Fix the Debt

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Herb Stein said "If something cannot go on forever, it will stop."  The debt can go on forever.  Can the debt increase forever?  Yes, as long as the Euro is dripping with Greece.  But people's willingness to hold dollar-denominated U.S. sovereign debt has some limit.  Things could change quickly.

The Can Kicks Back!

Swindled.  The "millenials" should be pissed.

Interesting Discussion of FIscal Cliff

Myself, I think the whole "Fiscal Cliff" thing is overblown.  After Simpson-Bowles specified a set of tax increases and spending cuts, as a STARTING POINT, rather larger than that that would be imposed if we go off the "cliff." (The intelligent and attractive DW has been saying this for a while, to be fair).  And I am for the most part a fan of Simpson-Bowles, if no one will take the KPC proposal of actually cutting military spending and entitlement spending F'REAL.

But, for those of you interested in the "Cliff" notes for their own sake, here is an interesting analysis by John Cochrane.*  It's not simple, but it is interesting.  There are parts I disagree with, but he raises some terrific points you won't hear in the MSM.

A nod to JR

*Misspelled earlier, corrected

Will the Fair Tax Raise Cain?

Herman Cain is a big fan of the "Fair Tax."

Me, I'm not so sure. We have to cut spending. Taxes are a secondary consideration.

Anonyman is not so sure the math adds up. Me, either.

NYT Op Editoriation

Three NYT op eds on the budget:

"A trick question: If Congress takes no action in coming years, what will happen to the budget deficit? It will shrink - and shrink a lot. This simple fact may offer the best hope for deficit reduction. As federal law currently stands, some significant tax increases are set to take effect in coming years. The most important is the scheduled expiration of the Bush tax cuts at the end of 2012...If Mr. Obama wins re-election, he could simply refuse to sign any budget-busting tax cut for the rich...Republicans, for their part, could again refuse to pass any partial extension. And just like that, on Jan. 1, 2013, the Clinton-era tax rates would return. This change, by itself, would solve about 75 percent of the deficit problem over the next five years." [David Leonhardt, NYT op-ed]

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"[W]e can't let the oldsters get off scot-free. As my colleague David Leonhardt reported in The Times, two 56-years-olds with average earnings will pay about $140,000 in dedicated Medicare taxes over their lifetimes. They will receive about $430,000 in benefits. This is an immoral imposition on future generations. The Ryan budget wouldn't touch this generation, but a bipartisan budget deal should ask middle-class and affluent boomers to make a sacrifice for their country. Slow the growth in health care benefits now and dedicate that money to paying down the debt and investing in the young." [David Brooks, NYT op-ed]

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"Public policy is going to be made from inside a fiscal straitjacket for the foreseeable future. But within that straitjacket, Washington can favor policies that enhance working-class opportunity, while ruthlessly paring back those that subsidize the affluent. The goal shouldn't just be small government, but what the economist Edward Glaeser calls 'small-government egalitarianism.' There are elements of this vision woven into the Ryan budget - cuts to farm subsidies, means-testing for Medicare, and promises to go after tax expenditures that primarily benefit the rich. But at least in its initial draft, too much of the budget's austerity is borne by downscale Americans." [Ross Douthat, NYT op-ed]

(Nod to Kevin Lewis)

Some thoughts: Douthat's "subsidize the affluent" is a little strange, as is the whole "tax cuts for the rich" meme. 47% of American pay ZERO fed income tax. How would you cut their taxes? You can only cut taxes on people who PAY taxes (I'm an economist; I know these things).

Still, and as Angus has said, we certainly could means test SocSec/Medicare, and by all means should cap mortgage interest deduction, perhaps at $15,000 per year.

But the real "subsidies to the affluent" are cutting subsidies to sugar, corporate farms, oil companies, and big fat defense firms. The problem is not a misallocation by ability to pay, but rather straight up subsidies to war pigs, farm pigs, and the prison-industrial complex fattening the purses of anti-drug warriors. Those payments dwarf the tax cuts.

Taxes take money from people who have earned it. Subsidies are gifts of money from those taxpayers to people who have NOT earned it. Get rid of the subsidies, first.

Andrew Sullivan Making Sense

For years Andrew Sullivan was one of my favorite writers.

Then, he appeared to have lost his mind.

But, as Anonyman notes quite rightly, this is good stuff.

A Not Funny Joke as an Illustration

So, I came up with a joke to try to illustrate the problem with the "cut taxes, raise deficit" view of policy.

Guy walks onto a used car lot. Guy has a sweater on that says, "I <3 Republicans".*

Salesman sees guy looking at 2006 Ford, marked "$10,000"

Salesman says, "Since you are a Republican, I'll cut the price to $4,000. You'll save $6,000, a 60% cut!"

Republican boy says, "Wow! That's great. Let's do the paperwork."

Salesman writes it up: "$4,000 now, and you owe $6,000, plus accumulated interest, sometime in the future when we feel like charging you."

Buyer starts screaming, "That's not what we agreed on! You said you were cutting the price 60%!"

Salesman says, "Yeah, but somebody has to pay for the car. Besides, I thought you Republicans couldn't tell the difference."

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I said it wasn't funny. But why, when we "cut" taxes by X%, adding that amount to the deficit, do we feel like we are getting a benefit from the government, when if a used car company did the same thing we'd have a fit?

Angus put it really well in his post today: We are just moving money around by "cutting" taxes, it is not a tax cut at all. Yet...we are all really happy. The used car salesmen in Washington are right: We DON'T know the difference.

*(For you old people, "<3" is "heart"; look at it)

Dance band on the Titanic

So President O and the Congressional Republicans have displayed their latest arrangement of the deck chairs on the USS Titanic.

There's something for everyone. No rise in income tax rates, lower payroll taxes, re-extended unemployment benefits, a compromise on the inheritance tax (35% on estates over $5 million) and a bunch of other directed tax breaks.

The two year "cost" is around $900 Billion

Number of spending cuts included in the plan? Around $0.00.

As my co-blogger has so forcefully stated recently: Deficits are future taxes.

Without spending cuts, all we are doing is shuffling the deck on the timing.

As for "stimulus", well the economy will turn around on its own at some point, perhaps soon, so these cuts may be lucky enough to be enacted at an opportunistic point in time whereby they will get the "credit".

And so it continues.

People, the search for grown-ups in government is not going well.

End the DAFT!

Our policy is daft. DAFT! Because *D*eficits *A*re *F*uture "T*axes. The DAFT Republicans want to borrow money to pay for tax cuts. And the DAFT Democrats want to borrow money to pay for unemployment benefit extension. It's DAFT! Deficits Are Future Taxes!

I'm going to get t-shirts made: "End the DAFT!"

It's easy....

Instead of "Hell no, I won't go!" we can try, "Like Hell I say, I won't pay!"

People: Do NOT eat Wheaties!!

Because from what I learned today, they make you very, very, very dumb.

Let me break it down for you. First, Tyler sends me to a Brad Delong post about medicare. Then I see a link to another Delong post called "Joe Klein has really eaten his Wheaties today". Intrigued, I checked it out, only to come to the horrifying discovery that Wheaties must be really bad for your brain.

Here's Klein:

Perhaps it isn't a coincidence that so many of the people whinnying the loudest are prominent members of the financial community, the sector that has had the most to do with hollowing out our manufacturing base....

People, you just know that this bizarre claim is submitted without any evidence or proof! It's a real head-scratcher. The Goldman-Sachs destroyed our manufacturing sector? Really? How? This is nuts.

Here's more Klein:

There is, for example, Glenn Hubbard, who was featured on the New York Times op-ed page recently in defense of the deficit commission, describing the problem this way: "We have designed entitlements for a welfare state we cannot afford." This is the same Glenn Hubbard who served as George W. Bush's chief economic adviser when Dick Cheney was saying that "Reagan proved deficits don't matter." One imagines that if Hubbard was so concerned about deficits, he might have resigned in protest from an Administration dedicated to creating them.

Wow. First, one can easily and logically consistently believe both of the following: (A) Our entitlement programs are unaffordable and (B) deficits don't matter.

Saying entitlements are unaffordable means you want entitlement spending cut. It's the SPENDING THAT MATTERS. Deficits, to a first approximation are future taxes so, yes one could hold the view that, while deficits don't matter, spending does, and the future path of our entitlement programs put us on a path to too high spending.

I am an example of someone who believes both (A) and (B) above, so is Milton Friedman.

Look, I am not a Glenn Hubbard fan by any stretch of the imagination, but there is really nothing necessarily hypocritical in simultaneously espousing the two views being attributed to him by the wheat-and-milk-addled Klein.

The last bit, that anyone who didn't resign from the Bush administration has no legitimate standing to discuss future entitlement spending, is just plain asinine.

People, Brad is a smart guy, so I figure he knows Klein is full of it. Thus I view his post as an elliptical, but important PSA on the ill effects that Wheaties have on brain function.

Thanks Brad!

Does it matter if the Republicans take the House?

Some see a zombie apocalypse. I don't see much really.

First, the "repeal Obamacare" idea is simply nuts. The Repubs won't have anything near a veto proof majority and the Dems in the Senate, even if the Repubs take the Senate, can just act like the current minority party in the Senate is acting.

Second, it's true that "progressive" legislation will be harder to pass. But it seems that it was already next to impossible to pass anyway. Cap & Trade is already dead, card check already dead, more stimulus, already dead. I don't see any big change here.

Third, it's true that there will be more support for DADT and the wars and our brutal immigration policy, but again, the current administration was already vigorously prosecuting these and other horrible policies.

Finally, I do think there will be a change in the mix of tools used to achieve deficit reduction, with (and I admit this may be more of a hope than a reality) more emphasis on spending cuts and less on tax increases. In any event, I think a Republican House makes deficit reduction at least a little bit more likely.

PS: Am I the only one who'd like to see Christine O'Donnell in the Senate? Just for the Caligula's horse kind of vibe it would have?

Stealing From the Children

A nice synthesis by Dr. Karlson.

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Several Amazing Things, But I Won't Get My Hopes Up

Several amazing things about this post by John H.

--The contents. We spent a ton of money, for no value, except a whole bunch of goofballs with worthless M.A.s in "Education Policy" sucking down groceries in bureaucratic jobs.

--The reference. A gen-you-eine conservative like Hindraker citing the CATO Institute.

Wow. Maybe there is hope for some of you half-wit Republicans actually finding a way to cut specific programs. Because by and large, you have failed. If you are starting to feel hopeful, read this. 'Cause I still think the Republicans only care about winning, and will never actually try to cut anything, except taxes, which is moronic.