Paul Krugman: Shameless in the Senate

Paul Krugman asks how congress can justify eliminating or substantially reducing the estate tax after arguing it had to cut essential social services such as health insurance for children to trim the deficit in a bill signed in February:

Shameless in the Senate, by Paul Krugman, Estate Tax Commentary, NY Times: The Senate almost voted to repeal the estate tax last fall, but Republican leaders postponed the vote after Hurricane Katrina. It's easy to see why: the public might have made the connection between scenes of Americans abandoned in the Superdome and scenes of well-heeled senators voting huge tax breaks for their even wealthier campaign contributors.

But memories of Katrina have faded, and they're about to try again. ... So it's important to realize that there's still a clear connection between tax breaks for the rich and failure to help Americans in need. ... To understand this point, ... look at what Congress has been doing lately in the name of deficit reduction. The Deficit Reduction Act of 2005, which was signed in February, consists mainly of cuts to spending on Medicare, Medicaid and education. The Medicaid cuts will ... cause 65,000 people, mainly children, to lose health insurance, and lead many people who retain insurance to skip needed medical care because they can't afford increased co-payments.

Congressional leaders justified these harsh measures by saying that we have to reduce the budget deficit, and there's no way to do that without inflicting pain. But those same leaders now propose making the deficit worse by repealing the estate tax. Apparently deficits aren't such a big problem after all, as long as we're running up debts to provide bigger inheritances to wealthy heirs rather than to provide medical care to children. ...

Who would benefit from this largess? The estate tax is overwhelmingly a tax on the very, very wealthy; only about one estate in 200 pays any tax at all. The campaign for estate tax repeal has largely been financed by just 18 powerful business dynasties, including the family that owns Wal-Mart.

You may have heard tales of family farms and small businesses broken up to pay taxes, but those stories are pure propaganda... Nonetheless, the estate tax is up for a vote this week. First, Republicans will try to repeal the estate tax altogether. If that fails, they'll offer a compromise ... like a plan suggested by Senator Jon Kyl, Republican of Arizona, that would cost almost as much as full repeal, or a plan suggested by Senator Max Baucus, Democrat of Montana, that is only slightly cheaper.

In each case, the crucial vote will be procedural: if 60 senators vote to close off debate, estate tax repeal ... will surely pass. Any senator who votes for cloture but against estate tax repeal — which I'm told is what John McCain may do — is simply a hypocrite, trying to have it both ways.

But will the Senate vote for cloture? The answer depends on two groups of senators: Democrats like Mr. Baucus who habitually stake out "centrist" positions that give Republicans almost everything they want, and moderate Republicans like Lincoln Chafee ... who consistently cave in to their party's right wing. Will these senators show more spine than they have in the past?

In the interest of stiffening those spines, let me remind senators that this isn't just a fiscal issue, it's also a moral issue. Congress has already declared that the budget deficit is serious enough to warrant depriving children of health care; how can it now say that it's worth enlarging the deficit to give Paris Hilton a tax break?

Previous (6/2) column: Paul Krugman: Secretary, Protect Yourself
Next (6/9) column: Paul Krugman: The DeLay Principle

Update: Brad DeLong adds: Any Advocates of Estate Tax Repeal?

The Republican congressional leadership is trying to push permanent repeal of the estate tax through the Senate this week--without, of course, any offsetting spending cuts to neutralize the impact on the federal deficit. This is, as Bob Reich pointed out, a deficit-widening move of about the same order of magnitude as Social Security's long-run 75-year deficit.

I haven't found anybody serious willing to argue that this $5 trillion present value increase in the deficit and steeply regressive change in the tax code is good public policy, save for Ed Prescott:

Prescott, "Death and Taxes"

Is there any other serious economist arguing that this is a good deal? Any other half-serious economist? Quarter serious?

Comments

[save_the_rustbelt]

"...You may have heard tales of family farms and small businesses broken up to pay taxes, but those stories are pure propaganda..."

I wonder what source or evidence he has to back up that statement. It may well be true (due to sheltering and life insurance) but I would like to see his evidence.

[Devang]

Ending the debate on SCOTUS Judge Alito got 25 no votes, while the simple majority vote got 42 no votes. They could've filibustered, but clearly were afraid of something...

I thought I'd seen some flip-flops on the cloture vote on c-span, but I guess not.

[a]

"...You may have heard tales of family farms and small businesses broken up to pay taxes, but those stories are pure propaganda..."

I wonder if the following facts would prove his point already:
(from http://www.pcdf.org/meadows/straight_story.html)
=====================
What they tell us: The "death tax" (estate tax) takes half or more of a family's hard-earned savings (and at a most difficult time for the family), requiring land holdings to be broken up and bankrupting family farms and small businesses.

What they don't tell us: The estate tax applies only to estates of over $650,000 (for single person, double that for a couple), a threshold that will rise to $1 million by 2006. The top marginal estate tax rate is 39 percent, not "over half." In a typical year fewer than two percent of estates pay any tax at all, and only one in twenty farm estates. The estate tax brings in $27 billion a year, more than double the federal income tax paid by the bottom half of all taxpayers.

says...

People should really read this book:
http://www.responsiblewealth.org/commonwealth/index.html
It makes a logical & clear case for why the estate tax is very important. It really gets under my skin when rich Republican senators can fire up their constituents about this issue, when in fact almost none of them will ever be affected by the estate tax. It is a truely progressive tax, as it only affects a small percentage of citizens who can afford it, and reaps massive amounts of revenue for federal programs.

[Barry]

Rusty, the opponents of the estate tax were unable to provide any examples.

[knzn]

“Any senator who votes for cloture but against estate tax repeal — which I'm told is what John McCain may do — is simply a hypocrite, trying to have it both ways.” This is the kind of argument that was used (in a different context) against Kerry during the 2004 election campaign. It was wrong then when the Republicans used it, and it’s wrong now when Krugman uses it. It is a perfectly reasonable position to say, “I’m against repeal of the estate tax, but I’m even more against using filibusters indiscriminately to block the legislative process.” Of course McCain realizes that a successful cloture vote will lead to passage of repeal. Presumably that’s the price he’s willing to pay for taking a stand on the general issue of filibusters. (Similarly, it was perfectly reasonable for Kerry to say, for example, that the President needed the authority to wage war in Iraq but that he misused that authority.)

[Lee A. Arnold]

The estate tax should NOT be repealed. The "percentage-size distribution of income" is not changeable, and life is not a game. There is no reason to reward the wealthiest beyond their lifespans. We will see the arising of an hereditary aristocracy, and the further destruction of our democracy.

The estate tax falls on a vanishingly small percentage of the population, and this tiny group has been solely responsible for a marketing and lobbying campaign to bring this attempted repeal to the floor of the Congress.

In this campaign, ordinary Americans have been led by their natural optimism about the future to believe that they, too, can all become rich enough to be subject to the estate tax. They have been led to believe that their own lack of ability is the only obstacle. And they have been led by their natural suspicion of government to believe that a tax of this sort must be unfair.

None of these things could be further from the truth.

The current shape of the "distribution of income," (or the percentage of rich-to-poor,) has been nearly the same for at least a century, and perhaps longer. Why is this? This distribution fluctuates slightly, and there has been a little increase in inequality over the last 25 or so years. But on the whole, it has not budged for a century. Are we to presume that the natural abilities and luck of individuals in every generation account for the fact that the top 5% of the income-earners always end up with around 28% of the annual income, and that the top 5% of the asset-owners always end up with around 58% of the total assets? (There is perhaps a good deal of overlap by these two five-percents of income and assets.) No: It seems likely that ability and luck do NOT determine the shape of the percentage-size distribution of income and wealth -- or rather we should say, that ability and luck determine WHO GETS the slots, not relatively HOW MANY slots there are.

Let us suppose instead that this shape is endemic, or typical to our system. The percentage-size distribution of income and wealth is not a failure -- it is a property of the perfect, allocatively efficient, market price system. Perhaps it is some sort of "fractal shape," the result of millions of single-step decisions throughout the economy of the industrial age, coupled with the institution of private ownership. It is a "bio-social" pattern which is inescapable to our way of life.

That is all well and good: it allows us freedom and creativity; it gives us economic growth. We like it. In addition, it gives us a cause for celebration, when a small person makes it big. It's even fun--we all love a good party! But we should not make the mistake that everybody can get there. This is NOT a game. A game has several parts to its definition. Participation in a game is voluntary, and there is always a beginning and an end. Game winners are temporary. Games are played again, with possibility of a different winner from the same participants, the next time. THAT is the definition of a "game."

So, IF the distribution of income is NOT a market failure, and the whole of life is NOT a game -- BUT we want to keep our system of free markets for its economic benefits -- we are left with only a few conclusions.

"Equality of opportunity" is not entirely honest, if economic outcomes will always be vastly unequal. Further, the claim that people have a absolute right to their snagging of the limited supply of great outcomes can not carry on absolutely. We wish for all people to provide well-being for their loved ones. Beyond that, they should be encouraged to leave their wealth to charity, or to build institutions magnificent and useful to everyone when they're gone. But there is little reason to honor the ablest, luckiest recipients of our system beyond their charity and public works, and beyond the point of their effectiveness to the system that HELPED TO MAKE THEM.

The House of Representatives has disgraced itself, and they should be voted out in the next election. The Senate should not follow their example.

[liberty]

It may only affect businesses worth over $650,000 but what is the average small business worth, including value of the land, business assets, insurance etc? The market value of the business may approach that number, the family which owns it may be forced to sell. What could be a safe and dependable income for a whole family may become something which must be sold in order to pay the tax and then the family must find a new way to earn income. Its true that after selling and paying the taxes, the family would have some cash to use in order to start over, but after paying uncle Sam the taxes, they would have to start over with a smaller business. Why is this fair, after losing a loved one and one member of the family business? They already have lost one earner in the business, paid funeral costs and so forth, and now they must struggle to pay taxes or sell the business and start over.

But aside from the effect on small business, there are of course the unintended consequences as with any tax. The more a business must pay in taxes, the less it can expand; as money flows to the government and away from the private sector it is used less efficiently and incentives are reversed. Rather than being invested, creating wealth and jobs, it is spent by government on wasteful programs. Perhaps if the estate tax were the only tax it could be justiufied to pay for the military and courts and jails, but it is not. We should reduce spending not raise taxes. We do not need restribution which mangles incentives and destroys the economy for everyone.

If you don't like to see outsourcing hurt the workers, surely you wouldn't like to see this tax break up small business. The difference of course, is that outsourcing is a natural feature of a free economy (and the longer term consequences are all good: more jobs, lower prices, higher wages) while the longer term effects of taxation, part of a less-free economy are all bad (fewer jobs, lower wages, higher prices).

[liberty]

One more thing:

>The current shape of the "distribution of income," (or the percentage of rich-to-poor,) has been nearly the same for at least a century, and perhaps longer.

This is a static income fallacy. Would you make that argument if all poor were 20-25 years old and all wealthy were in their 50s and 60s? You would be complaining only that one must start out at relatively lower paying jobs and advance over their lifetime. Not really unfair, is that?

You assume that the poor at any given point are poor for life, but they are not. The American Dream is alive and well, regardless of what economists with an agenda and a misrepresentation of mobility might tell you. The vast majority (95%) of poor are within 15 years a few quintiles higher up in the income distribution, according to the IRS data (Treasury study) and longitudinal studies (Cox and Alm). "income inequality" and "low social mobility" refer only to the fact that the poorer youth, compared to richer youth tend often to remain relatively poorer at retirement; but they are still wealthy compared to the average American (who has not yet reached retirement). In other words, all youth may start out poor ($20-30k/yr) and end up wealthy ($60-100+k/yr) but the poor youth ($20k/yr) are more likely to end up the relatively "poor" retirees ($60k/yr). But they are still in the top quintile of society.

See here: http://www.urban.org/url.cfm?ID=406722&renderforprint=1&CFID=3591331&CFTOKEN=55100819
And here: http://www.economicliberty.net/mobility_stats.htm

[Shawn]

As I understand the estate tax, the government doesn't actually make any money off of it. That is, their expenses are as high as the revenue they bring in. So it's basically just an expensive jobs program.

[Lee A. Arnold]

(1) Actually, repealing the estate tax will lead to the increased sale of small businesses, if the gift tax is repealed at the same time, because of a loophole regarding the valuation of assets; this argument is explained in Chapter 6 of Perfectly Legal, by David Cay Johnston.

(2) The idea that repealing the estate tax will increase economic growth makes no more sense than the argument that President Bush's income tax cuts increased economic growth any more than we would have had anyway. Instead, the President's tax cuts appear to have stymied job growth for several years, simply because they were not short-term consuption-orientated tax cuts.

(3) The size distribution of income is clearly defined and there is no fallacy. Yes, people do better during their lives. The recent decrease in income class mobility refers to lifetime income classes, and is not alleviated by the fact that nearly everyone does better over the course of their lives -- this is already included as a matter of definition. (Any implication that this has a bearing on the incidence of the estate tax, of course, is ludicrous.)

[liberty]

>The idea that repealing the estate tax will increase economic growth makes no more sense than the argument that President Bush's income tax cuts increased economic growth any more than we would have had anyway.

You think we would have recovered from two recessions, in 2000 and 2001 magically growing then at 4% and better, without any tax cuts, just as a matter of course; though that has never happened in the past? That is absurd. There is a huge literature of econometric evidence supporting the value of any and all tax cuts on economic growth. Bush's tax cuts included cuts that affected small business, personal consumption and wages. They absolutely helped to spur growth and if you ignore that you are simply covering your eyes to an obvious fact.

>The size distribution of income is clearly defined and there is no fallacy. Yes, people do better during their lives. The recent decrease in income class mobility refers to lifetime income classes, and is not alleviated by the fact that nearly everyone does better over the course of their lives -- this is already included as a matter of definition.

Yet the "cure" to the income inequality that you cite is redistribution and redistribution is very closely correlated with (and there is much evidence that it causes) a decrease in lifetime mobility (that people do better over the course of their lives).

So, it would be a fallacy to assume that peoiple will do better and complain of descred social mobility without recognizing the trade off in absolute advancement if you depress the inequality. In addition, most people don't recognize that "social mobility" and absolute advancement are not the same thing. There are numerous articles in the Times and Post that claim the studies regarding social mobility prove that the American Dream is long gone. Nothing of the sort - we have always had inequality, growth, high employment and high absolute advancement: that *is* the American Drem.

If in the US you can go from $20k/yr to $60k/yr and still be considered to have seen no mobility as in my example above; while in Sweden you can go from $20k/yr to $30k/yr and be considered socially mobile because nobody else advanced more than you: where would you rather live? I would happily take $60k and be considered poor compared to my peers.

[JoshK]

If people are already taxed on earnings, it doesn't seem fair to tax them again on it when they die. If we want to tax the rich more, we could just raise regular income taxes. But I think people realize that taxing the rich shifts that money from productive purposes to government purposes, which is almost guarantted to be spent inefficiently, and negatively effect the economy.

says...

"If we want to tax the rich more, we could just raise regular income taxes. But I think people realize that taxing the rich shifts that money from productive purposes to government purposes, which is almost guaranteed to be spent inefficiently, and negatively effect the economy."

Like, say, roads and bridges and waterways and parks and schools and libraries and teachers and librarians and oversight of food and drug safety and researchers and fire fighters and police and soldiers [though I wish none were ever needed] and, well, all the non-productive things that we would be better off were there no government to tax the poor rich to do for, well, even for them :)

[anne]

That was me :) thinking of all the things we would be better off were we not to have because of, oh, how I do hate it, government.

[liberty]

>Like, say, roads and bridges and waterways and parks and schools and libraries and teachers and librarians and oversight of food and drug safety and researchers and fire fighters and police and soldiers

All of which constitutes well under half of the budget of government in any given year.

If we cut out all the inefficient social programs and keep only the constituional programs - such as those that you mention - the effect on the economy may be acceptable.

Some states are considering privatizing highways, some firehouses are private, certainly schools can and should be private (with or without vouchers for the poor) but even if your whole list remained public, it would be a much more reasonable list of government provided services than we have today.

[anne]

No; the heck with the poor, let them build their own schools; the last thing we want is having them in our schools. There is much to be said for ignorance. Imagine too allowing the poor to use our hospitals. There was a time when using Massachusetts General was a mark of status, but that was when there were separate charity entrances. Heck, let the poor learn to be well for a change.... Oh, I forgot, not in our schools. Schools by and for the poor, health care by and for the poor. Hmmm....

[liberty]

>No; the heck with the poor

Once again liberals miss the point. They assume that conservatives don't care about the poor. But its not intention, its the method that differs between the two sides.

Both sides want to see the lives of the poor improved and each have a different method they believe will work; yet one side refuses to discuss which method will work better and instead assumes that the other side is unfeeling and simply doesn't care. Reminds me of Marxist thought, honestly - class warfare and refusal to face the implications of the proposal.

Instead for once grow up and look at which method brings the better results.

[anne]

Well, myself, I have always favored class warfare though getting by the blue and white uniforms was a problem, Catholics having no fashion sense. Still, when it comes to class warfare, I am there :)

[Lee A. Arnold]

liberty: "Though that has never happened in the past?" Check your history again! We would be where we are now, or maybe even further along, if the tax cuts had been short-term and targeted to consumption. We might have even had job growth much sooner, with less personal and household debt to prop up the consumption. Over a couple of hundred economists signed a letter saying so beforehand, and explained why the Bush Tax Cuts were wrongly structured and would harm job growth. Then job growth tanked for over three more years, while personal debt shot further upwards.

There is no "cure" to the inequality of the size distribution of income, nor did I claim there is. Quite the opposite. I wrote in effect that it appears to be necessary to our system. It makes repeal of the estate tax inexcusable.

I don't support increased government spending, but the idea that government spending is necessarily inefficient is also incorrect. Read the new book "Knowledge and the Wealth of Nations," by David Warsh. Indeed redistribution could in certain circumstances increase economic growth, by providing more and better education and freedom from medical cares and woes, thus promoting worker productivity.

[liberty]

>We would be where we are now, or maybe even further along, if the tax cuts had been short-term and targeted to consumption.

I said "without tax cuts"; you are only saying we could have had better tax cuts. I would have to read a study that explained and showed with empirical evidence why a different structuring of tax cuts would be better in order to argue that point. Please link one of you have one. I know Keynes argued that tax cuts should go to those who consume, but I don't buy it and that which is not consumed in the private sector is invested (unless you are using a mattress instead of a bank) and I think investment is as important as consumption. In addition, I would think that more money to invest would create as many jobs, however its posible that those jobs would come slower than jobs spurred by increased demand of existing business which would be spurred on by increased consumption due to tax cuts for the poor - however that makes it more immediate not better. My position is that tax cuts of any sort are good and the bigger the better; spending cuts are also good and we should reduce government to its essentials as outlined in the constitution.

>There is no "cure" to the inequality of the size distribution of income, nor did I claim there is.

Sure there is. Sweden cured inequality beautifully. The richest 20% are barely any wealthier than the poorest 20%, the income distribution is exceptionally flat. Sadly, the cure is much worse than the disease. The richest 20% in Sweden are barely at our middle income quintile.

>Indeed redistribution could in certain circumstances increase economic growth, by providing more and better education and freedom from medical cares and woes, thus promoting worker productivity.

This is only true of developing nations. The evidence is very clear that in highly productive societies, post-industrial societies, income redistribution is a very heavy drag on economic growth.

[anne]

Should I sell my Swedish stocks now before the terrible collapse to mediocrity? I like Sweden and even the style crazed Swedes, and, oh dear oh dear, Norwegians, all those middling Norwegians; Finns are just cute.

[anne]

Beware of creeping Swedenism; but, oh, those Swedes know how to build companies, Finns too.

[Lee A. Arnold]

liberty, Go to "What Bush Boom?" right here on Mark's invaluable site, from March 7:

http://economistsview.typepad.com/economistsview/2006/03/what_bush_boom.html

where Bruce Bartlett will explain it. Go to Wikipedia to learn who Bruce Bartlett is.

The things you say are certainly true as first-order abstractions, ceteris paribus. Trouble is, ceteris is rarely paribus. First-order economics is an excellent way to begin thinking about things, but it's rarely decisive in economic policy.

For example, a single-payer universal healthcare system might greatly increase productivity in our developed post-industrial society, because it would greatly decrease transactions costs that are incurred all over our dysfunctional system, and particularly falling heavily on marginal workers, who then fall backward. Here again, the Europeans are providing excellent counterexamples to our own system. Income is only part of the quality of life because some costs are real but not regularly monetized, nor should they be, &cet.

[Lee A. Arnold]

liberty, in my advanced decrepitude I forget myself! All the ceteri are strung together, in an animated systems flowchart called "The Bush Tax Cuts" at http://ecolanguage.net (scroll down the page to find it.) It was finished late in 1994 but I think it still all holds up, except for the fact that the Federal Reserve Board's new Survey of Consumer Finances this February showed that distribution of income got a little worse.

[dryfly]

liberty = rich anarchist

This thread started out a 'discussion' of the estate tax & degenerated into a libertarian rant... YAWN.

BTW - I own/run a small business... so did my father. It isn't theory to me.

The inheritance tax considerations didn't play into our 'expansion plans'... No tax did with ONE exception... depreciation on capital. Given higher marginal rates and aggressive depreciation it almost FORCES you to expand (so as to depreciate the capital & reduce the tax load while increasing assets).

Low marginal rates though mean you can work a lot less hard, maybe make less money, but still have plenty left over if the rates are low enough... then play. Once you have 'enough' money start working on building up that 'leisure time'. Not a bad way to live but certainly not an incentive to work hard & expand & grow the economy.

Believe me a lot of small businessmen think that way... short meetings and long golf outings. These guys aren't little Bill Gates.

[DJM]

Comments about wasteful government spending and how privatizing everything is *always* a better idea, bother me for many reasons but one of the most obvious to me is that private business, just like government, is only as good as those who run the organization ....right now we have many in government whose main purpose seems to be to enrich themselves and their friends (running it like a private family business, and we have seen many disasterous results) Business has to be accountable to the stockholders who will always demand higher profits(and the company has to offer a decent product or service that the people want and trust) Government has become unaccountable to the people and that is the root of the problem in my opinion. There are many social programs that have proven themselves to be extremely valuable but are being cut because of differences in opinions about the methods to reach the goal... When I read the book Moral Politics by George Lakoff, it helped me understand a little about the current lack of compromise among the two parties and how each cannot understand why the other side is so "unreasonable".

[DJM]

"The test of an industrialized nation is whether it can maintain a balance between community and private interests." ~Kevin Phillips (author)

As we know "balance" is in short supply these days.

[reason]

Liberty,
nice own goal quoting Sweden. To a lot of people the Scandinavian model looks very attractive at the moment. Look back through the archives on this blog for instance.

[anne]

http://www.nytimes.com/2006/06/06/opinion/06tue2.html

June 6, 2006

The Estate Tax, Back on the Agenda

Still giddy over the passage last month of a $70 billion income tax cut for affluent Americans, Senate Republicans are hoping this week to go further, and gut the federal estate tax. And they'll probably try to accomplish this gift to the super-rich under the guise of compromise.

Their fondest wish would be to permanently repeal the tax. But planning, during a time of war, to give away nearly $1 trillion over 10 years may look too radical even for this crowd. So the senators are also considering a so-called middle-of-the-road approach. Sponsored by Jon Kyl, Republican of Arizona, the "compromise" would drastically raise the thresholds at which the estate tax kicks in, while slashing the estate tax rate. Together, those changes would cut taxes for the wealthiest families by $652 billion between 2012 and 2021, the first full decade of the proposed cut. Because the government would need to borrow to make up for that lost revenue, the tax cut would also cost all taxpayers some $175 billion in higher interest payments.

And for what? Fully 71 percent of the additional benefits would go to people who stand to inherit more than $10 million. Almost all of the rest would apply to estates worth more than $5 million.

There is no economic justification for doing this, any more than any tax cut can be justified when the economy is growing and the government is running a big deficit, as is now the case. The notion that small businesses and family farms are unfairly targeted by the estate tax is nonsense.

There is no moral justification for cutting estate taxes. Much of the wealth taxed after death has never been taxed because profits on stocks, bonds, real estate, artwork — you name it — are not taxed until an asset is sold. Obviously, people with big estates never got around to selling their assets.

And yet, some multimillionaires, and their Congressional supporters, have the gall to say that the wealthy should not be "penalized." Estate taxes imposed after one's death are no more of a penalty than income taxes withheld from paychecks....

[anne]

Well, $2 million is an income above $120,000 a year from the Vanguard long term investment-grade bond fund. But, the estate tax does not even begin till $4 million which would be an income over $240,000 a year from the Vanguard fund. Not enough? Try $6 million or $8 :)

[anne]

Then, $4 million is an income above $240,000 a year from the Vanguard long term investment-grade bond fund. Precisely, and $6 million is an income above $360,000 a year from the fund. Care for $8 million? What is enough to make ends meet? But, oh the family farm, oh, the family farm. What are we to do with the family cows and cowletts. Save our cowletts; $8 million cowletts. Oh, oh, oh, the estate tax begins, really begins, above $4 million. Really, really. Save the family cowletts; they need $8 million :)

[nyuk]

Only a political buffoon would think that it is possible to make any meaningful cuts in government spending, except perhaps for that useless war Bush lied us into.

I'm for better roads, better schools, cleaner water and air, more reliable public utilities, and safer neighborhoods, and I don't see a whole lot of private entities lining up to accomplish these things.

I'm for necessary health care for every citizen, and I sure won't hold my breath waiting for any private entity to tackle that one. And that Medicare Part D that has "idiot Republican" written all over it...what a screwed up mess that is.

When are some people going to make the logical connection between the existence of society, and the need for a certain amount of socialist policy? Does it not occur to some that sickness left unchecked in the poorer populations might eventually have an impact on the health of the richer populations?

[liberty]

>For example, a single-payer universal healthcare system might greatly increase productivity in our developed post-industrial society, because it would greatly decrease transactions costs

Right... just as happened in the Soviet Union, eh? They made the same arguments.

> Here again, the Europeans are providing excellent counterexamples to our own system.

Yeah, ones where they have much lower total productivity, stagnant economies at 1.5-2% growth in a boom; and healthcare systems that have long lines and routinely cannot provide surgery in time, lower life expectancy for cancer patients, etc.

Not to mention no new innovations in many of these countries. If it weren't for America, they would have no new medicines, nor medical technology.

[liberty]

>liberty = rich anarchist

I'm sure you don't care but I am neither rich nor an anarchist. Anything but - I believe strongly in the rule of law and the vision of the founding fathers of this country. I am anti-Socialist as it creates the very problems it is supposed to fix.

>BTW - I own/run a small business... so did my father. It isn't theory to me.

Because a single anecdote is the best data..? Only for making whatever point you want to make without effort or proof.

By the way, that bush tax cuts flash movie is a sadf twisted mess of statistics that ignores lifetime mobility and is littered with untruths and mis-spoken half-truths. Then its all shoved into a little movie so that it doesn't need to be footnoted as is unlikely to be analyzed. Its very Krugman.

[liberty]

>When are some people going to make the logical connection between the existence of society, and the need for a certain amount of socialist policy? Does it not occur to some that sickness left unchecked in the poorer populations might eventually have an impact on the health of the richer populations?

What I find sad and absurd is that there are two sides arguing over methods to help the poor: on the left you have those who want government to do it; on the right you have those who want private entities to do it (and conservatives give much to charity per dollar of income, so they walk the walk).

Yet only one of those two sides admits that both sides are interested in the same goal - helping the poor.

Those on the right say "yes, yes, we want to help the poor but the right way to it is with private charity and the least interference by government, here is some proof of why this is better."

Meanwhile those on the left say "you heartless rich anarchists! You want to see the poor bleeding on the streets! You don't care if they die of poverty and disease!"

[nyuk]

In what fantasy world do private charities have the reasources to even begin to scratch the surface of the socioeconomic problems of the American people? After all of the tax-cutting over the last 5 years, has there been some serious increase in private charitable help for lower income people to get health care? And just how effective has it been?

Maybe those on the right really do want to help the poor. They simply are failing miserably at doing so. Meanwhile, there are successful programs like CHIPS and Medicaid that really do help people in need, and they are being gutted. And that's why it looks like the right really doesn't care to help the poor - they're just not very good at it. And it looks like they would rather have their tax cuts, right along with their deficits. The right who are rich look greedy. The right who are middle to lower income just look ignorant.

[DJM]

I agreed with nyuk all the way and as for liberty...sigh* I know I have read many statistics over the last few years ... credible statistics (!), that would refute several of the statements he made that were basically Republican talking points.... but even if I had those articles at my finger tips I am pretty sure the facts would bounce right off him. "Passion rules reason." Most true conservatives have begun to see the contradictions in what the current administration said it believes in and what it has actually accomplished.

[Lee A. Arnold]

There is also the fact, well-reported, that private charity giving has DROPPED in the Bush years, despite the tax cuts! Of course, when a discussion of worker productivity is characterized as "just as happened in the Soviet Union, eh? They made the same arguments," we had already left the realm of facts.

[anne]

http://www.nytimes.com/2005/12/19/national/19give.html?ex=1292648400&en=83c752fafe5c479d&ei=5090&partner=rssuserland&emc=rss

December 19, 2005

Study Shows the Superrich Are Not the Most Generous
By DAVID CAY JOHNSTON

Working-age Americans who make $50,000 to $100,000 a year are two to six times more generous in the share of their investment assets that they give to charity than those Americans who make more than $10 million, a pioneering study of federal tax data shows.

The least generous of all working-age Americans in 2003, the latest year for which Internal Revenue Service data is available, were among the young and prosperous - the 285 taxpayers age 35 and under who made more than $10 million - and the 18,600 taxpayers making $500,000 to $1 million. The top group had on average $101 million of investment assets while the other group had on average $2.4 million of investment assets.

On average these two groups made charitable gifts equal to 0.4 percent of their assets, while people the same age who made $50,000 to $100,000 gave gifts equal to more than 2.5 percent of their investment assets, six times that of their far wealthier peers.

Investment assets measures the value of stocks, bonds and other investments assets held in the tax system. Excluded from this are retirement accounts, which are generally held outside the tax system, personal property like furniture and art and equity in homes.

The I.R.S. data was analyzed by the NewTithing Group, a San Francisco-based philanthropic research organization that since 1998 has been encouraging the most prosperous Americans to give more. The full report was posted last night at www.newtithing.org.

Tim D. Stone, the president of New Tithing, said that taxpayers who itemize took $148.4 billion in deductions for charitable gifts in 2003. The American Association of Fundraising Counsel, an organization of companies that advise charities on seeking donations, estimates giving by all Americans, including those who file simple tax returns, was $180.6 billion.

The study used unpublished I.R.S. data from 180,000 tax returns to analyze giving by income, assets, gender, marital status and age. It found that disparities in giving by income class declined once taxpayers reach age 65, but it also found that as Americans grew older their giving as a share of their investment assets also generally declined.

Among those 35 and younger, those making under $200,000 made gifts equal to 1.87 percent of their assets, a figure that fell to 0.5 percent for the 189,000 taxpayers making $200,000 to $10 million and to 0.4 percent for the 285 taxpayers making more than $10 million.

Americans age 36 to 50 making under $200,000 gave less.

Those making $50,000 to $100,000 made gifts equal to nearly 2 percent of their investment assets, compared with less than 1 percent for those making $200,000 to $10 million.

But those with income greater than $10 million, whose investments averaged $81 million, made gifts equal to 1.54 percent of their assets. This makes these middle-aged givers more than three times as generous as their wealthier and younger peers, who gave at a rate of 0.4 percent.

Americans ages 51 to 64 gave in an almost identical pattern to those 36 to 50....

[anne]

http://www.nytimes.com/2005/12/19/national/19give.html?ex=1292648400&en=83c752fafe5c479d&ei=5090&partner=rssuserland&emc=rss

"Working-age Americans who make $50,000 to $100,000 a year are two to six times more generous in the share of their investment assets that they give to charity than those Americans who make more than $10 million, a pioneering study of federal tax data shows."

Really, I am not interested in being supported by the charitable rich when I am ill. Really :)

[liberty]

>In what fantasy world do private charities have the reasources to even begin to scratch the surface of the socioeconomic problems of the American people?

It isn't a fantasy world. In 1994 with welfare reform kicking millions off the rolls, poverty dropped, unemployment dropped. Despite cries from the left that the streets would be filled with new homeless, the fact was that welfare had created poverty.

The same is true with all of these programs. Privatization means a more robust economy - more jobs, higher wages; it means fewer people *in need* and more money flowing to charities. So, the combined effects of fewer people who need help and more money for help, and yes the private programs can easily handle the problem.

>After all of the tax-cutting over the last 5 years, has there been some serious increase in private charitable help for lower income people to get health care? And just how effective has it been?

The tax cuts of the past few years are pretty small. We only went from 37% to 34% or something like that. But, yes, tax cuts do lead to more giving - as does a robust economy.

[liberty]

Obviously charitable giving drops during a recession, Lee.

Econometric analysis over many years, holding GDP/capita constant and signs of recession such as unemployment; tax cuts do increase charitable giving.

As for the estate tax, here is some more economic analysis.

[anne]

Well, no, interestingly enough, just as the rich are less generous than the middle income, so when tax rates fell there was not not not a compensatory increase in charitable giving by the wealthiest to the gains from the large large large tax cuts for them them them. Imagine that :) I love me capital gains and dividends, I do, I do, I do. Lower me more.

[anne]

Notice, how I am all about class war :) To the ramparts, well, the Gap in any event. I will march on the Gap. Have you seen the clothes?

[Lee A. Arnold]

Sorry -- I thought we were in a boom!

[anne]

No, no; the only question worth answering is whether you are with us in moving to the Gap. I must read of the "Long March." I wear red well :)

[nyuk]

Liberty, do you operate based on any actual facts, or are you just a theory-driven right wing automaton? Look at what's happening today, look who is in charge, and do the simple math, dude. Republican policies suck at making life better for anyone other than the rich. Stagnating wage growth and loss of health coverage is not a sign of good times.

Were you born in denial, or do you have to work at it?

[calmo]

The 'debate' between Max and Tyler on that forum (WSJ) is from my perspective (not connected to one of the 400 families lobbying for the repeal of the estate tax) polite and crushingly victorious for Max.
So liberty, was that the link you wanted or is there something to nyuk's claim?