Subscribe to this BlogTax cuts and Medicare could kill the economy
Here's part two of my extended interview with renegade supply-side economist Bruce Bartlett, including some thoughts on Medicare that might just scare the pants off you. See here for part one, and here for the less-wonky version that's running in Money's November issue.
David Futrelle: As one of the original supply-siders, you worry that supply side economics had been reduced to little more than a religion of tax cuts, tax cuts, and more tax cuts.
Bruce Bartlett: That's right. A lot of what's wrong with conservative economists today is that they still act as if we're living in 1980 — as if we're facing inflation and massively high tax rates — and they're advocating policies that were perfectly appropriate for 1980 in an environment in which they make no sense.
A lot of conservative economists, practically all of them except me, think tax cuts were the way we should have gone back in February, rather than with fiscal stimulus. And I keep saying, "What good are tax cuts when people don't have any income to tax? When there are no capital gains? When corporations have no profits?"
DF: Of course, nobody pounded tax cuts quite as hard as George W. Bush.
BB: He got it all wrong. A critical point about supply side economics that's gotten lost over the years is that it's not tax cuts per se that are good for the economy. Rather, it's cuts in the marginal tax rate, the tax on each additional dollar you earn, that matter, because what you want to do is to increase the incentive to earn additional income.
So tax cuts that don't affect incentives are essentially worthless. They're just giveaways of money. A a huge percentage of Bush's tax cuts in were for child credits and tax rebates, not reducing tax rates. And all of Bush's tax cuts had an expiration date on them. Supply-siders argue that temporary tax cuts don't do any good because it takes people time to change their behavior.
A lot of conservatives today still don't get it right. They think that any tax cut is better than government spending. but a lot of tax cuts today essentially are government spending: We're just mailing out checks and calling them tax refunds.
DF: You've recently been quite critical of what you call the GOP's misplaced rage.
BB: What they've done is to take all of Bush's mistakes and blame them on Obama. Conservatives look at the deficit, and they somehow or other convince themselves that it would have been zero if McCain had won. Now, the Congressional Budget Office projected a deficit for this year of $1.2 trillion. They projected this in January, before Obama took the oath of office. They've since raised the estimate to $1.6 trillion. If you want to blame Obama for that $400 billion, that's fine, but if you go through the CBO's accounting, the bulk of it is because the economy has been even worse than they thought it was going to be in January, and that reduces tax revenues and increases spending automatically.
And what has John McCain said since election day that would lead you to believe that he has better ideas about what we should be doing? He's been pretty quiet, if you ask me.
DF: What do we do once we're out of this crisis?
BB: The longer-term problem is the aging of society and uncontrolled entitlements. I'm afraid that when we reach the point where everybody finally recognizes that we need fiscal tightening, it'll be impossible to cut spending because it'll all be going to the old people, who command a lot of votes, and who will veto any big cuts.
That leaves us with one and only one alternative, which is to raise taxes. The common conservative view today is that all tax increases are equally bad. I honestly feel that conservatives would rather default on the debt than raise taxes.
But there are better and worse ways of raising taxes. What we need a is value-added tax. It's a consumption tax that has very little negative effect on incentives, meaning that you can raise a lot of revenue at relatively low economic cost.
But conservatives have the attitude that's the worst possible tax precisely because of its virtues. They think that if we make it too easy for the government to raise revenues, then they'll raise too much revenue, and the next thing you know we'll be like Europe. It's just total [expletive deleted] nonsense. Have these people ever been to Europe? The people there are not exactly living in abject poverty and slavery.
DF: It seems much more likely that the Obama administration will raise taxes on the rich.
BB: Not raising taxes is simply not an option. If the Republicans refuse to put any tax increase on the table, the Democrats will to raise taxes in the way that suits them: They'll raise the capital gains tax, they'll raise corporate taxes, they'll raise taxes on the so-called rich. The only thing that can forestall that is if you put a better tax on the table.
DF: Of course, in the days of multi-million-dollar bonuses, the rich certainly do have plenty of money to tax.
BB: The big mistake of the left is that they assume you can raise these rates on the rich and the rich won't react. Now I'm not saying that all these people will go on a John-Galt-type strike. But they will put a lot more effort into tax avoidance and tax evasion.
Let's say Obama raises the top rate back up to 39.6% — which happens automatically when the Bush tax cuts expire. Add on another few points to pay for health care, and we're back up to 45%. If you're a rich person, all you have to do is essentially incorporate, and then you'll pay only 35 percent. That won't do anyone any good except tax lawyers.
DF: Obama says we can't solve our fiscal problems without health care reform — which he says will cut the costs of health care. Do you agree?
BB: I voted for Obama. I believed all that stuff he said about health reform being essential to budget reform, because it's true. But I've been disappointed. When he put his plan together it didn't have anything to do with reducing health care costs. Of course, Republicans have no reforms of their own to push. They're just against whatever the Democrats are for. Period. That's just irresponsible.
Medicare is the biggest fiscal problem we have. I've always thought or at least hoped that the one way you might be able to get control of Medicare is if you did it as part of a package that more or less created a national health insurance program. You're not going to be able to do a national health insurance program as generous as Medicare is, and so what you might be able to do is to reduce Medicare benefits to the same level as everybody else under the new plan.
DF: That idea isn't going to go over well in today's political climate, to put it mildly.
BB: I think it's crazy that the Republican party is trying to position itself as the party of Medicare, saying we can't cut one penny of it. That's insane. Cutting Medicare is exactly what we have to do.
For more Bruce, see his blog, his Forbes.com column, or his provocative new book, The New American Economy.
Loved the interview with Bruce Bartlett ; the comments on Supply Side Economics got me thinking about some data I found on
Wikipedia (http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms) concerning U.S. Deficits as a percent of GDP by Presidential term.
An interesting pattern wrt to deficits starts in 1980 with the Reagan administration — From then on EVERY Republican administration has run up red ink !!! These figures would make the last real fiscally conservative Republic President (Eisenhower, in my opinion) turn in his grave.
Anyone looking at these figures should wonder why the "Tea Parties" just started up — 30 years ago would have been a much better
start up time. So , after about 8 months in office (according to the extreme right) the deficit problem is Obama's fault !@#?.
U.S. President Party Debt WRT GDP
—————— —— ——————–
Truman Dem Decrease in debt of 21.9% (Paying down the cost of WW II)
Eisenhower Rep Decrease in debt of 10.8 %
Eisenhower Rep Decrease in debt of 5.4 %
Kennedy/Johnsn Dem Decrease in debt of 8.2%
Johnson Dem Decrease in debt of 8.3%
Nixon Rep Decrease in debt of 2.9%
Nixon/Ford Rep Even
Carter Dem Decrease in debt of 3.2%
Reagen Rep INCREASE in debt of 11.3 %
Reagen Rep INCREASE in debt of 9.2%
Bush 41 Rep INCREASE in debt of 13.1 % ("Read my lips, no new taxes")
Clinton Dem Decrease in debt of -.6%
Clinton Dem Decrease in debt of 8.2%
Bush 43 Rep INCREASE in debt of 6.9%
Bush 43 Rep INCREASE in debt of 11.7 % ("Deficits don't matter" — VP Dick Cheney)
May I put off a suggestion to the leaders of this great nation on true health care reform? Let's work together toward a no-profit health care system, where health care providers are of the people, by the people, and for the people and not for personal profits. This is the way it is in Cuba. This tiny communist country sent out 7,000 doctors and specialists to help other third-world countries. It has no health care crisis. It has no health insurance companies. Doctors and nurses are trained by and taken care of by the people (via their non-profit government) to take care of the people. We can do that because we have public safety officers (police and fire men and women including the military who put their life on the line for us 24/7 without demanding a big profit, and we have a public school system from which most Americans graduated. We can build an "army" of national health care providers to defend our people against profit-based medicine that is bankrupting the U. S. Treasury. We can also accelerate this process by offering citizenships to foreign health care professionals and students for their lifelong service for the people and not for profit. This is already done in the U. S. Army – foreigners who join the Army and put their life on the line on the frontline of Iraq and Afghanistan are entitled to citizenship on a fast track. The U. S. government CAN nip runaway health care costs in the bud, if the people will demand it. Throwing good money after bad or doing the biddings of the health care industry is a big BandAid that could make the problems worse in the future. Those who serve the people without demanding a profit will be taken care of the people. Those who are for profit will have plenty of people that prefer their services and are willing and able to pay for them as well. Both for-profit and not-for-profit systems may co-exist without conflict. Our goal is to take care of the people without bankrupting the Treasury. The details could be worked out. But let us address the ROOT CAUSE of the problem and not take the easy way out by throwing more money at the problem and pretending it is solved for good. It comes back to haunt us from the start of the most costly "health reform" ever. America CAN address the ROOT CAUSE if not dictated by lobbyists with narrow interests. Let us all work together for the common good, and not just good for a minority. Again, this is like the U. S. Armed Forces, police and fire service men and women, and public school men and women. We honor and respect those who serve and put their life on the line for us. We will honor and respect those medical officers who are willing to serve and protect us without demanding profits. We will take care of them through different incentives other than profits. Everybody wins. May God bless America. Here we may quote a former president's inaugural address to end this note, "Why not?" Both former President George Bush Sr. and President Obama call for volunteerism. There will be thousands who will answer their call for a national army of health care providers of the people, by the people, and for the people, from all corners of the earth.
Do you trust the government (i.e banks) with your money?
The government can tell us we have to take new untested vaccines in order to stay on the "public option".
Americans need to take control, start their own insurance policies – they are many community run programs now.
Yeah, great idea. Let's go to a Value Added Tax. After the last few decades where we've seen a huge transfer of wealth to the wealthiest Americans, let's solve our tax revenue shortfall by adding a tax that's REGRESSIVE (in other words, it costs low-income people a higher portion of their income than the rich).
Brilliant.
Just because the marginal personal income tax rate goes above 35% doesn't mean that all wealthy people will become corporations. First of all, for that to work for them, they'd then have to make all their money through their corporations. What do you think will happen when some overpaid Goldman Sachs trader goes to their boss and says, "can you guys start making out my checks to my new corporation?"
There are plenty of ways to handle this scenario.
Let's not forget that it wasn't too long ago that personal tax brackets DID go far higher than 35%, and our economy in the post-WWII period was still doing fine.
Don't try to pass that off saying tax cuts and Medicare could kill the economy when in fact it's all the bailouts that is doing it.
Bailout is another word for give to the greedy and we spent our money the wrong way so give me more.
Actually Paul from Augusta, seniors did not pay into it. Medicare was signed into law by Johnson in 1965, so most of the people on Medicare paid into it only a few years. The system was not meant to take care of people for 30 years, the average life expectancy was lower then and medical technology was limited. So now you have people taking out more from the system than they ever paid in. It's a Ponzi scheme, and as all Ponzi schemes, it will fall apart.
"What good are tax cuts when people don't have any income to tax? When there are no capital gains? When corporations have no profits?"
What good are tax increases under the same example above?
Government at state and federal levels is totally out of control and has been for decades. America has become a Socialist state for all intents and purposes. Government in a democracy was never meant to be as large and intrusive as ours is today and much of what we suffer now is a result of tax code and regulatory requirements run amok. I would like to think that solutions could be found but I am afraid that total collapse is un-avoidable at this point and heaven help us when it comes.
I can fully Relate with "Tony Lin, Germantown, Tennessee: October 23, 2009 1:53 pm"
I agree with you that healthcare here looks like healthcare in a 3th world country, if you got money you're ok, but when you run out of money, couse you can't find a job you can die on the street.
What a shame when the people in the most powerfull country in the world can not even agree on that everybody should have acces to healthcare, even if they lose there job.
Everybody can get sick, so why not pay the bill together, share the pain.
Look,
Warren Buffet said it simply. Congress get to work and cut expenses. We spend too much money on too many things our budget cannot afford. Just say no to political wrangling and football if you really care.
In addition keep capital gains tax low and give business a meaningful investment tax credit. This incentivizes investment which creates jobs. More jobs means people have more to spend and save, and the result is more taxes and a healthier economy.
Dealing with the fall out wouldn't be simple, but the results will work. I don't think this Congress or President has the will or moxy to try it, but if by some miracle they could get it together we'd all eventually like it.
Why do people keep saying that the poor do pay taxes? I am reading they pay payroll taxes, excise tax etc, but they get it back with a PROFIT when they file earned income, they get it back with a PROFIT when they get their FREE medicaid, they get it back with a profite when the get FREE child care, oh yes they get free childcare, my family has been in the daycare business for 40 years, and 98% of their money comes from the State for others FREE childcare! So what if they took 50 dollars out of their weekly $150 paycheck, they get it all back ten fold. So you can take that argument and shove it! Most of us go to public school, and turned out fine. It is not our fault some wanted to play and be cool and forget to get an education and get that FREE Pell Grant they were qualified for. Give me a break! As for Medicare… seniors paid into that system for 35 plus years and won WWI, WWII for our sorry self centered selves… I think they deserve the medicare THEY PAID for.
"A lot of conservatives today still don't get it right. They think that any tax cut is better than government spending. but a lot of tax cuts today essentially are government spending: We're just mailing out checks and calling them tax refunds."
Now could it be that government is JUST TOO BIG? When is too much – too much. If one adds ALL taxes pai – not just to the Feds – it's close to 50% if not over of one's income. What can not stand is 50% of the population not PAYING any tax. And as to your value add tax…just more money for big government to spend on additional entitlements we can not afford. STOP BIG GOVERNMENT FROM OVER PROMISING EVERYTHING.
At the moment, the democrats want to increase spending and the republicans want to cut taxes. Both are absolutely wrong. We are spending at an unsustainable rate and the only place to cut spending is the defense budget and the small services account. The interest on the debt must be paid as do Social Security, Madicare, and Medicade. Welfare and unemployment are about all that is left. If we continue to borrow to finance a deficit the dollar will untimately collapse due to rising interest rates and the system begins to implode. The answer is that taxes must be raised, including those on social secutity and medicare, and spending, including defense, must be cut. The politicans have to focus oon our problems and make the hard choices rather than worrying about getting reelected.
Bruce Bartlett and all supply siders have misread history. Low marginal tax rates have never brought long term robust growth. There have been three times the top rate has been cut from above to below 37%: 1925, 1988 and 2003. The subsequent 5 year periods all had sub par GDP growth: 1926-1930 grew at 1.1%, 1989-1993 at 2.3% and 2004-2008 at 2.4% vs. an average of 3.4%.
After the 1988 cut growth came back strong following top tax rate increases in 1991 and 1993. The great depression started 4 years after Coolidge's 1925 cut. The great recession started about 4 years after Bush's 2003 tax cut.
A month after Hoover raised the top rate from 25% on income above $100,000 to 63% on income above $1 million, the stock market and industrial production started recovering. Then GDP annualized growing 7.5% from 1933-1937.
With no income tax increases the growth rate since 2003 has deteriorated to 1.6% and is probably headed to 1%.
The best tax policy for growth has a high enough top rate that the wealthy have strong incentive to put the marginal dollar in a business where it can be deducted or depreciated and a high enough bracket where the most productive have a dramatically above average after tax income.
The best growth we have had since the 1960s was when Reagan had the top rate at 50%. This was a more growth friendly balance between top rate and bracket.
Had Reagan raised brackets on the 70% rate instead of eliminating it we might have had faster growth in the 1980s than in the 1960s. Hoover's $1 million bracket adjusted for per-capita GDP would have been about $29 million in 1981 and about $100 million today.
Here is how I know your premise is dead wrong: I am a small business owner and just cut a big fat check to the State of Wa. I also cut a big fat check to the IRS.
That's money I don't have for my employee profit sharing program, that's money I don't have to pay for the next truck for my fleet, and that's money I don't have to pay for a tuition program.
For Q3, my employees have the benefit of paying for climate change programs, global warming awareness programs, gay marriage hearings, ACORN pimp enablement and tons of government overhead.
The difference between Bush and Obama is that Bush felt my employees knew how to provide for their families better than the government does and tax cuts are where the rubber hits the road.
Obama feels he can spend money better than my grandchildren. Since the White House's lead economist came out yesterday and said we shouldn't expect anymore jobs from the stimulus program after Q3 period, you sound like a complete fool trying to do a smack down on tax cuts, because YOUR idea couldn't be a bigger failure.
One of the reasons for health care costs skyrocketing is medical liability. I am not saying that medical malpractice shouldn't be punished, but the current system seems to be geared towards limiting liability, not lowering costs.
In regards to medicare and medicaid, once again, if you have in essence free healthcare, what is the cost of getting every test. If you sprain your hand, get an x-ray, an MRI, and a catscan, just to make sure. There is no cap or limit to prevent people from "overusing" their medicare or medicaid. A national healthcare system will not lower costs, but a tax credit toward healthcare and a consumer driven system will.
As for taxing, I am all for taxing more as long as the money is used for infrastructure(roads, schools)/healthcare and used wisely. I love the people who still beleive in Reagonomics. Sorry people, the money does not trickle down. The rich get richer and the poor get poorer.
I don't beleive Obama is killing the dollar, Greenspan and Bush did that already with tax cuts, the war, and keeping rates ridiculously low for far too long. The debt lessened under Clinton, grew under Bush, and something tells me at some point will lessen under Obama. The higher national debt hurts the dollar. Once again, this is due to Bush not Obama.
I agree that a consumption tax hurts the poor more. Taxing the middle class and poor less is a much better way to get people to spend money though. These are the people that will actually spend money, not save it or invest it. 
So if you want instant stimulous that will happen within a few months, give the poor checks in the mail, not banker bailouts.
As for those of you who cannot support health reform but complain about paying for those who take crappy care of themselves, consider that Euro and Canadian systems focus heavily on education and prevention. I've only been to the doctor one time in Canada, but after an invasively thorough examination by one doctor, then follow-up by another, I was informed that I had a tendency to hernias, an inherented weakness. They offered exercises I could do (and I still do them) to avoid developing hernias. Such preventive care would seldom be offered in our system, especially during a routine exam. I felt like they were treating my overall health, not just the swollen gland that I had visited them to check out.
Our health system costs too much. We don't prevent. We treat the poor in emergency rooms. We bankrupt middle class people who have either no insurance or a crooked insurer. The system must be repaired, and Americans are figuring this out. Most of them know someone who's been screwed over by the insurance industry.
It's no wonder that Congressional
Republicans have a 9% approval rating.
They need to cease their abdication of the public trust.
If all these people responding knew the answer, they would be in office or trying to get into office. People who use the word socialism read it somewhere or are listening to talk radio. We are not a capitalist but more of a mixed econnmy. People who saying Obama is a socialist is the same people who have in the past taken advantage of so called "socialist" programs.
I came from the country of Taiwan where everybody has a government issued Health Insurance Card. If you get sick, or think you are sick, you just go to see a doctor. The premium is incredibly cheap and to the point where I think some people really "enjoy" or abuse the system. However, the point is: YOU ARE COVERED. The system is not broke.
When my father got ill and had to have surgery done a few times last year, he was placed in hospital and received very good care. He had the choice to go to any hospital.
After becoming a US citizen and living here for over twenty years, I begin to feel this society now looks like a third world country. Looking at my family and friends in Taiwan from this side, I all of a sudden realize that they have no worry about healthcare. I feel lucky that my parents are not counting on me and my siblings on their healthcare. Nobody will become bankrupted simply for getting sick and has no coverage. In the United States, you could work all your life, and one illness can wipe you out. Well, the "system" which basically is healthcare and lawyers gets your money. Tell me: is this the "land of the free"?
True, some people like me have work related insurances and they are good. But, the point is your insurance is not transportable and these gaps can hurt you once you changes job or retire.
I voted for Obama. I am disappointed that he is not able to tackle the tort reform and insurance industry. In Taiwan, no lawyer will sue to get the millions from patients and get awarded. As a result, doctors don't have to pay 40% of their income to the insurance companies like in the USA. American people need to wake up now and know that their troubles come from the injustice of a legal system itself and everybody pays the price.
Yes, Republicans are mistaken. And the articles clearly explained why. Right policies, but for a different time. As for the contributor who says 41% pay zero tax, how could you be so misinformed. They pay excise tax, sales tax, lodging tax, plus taxes passed along in their rent.
Here's the problem. Our respective personal economies have diverged to the point that the working poor cannot get if they pay federal income tax. And still they live in deperate poverty. Meanwhile, others are forced to pay high taxes to support these inequities. Adjusted for inflation since my youth (and I'm 58), the minimum wage should be close to $20.00 per hour. So you complaining 36 percenters subsidize wage inequities with your taxes, which will only go higher until we return to paying a working wage. Want to read an eye opener on the subject. Try a book called NICKLED AND DIMED, and if you've got a compassionate trace element in your body, it will be stirred.
Why is it that Medicare costs are so high to begin with. It all boils down to America's poor eating habits. Older Americans have doused themselve with overeating in their younger years and now they all end up with what we all come to refer to old age diseases.
Whe a country's eating habits go astray, we pay the price. Just look around at some of the morbidly obese people in our cities. It is sad.
So, they can only state that Republicans are wrong?
A National system is not the answer. Until you address the reason for the rising healthcare (unhealthy lifestyles), you can't address the cost. Fiscal responsibility on the part of the consumer is needed. You want to eat crappy food, you pay more. Period.
None of the bills put any ownership on an individual controlling their own life. Why do that when the Dems think they will just take from one group and give it to another.
One of the other posts put it perfectly. "No taxation without representation." Isn't that how the American Revolution really started? England was taxing without represenation from the Americas.
Increase my taxes and see how little I spend. Let the recession last longer. If I don't have the money to spend, I'm not going to spend it.
more from commy news financial
lets examine the facts and compare to a few of the 'writers' opinions:
1. "..any tax cut is better than government spending. but a lot of tax cuts today essentially are government spending: We're just mailing out checks and calling them tax refunds."
what a profoundly stupid statement. tax cuts leave more money for consumptive spending by consumers while govt spending eliminates consumer choice. Without productive consuption(ie..consumers producing before consuming) all that is left is borrowed consumption, which got us in this state in the first place.
2."What they've done is to take all of Bush's mistakes and blame them on Obama"..
It was expected that Obama would undo the bailouts not propose more, that he would force Wall Street to go prison for their crimes, not allow them to continue, that he would bring troops home not expand them, that he would shrink the military not expand it.
"Change we can believe in" was a lie the day it was hatched.
3 "..What we need a is value-added tax. It's a consumption tax that has very little negative effect on incentives, meaning that you can raise a lot of revenue at relatively low economic cost."
more idiocy. guaranteed to reduce consumption or force it to the secondary/wholesale/yard sale/craigslist/classads market. the writer proves his lack of economic knowledge again. It would indeed impact the poor much more than the rich.
Too bad Commy news cant find higher quality thinking…but then CNN IS AN EXTENTION OF THE WHITE HOUSE…cant expect much from so little,
This guy is supply side economist who voted for Obama! LOL….where do you guy find these nuts? How can you call your supply sider and vote for the Obama who promised to raise taxes, soicialize the healthcare system and attack the sytem that created the wealth production engine of our country? He endorses a VAT! LOL Supply side means a marginal tax cuts, fiscal discipline and a strong dollar. Obama is raising taxes, blowing out the debt and killing the dollar. Maybe we will get a real supply sider in 2012. Sarah Palin know more about economics than this idiot!
Two observations.
1) Yes, a value-added tax would be better than our current, income-tax based system, for a variety of reasons. But that doesn't mean that setting a value-added tax on *top* of our current income tax system is a positive. The notion that cutting taxes always leads to growth is foolish, but so is the notion that "taxes must be raised" to cover our current spending spree. What we need to do is knuckle down and spend *less* money on medicare, *less* money on social security, *less* money on bailouts, *less* money on expensive military bases abroad and unnecessary wars. Spending cuts are what aren't optional, not tax increases.
2. This guy is talking out of both sides of his mouth:
"What good are tax cuts when people don't have any income to tax? When there are no capital gains? When corporations have no profits?"
"it's cuts in the marginal tax rate, the tax on each additional dollar you earn, that matter, because what you want to do is to increase the incentive to earn additional income."
"tax cuts that don't affect incentives are essentially worthless. They're just giveaways of money"
So… tax cuts at this time of low incomes don't work, because people don't have incomes to tax, meaning it creates no investment/growth incentive. But, a few sentences later, he asserts that cutting taxes now would be bad because we'd "just giving away money"… when the whole crux of why he says it doesn't work is that the amount of money is insignificant.
As living beings we all respond to our environment in active ways – if it costs more to live and you are paying more in taxes you will hold back spending because you have less money and at the end of the year when you look at your take home income you will make serious choices about your actions. If they increase my taxes one dollar I will have to cut $1.20 in spending. When that happens times 250 million people I feel the people will regret the notion that increasing taxes will somehow benefit all of us and our freedoms.
Bruce Bartlet: "So tax cuts that don't affect incentives are essentially worthless. They're just giveaways of money. A a huge percentage of Bush's tax cuts in were for child credits and tax rebates, not reducing tax rates. * * *
The longer-term problem is the aging of society and uncontrolled entitlements. * * * That leaves us with one and only one alternative, which is to raise taxes."
I agree with much of what Bartlett says. A lot of liberals are blaming Reagan for our problems, but Reagan did what was needed in the 1980s. The problem is that when GWB became president, he and his advisors went back to Reagan and thought tax cuts were always and under all circumstances good. It's like a doctor who treated a patient for one disease with one drug 15 years ago treating the same patient with a different disease with the same drug today.
However, Bartlett misses an important point. At one point, he indicates that child tax credits are a waste of money, in another that the aging of our population is a huge problem. The fact is that our fertility rate has been too low since the 1970s. The boom of the 1950s and 1960s was in large part the product of the baby boom and the baby boom was assisted by tax policy, specifically the 1948 Revenue Act, which provided far more generous dependency exemptions that we have today. If we are to solve our long term aging situation (and the pressure it puts on entitlements) we must once again have a tax code that encourages young adults to invest in the future of America by having more children (who will be the workers and taxpayers for the next 40 to 50 years beginning two decades after their birth).
Since the Government can only recieve money by taxing the people, printing money, or borrowing money, can we stop talking about the government raising revenue. It's not revenue, it's taxes. The government can not raise revenue. That is a very dishonest term.
The average Joe in America retires at age 67 with a social security retirement check of around $12,000 per year. Before retiring, that same average Joe pays taxes to a government whos workers retire at age 52 with $70,000 per year pensions. I need someone to explain to me why it's a good idea to take more money from Joe average (raise taxes) and then give that money to the rich (government employees).
Maybe if corporations actually paid taxes
http://www.reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php
That was a very concise and easy to understand answer to many question surrounding our current mess. I wish we did have a VAT and also wish health reform was being done correctly. The government needs more revenue and costs for health care need to come down. However, when you have a party that wants nothing to do with any of these choices (republicans) you are left with nothing but the hard left/right positions that produces a lousy result. Welcome to America.
Another Great article! I love to see the far right continue to provide nothing that actually helps anyone but the rich (those top 5% – to clarify for the handicapped right (H.R.) that love to play on the “what is rich”). They sound like a broken record – cut taxes, cut taxes, cut taxes, that will create jobs that will save us. I have heard that for over 20 years. Nevertheless, in that time, my tax ratio (again for the H.R. – using a ratio as yes I do make more and are in a higher tax bracket than 20yrs ago) has only increased. The only solution I ever see in ads for this fall’s election from the right is to cut taxes because the left will raise them. I hate taxes too! However, as Bruce implies, the right needs to pony up something viable or the left will do their own thing. Again, as Bruce said, most of the tax cuts are only temporary. The right is still soaking about losing last November. Get over it! Instead of taking the opportunity to make a difference, they just want to do the same ol same ol, complain about the left and stonewall anything that is not part of their tax cut song. You can only cut taxes so much before your spending more then you take in – oh, wait, we have that now. Maybe we should cut defense spending. That would save a lot that could go to Medicare. Cut any money to fund the conflicts in Iraq and Afghanistan and bring our troops home. There is a true waste of money and lives. But that is a whole other matter. I have been saying for years, that as Bruce said, we should have a VAT in place. This taxes everyone that buys the item – even the poor have to buy food and clothes. We need to change to a consumer based tax system. This is a consumer driven economy. VAT addresses that. Lower business taxes to something normal like a person pays. In addition, a business should not have anything to do with providing healthcare or your retirement. This is a government issue, the welfare of its people. Let a business do what a business needs to do to make money. If a business does well, people are paid, people spend, and businesses do well. It is that simple. Like Bruce said too, taxing the rich only makes them look for other loopholes, and they have the resources to find them. People complaining about those who do not pay taxes (the poor) never offer solutions, just complain. Maybe give them skills and work so they can also then pay taxes. What an idea, but let’s get real, the people that complain only want to feel superior to those who have less.
Of course tax cuts don't work when on the other side you are spending historical amounts of money. We can't cut taxes now because our leaders in Washington just spent trillions and trillions of dollars on bailouts and stimulus. His argument likes to leave that part out of the equation. If we hadn't spent trillions and trillions of dollars then tax cuts would have worked. The Bush tax cuts didn't work because Bush was spending like a drunken sailor. To say tax cuts don't work is really a very limited argument. Tax cuts work if you cut spending at the same time. There's more than one part to the equation
Bartlett has his head on backwards. He sounds like a socialist. He has no understanding of what makes an economy function efficiently.
One small problem with trying to cut Medicare is that medical care in retirement already costs more out of pocket (about $250,000 over a lifetime according to Fidelity Investments) than the entire amount the average Boomer or senior has saved (about $125,000-$150,000 according to the Employee Benefits Research Institute). Since solid majorities of Americans consistently say they believe health care is a right, not a privilege, just cutting benefits will always be tantamount to political suicide.
The only way to fix Medicare is to fix the entire US health care system by "bending the curve" of future cost growth. This will benefit everyone, not just Medicare recipients and will go a long ways toward a permanent improvement in the US economy. Investments in health care information technology, comparative effectiveness review (already underway) and provider payment reform (hopefully coming next) are what's going to be required to make that happen. This is generally the path the President has tried to take so far.
Take more taxes out of my hide, the less I spend, the deeper this recession will get.
Where in the constitution does it say you can tax me anyway….I feel like taxation without representation….
The government has no right to do what it is doing.
We should probably try to focus on preventive health care, eliminating erroneous costs and financial responsibility.It would also help to solving issues on the local level.
This fact that 41% of Americans pays 0 out of every dollar they earn is wrong.
The majority of all workers pay payroll taxes, that is social security, medicare, FiCA. People mistakenly equate income taxes as the only taxes people pay. Sorry my friend that is a mistake.
As well you pay a progressive tax that is on certain portions of your income you pay 36% not all of it.
Fact:
41% of Americans pay 0 cents out of every dollar thay earn.
The average American pays 6 cents out of every dollar they earn.
I pay 36 cents out of every dollar I earn.
How is it that I make twice the average American, but pay 6 times the average tax?
I too am tired of the wealth redistribution that has been going on lately. Based on my statistics, I would have qualified for nearly $3000 in stimulus dollars. However, my income turned that $3000 into zero.
In addition, my income excluded me from over $12000 worth of other deductions.
In essence, the government took $3000 or my hard earned dollars and gave it to some one else and told them to buy a flat screen TV to stimulate the economy.
The worst thing is, the stimulus crap didn't help the economy.
David, your "leading" questions yearn for an anti-Republican and anti-Bush answer. Consider (with my comments in parentheses):
1. "As one of the original supply-siders, you worry that supply side economics had been reduced to little more than a religion of tax cuts, tax cuts, and more tax cuts." (Reduced to a religion… to make it sound as though conservatives are stuck with some dogma, regardless of how the times change. Nice "question". Not to mention it's anti-religious, but that's another story.)
2. "Of course, nobody pounded tax cuts quite as hard as George W. Bush." (What do you mean "pounded"? Isn't Obama talking about giving seniors on Social Security a $250 check? What do you call that? And when Mr. Bartlett answers, "We're just mailing out checks and calling them tax refunds", you don't question that? Why ISN'T that a tax refund? How about when Democrats approve people checks who don't even pay into the system? That is OK, but sending money to those who pay taxes isn't?)
3. "You've recently been quite critical of what you call the GOP's misplaced rage." (There are so many reasons for the GOP to be upset with the Obama administration – buying off insurance companies, doctors, AARP and insurance companies to pacify them for Obamacare, having a tax cheat as head of the U.S. Treasury, hiring communists in the administration, and on and on. You didn't need to call it "rage", anymore than you need to call Democrats' anger at Republicans requesting that the healthcare bill be posted on the Internet for everyone to see "rage", which implies unfounded anger, rather than justifiable concern. Just trying to paint a picture of Republicans as unreasonable angry with your question?)
4. "It seems much more likely that the Obama administration will raise taxes on the rich." (First, everyone defines the "rich" differently. To someone in a ghetto, those in a middle-class neighborhood appear rich. Regardless, the vast majority of the people have earned their money. Implying that the Obama administration will only raise taxes on the "rich" is buying into his campaign promises, which are falling faster than a domino contest, plus it implies that most of your readers won't have their taxes raised, which is ridiculous.)
5. "Of course, in the days of multi-million-dollar bonuses, the rich certainly do have plenty of money to tax." (Your question intentionally makes it sound as though the "rich" are not ALREADY paying progressively more taxes, which they are.)
No one mentioned all of the income re-distribution. I have no problem paying my fair share. I do have a problem with 40-45% of taxpayers paying nothing and some getting checks from Treasury. Where I went to school, this was called socialism.
"What good are tax cuts when people don't have any income to tax?"
Really? I'm guessing the 120+ million people who still have jobs would disagree. There is no need to surmise, why don't you ask them?
"So tax cuts that don't affect incentives are essentially worthless. They're just giveaways of money."
Incentives for what? What makes you think you know better what people should do with their lives? I certainly wouldn't call a tax refund a giveaway. Unlike you, I worked for that money and earned it in the first place.
Good article. It would be nice to see some politician, somewhere, pretend they understand econ 101. Supply, Demand, and Price are all connected. The reason healthcare costs continue to increase is due to a lack of supply and high demand. Democrats seem to believe they can lower price without a change in supply or demand, which is insane. The only way to lower price is to either significantly reduce demand, which would be very hard, or much easier is to significantly increase the supply. A much wiser use of tax payer dollars would be to provide significant incentives for more people to enter the medical field and more hospitals to be built. If you flood the market with Dr's, nurses, and medical centers over time prices will come down. In my state it's almost impossible to even get permission to build a new hospital. Government mandated lower prices will only increase demand and reduce supply causing very long waits for medical services. Surely there is an economist that works for the government that understands a supply/demand graph.
A pretty good article; everything I read here is manageable except maybe Medicare, but you need to look inside the Medicare box.
Medicare Part A (hospital insurance) is the catastrophic, cost-effective part of the program. Part B (medical insurance) starts to waste money, but the customers have to pay more to waste more. Part C (medicare advantage) is a total waste of money, bringing in margin-stacking by health insurance companies. Part D (drugs) is the un-funded part that was added by Bush, and it needs a do-over.
In short, Medicare Part A is part of the SOLUTION. It could be a good, low-cost solution to national health care. The other parts are progressively more expensive with declining benefits. Overall reform is needed, and going back to Part A (aka Original Medicare) would be a good start.
I too blame Bush for all my current problems.