"Faux Fiscal Discipline"

Will Bush's attempt to portray Democrats as the party of big spenders work again? I want to believe it won't, that the "non-Faux News" press will call it for what it is, that we have learned, that the Democrats will mount an effective defense, and so on, but it's hard to have too much confidence:

The President’s Cynical Budget War, Editorial, NY Times: President Bush’s lame-duck attempt to repair the Republican Party’s threadbare fiscal reputation is an increasingly reckless game. In the latest exercise of irresponsibility for political gain, Mr. Bush reportedly wants to slash counterterrorism funding for front-line police and firefighters.

The administration’s own Homeland Security agency requested $3.2 billion for this first responder aid to high-risk cities and states in the 2009 budget — the one that Mr. Bush’s successor will inherit. The White House is considering cutting that request by more than half to $1.4 billion by eliminating grants for port and public transit security, according to documents obtained by The Associated Press.

While Mr. Bush wrestles with more responsible members of his own administration, his larger and more immediate game is to portray the narrow Democratic majority in Congress as feckless overspenders. ...

In the name of faux fiscal discipline, he is threatening to veto budget measures that the nation needs for effective government.

Mr. Bush is clearly hoping that the public will somehow forget that he is the one who spent the last seven years running up huge deficits and debt with his off-the-books war in Iraq and serial tax cuts customized for his affluent political base. Mr. Bush’s Republican allies on Capitol Hill are also hoping that the voters will forget how they abetted the president through all those years. Those fiscal turncoats are now scrambling to pose once more as budget hawks to survive in next year’s watershed election.

The differences between the Democrats’ spending bills and Mr. Bush’s budget are not that large. And the Democrats are offering to split the difference. But Mr. Bush isn’t interested in compromise. He’s decided the real political traction comes with manufactured standoffs and blame-the-Congress gridlock. ...

As the White House plays out its cyncial scenario, loyalists are flinching.

“This isn’t a bridge to nowhere. We’re talking about life and death,” Representative Peter King of New York, the top Republican on the House’s Homeland Security Committee, warned of first-responder cuts. Having played along so far with the grand Bush strategy, Mr. King is alarmed now and threatening to vote against sustaining future vetoes.

Republicans sweating political survival beyond Mr. Bush’s desperate endgame would be wise to follow Mr. King’s lead, not the president’s.

One way to save money is to improve the quality of government services so that we can get more out of the same level of spending, or the same amount of services with less spending, but with the decline in the quality of government under Bush we are getting less value per dollar spent and just the opposite has happened.

Comments

[Ted]

One way to save money is to improve the quality of government services so that we can get more out of the same level of spending, or the same amount of services with less spending, but with the decline in the quality of government under Bush we are getting less value per dollar spent and just the opposite has happened.

From a recent point-counterpoint discussion between Bruce Schneier and Marcus Ranum:

Ranum: Another trend I see getting worse is government IT know-how. At the rate outsourcing has been brain-draining the federal workforce, by 2017 there won't be a single government employee who knows how to do anything with a computer except run PowerPoint and Web surf. Joking aside, the result is that the government's critical infrastructure will be almost entirely managed from the outside. The strategic implications of such a shift have scared me for a long time; it amounts to a loss of control over data, resources and communications.

[anne]

There is a falseness to the editorial today that is distressing, and adds to a predictable falseness by Thomas Friedman yesterday. All the New York Times is concerned about, Republican Peter King care about, is security funding for New York. I am not concerned about whether the funding is needed, but only about the pretense that a local issue is national in scope, and a loss in focus on the buget issue.

Friedman added to the voices crying for the supposed problem in Social Security, while pitching as always for an oil tax that will harm millions while ignoring the numerous Democratic candidate proposals for an industry emissions auction and cap and trade system that would more efficiently and fairly limit emissions.

[Cyrille]

An oil tax should be applied. Internalising externalities is the only way to price things properly. Then you may redistribute the monies collected to the poor -they will still have an appropriate marginal price.

Without an oil tax, you are effectively subsidising oil consumption across the board. Friedman is often wrong, but an oil tax is, economically and ecologically, a must have. Cap and trade would be far less efficient, and probably less fair in practice (optimal implementation would not be operable).

[anne]

We are not a redistributing sort of people, and there need be no regressive tax on oil beyond what we have already. However, I am perfectly content to let Republicans try for higher oil taxes. Let Republicans lead us on to $6 dollars a gallon gasoline. I will surely follow. For now, I am content as a gas-burning clam with my Prius and Democrats have learned.

[anne]

We are a country that has not made a fig of progress in vehicle efficiency since 1984, by catering to a self-destructive automotive industry, so I am not impressed when told how much I need to be punished for the sake of the efficiency gods. I am nothing but efficient already, for the matter, and will become more so with no help from Thomas war-and-more-war-and-war-again Friedman.

[wogie]

anne

It depends on what kind of cap-and-trade program is adopted. The permits have value and if given freely to power plants (more than 50% of CO2 emissions) and refineries it will provide them a financial windfall while increasing costs borne by consumers. The right way would be for the government to auction permits and use the revenue to reduce taxes, thus offsetting to a degree the increased costs of curbing emissions. Unfortunately, the five proposed pieces of legislation in Congress primarily call for free distribution of permits, although at least one would auction a few.

Most economist believe a direct tax on the source would be most effective, again with redistribution of the revenue.

[calmo]

That overall strategy/accident to perform a HeckofaJob so that succeeding administrations can face that record of Miserable Government Meddling does not seem to be working once one steps up and away from the major media and joins the adults on web pages like this.
To be confirmed in spades Nov 08.

[Alex Tolley]

I'm all for carbon taxes. However I would like to know how it can be implemented globally? Whilst Europeans are effectively already taxing oil consumption heavily, and we should follow suit, how do we get the Chinese and Indians to tax their carbon emissions too? Do we need to violate WTO and add carbon import taxes to Chinese goods?

I am aware that cap & trade is also an issue in this regard. The one commendable part of this approach however, is that theoretically, we can constrain absolute carbon emissions. However, again, this will need to be a global consensus with everyone participationg and not cheating.

I was most disheartened at the recent BusinessWeek report on "greening" companies. The report highlighted that it was mostly smoke and mirrors, with most companies emitting more CO2 but buying dubious carbon offsets. It shows how hard this is as a problem, and that even with carbon taxes (what else is buying carbon credits to the buyer?) we are going to have great difficulty in curbing CO2 emissions. Perhaps we will need to offer massive subsidies for renewables such as solar, plus high carbon taxes on fossil fuels (offset by effective CO2 sequestration) plus global caps on CO2, plus subsidies on energy wasting construction and heating in buildings. I don't doubt this is going to be hard, but we need to get started asap and encourage invention and innovation to reducing our CO2 emissions deeply.

[anne]

Wogie:

"The permits have value and if given freely to power plants (more than 50% of CO2 emissions) and refineries it will provide them a financial windfall while increasing costs borne by consumers. The right way would be for the government to auction permits and use the revenue to reduce taxes, thus offsetting to a degree the increased costs of curbing emissions."

Agreed completely.

[anne]

Cyrille:

"An oil tax should be applied. Internalising externalities is the only way to price things properly. Then you may redistribute the monies collected to the poor -they will still have an appropriate marginal price."

There is a story told by Benito Perez Galdos of a Spanish royal tradition through which selected poor people were taken from the streets to palaces on a given saint's day to eat and be served at the tables of royalty (though not necessarily to be served by the royalty). I am not interested in such nonsense.

[hari]

In EU countries we've what's called VAT (tax) which currently averages +15%.

This value added tax is, of course, a consumption tax applied across the board inside the EU.

Why is it not acceptable to introduce a sort of minimum VAT at federal level in order to not only deal with issues like climate change but other constraints in the economic system?

[Frank Mayo]

Well we've had faux celebrities, faux mansions, faux wealth, faux war, now it seems we had faux financial security and fiscal discipline.

[Patricia Shannon]

Hari, a VAT is a sales tax. The less money a person makes, the higher the percentage goes to these taxes, because they have to spend a larger percentage of their income for basic expenses, such as food and shelter. In Alabama, which depends heavily on the sales tax, the poorer a person is, the larger the percentage of income they pay in state and local taxes, because of this factor.

[James Killus]

The auguries for an election cycle are always in the campaign donations, and the Republican Party is currently running very scared. Corporate donations have shifted significantly to Democrats, and even some of the RP fat cats are having second thoughts, given the way that Bush and Company have managed to "precaritize" the economy (to use a Bushism, never uttered by Bush; it's sort of a zen challenge).

There are two big battles now. The Authoritarian Right vs the Country Club Republicans are now having a rematch of the epic 1980s smackdown (culminating in the 1992 "spoiler" from the AR, to make an example of the elder Bush). Many Republicans are now aware of the toxic nature of the AR Republicans, but are hampered by the centralized nature of the Party itself, and the stranglehold the AR has on the Politburo, er, RNC.

In the Democratic Party, the fracture line is the "Blue Dog Democrats" who claim that they have to be "conservative" to represent their districts, but who, in fact, are sucking down the bribe money like, well, like politicians, actually. The problem with these guys is not that they can be bought (heck, I've got my price), but that they can be purchased so cheaply. It's outright embarrassing, it is. Oh, and the fact that they think it's their job to be every bit as racist, xenophobic, and warmongering as any Republican. Yeah, that's a problem, too.

[calmo]

"It's outright embarrassing." ...reminded me of PK's note on Huckabee on his blog that traced a thread from The Howler (a howling monitor on the messengers)...Krugman noted that Huckabee makes him "nervous" and reading all the details (I don't know what excessive means if "all" in this context is not excessive.) ...this is an extraordinary understatement.
Take it from me people, read that chunk only with parental guidance.

[calmo]

"It's outright embarrassing." ...reminded me of PK's note on Huckabee on his blog that traced a thread from The Howler (a howling monitor on the messengers)...Krugman noted that Huckabee makes him "nervous" and reading all the details (I don't know what excessive means if "all" in this context is not excessive.) ...this is an extraordinary understatement.
Take it from me people, read that chunk only with parental guidance.

[Cyrille]

Anne, if you are not interested in nonsense, I suggest you refrain from posting things like that again.

It is totally irrelevant and completely silly, and I believe intentionally so.

My proposal leaves the poorer people with more money than they had in the first place, even with equal consumption, and of course with a clear way to having even more if they can find a way to consume less (there's a lot that can be done there).
Don't try to make me pass for hard right. My political position is far to the left of anything that exists beyond the marginal in the States. But I understand marginal cost incentives. And the operational problems of a cap and trade scheme applied to greenhouse gases.

[anne]

"An oil tax should be applied. Internalising externalities is the only way to price things properly. Then you may redistribute the monies collected to the poor -they will still have an appropriate marginal price."

Them whats got will tax them whats not got and return the tax to them whats not got. I understand completely. Like the Spanish Queen having her servants serve the poor Spaniards (on her saint's day).

Thank you, Perez Galdos.

[anne]

What was it that happened when a certain California governor decided to raise vehicle registration taxes? That is in California, the place where people, like, drive. That was a Democratic governor in a Democratic state, only now there is a Republican governor in a Democratic state.

"Hasta la vista, Baby."

[anne]

There is a funny sort of ethic in which physicians think, do no harm. Utilitarians however think as long as we only harm a few for the sake of the many then fine. Me, I figure there are all sorts of ways to foster efficiency and conservation and protect the enviornment that are not games played at the expense of the poorer. Like getting General Motors to make a Prius before 2020. Love my Prius.

[Lafayette]

PS: In Alabama, which depends heavily on the sales tax, the poorer a person is, the larger the percentage of income they pay in state and local taxes, because of this factor.

You're right, it's a regressive tax.

But, it was introduced to assure that European states would have the resources to reconstruct in Europe. It is also a tax that is amazingly efficient to collect, especially with respect to income tax the collection of which is significantly more expensive.

Of all tax revenues, VAT accounts presently for somewhere around 60%, which means that income tax is a correspondingly lower percentage of total tax revenues.

Frankly, I would prefer to have a common VAT at around 9%, rather than an elevated income tax. Income tax should become truly regressive at the upper income levels, leaving the lower and middle-class relatively untouched. That is not the present case today.

The middle-class, struggling to make ends meet (AND send their kids to university), pay the bulk of tax revenue in the US.

So, though European VAT is a regressive tax, at least we can be sure ALL people pay it. There is no "minimal tax" necessary for the rich -- who may have an army of fiscal experts to find loop-holes in the tax system.

Most importantly, when tax revenues are directed at subsidizing enhanced public services, the fact that the money is put to good use justifies (at least somewhat) that a regressive tax is being employed to pay for them.

That is the prevailing thought in Europe today, which has a general tax burden much larger than the US ... but far, far fewer of its citizens living in the precariousness of inadequate health care.

Americans in general have an intense distaste for taxes. That's fine, given America's penchant for ruinous foreign wars. But, they must assume the consequences of that short-sighted notion, given also that tax revenues can do so much for so many if used appropriately.

[Patricia Shannon]

Anne, I sometimes want to send a link to an article on this site, usually to inform them of how the Republicans and media are distorting the facts on Social Security funding. But I hold back because I know your postings will reinforce their stereotype of unrealistic liberals. Sometimes you sound like you're on drugs!

You should know by now that I am sympathetic to the poor. But I also know that being poor doesn't transform a person into a saint, or a person of good judgement, or someone who will take action for the collective good, or spend the time (if they have it) learning about problems of society, any more than any other financial class.

The poor and near-poor stand to be hurt more by environmental degradation than others. They are a large enough proportion of the population, and use enough resources, that they must change their habits along with everybody else to deal with environmental problems such as GW and air pollution. A friend of mine, who makes less than $20,000 a year, was going to run her landlady's washer and dryer for three small items of clothing this summer, when we were already under water restrictions because of the drought, until I pointed out how wasteful it was. She's not an evil person, she's not retarded, she just hadn't thought about it.

We do need some way, such as the negative income tax, to ameliorate the effects on the poor. (Better, we need decent paying jobs, but that is another issue). We probably need some kind of assistance to people who have a leak, and can't afford to repair it. Maybe utility meters in the house that show how much money is being spent. We need useful ideas that work.

[TigerPaw]

If a miracle occurred and the US decided to implement a VAT, they could do the same thing that is done here in Canada. Certain items (e.g. food, rent) are not taxed, but everything else is. If the items not taxed were selected carefully that would likely eliminate a significant part of the burden on the poor.

And I don't know if it still works this way but I seem to recall that in France the VAT had different percentages depending on what types of things you were buying. If that scheme were also implemented - buying a Hummer would have a VAT of say 40% but buying shoes for your kid would only have a VAT of say 5%.

Of course it'll never happen. The vested interests in the US would never permit it. But it's possible to create a system that doesn't hurt too much at the low end if people want to put the effort in.

[Cyrille]

Ah Tigerpaw, but if you were to do that Anne would be there to claim you were a hypocritical 16th century Spanish royalty...

[Lafayette]

C: My political position is far to the left of anything that exists beyond the marginal in the States.

And what makes you think that an oil tax, on top of already high taxes on petroleum, will do all that much good for the poor? They don't use petroleum products to heat their houses in winter? To drive cars? To cook?

An oil tax is like the Tobin Tax on all international trade, the intention of which is also to "attend to urgent global priorities".

It would be nice, for just once, that the Left would think of some answer to the ills of this world that did NOT call for increased taxation. But, that simple notion appears beyond their imagination.

I'd like to see increased taxes on exaggerated income, yes, but find it far more interesting to consider how to better use tax revenues for subsidizing public services (in the US).

[Lafayette]

TP: The vested interests in the US would never permit it.

Yes, for as long as Americans permit vested interests to run Congress.

But, a VAT that develops tax revenues that are used to fight foreign wars that employ, largely, cannon fodder made up of "poor boys", that amounts to what sort of improvement.

There is little public will to have taxes attend to public services, so the decline of America will continue. Who knows how many neonatal deaths will be necessary to change attitude, how many heart attacks born of obesity, how many high school drop-outs, how many young men (bent by TV) will take a shotgun to a crowded shopping mall in an effort to "become a celebrity".

God Bless America.

[Cyrille]

There are already high taxes on petroleum in the US? Hell no. Including externalities, gasoline should never be priced less than 8$ a gallon. It is FAR from there at the moment.

So, effectively, gasoline is subsidised.

Now if you were to create an externality tax and use its revenue either in a completely equal redistributive way (that would help the poor who do heat their houses but rarely have a football pitch size house, who do travel but rarely take a trip round the world, and so on) or in investing in services that help the poor more than anyone else, they would end with a net benefit.

And remember, it would only serve to give oil consumption its real price. At the moment, it is effectively subsidised. And poors suffer disproportionately from pollution, and will suffer disproportionately from global warming.

[hari]

Lafayette - thanks for pitching-in for me on my VAT input (while I was caught in a storm/flooding last few days!).

Personally I prefer VAT (sales tax) across the board in place of income tax!

VAT can be varied in application, for example, luxury goods as against food items.

I'm trying to get from EU (official) Blog the variations on VAT rates applied across the EU region today.
[It'll take a bit of time to get it in a format of a simple table.]

[Patricia Shannon]

The oil industry is not just effectively subsidized by not having to pay for damage to our health and environment. It is actually subsidized by giving it large tax breaks.

http://www.cbsnews.com/stories/2007/12/06/national/main3585710.shtml

WASHINGTON, Dec. 6, 2007
(CBS/AP) The House of Representatives approved the first increase in U.S. government automobile fuel efficiency requirements in three decades Thursday as part of an energy bill that also repeals billions of dollars oil company tax breaks and encourages use of renewable fuels.

The bill, passed by a vote of 235-181, faces a certain delaying debate in the Senate and a veto threat from the White House.

[Lafayette]

Hari: I'm trying to get from EU (official) Blog the variations on VAT rates applied across the EU region today.

Europe will tend to harmonize VAT in order to avoid country-by-country competition on the matter.

And, given the long fight that France had to get Germany to go along with a reduction of VAT on restaurant meals, I suspect that "tweaking VAT" per product/service category would be a real hell amongst all the countries.

It will be far easier to get one common EU VAT rate, with select exceptions for food, schools supplies, etc., or some such.

Finally, I think the VAT rate cut to 9% would give the EU the perk it needs to get growth restarted, but it would likely bankrupt most countries at the same time.