous painters. It is estimated that that economics is thought about eight times every day by so called 'babies', whom I can say no more about due to legal restrictions. In the light of this I will break down the issues in order to give each of them the thought that they fully deserve

 

Social Factors

As Reflected in classical mythology society is complicated. The immortal and indispensable phrase ‘honesty is the best policy’ [1] globalised an issue which had remained buried in the hearts of our ancestors for centuries. More a melody to societies dysfunctions than a parody of the self, economics helps to provide some sort of equilibrium in this world of ever changing, always yearning chaos.

 

Some analysts have been tempted to disregard economics. I haven’t. It breaks the mould, shattering man's misunderstanding of man.

 

Economic Factors

Increasingly economic growth and innovation are being attributed to economics. We will primarily be focusing on the Inter-Spam model. Taking special care to highlight the role of economics within the vast framework which this provides.

 

 

It is apparent from the graph that the influence of economics is strong. What is the secret to its strength? Even a child could work out that oil prices has always depended upon economics to a certain extent, but now more that ever. Assumptions made by traders have caused uncertainty amongst the private sector.

 

Political Factors

Politics - smolitics! Looking at the spectrum represented by a single political party can be reminiscent of comparing the vote of the man in the street with that of one more accustomed to economics.

 

To quote a legend in their own life time, Francis Woodpecker 'The success of any political system can only truly be assessed once the fat lady has sung.' [2] This clearly illustrates the primary concern of those involved with economics. I feel strongly that if politicians spent less time thinking about economics and put more effort into their family life, that we would have a very different country.

 

Why did economics cross the road? - To get to the other side! Just my little joke, but lets hope that economics doesn't inspire similar hilarity in the next elections.

Conclusion

 

How much responsibility lies with economics? We can say that economics is both a need and a want. It brings peace, invades where necessary and it brings the best out in people.

 

I shall give the final word to star Britney J. Fox: 'I love economics? Yes! Hurray for economics!' [3]

 

 

 

--------------------------------------------------------------------------------

 

[1] Traditional - possibly first said by King Arthor... but probably not.

 

[2] Woodpecker - Serving The Greats - 1990 Palmerston House Publishing

 

[3] Go mad for economics - Issue 132 - Kendeal Books

 

[prole]

"...we find that a one percent increase in the net of tax share is associated with an 0.7 percent reduction in incomes earned by people in the top 0.1 percent of the income distribution ...

 

[video:youtube]

[j_b]

Has Jay been cherry-picking again?

 

Raising taxes on the richest one percent appears to increase tax revenues without lowering economic growth.

[billcoe]

Confess, you don't seriously read that stuff do ya JayB? LOL Nice links from both J's, thanks to you both.

 

PS, I fell asleep in the middle but woke up for the conclusion of your .edu link Jayb. 3 things which relate to this discussion:

 

1st) In many peoples opinion (Robert Rubens, mine, etc) what keeps the tax system going is the facade or reasonable expectation of fairness. Although some say that the rich are not paying their fair share and there are exceptions, most of us know that they are. A quick look at a chart would confirm this to anyone with half a brain. If the perception were to become widespread that the rich were riding for free on everyone else, this system would fall apart.

 

2nd) I have seen several papers which have correlated the concentration of wealth at the top to depressions. (although it is true that I'm too lazy to go find this study and give you a link) Pulling all that extra money out of the hands of the many and putting it into the hands of the few seems to be something which the current administrations are trying to allow without the hard crash by pumping cash into the system. Yeah, there: I said it.

 

3rd) Economists, (like those who put together your interesting and complex study which appears to conclude that raising tax on the top earners is counterproductive) as a profession and a group, are a pretty fucked up bunch. They pontificate and pitch models of why this or that occurred, yet by universal claim they are much better at driving by looking in the rear view mirror and explaining what they just saw, and have a difficult time telling you what the view is going to be in even a very short time. Rare is the rich economist. Although there are exceptions of course.

 

Certainly as JB's real link concludes there isn't agreement by experts on your links conclusion that raising tax rates on the top tier folks is counterproductive. Dropping the rate from 91% to 70% (Kennedys bill) was am obvious and sure winner, but as said in jbs article: "reducing the top tax rate from 70% to 50% is probably a revenue gainer and surely not much of a loser. From 50% to 28% is, I think, very different: a big revenue loser."

 

Regards:

[ivan]

"the spice most flow"

[j_b]

Although some say that the rich are not paying their fair share and there are exceptions, most of us know that they are.

 

they are certainly not paying their fair share. Most corporations don't pay taxes and most wealthy people pay a much smaller fraction of their revenues in taxes than the middle class does. Get your head out your ass, Billcoe.

 

 

 

[JayB]

Hey Bill:

 

2)That's an interesting idea, but I'd have to take a look at the paper to see if they've got something more compelling than a set of statistical aggregates and an R-squared value from a regression analysis to offer.

 

My first take is that they've probably captured the typical dynamics of a boom-bust cycle, where you get an investment mania followed by a crash. It could also be capturing political processes where the distribution of economic rewards is increasingly determined by a centralized political process and the resulting capital misallocation leads to an economic contraction, etc.

 

3) Completely agree with you on 3 with a few important exceptions. You might enjoy the following links:

 

http://blogs.ft.com/maverecon/2009/03/the-unfortunate-uselessness-of-most-state-of-the-art-academic-monetary-economics/

 

http://democrats.science.house.gov/Media/file/Commdocs/hearings/2009/Oversight/10sep/Colander_Testimony.pdf

 

 

 

[j_b]

3) Completely agree with you on 3 with a few important exceptions.

 

When Zombies Win

By PAUL KRUGMAN

 

When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.

Fred R. Conrad/The New York Times

 

How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

 

The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies?

 

For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.

 

Now, maybe it wasn’t possible for President Obama to get more in the face of Congressional skepticism about government. But even if that’s true, it only demonstrates the continuing hold of a failed doctrine over our politics.

 

It’s also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation — which excludes volatile food and energy prices — now at a half-century low.

 

The free-market fundamentalists have been as wrong about events abroad as they have about events in America — and suffered equally few consequences. “Ireland,” declared George Osborne in 2006, “stands as a shining example of the art of the possible in long-term economic policymaking.” Whoops. But Mr. Osborne is now Britain’s top economic official.

 

And in his new position, he’s setting out to emulate the austerity policies Ireland implemented after its bubble burst. After all, conservatives on both sides of the Atlantic spent much of the past year hailing Irish austerity as a resounding success. “The Irish approach worked in 1987-89 — and it’s working now,” declared Alan Reynolds of the Cato Institute last June. Whoops, again.

 

But such failures don’t seem to matter. To borrow the title of a recent book by the Australian economist John Quiggin on doctrines that the crisis should have killed but didn’t, we’re still — perhaps more than ever — ruled by “zombie economics.” Why?

 

Part of the answer, surely, is that people who should have been trying to slay zombie ideas have tried to compromise with them instead. And this is especially, though not only, true of the president.

 

People tend to forget that Ronald Reagan often gave ground on policy substance — most notably, he ended up enacting multiple tax increases. But he never wavered on ideas, never backed down from the position that his ideology was right and his opponents were wrong.

 

President Obama, by contrast, has consistently tried to reach across the aisle by lending cover to right-wing myths. He has praised Reagan for restoring American dynamism (when was the last time you heard a Republican praising F.D.R.?), adopted G.O.P. rhetoric about the need for the government to tighten its belt even in the face of recession, offered symbolic freezes on spending and federal wages.

 

None of this stopped the right from denouncing him as a socialist. But it helped empower bad ideas, in ways that can do quite immediate harm. Right now Mr. Obama is hailing the tax-cut deal as a boost to the economy — but Republicans are already talking about spending cuts that would offset any positive effects from the deal. And how effectively can he oppose these demands, when he himself has embraced the rhetoric of belt-tightening?

 

Yes, politics is the art of the possible. We all understand the need to deal with one’s political enemies. But it’s one thing to make deals to advance your goals; it’s another to open the door to zombie ideas. When you do that, the zombies end up eating your brain — and quite possibly your economy too.

 

http://www.nytimes.com/2010/12/20/opinion/20krugman.html?ref=paulkrugman

[JayB]

Key quote from the first link:

 

"The common practice of solving a dynamic general equilibrium model of a(n) (often competitive) market economy by solving an associated programming problem, that is, an optimisation problem, is evidence of the fatal confusion in the minds of much of the economics profession between shadow prices and market prices and between transversality conditions that are an integral part of the solution to an optimisation problem and the long-term expectations that characterise the behaviour of decentralised asset markets. The efficient markets hypothesis assumes that there is a friendly auctioneer at the end of time – a God-like father figure – who makes sure that nothing untoward happens with long-term price expectations or (in a complete markets model) with the present discounted value of terminal asset stocks or financial wealth.

 

What this shows, not for the first time, is that models of the economy that incorporate the EMH – and this includes the complete markets core of the New Classical and New Keynesian macroeconomics – are not models of decentralised market economies, but models of a centrally planned economy.

 

The friendly auctioneer at the end of time, who ensures that the right terminal boundary conditions are imposed to preclude, for instance, rational speculative bubbles, is none other than the omniscient, omnipotent and benevolent central planner. No wonder modern macroeconomics is in such bad shape."

 

 

[prole]

Gotta love it. As the picture becomes clearer and the ideological fog over what has amounted to the open swindling of a nation for couple of generations lifts, you resort to cheap obfuscation and more of the same Hayekian horse-manure. Which phase of the acceptance process is this? Looks like we're still in the denial phase to me.

[JayB]

Anyone trying to tether Hayek to DSGE modeling doesn't know much about either.

[prole]

Looks like the same Road to Serfdom crap you're always peddling to me.

[tvashtarkatena]

Key quote from the first link:

 

"The common practice of solving a dynamic general equilibrium model of a(n) (often competitive) market economy by solving an associated programming problem, that is, an optimisation problem, is evidence of the fatal confusion in the minds of much of the economics profession between shadow prices and market prices and between transversality conditions that are an integral part of the solution to an optimisation problem and the long-term expectations that characterise the behaviour of decentralised asset markets....

 

riveting!

 

[JayB]

Looks like the same Road to Serfdom crap you're always peddling to me.

 

That's because anything other than direct quotes from Mao's Little Red Book look like that to you.

 

All that the author of the above quote is doing is pointing out that the reason that most mainstream economists were so profoundly useless in the last crisis is that sometime around the mid-1940's they got lost in an idealized, purely mathematical meta-world that resembled a market economy about as much as "World of Warcraft" resembles the real world.

 

 

[prole]

All that the author of the above quote is doing is pointing out that the reason that most mainstream economists were so profoundly useless in the last crisis is that sometime around the mid-1940's they got lost in an idealized, purely mathematical meta-world that resembled a market economy about as much as "World of Warcraft" resembles the real world.

 

Glad you're coming around. Hasten thee to the nearest tattoo parlor and have it permanently inscribed on your forehead.

[KaskadskyjKozak]

Looks like the same Road to Serfdom crap you're always peddling to me.

 

That's because anything other than direct quotes from Mao's Little Red Book look like that to you.

 

All that the author of the above quote is doing is pointing out that the reason that most mainstream economists were so profoundly useless in the last crisis is that sometime around the mid-1940's they got lost in an idealized, purely mathematical meta-world that resembled a market economy about as much as "World of Warcraft" resembles the real world.

 

 

[prole]

I wonder if it concerns Jay that the only people that give him the time of day around here are Billcoe, Fairweather, and Kojak.

[Jim]

All that the author of the above quote is doing is pointing out that the reason that most mainstream economists were so profoundly useless in the last crisis is that sometime around the mid-1940's they got lost in an idealized, purely mathematical meta-world that resembled a market economy about as much as "World of Warcraft" resembles the real world.

 

This is not some aberration of the market system, just the latest manifestation. Private industry has a strong background in bailouts: http://www.propublica.org/special/government-bailouts

 

There will be another emerging trend soon enough where the Masters of the Universe figure out a way to game the system, make a ton of cash, and then ask for public money. All the while the Wall Street Journal will be full of Op-Eds on how this doesn't represent the true market system. My guess is that the next trend will make use of Ouija Boards.

[JayB]

All that the author of the above quote is doing is pointing out that the reason that most mainstream economists were so profoundly useless in the last crisis is that sometime around the mid-1940's they got lost in an idealized, purely mathematical meta-world that resembled a market economy about as much as "World of Warcraft" resembles the real world.

 

Glad you're coming around. Hasten thee to the nearest tattoo parlor and have it permanently inscribed on your forehead.

 

 

 

None of this is anything new - unless you're a technocrat from Soviet Central Planning department that's been locked in a cave since 1988 and trying to develop computational methods to perfect a bureaucratically defined substitute for market prices, or you're a New Classical/New-Keynesian economist getting angry at the real world for failing to behave like one of the mathematical models you've spent all of your adult life trying to cook up. Or you are....you.

 

Hayek made criticizing the limitations and misapplications of these models one of the primary causes of his career, and used the occasion of his Nobel lecture to re-iterate them.

 

http://nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html

[j_b]

How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed?

http://www.nytimes.com/2010/12/20/opinion/20krugman.html?ref=paulkrugman

 

No shit! How did we end up with the king zealot at the helm of Fed regulatory review? It'd be hilarious if it weren't so tragic. That has got to be the symptom of systemic dysfunction or legislative malfeasance.

[JayB]

All that the author of the above quote is doing is pointing out that the reason that most mainstream economists were so profoundly useless in the last crisis is that sometime around the mid-1940's they got lost in an idealized, purely mathematical meta-world that resembled a market economy about as much as "World of Warcraft" resembles the real world.

 

This is not some aberration of the market system, just the latest manifestation. Private industry has a strong background in bailouts: http://www.propublica.org/special/government-bailouts

 

There will be another emerging trend soon enough where the Masters of the Universe figure out a way to game the system, make a ton of cash, and then ask for public money. All the while the Wall Street Journal will be full of Op-Eds on how this doesn't represent the true market system. My guess is that the next trend will make use of Ouija Boards.

 

If the government offers rents, organized interests will seek them.

 

Farmers will continue to use bogus pretexts for agricultural subsidies, the real-estate folks will do the same with the Mortgage Interest Deduction, uncompetitive industries will secure tarriffs to rip off consumers and insulate themselves from competition, etc, etc, etc. Same-o, same-o.

 

If you're for tariffs, subsidies, etc then you really can't make a principled objection to bailouts for the financial sector. They're just playing the same game as the Corn Ethanol lobby, public sector unions, etc - but with way less effective PR.

[prole]

This is not some aberration of the market system, just the latest manifestation. Private industry has a strong background in bailouts: http://www.propublica.org/special/government-bailouts

 

There will be another emerging trend soon enough where the Masters of the Universe figure out a way to game the system, make a ton of cash, and then ask for public money. All the while the Wall Street Journal will be full of Op-Eds on how this doesn't represent the true market system. My guess is that the next trend will make use of Ouija Boards.

 

The op-ed and think tank free marketeers love to position themselves as maverick outsiders by dint of their "let it burn" policy positions and the purity of their assumptions. Outside of these airless environments the real impact of these ideas is to provide ideological cover for the very activities you describe above. Amongst real world capitalists, "let self regulating markets rip" is simply the rhetorical means to realize the first leg of a political strategy to privatize gains and socialize losses. To the extent that "free market" policies have been implemented during the ascendancy of the Washington Consensus, they've been an unmitigated disaster. The notion that free market principles simply haven't been adequately applied is not only an ahistorical reading of what we've just lived through but a textbook case of denial on the part of zealots who've built their careers and reputations on a house of sand.