Saturday 11 August 2012 — This is 12 years old. Be careful.
Mitt Romney has chosen Paul Ryan as a running mate, and I think it is an excellent choice. I say this not because I ever want either of them to lead the country, but because it provides a clear distinction between the parties.
Ryan is to be commended for proposing his alternative budget. He believes that you should not just oppose things you think are wrong, but instead, you should provide alternatives. His budget is an alternative, and a stark one. I hope that his candidacy will bring his budget to the fore, because I think it is a great demonstration of what the Republican party wants.
Ryan’s budget was written to address the problem of the deficit, a problem I believe is a real one. My issue with Ryan’s budget is how he proposes to solve the deficit problem, and I wish people better understood his solution.
Ryan’s answer to the deficit is to ask more of those with the least, when we could be asking more of those with the most.
To be clear: you can solve a deficit in one of two ways, and the deficit doesn’t care which you choose: you can cut spending, or you can raise revenue. Those that blare, “it’s the spending that’s the problem!” are being disingenuous. The deficit is the difference between two numbers, and any way you bring those numbers closer together will help.
Only if you also have a second (or actually, first) agenda of reducing the size of government do you think it matters which way you reduce the deficit.
The only way to ask more of those with the most is to increase taxes. Conservatives claim that those with the most create jobs, but mostly what they do is invest, and investing is not what really creates jobs: spending creates jobs. The way to get more spending is to help those with the least have enough money to spend. Letting those with the most have more will not get them to spend, they already have enough to spend.
So let’s welcome Paul Ryan to the presidential campaign, and let’s hope that his ideas get a wider airing. I think they are bad ideas, and I hope more than half the voters in November think so too.
Comments
By abstracting the problem of the deficit to simply the difference between two numbers, you are ignoring the inherent moral dilemma of compelling taxes, as well as its negative economic effects, including the central question of whether the services of government are cost effective for the value provided. It is not disingenuous to include these considerations, it is pragmatic.
To put it simply, when the government spends your money, it asserts that it provides so much more value for that money than you would voluntarily, that it warrants taking it from you (it does not ask).
Both investment and spending can create jobs. More importantly, all three are merely indicators of value, and our goal is not simply to increase spending, but to increase value. Not all spending is of equal value. Not all jobs are of equal value, even if they pay the same. That is why you cannot simply redistribute money or spend more to improve the economy.
These are fundamental differences in economic theories that I, like you, hope will be brilliantly illuminated and debated in this election.
I think it is unconscionable to say, "the government is in trouble, so people with less will have to feel more pain." We aren't even talking about uneven distribution of pain. Those with the most will actually have more under Ryan's plan, and those with the least will have less. It is morally and economically wrong. It only makes sense under the topsy-turvy dogma of today's GOP.
Right now, the people who control the top 80% of the income in the US are responsible for 80% of the tax burden. The people who control the bottom 1% of the income are responsible for less than 1% of the tax burden. Any tax decrease will therefore necessarily have what appears to be a disproportionate benefit for the wealthiest.
I have to admit that I am uncomfortable with the GOP plan. I was raised to believe that you always make sure you have enough money to cover your debts before you do anything to decrease your income. My personal preference would be to cut spending and keep taxes as they are (which, I realize, is an idea that makes economist quietly weep). But, since support for such a plan would be political suicide, I prefer the man who will send us up *%&#'s creek with less government and less bureaucracy than the man who prefers to send us there with more spending.
Why do you want to keep taxes "as they are"? Why are taxes only allowed to go down? Reagan raised taxes, Bush 1 raised taxes, because it was necessary to keep the government and the economy healthy. The current GOP mantra about not raising taxes is short-sighted dogma. Taxes are lower now than they've been in 30 years, but the GOP can propose nothing but cut taxes. It's dangerous and immoral.
Having the top 1% pay 100% isn't a useful boundary case, is it? If that happened, then the economy would collapse since the 1% would all leave or stop working until they were under that 1%. Even approaching that case creates a deeply perverse competition to create less and less value. Is avoiding the collapse of the economy the only countervailing moral to taking taxes from the rich?
My broader point is that if you judge fairness simply by a _change_ in taxes, as you do (e.g. if it is wrong to "ask more from the least" or that "people with less will have to feel more pain"), then applying that change would always be justified, and in your case, repeatedly applying it would eventually destroy the economy, or close to it.
Instead, our moral framework should describe the ideal tax system, against which we judge any changes toward (more fair) or away from it (less fair). I share your personal compassion for those with the least, but I respectfully suggest that your current basis for saying a tax proposal is "immoral" is lopsided and misdirected.
As to economically "dangerous", we still seem to fundamentally disagree on economics, despite my attempts to win you over by contrasting value and spending. :) But I'll just reiterate that the government usually gets less value for its spending than we do voluntarily, so cutting government spending is not nearly the risk to the economy and jobs that you suggest it is. Quite the opposite.
IMHO, if Ryan's plan is dangerous, it is dangerous because it does not reduce government spending enough. It even takes 30 years to balance the budget. It's not a great plan, but it seems better and more feasible than the alternative proposals so far.
You are exactly right that everyone wants to reduce spending, but no one wants to reduce their own benefits, which is a particularly insidious problem of spending other people's money. That's why cutting taxes have consistently been a priority of (at least part of) the GOP -- because taxes are the last straw for having a serious discussion about spending (cf. promises like "We'll cut spending if you raise taxes.").
I'd be happy to discuss the proper role of government with you. If more of us agreed on the general limits, perhaps we'd elect representatives to follow suit with the specifics.
I am looking at the full picture. While cuts in spending may cause short-term job losses, it will allow us to repay debts and rebuild credit ratings, making our future debt more valuable (and more useful).
Will it hurt those who are the most vulnerable? Not necessarily. If it is done correctly, it could net a long-term boon for them. I would argue that bad policy hurts the poor more than spending cuts. Did you know, for example, that welfare in NJ refuses to help those who are in danger of homelessness? Instead of providing one or two months of rent assistance (at $800/month), they prefer to wait until people are evicted and move them into homeless shelters ($1,900/month). I will not address the flagrant nepotism. The system is clearly in need of reform and my experience is that when people are required to do more with less, they make themselves become more efficient. I find claims that support of such a system is somehow more "moral" dubious at best.
My understanding is that the income tax rate for the average American and the average income tax rate (two different numbers) dropped overall under Reagan. Is this inaccurate?
I prefer to keep taxes as they are because they effect my personal bottom line. Programmers, as a rule, earn within the top 25% of incomes, making us one of the groups who is more affected by increases and decreases in income tax.
That said, if the only solution everyone could agree on is raising taxes while cutting spending, I would find that equitable as well, but there are *no* economists who would think that a good idea, in any sense. But, even if raising taxes were a solution, the focus should be on simplification of tax code and elimination of exceptions (for example, having a rule that "income is income, it doesn't matter how you got it") and taxes on usage of services instead of taxes on having a successful career.
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