Reframing the Debate over Taxes

After this, it's good to see Robert Frank back in action. This is on the framing of taxes:

Reshaping the Debate on Raising Taxes, by Robert Frank, Commentary, NY Times: Powerful anti-tax rhetoric has made legislators at every level of government afraid to talk publicly about a need to raise taxes. The constituents of the few who dare speak are typically bombarded with attack ads that go something like this: “It’s your money, but your esteemed senator thinks the bureaucrats in Washington know how to spend it more wisely than you do.”

Because of our inability to talk sensibly about taxes, the United States has been sliding toward second-class status in the world economy. Our national debt, for example, has increased by more than $3 trillion since 2002. Once the world’s largest creditor nation, we are now its largest debtor. We are currently borrowing more than $800 billion a year from the Chinese, Japanese, South Koreans and others — loans that will have to be repaid in full with interest. These imbalances have sent the dollar plummeting.

The situation is set to become worse. ... In short, realistic proposals for solving our budget problems must include higher revenue. But unless political leaders can develop strategies for dealing with the powerful anti-tax rhetoric that has sunk similar proposals in the past, the impasse will continue.

One strategy would be to inform voters that the “it’s your money” argument is incoherent. Taken to its logical conclusion, it implies that it is illegitimate for the government to collect taxes. ...

In the real world, governments ... provide a variety of public goods and services that would be impractical for private citizens to provide for themselves. ... So it’s strongly in our interest to talk about what services the government should provide and how to raise the revenue to pay for them. Politicians need to explain this clearly to their constituents. The argument is simple and would fit easily into a 30-second campaign spot.

Anti-tax crusaders sometimes brand proposals to make the tax structure more progressive as class warfare based on envy. This tactic has also been rhetorically effective, but, like the “it’s your money” slogan, it stifles an important conversation to everyone’s detriment.

Progressive taxation is not about envy. Top earners have captured the big share of all income and wealth gains... They’re where the money is. If we’re to pay for public services they and others want, they must carry a disproportionate share of the tax burden.

Anti-tax crusaders often bristle at taxes whose aim is not just to raise revenue but also to alter behavior. They label such efforts “social engineering.” But as even Adam Smith recognized, behaviors that are attractive to individuals are often harmful to society as a whole.

Activities that give off greenhouse gases, for example, are misleadingly attractive to individuals because their costs fall largely on others. Carbon taxes are the remedy of choice. When individual and social incentives diverge sharply, tax remedies of this sort are the least intrusive way to restore balance.

Nowhere have the carefully constructed slogans of anti-tax crusaders been more been powerful than in the case of the estate tax, which they like to call the “death tax.” ...

Fortunately, there is clear evidence that reframing the discussion often has a big impact on the way voters think about tax policy. In the spring of 2005, for example, I asked the Survey Research Institute at Cornell University to conduct two telephone surveys to investigate public attitudes about the Bush administration’s proposal to eliminate the estate tax.

In the first survey, respondents were simply asked whether they favored the proposal. Almost 75 percent said they did. In the second, respondents were first told that lost revenue from eliminating the estate tax would necessitate some combination of raising other taxes, borrowing more money from abroad and further cutbacks in government services. This time, almost 80 percent of respondents favored keeping the estate tax.

Given the effectiveness of anti-tax rhetoric, presidential candidates are understandably reluctant to tell voters what must be done to put the fiscal house in order. But voters are smarter than many cynics think, and they may be especially receptive to fresh points of view at this stage in the political cycle. The anti-tax rhetoric of recent decades is at the root of many of our current problems. Candidates with the courage to confront it head on may not only contribute to our economic recovery, but may also win additional votes.

Comments

[nocountry]

First, we are not "sliding toward second-class status in the world economy." Our status in the world economy is determined by GDP, not by the level of government debt. By that measure, we are doing just fine, thank you.

Second, it is intellectually dishonest to say that we are the largest debtor nation (in absolute terms) without pointing out that, as a percentage of GDP, our debt is lower than Japan and many continental European countries, many of whom have far higher tax rates.

Third, no one is proposing we take the "it's your money" argument to its logical conclusion and eliminate all taxes, so Frank is knocking down a straw man. The argument refers to the marginal tax dollar, and resonates with many taxpayers who justifiably feel that much of any tax hike will be squandered.

Fourth, progressive taxation is not necessary to ensure that big earners pay a disproportionate share of the tax burden. Under a flat tax system, big earners also pay more than others - though whether they would pay enough is subject to debate.

Fifth, although America certainly needs to invest more in its infrastructure going forward, many of these investments could be privately funded through the types of build-operate-transfer arrangements that have been successful in other countries. This approach ensure that users of the infrastructure pay for it and helps alleviate taxpayer concerns about squandered revenue.

[Excessively Taxing the Middle Class Has Made Them Hate Taxes]

As a strategy to reduce their taxes, the upper income people have lobbied for onerous taxes on the middle class. The tax burden has made the middle class hate taxes. The middle class now reacts negatively toward taxes because middle class rates have become burdensome, require many hours to save/organize the documents, and are too complicated for many to figure out.

If you want more support for taxes, reduce the high and growing burden on the middle class.

[save_the_rustbelt]

Over the past 40 years of so we have had plenty of reasons not to trust either party with our money.

If we give the feds more money will it fix problems or provide more farm subsidies to the wealthy?

Trust is something that is earned.

[nocountry]

One more thing. Frank is conflating the issue of the government fiscal deficit with the current account deficit. The fiscal deficit certainly doesn't help, but at 1.2% of GDP it is hardly at crisis levels. I know of no knowledgeable observer who believes the fiscal deficit is a primary cause of the dollar devaluation. After all, Europe is hardly a paragon of fiscal responsibility...

[nocountry]

Last one. I promise...

Frank says we can't achieve fiscal responsibility by cutting spending because "most existing government programs have powerful constituencies". But isn't that a powerful argument against raising taxes and instituting new programs? Once new spending programs start, they create entrenched political interest groups. That's bad for budget and bad for democracy.

Besides, aren't taxpayers also a "powerful constituency"? What makes those other constituencies more worthy than us for a piece of the pie?

[Brooks]

Here are what I view as the key aspects of framing to encourage rational thinking and discourse on whether or not to raise taxes, in light of our unsustainable (or at least very highly undesirable) projected long-term fiscal imbalance.
1) Higher taxes vs. more borrow & spend (higher debt).
2) Higher taxes vs. lower spending (and related trade-offs, viewed in light of our values/priorities).
3) Impact of higher taxes on our national wealth and the distribution of that wealth.
4) Impact of higher revenues on spending (i.e., degree to which "starve the beast" is valid), and in turn, our fiscal imbalance.

Re: #1, Whenever I hear someone argue simplistically against any tax increase (or for a tax cut) by saying "It's MY money, not the government's money" I respond by saying "Oh yeah, and whose DEBT is it?" The very first point that must be made is one of fundamental fiscal responsibility -- or put more basically, basic, mature, adult-type responsibility, as in, if we don't take our medicine we'll get sicker or if we eat all the icing off the cupcake first there won't be any left to eat simultaneously with the cake part. Borrow and spend doesn't mean we avoid tax increases and/or spending cuts, it just means we delay them (or suffer the consequences of maintaining higher debt and/or related effects indefinitely).

Re: #2, that is partly a philisophical debate (not to be confused or all mixed up rhetorically with the economic debate, which is #3), and it assumes that, to at least a large extent, "starve the beast" (#4) is invalid (i.e., it assumes that higher revenues would NOT correspond to equally higher spending, thereby not reducing our fiscal imbalance). The philisophical debate looks at what the trade-offs are (based on what economics tells us in #3 and political science tells us in #4) and applies our values/morality/priorities/philosophy. For what purposes and to what extent should the state confiscate wealth to redistribute it (either directly to individuals or indirectly via public services)? An economics component to this component of the tax issue is the question of the relative efficiency (in terms of utility) of government spending vs. private sector spending.

Re: #3, We have to consider impact of higher taxes on GDP, debt-to-GDP (considering impact on growth and on revenues, including revenue feedback [i.e., dynamic] effects), and standards of living overall and for various segments.

Re: #4, Would higher taxes bring reduced fiscal imbalance or just higher spending?

Of course, I'm framing all the above from the perspective of our need to reduce our long-term fiscal imbalance and to do so in a way that best fits our values/priorities. One can also look at the matter of taxation levels from the perspective of any given level of fiscal imbalance and ask simply, should we tax more and spend more or tax less and spend less. Many of the same elements apply, but with some different twists.

[anne]

My oh my, we have a critic who understands the problem with government spending. I glow with excitment. Now just what sort of government spending is ba for budget and democracy. What sort of government spending really truly is uncuttable? I really want to know, I do.

Since the initial budget of George Bush and fellow compassionately conservative Republicans, spending on social benefit programs has fallen as a share of national income. Like fallen. Social benefit programs are relatively less costly now than in 2002. Taxes too have fallen, several tyimes, but mostly for the wealthiest.

Where then is the problem? Well, the problem is all in the military budget. Notice though budget-mongers never remind us about this, never remind us about $200 billion for Iraq this year.

[anne]

"I know of no knowledgeable observer who believes the fiscal deficit is a primary cause of the dollar devaluation."

Me, call on me, I know. Like Brad DeLong, like me too really, not wanting to name drop further. Private saving is minimal or less than minimal, and there is a government deficit, so something gotta' give. We spend more as a country than we save, even though I like spending, but when that happens we need to borrow internationally to make up the difference and eventually that means dollar trouble. I am so clever.

[anne]

Be well, Robert Frank, so we can have a decent battle in future. Be well.

[nocountry]

Anne:

No disagreement here about the military. Given the sheer numbers in question, the defense budget is the first thing that should be cut by any leader serious about reigning in spending. Note that I said "should", not "will".

I am sure you will agree that the military is a powerful political constituency. And yes, I think that is bad for democracy.

[Brooks]

More broadly, all fiscal policy discussion/debates, particularly now that we face a terrible long-term fiscal outlook under current policies and therefore need to make substantial sacrifices, must focus on trade-offs (and on economics, which informs us what trade-offs are involved and their relative magnitudes). Anyone who says "We can't afford to cut Defense spending in today's world" must be prepared argue what other sacrifices are more worth making (lower non-Defense spending, higher taxes, higher fiscal imbalance). Anyone who says we should solve the imbalance without cutting entitlement benefits/eligibility at all, mainly through tax increases, should consider how much higher taxes would have to go and what impact tax increases of those magnitudes would have on the economy and on the standard of living of most Americans and of particular segments (as well as the philisophical aspect of merit and private property). Etc. The point is that fiscal policy usually involves choices among trade-offs -- among sacrifices for someone at some time for the purpose of some benefit, so anyone who focuses on one type of spending or on just taxation or whatever in isolation and pronounces some absolute (e.g., "We simply can't cut this, period.") without addressing trade-offs is not thinking things through rationally.

[anne]

No Country,

I am genuinely impressed; the rest of my difference is all nuance and you are completely methodical in presenting your argument. We are not Japan or Europe for lack of private saving, and Paul Krugman is arguing that the problemn with a decline in dollar value unlike that from 1985 is a failure to understand where the balance will come.

[anne]

http://krugman.blogs.nytimes.com/2007/12/06/evil-bushpaulson-plot/

December 7, 2007

Some readers have asked for my speech. * No text, though I may eventually do a writeup. I tried to scope out what might happen from the current dollar plunge by drawing parallels with the great dollar decline of 1985-1987, which many feared would cause big economic problems but didn't. One main reason was that the feared surge in inflation didn't happen, largely because import prices rose much less than the dollar fell. If this holds again, we'll be fine on the dollar front.

The main concern is that the new sources of U.S. imports may not be able/willing to absorb as much of a dollar decline....

Much interesting and well-informed discussion.

-- Paul Krugman

* http://www.newyorkfed.org/research/conference/2007/exrates_prices.html

[James Killus]

Hmm, let me think about some of those things that the Feds have "squandered" my tax dollars on. My mother gets Social Security payments. I guess some people hate their mothers, but I don't.

I drive on those nice Interstate Highways that Mr. Eisenhower began building. Do I hate being able to get around? Some people must; after all, they hate taxes so.

Then there is that gosh darn EPA, the bastards. Trying to prevent good, profit-fearing folk from dumping waste into the air I breath and the water I drink. Yum, yum, MTBE gives water such a nice flavor, just right to wash down the hexavalent chromium.

True, farm subsidies suck, especially the food stamp program, which lets those young bucks buy all that food that angries up the blood. And damn all that DARPA money that built the Internet, just so Al Gore could claim credit for it.

And the courts, don't get me started on the courts, what with their meddling, interfering ways, telling people who they can hire and fire, and who can go to what school, and when a decent man can lynch an obvious felon. Or the police, and firemen, whata bunch of losers. Or the air traffic control system. I'm sure the market would take care of that just as soon as a few planes fell out of the sky.

But you know, the "it's your money" part is really kinda funny, because there is absolutely no intrinsic worth to the dollar, except as a means of paying taxes.

I'm sure we'd be better off back on the gold standard, though. In fact, we'd be better off without any paper currency, or banks, or financial institutions of any sort. Hell, interest is just usury, and no one should control any more land than a knight can ride in a day.

[DemandSide]

Most absurd is the Senate's turning its back on even rudimentary good economic sense when they shoved PAYGO provision of the AMT patch sent to them by Charles Rangel a couple of weeks ago. For heaven's sake, this tax was closing loopholes for billionaire hedge fund managers!

It has to be some fretting of presidential candidates, don't you think? The whole lesson of the 2006 election was that populism was on the rise, and (to put it in appropriately populist terms) What better tax to highlight the gravy train being enjoyed by the rich?

I think the presidential candidates have hung the economy from the rafters by its ... waiting for the campaign to be over. The CBPP pointed out that it is one tax that is clearly not contractionary.

CONCERNS ABOUT THE STATE OF THE ECONOMY ARE NOT
A GOOD REASON TO WAIVE PAYGO FOR AMT RELIEF
By Aviva Aron-Dine

[save_the_rustbelt]

James:

I'm glad you and Anne think the federal government is an efficient well run organization. (Chuckle)

I do think most of us are in agreement over the waste in Iraq. That one is a no brainer.

[ilsm]

No Country,

I am sure you understand that the 'deficit' is reduced each month by growing surpluses in things like SS retriement, SS disability, federal civil service retirement, military retirement, and medicare (although may not grow in near future)..........

[Alex Tolley]

"Taken to its logical conclusion, it implies that it is illegitimate for the government to collect taxes. ..."

That is exactly what some anti-taxers believe. They point to the constitution and ask where does it say that the government can tax you.

[Alex Tolley]

It is perfectly legitimate to ask which services the government should provide and how effectively those services are provided.

Military procurement and farm subsidies are two examples that might be subject to re-thinking.

[save_the_rustbelt]

Liberals have every opportunity to make their case.

Clinton (Bill) did it quite effectively.

I'm a little surprised this year's crop of candidates haven't done the same. Is the war blocking out other issues?

[save_the_rustbelt]

Liberals have every opportunity to make their case.

Clinton (Bill) did it quite effectively.

I'm a little surprised this year's crop of candidates haven't done the same. Is the war blocking out other issues?

[ken melvin]

I don't believe that man has the right to or should walk upright.

[Lafayette]

Article: Politicians need to explain this clearly to their constituents.

We the nerds

It would help if the constituents would start listening. But, don't count on it.

Ordinary people don't think about such esoteric subjects that drive forum debates. They look at their pay slip and little else.

In fact, given the media claptrap, one must wonder who and what they listen to when they are about to take an electoral vote.

Lead-head will go down in the annals of history of one of America's worst Presidents. And yet, we the nerds, voted him in not once but twice. Such a leave of one's senses, twice in a row, is remarkable.

And worrying ...

[Lafayette]

Article: Politicians need to explain this clearly to their constituents.

We the nerds

It would help if the constituents would start listening. But, don't count on it.

Ordinary people don't think about such esoteric subjects that drive forum debates. They look at their pay slip and little else.

In fact, given the media claptrap, one must wonder who and what they listen to when they are about to take an electoral vote.

Lead-head will go down in the annals of history of one of America's worst Presidents. And yet, we the nerds, voted him in not once but twice. Such a leave of one's senses, twice in a row, is remarkable.

And worrying ...

[Lafayette]

nocountry: Fifth, although America certainly needs to invest more in its infrastructure going forward

Sixth, Income Inequality is tearing at the fabric of a nation that generates more megabuck millionaires at the expense of abject poverty for a significant amount of its population.

America has one of the worst Income Inequality situations of any developed nation. Its Gini Coefficient is about the same as China.

The only way to correct that indecency is higher progressive taxation and particularly confiscatory taxation at the upper income levels. With a maximum cap (100%) on all revenues (income and capital gains) over $10M. (Everybody would like a billion dollars, but nobody actually needs one.)

American and Americans enjoy one of the lowest personal income tax takes in the world. Look here. Raising taxes, as proposed above will have no visible effect (on middle-class taxation) except to
1) Correct a chronic deficit and enable the country to pay off its debt,
2) Allow a more equitable array of Public Services for those who need it most in Health Care and Education,
3) Derive more social harmony between the "have-nots" and the "have-to-much".

[robertdfeinman]

Something has shifted on this site lately. We are starting to see more absolutist comments backed by nothing other than the author's opinions.

Unfortunately this tends to be more common with those espousing a "conservative" viewpoint. This can be seen in the recent discussions over immigration and in this one on taxes. Since many are doing this I feel free to do the same.

1. Taxes are needed to run government

2. Deficit spending is not harmful if the money is used for "investment" and is within "reasonable" limits.

3. Recent changes to tax policies have favored the rich and big business.

4. Government spending is not any more wasteful than that by private enterprises. Both are subject to corruption, cronyism and just plain stupidity. With the current revolving door in Washington it is the same people who make the decisions. Does Robert Rubin become a fool when working in government and then become a financial genius when he returns to the private sector?

5. The biggest sector in government spending is for militarism and policing. Here's a graphic:
Federal Pie Chart

6. Government social services are not, primarily, government spending. The government is just performing a clerical function, gathering and disbursing specially designated funds. That it is combined into the general budget is a trick started by LBJ to hide the cost of the Vietnam War.

7. The US has lost its place as the leading power. This is not yet apparent because measures like GDP are artificially increased by the inflation in financial instruments and real estate. The real economy has been hollowed out, as can be seen by the inability of the country to respond to natural disasters and decaying infrastructure. You can feel well fed for a season when you eat the seed corn, it's what happens the following year that matters.

8. There are several steps that can be taken to slow the decline from "super power" status (it is impossible to retain it). This is includes reducing militarism and using the money for the neglected domestic needs. It also includes reducing consumerism and cutting our trade deficit. Finally, it includes cutting our personal consumerism so that we can transition to living within our means. Eventually this will lead to less debt and a personally sustainable lifestyle.

9. None of these changes are going to happen, at least not without a huge economic reversal. Katrina didn't change anything. Losing two wars didn't change anything. High fuel prices didn't change anything. The housing collapse and the rise of bankruptcies didn't change anything.

10. The economic collapses of the 20th Century are now ancient history. People don't know anymore that a super power like Germany could be reduced to chaos in the 1920's by economic collapse. People think that the Great Depression of the 1930's can never happen again. They are wrong. So are the political leaders who preach hope and growth, but offer no plans that require sacrifice or adjustment.

[lonesome moderate]

Save_the_Rustbelt: Liberals have every opportunity to make their case.

Clinton (Bill) did it quite effectively.

I'm a little surprised this year's crop of candidates haven't done the same. Is the war blocking out other issues?

Just curious, what exactly do you feel needs to be said? My impression from previous postings (by you and many others) is that any truly populist Democrat will have to promise to roll back existing free trade agreements in order to create something like real excitement. Was that what you were referring to?

[Alex Tolley]

lafayette: American and Americans enjoy one of the lowest personal income tax takes in the world:"

A better comparison would look at all taxes and, if possible, adjust for different services. E.g. in the US, health care is a private cost outside taxes, whilst in Britain, the NHS is part of the services taxes pay for.

The same comment applies to the federal spending pie chart rdf offered. Show me what it looks like after state and local taxes as well, and how much in taxes a median income person pays.

rdf:
"4. Government spending is not any more wasteful than that by private enterprises. Both are subject to corruption, cronyism and just plain stupidity. With the current revolving door in Washington it is the same people who make the decisions. Does Robert Rubin become a fool when working in government and then become a financial genius when he returns to the private sector?"

It is irrelevant how smart Rubin was working in or out of the private sector. What counts is how the machinery he worked in operated, what its task was and how efficiently it served that objective. Some agencies can be models of efficiency, others are just unbelievably inefficient, enough to make you bang your head against a wall.

[save_the_rustbelt]

Lonesome:

If any of the Dem candidates have a comprehensive economic plan I have missed it.

My best guess is that the consultants are muddling a great deal of the message, too much polling; the Dem candidates for the most part are very bright people but there is too much static.

At least we know where the GOP candidates stand, even when they are misguided.

[Lafayette]

rdf: Does Robert Rubin become a fool when working in government and then become a financial genius when he returns to the private sector?

Good question, that is , that you should put it.

The contexts are different. We bring industry titans into executive branch positions because of their supposed knowledge of that particular industry. But, the measures of success are considerably different than from whence they came.

The case in point, Rubin, who was Treasury Secretary (or Paulson today), is that these people do not have the same factors by which their success or failure can be measured. In fact, as political appointees, aside from kissing the president's you-know-what, their metrics are very thin indeed.

In fact, these people are the least objective individuals that could be placed in key positions. After all, when their Cabinet level position is over and done, where do they go. Back to the industry from whence they came.

Does that fact make of them the most objective in terms of the advice and counsel they may be submitting to the PotUS? I think not.

[robertdfeinman]

The point I was making is that those who don't believe in government services (except police and military) think that there is something inherently wrong with them. But institutions are run by people, so if they don't work properly perhaps there is something wrong with the people selected. In an earlier age it was the "unelected bureaucrats" who were at fault.

We still have the unelected people, but the policy makers within the agencies are no longer career civil servants, but come from industry. Therefore, one could expect them to do the right thing, otherwise why pick them in the first place?

So, the new improved, argument for the anti-government forces has to fall back onto the even more abstract idea that such agencies are inherently defective. There is no evidence for this, quite the opposite. FEMA worked well under Clinton and poorly under Bush. The difference was the leadership and structure put into place to manage the agency. The goals were also different. Under Clinton the agency was supposed to do something useful. Under Bush is was a place to park cronies. No one ever expected it to be called upon to deal with serious events.

I'll repeat my axiom: for-profit firms, non-profit firms, and government agencies can all do a good job or a poor one. It depends upon circumstances. Those who condemn a whole class are just ideologues who refuse to look at the data. That's why they are forced to make absolutist statements without any citations. Ideologies fail when brought in the cold light of reality.

[Detlef]

nocountry says...

First, we are not "sliding toward second-class status in the world economy." Our status in the world economy is determined by GDP, not by the level of government debt. By that measure, we are doing just fine, thank you.

Uh huh, you´re "selling each other homes paid for with Chinese loans".
Seriously, I´m starting to doubt GDP numbers. Not only in the USA but also in Europe.
The housing boom did raise GDP numbers. Not only the houses sold themselves but also the fees involved. Not to mention the loans taken out to pay for consumption. Now that the housing boom seems to be over, are you telling me that this is sustainable GDP growth?

Second, it is intellectually dishonest to say that we are the largest debtor nation (in absolute terms) without pointing out that, as a percentage of GDP, our debt is lower than Japan and many continental European countries, many of whom have far higher tax rates.

Well, according to the CIA fact book, only 2 to 3 continental European countries have far higher debt to GDP ratios (roughly 64% for the USA). Greece, Italy and Belgium come to mind. Germany roughly the same as the USA today but with an almost balanced budget 2007. Most of the other continental European (EU) countries actually have lower dept/GDP ratios. At least if the CIA is to be believed.

Third, no one is proposing we take the "it's your money" argument to its logical conclusion and eliminate all taxes, so Frank is knocking down a straw man. The argument refers to the marginal tax dollar, and resonates with many taxpayers who justifiably feel that much of any tax hike will be squandered.

I don´t know what to make of this?
What is that "marginal tax dollar" about?
Being a German, I´m not that involved in US discussions so could you define the term "marginal tax dollars"?

Fourth, progressive taxation is not necessary to ensure that big earners pay a disproportionate share of the tax burden. Under a flat tax system, big earners also pay more than others - though whether they would pay enough is subject to debate.

Uh huh.
A flat tax of 10% on a $20.000 income and on $10 million will still insure that "big earners pay a disproportionate share of the tax burden" (numbers my example). Without even mentioning that low-income employees will still be hurt proportionally more by that tax than a millionaire.
And of course, a flat tax proposal doesn´t guarantee that you´ll get rid of all those tax exemptions (witness the lobbies). Meaning that a millionaire will still hire a tax lawyer to minimize his/her taxes.

And I´m also curious?
If you´re still open to the question if big earners "would pay enough", how would you - as an (assumed) flat tax proponent - attempt to rectify that?

Fifth, although America certainly needs to invest more in its infrastructure going forward, many of these investments could be privately funded through the types of build-operate-transfer arrangements that have been successful in other countries. This approach ensure that users of the infrastructure pay for it and helps alleviate taxpayer concerns about squandered revenue.

I´ve got real problems with that.
It´s a simple fact of live that your house/appartment probably will only have one single (electric) power line, one single fresh water pipe, one single waste water pipe and one single line for cable TV/broadband Internet.
(I´m not even mentioning the road outside your house.)

Why in the world would any private company in a real free market agree to invest that kind of money without tying you to them for - say - 5 to 10 years?
Enough time for them to get their investment money back and make a profit at least. Once they´re built that line/pipe to your house, any private profit-oriented company wouldn´t be interested to surrender the rights to that line/pipe to any competitor. Meaning they would lobby against it or demand really high fees for its use.

And it´s the same for roads or bridges.
Once that toll road or bridge is built, a private company will lobby against all new roads or bridges threatening their profits. Unless you´re fine with grabbing private property for building new roads/bridges/power lines etc.

It´s a simple fact of live that most of our infrastructure is built on private land. So it makes sense to just built one electric power line, one water pipe, one waste water pipe and so on. And it´s necessary infrastructure.

No private company will built it unless you grant them a monopoly for x years. To get their investment money back plus x% profit. Are you telling me that private investment plus profits is cheaper than public investment without profits?

[James Killus]

James:

I'm glad you and Anne think the federal government is an efficient well run organization. (Chuckle)

Ah, rusty, you were doing so well for a while, and yet now I find I must suggest that you bite me.

Perhaps you would be so kind as to tell me the name of the private health insurance company that works as well as Medicare, you know, the one that has a single digit overhead rate. (Is there anyone here below the age of 65 who wouldn't sign up for Medicare on the spot if it were offered? Is there a company in America that would not go that route?)

Or how about the private health care company that works as well as the VA did under Clinton (and truly, the next time you call Clinton a liberal, I'm going to suggest something more extravagant than I did up above. Clinton is a "liberal" about the same way that Newt Gingrich is a "moderate" which is to say, only by comparison to the BF crazy current crop of Movement Conservatives.

You might also want to compare, say, FEMA when it was run as something other than a patronage/ethnic cleansing operation, i.e. before those committed to the idea that "government is always the problem" took over.

Your opinion is part of a very large, self-fulfilling prophesy, got that? Please go self-fulfill yourself someplace private, as you strike me as a privatizing sort of guy.

Oh, and (chuckle).

[save_the_rustbelt]

James:

Do you know who has done most of the claims processing for Medicare?

Private contractors, often affiliates of the old "blues" system. Nationwide was a major contractor for 30 years.

Too bad you cannot engage in a conversation with being crude. Had you asked I would have mentioned some of the federal programs that do work well.

I didn't call Clinton a liberal to be offensive, do you think he is a centrist? Certainly he is not a Humphrey style liberal, but I don't think centrist quite gets it.
Center-left?

A little too much caffeine?

[nocountry]

Detlef,

I don't want to get into a point-by-point argument about values or opinions, but I will defend my facts about debt to GDP ratios. Here is the data I get from the Economist Intelligence Unit:

Japan: 183.0%
Italy: 105.5%
Germany: 65.8%
France: 63.9%
United Kingdom: 43.3%
United States: 36.6%

The figure you quote from the CIA (64%) includes borrowings from the Social Security trust fund, which really should not be counted since they represent money owed by the government to itself. Even including the Social Security debt, only the U.K. has lower debt than the U.S. among major developed economies.

My larger point is that Frank is misleading readers by claiming that the U.S. is the world's largest debtor nation, without putting this claim into proper context.

[save_the_rustbelt]

James:

I am a little confused.

Within the past six months or so Krugman said that the VA is the best healthcare system in the country.

So apparently there is something Bush did not ruin :)). The VA must be running pretty well.

(Actually in the midwest many vets having trouble getting to a VA facility because powerful liberal Congressman [Dingell, Conyers] directed too many facilities to their districts.)

[Alex Tolley]

detlief: No private company will built it unless you grant them a monopoly for x years. To get their investment money back plus x% profit. Are you telling me that private investment plus profits is cheaper than public investment without profits?

rdf: I'll repeat my axiom: for-profit firms, non-profit firms, and government agencies can all do a good job or a poor one. It depends upon circumstances. Those who condemn a whole class are just ideologues who refuse to look at the data. That's why they are forced to make absolutist statements without any citations. Ideologies fail when brought in the cold light of reality.

Well, isn't making unjustified statements what economists do? (sorry, couldn't help myself).

OK, there is some theory to work with. Monopolies extract supernormal profits compared to aggregate profits of competing firms. Government agencies are monopolies, plus they can create a guaranteed market for their product by fiat.

Thus we can infer that when private companies compete, they may do any job at lower cost than a government monopoly. In practice the operating assumption is that organizations without competition get fat and happy and hence inefficient.

Is this true? Well we have the examples that in California, private road construction companies have successfully completed road projects under time and budget and underbid Caltrans. Does this work in all cases, well no. The crony capitalism example of the Iraq war contractors is a good case in point, as are the private tax debt collectors that Krugman once wrote about.

[James Killus]

rusty, you have very delicate sensibilities if you think that I was being "crude." Don't tempt me.

You're working the side of the street where the marks are so brainwashed that all you have to do is say, "Ha, the Federal Gummint sure are dumb," and everyone laughs and gives each other a high five. It's been what now, 50 plus years since Brown v Board of Education? That's where I'd put the real start of the campaign, but of course in my former neck of the woods it's always been about the revenooers and the damn Yankee gummint. I'm pretty sure it took "forced busing" to rile y'all Yankees.

Oh dear, now I'm going to be accused of playing the race card, aren't I? Are you about to tell me that hatred for the Federal Government is all about hating Social Security, not about the EEOC?

Or maybe you just hate our tax-supported military. What have you got against our troops? Is it that they aren't in private armies?

Every single self-styled "small government Conservative" that we've had since well before I was born has watched over substantial increases in the size of the Federal Government, and you guys still haven't figured out the con. I swear, some of you are too stupid to think and breathe at the same time.

[ScentOfViolets]

Too bad you cannot engage in a conversation with being crude. Had you asked I would have mentioned some of the federal programs that do work well.

You really are a nasty piece of work. In fact, you originally said this:

I'm glad you and Anne think the federal government is an efficient well run organization. (Chuckle)

So you are the instigator, and you are the last person to be pointing out anyone else's breach of posting etiquette. As well as being completely dishonest in not referencing what James is responding to. Do you think that people cannot scroll up, use google, remember for more than a few posts?

Oh, and the only person here who has chosen to interpret James' words as an inclusive 'always' is you. I think it's quite apparent that James is saying that in some cases the government has turned out to be the most efficient provider. You wouldn't be deliberately, maliciously, misinterpeting his posts, now would you? Of course not .(sarcasm)

[calmo -hunter and gatherer]

O Scento thank you for that(sarcasm) and providing such a restful retreat for those of us who feel damaged because they just bonked another mouse on the head.
Yes, I'd jump right into the "(sarcasm)" if I could do it...no, actually I think I merely want to displace the word "sarcasm". Not that it isn't the right word to use there (beats the snot out of any and all suggestions ...like "irony" for instance) [right, James, RIGHT?] just that in that effort to be sarcastic (we bi-polars love it) you had 2nd thoughts and instead of swinging and belting the homer, at the very last second, decided to bunt. Well I'd say you got on base with it anyhow...unlike this (so far, people, --but I have been known to improve mid-post).
I'm not up to that thing: "I come to bury Rusty, not to praise him...",(It's anne's turn.) but he certainly is exercising us...any moment now I will feel The Vigah as JFK put it, and be as energized as O-scento.
No, I am that unsarcastically plain dead mouse, quite unenergizable.

[barry payne - economist]

What rdf said. Take Katrina as a microcosm of what's going on everywhere, not in kind but in degree:

pre-Katrina - federal government underbuilds dams; private big Ag dumps fertilizer into Mississippi Delta to destroy wetlands that would have buffered the hurricane; - government AND private market FAILURE sets up Katrina aftermath bigtime;

post-Katrina - Keystone cops bigtime - million dollar gov helicopters plucking people off rooftops while hundreds of private $200 flat bottom boats not allowed to enter and rescue many; many schoolbuses that could have transported people with no cars left idle in the parking lot;

Walmart supplies fresh water as FEMA is holding training meetings and Michael Brown is worried about what to wear; Blackwater thugs roam through neighborhoods to protect property of the rich and take a few potshots on the side;

No less than Fox news is in the street screaming "oh the humanity ...", then the DIM ONE shows up after a flyover under a pale blue-grey sheen of custom prop stage lights as a marionette-like puppet with no strings, striking a ghostly contrast against backlighted buildings that don't look real either.

Katrina now - with acute housing shortage in New Orleans and 50,000 living in FEMA trailers, HUD sells off 4,600 structurally sound public housing units to private developer for 744 condos on the same space, while evicting trailer tenants as people camp on the streets;

So the short-term comedy of errors is expanded into the long term along with the usual PR smooth-over; everyone claims to regroup with lessons learned, but watch what they do, not say ...

There'll never be another Katrina ... but not to worry, some lacky consultant is getting paid millions to write up hundreds of studies on "situational awareness" for every conceivable variation of Katrina.

Why Homeland Security was just there the other day overseeing the grand design of a 5-Year Plan worthy of Mao's China, delivered by a man with wavy silver hair and golden voice who spoke in folksy parables.

Another example - the notion of using private highway contractors to "compete" and drive cost down more than achievable by government misses the point entirely.

There is only one, national highway system by design - not two or three. Ditto for all distribution systems for water, gas, electricity and telecommunciations. Two or more in the same area would be grossly inefficient, whether owned by government or private parties.

That pieces and parts of those systems are provided through private competitive bidding among contractors or directly by government is irrelevant to the broader context of "network economies of scale and scope". See the extensive literature.

Again, as emphasized by rfd, some roads in some places under some conditions are more efficient when provided by government while others are more efficient under private provision. If the libertarians and socialists want to build all of them, toss a goddamn coin and let 'em both sink into oblivion.

Ralph Nader raised hell for years about the graft, corruption and earmarking that drove up costs in highway construction, but he never complained that a competing highway nearby was the answer to the problem.

Meanwhile, the great phenomena of today is that both government and the private sector are simultaneously getting very good and very bad on provision of goods and services in particular areas, sometimes clashing head on.

As in medical care for example, which is about two thirds the output of oil, where the private sector has failed so miserably that even the corruption in Medicare fails to hold it back from being way out in front of Big Pharma and Big Ins on cost and price.

And to draw it all back on the topic of taxes, consider Robert Heilbroner's observation that government expenditures would be represented more accurately if the underlying assets were reflected on a balance sheet like that of private industry - they both have assets and liabilities but for government, only the liabilities show up as debt and deficits while the asset side registers zero.

At least this would make sense for things like replacing crumbling infrastructure. It would not necessarily apply, for example, to the Pentagon with legacy accounting systems that cannot be audited at all, or bridges in Alaska that go nowhere.

[Winslow R.]

Anne wrote: "Me, call on me, I know. Like Brad DeLong, like me too really, not wanting to name drop further. Private saving is minimal or less than minimal, and there is a government deficit, so something gotta' give. We spend more as a country than we save, even though I like spending, but when that happens we need to borrow internationally to make up the difference and eventually that means dollar trouble.

**Eventually, suspentually? On a gold standard you are correct as eventually all reserves would be drained. You have now 'officially' joined the Delong club that thinks we are still on the gold standard. :(

I am so clever.

[nocountry]

With regards to privately-funded infrastructure, the way it usually works is that a project is put out to bid, and the winner commits to some sort of regulation of their pricing - usually a formula based on return on capital invested.

Only one bid is accepted. There is no need for competing highways or utilities.

I live in Hong Kong and we do this for a number of tunnels and roads, as well as the two electric utilities. For the most part it works out fine. Our top marginal tax rate here is 17%.

[calmo -hunter]

THE DIM ONE...nice touch barry-ec, but I need to tell you about html tags. Clarity is everything...take it from me...no puddle too muddy...and no mud refused a little puddling with.

http://www.ncsu.edu/it/edu/html_trng/html_basics.html

and they need to hear about the need for a new tag you just illustrated:
" DIM " [cm here prolly has the wherewithal to implement a new tag, but he is too reverential with the English.]
Can I tell you how glad I was to see this line (#47) following your rdf expansion:And to draw it all back on the topic of taxes...PPPlllleeeennnnty. Keep it shortish...so that we (symphoniacs...hard of hearing, seeing... everything...specially long posts...and this B one already!).
Don't give rdf the impression that he is too concise.
Ditto laffy. But you could hit on melvin...and lately James if you need some excitement.

So, do you think Winnie is as clever as he thinks he is? He notes "Anne wrote: "Me, call on me, I know." and I was there for that moment of anne's exhaustion with a previous bullheaded post, for which this little gem is a caricature. But such a poem. Look at it again:

Me,
Call on me,
I know.

I don't give a hoot for cleverness after that. It just sends me. [You figure that's because I'm so sendable? an idiot that cannot distinguish the great from the minuscule --so bangs every stoopid thing into 'the great'?] I remember it is anne's sarcastic retort, but I no longer hear the retaliation...or any troubling context. No, this goes on a bit longer and I could get religion, you know?

[Lafayette]

rdf: But institutions are run by people, so if they don't work properly perhaps there is something wrong with the people selected.

We been had

Yes, that is precisely what I was saying.

We select people to run cabinet-level positions because of their "background", but that experience is not necessarily the kind necessary to run a government agency.

FEMA proved that point amply during Katrina. Its head was patently incompetent at managing the type of rescue operation that was necessary. And, this will be the case for as long as "cronies" are selected for such cabinet-level posts.

My point: Federal agencies have, very often, competent people working for them. The problem is at the top, an incompetent who is bending to the whimsies of a president. This has also happened at the DoD and AG positions.

However, it should be recognized that these appointments ARE the prerogative of the PotUS. So, Americans had better understand how getting THAT selection right before complaining how a government is "run by a bunch of idiots".

For the moment, we have a LOT to learn about selecting a qualified person for President. We think we chose character and, after the selection, What We See Is What We Didn't Get. We been had.

Whose to blame? The stupidity of the American people or that of the "process" by which we select a President? Methinks a bit a both, but mostly the latter.

[Lafayette]

nc: With regards to privately-funded infrastructure

There is a rule that applies (or once applied), but perhaps not in Hong Kong. It is this: When the length and breadth of a country takes on an a large dimension, if we leave "infrastructure investment" uniquely to private enterprise ... they will go cherry-picking.

Meaning this: In order to obtain their beloved R-o-I, they cherry pick those markets, across the nation, that most easily returns the designated number. That means, further, that large concentrations are likely to get the service whilst backwaters wait for it come years later.

That is hardly a "public service", which, by its nature should be available to more or less all citizens in a country in a given period of time.

This notion of an equitable delivery of Public Service persisted at the onset of both telegraphy, electricity, telephonye and, more recently, even DSL/Cable services. To the point that, in telephony, it was recognized that urban agglomerations were paying for the less profitable rural services. Such was considered "fair play".

Then, with the rise and dominance of "free market capitalism", this notion (as regards Public Services) was thrown to the wind in a game of market "free-for-all". Geographies were carved to suit political whimsies and offered to the highest bidder (with some back-door payments to political coffers).

Health Care is just such a Public Service that has depended upon private enterprise ... and the consequence is not "the best service for the best price", as free-marketeers promise us, but an indirect head-tax due to quasi-oligopolistic service pricing.

Or, watch the roll-out of WiMax that supposedly will finally bring "ubiquitous high-bandwidth availability". Left to private enterprise, they will cherry-pick their markets. And the noodle-heads in Washington with think "that's the way markets should work". Yes, if we let them work that way.

Rather, all interested parties should negotiate their WiMax bandwidth allocations such that their implementation covers both urban AND rural market sectors -- that is, the R-o-I is based upon a Total Geography and not just a selected one.

Will that happen? Nahhhhhh ... Not if mobile telephony is the precursor example.

[Lafayette]

nc: I will defend my facts about debt to GDP ratios. Here is the data I get from the Economist Intelligence Unit

It's the perfect storm

You are reporting the ratio out of context, as if the ratio itself is sufficient argument. It isn't. It is an indicator of resilience to deficits but by no means an assured one.

None of those countries mentioned in your post is running a "reserve currency". As a reserve currency, the dollar is being held by creditor nations, meaning that it has privileged position. It is being kept rather than cashed-in at the first sight of an exchange rate downturn.

None of those countries mentioned -- apart from the US -- has a chronic deficit that has lasted for over half a century. None of those countries has a major dependence upon oil (a major part of the currency outflow) for its energy needs and none of them waste that product so well.

And, finally, what makes you think that GDP is the best indicator of a country's ability to sustain a chronic debt. When push comes to shove, the US will depend upon foreign countries to save the dollar by buying those T-notes that the major creditor nations are off-loading. And, the off-loading has only begun ...

Do you really think that a tsunami of T-notes hitting the market is sustainable if ONLY the US Treasury is buying them to support their price? And, how long can that last? T-notes are a preferred debt-instruments because it is assumed that the US government cannot default.

And there-in lies the gigabuck question: Why cannot the US government default? What law prevents it? Do you really think the US has such deep pockets?

Many people do not. And that minority is growing daily, given that the dollar's depreciation has already cost some countries an enormous loss. If the minority ever gets to be a majority, Uncle Sam will find himself in very deep sneakers indeed.

I-rates will sky-rocket. The US could enter and stay in a deep recession, with both its present internal and a looming external financial mess.

It's the perfect storm.

[anne]

Yes; I know I should be nice to Robert Frank while he is growing stronger, but really

"The situation is set to become worse. On the current trajectory, the national debt will rise an additional $5 trillion over the next decade. The retirement of baby boomers will require additional revenue to cover growing deficits in the Social Security and Medicare programs."

I am so tired of such presumptuous rubbish. Let's just have the debt and live happily ever after with it rather than allow such a false focus.

I should have read the entire text, immediately....

[anne]

The essay, which I had thought was reasonably inane, comes to arguing that because of Social Security and Medicare we are doomed doomed doomed, which is simply nonsense tripled. This is not an essay arguing that we can protect the health of 3.8 million needy children for a mere $7 billion a year by being willing to raise tobacco taxes, let alone cut spending on what looks to be a forever occupation of Iraq. Rather the essay is an attack on Social Security and Medicare couched in a self-defeating pitch for a willingness to pay higher taxes when higher taxes for these programs are not needed in the case of Social Security and are a minor concern for Medicare with competitive modifications in the program.

[anne]

There is an impossible falseness to an essay on debt and taxes, when Social Security and Medicare are raised as incomparable burdens while military spending and spending on the insanity of needless war an occupation are no mentioned. I was prepared to ignore what I took as inanity until I noticed the gratutitous fear-mongering reference to Social Security and Medicare. That Frank would ever raise the issue of needless military spending was impossible, of course.

[save_the_rustbelt]

James:

If you read much you know I think we should either end the war today or raise taxes, and after the Bush binge we will need to raise taxes anyway.

Perhaps if you weren't so busy admiring yourself in the mirror you would remember more.

I am a fan of Social Security, I am opposed to the bipartisan accounting fraud perpetrated since LBJ's great war.

My children went to integrated public schools, unlike the Kennedy children or the children of rich white liberals who lead your party.

And why are Nancy Pelosi and Chuck Schumer protecting the tax advantages of private equity managers?

The difference between us is that I criticize whoever is wrong, you criticize only those on the other side of the aisle.

By the way, I grew up with Teamsters and hardhats, so I can be really really crude.

This is Mark's blog, however, and you owe a duty of courtesy to him and his readers, not me. Manners please.

[Lafayette]

s-t-r: By the way, I grew up with Teamsters and hardhats, so I can be really really crude.

Yeah, right. Just ask Jimmy Hoffa how tough "really tough" is.

(If you can find him ... ;^)

[nocountry]

Lafayette said:

When the length and breadth of a country takes on an a large dimension, if we leave "infrastructure investment" uniquely to private enterprise ... they will go cherry-picking.

I never said that all infrastructure projects could be privately funded, but many can, and few are.

And yes, it's true that private sector will not invest in projects located in "backwaters" (as you put it) because these are unprofitable, and public-sector money is required. But let's call this money what it is. It's a subsidy to those who live in backwaters.

I'm not sure why taxpayers who live in highly-populated areas where infrastructure can be provided cheaply (on a per-capita basis) should subsidize those who choose to live in remote areas.

Regarding you comment on debt/GDP not being sufficient to express level of indebtedness, do you have an alternative measure?

[robertdfeinman]

I see two new themes raised above.

First, the corruption of the civil service.

This happens periodically and when the excesses get too large there is a movement for reform. We are currently in one such period. The way to fix this is to professionalize the civil service (again). This means restricting the number of political appointees in each executive department and limiting them to policy jobs, not operational ones. The same has to be done to the executive office itself. The Whitehouse now has over 1000 employees. This removes control from the agencies. The way to reform this is structurally simple, although it may be politically difficult. Congress determines the budget for all aspects of the executive branch. All it needs to do is to is limit amounts to spent for various positions.

A little more difficult, but underway, is to put new laws in place which limit the revolving door between government and industry. So far the focus has been on congress and lobbyists, but it can be strengthened in the executive agencies as well.

Second, the "monopoly" of government.

This seems to be a libertarian idea. Since the government has no competition it is going to be inherently corrupt or inefficient. This view is mistaken. Hundreds of well function government agencies throughout the world show that the model can work successfully.

The other assumption is that "competition" is needed to guarantee "efficiency". This is also mistaken. Oversight can guarantee efficiency. That's why all executive branches have independent oversight and audit staffs. In addition there is the justice department and its investigative arm, the FBI. Beyond that there is the oversight of the public. FEMA will be fixed by the voters. The corrupt and incompetent will be replaced when a new administration takes over.

If the changes fail to happen it is not because the remedies are not available, but because we have a democracy which is so imperfect that the will of the people is thwarted. There is no legal remedy for authoritarianism, which is why it usually takes a revolution to replace it.

This doesn't mean that a functional democracy can't monitor itself. Just like building a bridge that falls down doesn't mean that civil engineering is a fraud. Design and implementation are two separate issues. The US has a pretty good design, but has currently a weak implementation.

[anne]

"I'm not sure why taxpayers who live in highly-populated areas where infrastructure can be provided cheaply (on a per-capita basis) should subsidize those who choose to live in remote areas."

The need is always to make sure that farmers live in abject poverty for the sake of us city folks. Me, city folk though I am, I like to, say, eat.

[anne]

"I'm not sure why taxpayers who live in highly-populated areas where infrastructure can be provided cheaply (on a per-capita basis) should subsidize those who choose to live in remote areas."

Should I plant corn or spinich in the office? Yellow would go better with the art, but I like my greens. Then, I'll start working on a power station along the walkway..

[Icarus]

No, but you could import the corn from another nation, and then complain that it tasted like rubbish.

[anne]

Here then is what the debate should be and is about, a debate that Robert Frank cares not a fig to reshape meaningfully, preferring to pretend military costs and war and occupation costs are as nothing and Social Security costs are everything....

http://www.cbpp.org/policy-points12-7-07.htm

December 7, 2007

What's Behind the Budget Battles Between the President and Congress?

AMT Relief: Rejecting the House's plan to pay for it.

The Administration has said it would veto a House-approved bill to offset the cost of extending relief from the Alternative Minimum Tax (AMT) for upper-middle-income taxpayers by closing lucrative tax loopholes used by managers of private equity firms and hedge funds, many of whom make millions of dollars a year. The Senate has now fallen in line with the President's wishes.

Extending AMT relief without paying for it, as the Administration favors and as the Senate has approved, would add $51 billion in deficits this year alone — and up to $1.3 trillion over the coming decade if Congress keeps doing that.

There are no free lunches. If the nation doesn't pay for extending AMT relief now, it will have to later, through tax increases, spending cuts, or both, that are likely to affect millions of ordinary working families....

[anne]

http://www.cbpp.org/policy-points12-7-07.htm

Medicare: Protecting billions in overpayments to private insurance companies.

Congress is crafting Medicare legislation to avert a large cut (taking effect in January) in Medicare payments to physicians. To help offset the cost, Senate Finance Committee Democrats and Republicans were negotiating a very modest scaling back of the large overpayments to private "Medicare Advantage" plans, which serve some Medicare patients. (The House has passed legislation to largely eliminate these overpayments, avert the cut in doctors' fees, and make other improvements in Medicare, especially for low-income beneficiaries.) But in a letter to Congress this week, HHS Secretary Leavitt signaled the Administration will veto the bill if it contains any Medicare Advantage savings.

Although private insurance companies were brought into Medicare to lower costs, both CBO and the Medicare Payment Advisory Commission (MedPAC) — Congress' own expert advisory body on Medicare payment policy — have found that they receive 12 percent more, on average, than it would cost traditional Medicare to cover the same people. MedPAC has unanimously recommended that Congress curb these overpayments, and has warned that failure to do so threatens the financial stability of Medicare.

CBO has reported that these overpayments will total $54 billion over the next five years and $149 billion over ten years. That will accelerate Medicare's insolvency and ultimately necessitate much larger benefit cuts, tax increases, or both than would otherwise be needed to restore financial stability to the program.

Children's Health: Rejecting a tobacco tax increase to pay for expanded coverage.

The President says he vetoed bipartisan legislation to provide nearly 4 million uninsured children with health coverage under the State Children's Health Insurance (SCHIP) program because, among other things, it was financed through an increase in tobacco taxes. The Administration says it would veto any children's health compromise that is financed by increased tobacco taxes.

Domestic Appropriations: Demanding domestic cuts.

The President insists that Congress cut overall funding for domestic appropriated programs to the level in his 2008 budget — which is $16 billion below the 2007 level, after adjusting for inflation.

The President has vetoed the Labor-HHS-Education appropriations bill as excessive. Cutting that bill down to the President's level would require significant cuts in medical research ($1.4 billion), K-12 education ($1.3 billion), home heating assistance for the poor ($630 million), Head Start ($254 million, enough to serve nearly 34,000 children), and other programs.

Similarly, if funding for the nutrition program for low-income pregnant women, infants, and young children, known as WIC, is cut to the President's level, the number of women, infants, and children receiving this assistance next year will be cut by more than 500,000.

[James Killus]

rusty,

You voted for Ronald Reagan, twice, G H W Bush twice, Bob Dole once, and G W Bush twice. If I've gotten anything wrong there, it's because you voted for either Perot or Buchanan at some point; both of them have the virulent anti-immigrant, anti-trade bias that you have, so it's possible. The likelihood of your having voted for either Gore or Kerry is nil.

You are a Movement Conservative. Your "I criticize both sides of the aisle" shtick is very tiresome, and is in line with the current Conservative Movement's reflexive attempt to retreat from its years of blind support for the current Bush, as reality has grown too blindingly obvious to ignore without appearing loony--not that this stops a good many of them, the Republican presidential contenders being a good case in point.

When the drunken driver has put the car into the ditch, you don't say about the guy who has to fix the flat tires, haul the car out of the ditch, and then get it back into town in the driving snow, "Well, his driving has some flaws, too, you know." You spend your efforts tying up the drunkard so he won't do any more harm.

Your equating of Republicans and Democrats under the current situation means that you can't tell the difference (or want to obscure it) between war crimes and petty graft, or between the theft of billions and political timidity.

As for your scolding me on Mark's behalf, I think that a guest's telling other guests what the host ought to be thinking is rather rude to the host. In any case, I'm the most public person here; you can simply google my last name to find my web page, and my blog link is right here for all to see and click through. If you feel constrained by what you perceive as the limits here, by all means drop by and let me know what you really think. And I think your equating crudity with "Teamsters and hardhats," is very quaint, relying on some pretty lame stereotypes, and not at all representative of the truck drivers and construction workers that I know, or, for that matter, of my time driving a truck.

[anne]

There is a disgrace to telling us of the terrors of Social Security which is massively in surplus and will continue to be, and Medicare which is a marvelous program, a marvelous guarantee of a civil right, that is easily strengthened, and raving about taxes with never a word about military spending.

We can spend $200 billion on the tragic war in and occupation of Iraq, and a miserable $7 billion paid for by tobacco taxes to protect the health of 3.8 million needy children, along with the additional disabled children and adults who were cut this summer from Medicaid becomes impossible for compassion-less conservatives.

[Lafayette]

nc: But let's call this money what it is. It's a subsidy to those who live in backwaters.

Wash yo mouth! That sounds like ..... horrors! Socialism!!!

In other words -- so what?

[anne]

Then, compassionless conservatives are happily willing to to deny the right to nutrition assistance to 500,000 needy pregnant women, infants and children for the sake of the insanity to which we were driven by fear and deception in Iraq. That is the point that if columnists are willing to be truthful about will drive a profoun change in American politics.

No more Social Security terrorizing!

[nocountry]

Lafayette said:

When the length and breadth of a country takes on an a large dimension, if we leave "infrastructure investment" uniquely to private enterprise ... they will go cherry-picking.

I never said that all infrastructure projects could be privately funded, but many can, and few are.

And yes, it's true that private sector will not invest in projects located in "backwaters" (as you put it) because these are unprofitable, and public-sector money is required. But let's call this money what it is. It's a subsidy to those who live in backwaters.

I'm not sure why taxpayers who live in highly-populated areas where infrastructure can be provided cheaply (on a per-capita basis) should subsidize those who choose to live in remote areas.

Regarding you comment on debt/GDP not being sufficient to express level of indebtedness, do you have an alternative measure?

[nocountry]

Lafayette said:

When the length and breadth of a country takes on an a large dimension, if we leave "infrastructure investment" uniquely to private enterprise ... they will go cherry-picking.

I never said that all infrastructure projects could be privately funded, but many can, and few are.

And yes, it's true that private sector will not invest in projects located in "backwaters" (as you put it) because these are unprofitable, and public-sector money is required. But let's call this money what it is. It's a subsidy to those who live in backwaters.

I'm not sure why taxpayers who live in highly-populated areas where infrastructure can be provided cheaply (on a per-capita basis) should subsidize those who choose to live in remote areas.

Regarding you comment on debt/GDP not being sufficient to express level of indebtedness, do you have an alternative measure?

[Lafayette]

rdf: Hundreds of well function government agencies throughout the world show that the model can work successfully.

Anyone who has lived abroad, and particularly in Europe, knows that Public Services are generally better in Western Europe than stateside.

Public Services, however, can become a political boondoggle. European politicians fell over one another thinking up new taxes to spend more tax revenue because it got them reelected -- all of which led inevitably to economic stagnation. (Lower tax receipts but high state expenditures on Public Service programs including welfare, social security, national health service, university-level education, etc., etc.)

My point: Public services can bring tremendously good enhancements to living conditions in general of a people. But, a government must be pragmatic about their need (for who?), conception (especially cost) and implementation. Which is easier said than done.

[Lafayette]

nC: Regarding you comment on debt/GDP not being sufficient to express level of indebtedness, do you have an alternative measure??

An alternative measure is not necessary. Alternative understanding of the complexity of chronic debt is necessary.

I explained the reasons why. You obviously were not paying attention.

[Icarus]

The left will always praise and justify the growth of social democracy, to the point of pure populism.

The right will cry laziness, and point to the virtues of individual responsibility.

It's a world of the ever growing independence of finance capital from public welfare, coupled with the fear of riot and insurgence. In this tension, the calming salve is the possibility of capital to service various citizenries with commodities. Utility will have to match inequality. Finance capital will divorce itself from the citizenries which cultivated it. Neoliberal glory, to some. Dystopic technocracy for others.

[Lafayette]

IC: It's a world of the ever growing independence of finance capital from public welfare, coupled with the fear of riot and insurgence. In this tension, the calming salve is the possibility of capital to service various citizenries with commodities.

Historical oblivion

There’s right and wrong in the comment cited above.

Yes, we have created a monster economy that generates exaggerated wealth for a comparative few. One must be an intellectual invalid to not see the immorality of such personal aggrandizement (at the expense of peers left behind).

The “calming salve”, however, is not for capital to offer “commodities” (by which, I gather, you mean bread and bacon) to the hungry masses.

Despite our best efforts, the continued penury of wealth in many places on earth will assure that poor are there for a great many years to come. Try as we may, they are not going to go away. So, having relegated most of the third-world to its own devices (which are damn few); what about “our world”. That is, the one that we CAN change.

Anyone willing to look at it in detail finds plenty to be concerned about. At the very least, an economy as rich as ours (both in the US and Europe) should be able to take better care of its people. The US should look to Europe for a clue -- in terms of Public Services that invest in Human Capital. (Financial Capital will take care of itself, we can rest assured.)

What is the sense of worrying about Fed interest rates or private-equity investments or stock prices if this intricate house of cards inevitably comes tumbling down about our ears? And, to think it cannot is manifest hubris.

A nation that does not have the instinct of self-preservation, achieved by perennial investment in its capacity to continually enhance its skills and talents, is condemned to economic mediocrity. [Meaning excessive Income Inequality that pits the fortunate haves against the luckless have-nots.] Our free-market economy is consumer-based and what is a consumer if not an income earner? Which is why our efforts to “enable” each individual to reach for and achieve his/her full potential should be our first and foremost strategic objective as a nation.

Not more state-of-the-art toys-for-the-boys employed in foreign wars. Not more capital accumulation for the richest who would not have the foggiest notion of how to employ it – except in reinvesting it for even more capital gain. Our capital formulation should be reinvested in Public Services that enhance each individual’s chance of self-fulfillment.

Whether they arrive at the summit of success in their endeavours is, of course, a matter of chance. The pursuit of happiness lies in the fact that an individual must have tried to succeed. (More so, "success" is not simply measured in terms of financial gain.)

If we, as a nation, cannot understand these simple truths, then we are condemned, like those great nations of the past, to pass into historical oblivion. They too thought that the cornucopia would last forever.

But, I do go on ... a bit too much, methinks.

[alex tolley]

rdf: This happens periodically and when the excesses get too large there is a movement for reform. We are currently in one such period. The way to fix this is to professionalize the civil service (again). This means restricting the number of political appointees in each executive department and limiting them to policy jobs, not operational ones. The same has to be done to the executive office itself. The Whitehouse now has over 1000 employees. This removes control from the agencies. The way to reform this is structurally simple, although it may be politically difficult. Congress determines the budget for all aspects of the executive branch. All it needs to do is to is limit amounts to spent for various positions.

You should watch the classic BBC comedy series, "Yes, Minister" and "Yes, Primeminister". Be careful what you wish for ;-)

[Icarus]

Lafayette...

Are you for Socialism? Communism? When does the logic of 'taking care of one's own' end?

The opposing point of view is that it's not the "economy" which generates wealth, for the few. It is the "few", who generate wealth for the economy.

As well, the wealthy minority is not creating wealth at the expense of the masses. They create wealth which ultimately benefit some of those masses.

I know it's easy to point at McMansions, and across a (dirty) river you see the contrasting (forclosed) crappy homes, and hence, you quickly assume that one exists at the expense of the other...but, it's just not true.

The accumulation of wealth is difficult thing, requiring some combination of luck, brains, effort, and discipline. Most don't get that far. For every billionaire founder of Google, there are countless others who fail.

Do the Google founders owe their wealth to the poor in the Bay Area? Should they distribute their billions accordingly?
I say they earned it, by providing a service we all seem to want/need/use. Their wealth is a mirror of our collective utility. That's how wealth is accumulated...it reflects a gain in utility for all of us.

Instead of income redistribution (which is essentially all your asking/begging for), I think we should focus on behavior modification.
In the US, people with less than $1000 saved up, are having children. This is ridiculous. The risk is immense. Instead of expecting that the social whole makes up for such irresponsible behavior, we should use every iota of our effort to alter the mentality (or lack thereof) which brings children into this world in such a unfit environment.

Poverty will be perpetuated as long as people have children they can't invest time to discpline and love. Those kids are the future gang bangers, illiterates, teenage mothers/fathers, and general peons. More money isn't going to change that; and, more importantly, we shouldn't throw money at this problem.

[Icarus]

Lafayette...

My point about the perpetual commodification of life was that inequality is easier to accept, if one has the benefit of enhanced utility.

People in the underclass simply won't rise up and revolt, if they can stay home and play John Madden football on Xbox. I know that sounds crazy, but, there is a technology trap. Once utility is dirt cheap (as Television has made it), people perhaps feel that their life if 'ok'. It's a sad state of laziness, but, it seems to be growing.

[Patricia Shannon]

The natural gas monopoly in Georgia was broken up several years ago. They promised decreased prices because of competition. The actuality is increased prices, because of duplication of overhead. And few people have time or knowledge about how to compare all the different companies and decide which is best. From my experience of life, I would worry that if I tried to change companies, I would end up with two utility bills that would be a big hassle to get straightened out.

[Patricia Shannon]

A lot of people of all income brackets get their "news" from people like Rash Limburger. Some aren't even that "informed". I was talking to a recruiter last week who looks about 25 years old. When she asked if I were open to relocating, I mentioned the air pollution problems here in the Atlanta metro area. She said "Oh, does Atlanta have air pollution?" And she was serious, not sarcastic. She lives and works here, and doesn't know that Atlanta has very polluted air. How can we expect people so ignorant to vote rationally?

[Lafayette]

Ic: People in the underclass simply won't rise up and revolt, if they can stay home and play John Madden football on Xbox.

You are naive ...

Marx called religion pap for the masses. For centuries, religion had told its followers throughout Europe that their plight was the will of God. Which did not prevent revolution in neither France nor Russia.

Then, there is revolution and there is revolution. In a working democracy, revolution can be peaceful. People get fed up with the excesses of plutocrats and vote in a candidate who promises increased taxation on the rich and expenditure on public services for the not-so-rich.

It is populist politics at its worst, but it could work nonetheless. It simple logic doesn't appeal to me, since my arguments are founded in what I think is more intelligent reasoning.

But, if populist arguments would change things in this country, I'd embrace any politician proposing them.

And I'm not the only one.

[Lafayette]

PS: How can we expect people so ignorant to vote rationally?

May I suggest that she is probably not ignorant but misinformed?

And, being misinformed, there's a chance that she is also intelligent? (It happens.)

And, therefore, we really don't know how an intelligent person may develop their voting preference?

[Icarus]

Lafayette...

A study of religion, even from the Marxist perspective, will arrive at discussions of theories of suffering. Positing nobility in suffering is a key component of any religion of the masses. That is, your suffering today will be rewarded at a later day, so, live peacefully and aware that the particular lord I'm marketing to you, is with you.

Under the rubric of religion, Class Consciousness is rendered difficult, usually. Every now and then, a faction within a religious umbrella, will embrace a theory of revolt, and reframe their interpretation of the religion, into a call for action.

But, what I'm saying is that we no longer need religion, perhaps, to stave off any evolution of mass class consciousness. We may not even need the Nation State to provide the key hegemonic narrative either.

What we now have is Virtual Technocracy. The simulation of 'real life', translated into a television or online life, and hence, a vehicle to leave day to day practical reality, and enter another space, where the suffering of daily life becomes assuaged by the fantasy of another's life.
Hence, the pull of television shows. People live vicariously through their TV characters. And now, we have video game culture. Virtual worlds abound, and will only grow.

Given the utility tecnology provides, at ever cheaper prices (TV is pennies per hour), the potential for real change diminishes.

[Lafayette]

Ic: what I'm saying is that we no longer need religion, perhaps, to stave off any evolution of mass class consciousness

You live in the US, home of the "Religous Right", and you have the gall to say this? I am astonished.

I live in Roman Catholic France and I can assure you that 999 French out of a 1000 could not give a flies fart about religion. Their modern Cathedrals are now open on Sunday afternoons doing business at the local Mall.

Our perspectives are obviously different.

[Lafayette]

Ic: what I'm saying is that we no longer need religion, perhaps, to stave off any evolution of mass class consciousness

You live in the US, home of the "Religous Right", and you have the gall to say this? I am astonished. There is more of a religious following in the US than perhaps in Taliban Afghanistan.

I live in (supposedly) Roman Catholic France and I can assure you that 999 French out of a 1000 could not give a flies fart about religion. Their modern Cathedrals are now open on Sunday afternoons doing business at the local Mall.

Europeans are mainly ambivalent towards institutionalized religion and would rarely, if ever, let it interfere in national politics. (Aside from some smothering local political feuds.) And, having seen this interference within the US (in the White House, or on matters such as abortion), they are more convinced than ever in this sentiment. (Even if most polls show that, on average, they do believe in God.)

Our perspectives on the matter are obviously different.

[Icarus]

Lafayette...

Even Class Consciousness in Europe, is in question. The social contract devised post WW2 is slowly cracking. The flat tax regimes in eastern europe are doing well. And, center-right parties seem to be making a nice gain recently.

The idea that you're owed the goods/services you need to live by a social collective is slowly inching towards the dustbin of history (hopefully).

As for the Christian Right, yes, they're a regrettable problem. Hopefully, as we see the middle of america systematically lose their expected standard of living, this group of people will slowly fade into oblivion.

But, the Christian Right account for around 20% of the Republican masses. As a percent of society, not a plurality.

What I suggest is that Technology, Apple/Google style, is having a greater affect on a larger percentage of the population. And that effect is awe and wonder. The awe that we see has the likely capacity to work against class consciousness.

You can't protest the WTO when you're busy configuring playlists on your Ipod.

[Icarus]

Anne...

"The right to nutritional assistance for pregnant women"?

Wow, everyone, check that out. The 'right' to nutritional assistance. Comments like that make it so easy to move toward the neo-liberal realm. Craziness. Next, the rubbish-oriented-left will want the 'right' to fitness centers, and the 'right' to diapers.

As long as the left promotes a culture of no responsibility, it'll be inevitable that the democratic party moves closer to center-right.
Now, the democrats are throwing 70 billion at this pathetic war. The more ridiculous the left is about entitlements, the harder it seems to be to find real alternatives.

[Lafayette]

Ic: Comments like that make it so easy to move toward the neo-liberal realm. Craziness.

Ic, you can be downRight Neanderthal.

Of course, it is a child's birthright for its mother to have proper nourishment. And proper care during her pregnancy. And proper conditions in which to birth.

You might thank God your mother had that care, or you would not be opining such rubbish in a forum.

It should be a key Public Service in an America that has one of the worst neonatal death rates of any modern country.

[Icarus]

Lafayette...

No, I don't thank god for the care my pregnant mother had...nor do I thank the Nation State I was born in.

The people I thank are my parents, for having the responsibility to have a child, only when they could.

The world isn't a soup kitchen for irresponsible people.

We should teach people responsibility, and not tolerate their irresponsibility, and chastise a central government for not taking care of the results of that irresponsibility.

When personal responsibility sounds barbaric or neandrathal, we've really hit a sad age. Like I said...it's comments like this which make the push to neo-liberal rule so easy to sell.

[Lafayette]

IC: The world isn't a soup kitchen for irresponsible people.

Bah, humbug!

How trite, your rejoinder.

You deciding who is irresponsible (the indigent) and who are not (your parents and lucky you)?

Individuals like you paint an entire class of people as "irresponsible" because, deep inside, you are incompassionate bigots.

Shit happens in life. And, it has nothing to do with irresponsibility. Open your eyes. Talk to the poor. Understand their situation. They did not chose it willingly.

[Icarus]

Really Lafayette? Again, I ask...why would a person, in the United States, have a child if they have less than $1000 in the bank?
What possible sense of responsibility is there here?

The answer is...they have sex, irresponsibly. And then, infinitely worse, they birth children they cannot financially take care of. The typically requisite family structure is often missing, and, the discipline provided is insufficient. The next generation is screwed.

Is this "shit happening"? Really? Forget the exogenous circumstances for a second...the heart failures, the floods, the brutal unanticipated act. I'll acquiesce...that we need a social insurance program for those issues. (for the sake of argument)

What about these guys? What about the people who replicate, without foresight? Does society have the opportunity to stringently argue non-fornication and non premature pregnancies? Can we, as a collective, dis-encourage pregnancy when it is likely the child will be raised in an irresponsible enviroment?

Having a child is not "shit happening". It is a willful, yet negligent act when done by those with minimal savings, and minimal job security. Yet, they do it. The cycle of poverty only continues.

I do attempt to understand the situation of the poor, and I want to employ a practicality to every member of the 'next generation' I encounter.
"Just don't have kids"..."until you secure a skill, a career...just don't impregnate, or get impregnated". You can start from scratch in the US, with junior college courses, and the unlimited horizon as one's vision. But, it takes a bit of discipline, and hard work. People do it all the time. "Just don't have kids until you're financially stable".
If they can obey that simple rule, the cycle of poverty gets stalled.

[Lafayette]

IC: ... why would a person, in the United States, have a child if they have less than $1000 in the bank? What possible sense of responsibility is there here?

Bah humbug!

People have children for any variety of reasons and the very least of them is typically, "Can we really afford a kid? After all, there's only a kilobuck in the bank! Shouldn't we be doing an R-o-I analysis before we make love?"

The consequence of human concupiscence is children -- did your mother never teach you that?

Why aren't you so concerned about the sub-prime fraud that will put these same families out of house and home? Once again, it was THEIR fault, was it, because they stupidly did not read the fine print?

Ic, your attitude regarding the poor and the have-nots is unacceptable, perched on your promontory of righteous indignation, condemning their childishness.

You amalgamate ethnicities and demonize them sanctimoniously for ostensibly "breeding like rabbits" -- all of which is pure and simple bigotry.

You lack compassion. And, there are more of them than you and I. So, we would do better to consider their social conditions. It is lack of a proper education that is at the core of the problem. Ask yourself, "What values are we teaching them that promote this sort of behaviour?"

Is money the only "value" by which we measure social behaviour? If so, then those who do not have money will certainly not employ it to determine whether they should or should not have children.

There are other measures, more moral, that apply and we are not teaching them to our youth. And, neither are they getting them from any evangelizing of "God's word".