U.S. Politics: Wile E. Coyote edition

[Fez]

That's not the issue. NPV is necessarily the amount that would be needed to fund a stream of future payments based on an assumed discount rate. The issue is that, though they do reference the NPV in the article, their 5.5x comparison takes the undiscounted NFV against the actual value of today's GDP. As I said above the apples to apples comparison is the $63.3 mm NPV published by the entities, not the $86 m number.

Even that's not really an important number though, at least not in the way they use it. It doesn't matter what the unfunded liabilities are to current GDP, only to what GDP will be over the same stretch of time; and we don't know what what future GDP will be. Remember, of the three social security estimates put out each year, according to one of them the program will never (at least not in the next 75 years) run out of funds.

[White Walker Texas Ranger]

That's not the issue. NPV is necessarily the amount that would be needed to fund a stream of future payments based on an assumed discount rate. The issue is that, though they do reference the NPV in the article, their 5.5x comparison takes the undiscounted NFV against the actual value of today's GDP. As I said above the apples to apples comparison is the $63.3 mm NPV published by the entities, not the $86 m number.

Yes, the NPV they cite is the total amount of money we'd need, right now, in today's dollars, to fund medicare and social security for the next five years. Even the 63 trillion number is misleading because we don't need to to have all the money right now, and theoretically (hopefully) the GDP should rise, giving us some slack in raising revenues in paying for it.

The alarming number is that that, given constant GDP, it'll take 8 trillion a year in taxes to not increase the deficit, though even this number is misleading is GDP rises and we concentrate more on the proportion of debt to GDP rather than the absolute debt figure.

[Mlle. Zabzie]

Even that's not really an important number though, at least not in the way they use it. It doesn't matter what the unfunded liabilities are to current GDP, only to what GDP will be over the same stretch of time; and we don't know what what future GDP will be. Remember, of the three social security estimates put out each year, according to one of them the program will never (at least not in the next 75 years) run out of funds.

Surely that goes back to the discount rate chosen.

[White Walker Texas Ranger]

Surely that goes back to the discount rate chosen.

No, the discount rate matters, but not that much for this. The correct comparison would be the NPV of unfunded liabilities to the NPV of 75 years of GDP, rather than just the current GDP.

ETA: They're comparing a stock to a flow, with the NPV of 75 years of unfunded liability being a stock and GDP being the flow.

[Mlle. Zabzie]

Actually, they aren't using the NPV of the unfunded liability at all.

But in any event, you are saying that GDP growth is dynamic as well, and may well grow on different assumptions and at different rates than the liability. Fair enough.

[Paladin of Ice]

The Most Conservative States Have the Pregnant-est Teenagers

For years now, it's been pointed out that the pregnancy rates for teens are lowest in areas, where, how do you put it... teens are actually taught things about sex and pregnancy. Including how to prevent pregnancy and stuff.

Fortunately, all right minded people know that abstinence only is the way, and anything else is just set to confuse us, like carbon dating and dinosaur bones that claim the world is more than 6,000-10,000 years old.

[Guest Raidne]

The Krauthammer article must be this one from the National Review? "Swindle of the Year: Barack Obama won the great tax showdown of 2010": http://www.nationalr...les-krauthammer#

Why do I get this premonition that I'm about to get a lesson in not a lot more than the power of selective memory and wishful reading comprehension?

So...Krauthhammer's premises are that the extent of an Obama success is measured in terms of dollars successfully added to the deficit, and a Republican success is measured in terms of debt reduction. By that measure, the 2010 tax bill was a huge success for Obama because it blew up the deficit.

Seriously, that's the argument.

Some Republicans are crowing that Stimulus II is the Republican way — mostly tax cuts — rather than the Democrats’ spending orgy of Stimulus I. That’s consolation? This just means that Republicans are two years too late. Stimulus II will still blow another near–$1 trillion hole in the budget.

And Democrats don't even understand what a victory this is!

The Left is similarly clueless on the tax-cut deal: In exchange for temporarily forgoing a small rise in upper-income rates, Obama pulled out of a hat a massive new stimulus — what the Left has been begging for since the failure of Stimulus I, but was heretofore politically unattainable.

On the other hand, if you think Republican success is measured in terms of whether "stimulus" is provided by enacting tax cuts for the wealthy, the centerpiece of "trickle-down economics," then the 2010 bill was a huge win for Republicans.

As a Democrat, I feel that the characterization of my goal as "raising the deficit" is not representative of my views. If you feel that it represents yours, fine, you won the great tax showdown of 2010. Congratulations.

[Fragile Bird]

Setting aside the complicated CG stuff, I'd love to see us go over the fiscal cliff and then come up with something like this:

$0-8K: 11%

$8-34K: 17%

$34-82K: 25%

$82-172K: 31%

$172-373K: 36%

$373K+: 39.6%

That's a tax raise on all brackets except 34-82K It preserves most of the tax breaks and is only a 1-2% increase on the lower end--that is regressive, and bites, but it will capture more money, plus it would establish a new baseline that will better fund the government long term, and it's not severe enough to trigger a recession, I imagine. It would mean everyone shares a bit of pain, rather than putting all the pain on a new 250,000+bracket.

Why in heaven's name would you tax anyone in society making less than $8,000?

[Jon Sprunk]

Taxing people at or below the poverty level ($11k for a single person, I believe) is moronic, imo.

I would rather see more tax brackets at the high end (1 million, 10 million, 100 million) than across the middle- and lower-class income strata.

[Fez]

Why in heaven's name would you tax anyone in society making less than $8,000?

Because we do? Note however that most low-income people don't end up paying anything due to credits and exemptions; that rate is more there so that higher-income individuals are still paying some tax on all their earnings.

[Shryke]

Even that's not really an important number though, at least not in the way they use it. It doesn't matter what the unfunded liabilities are to current GDP, only to what GDP will be over the same stretch of time; and we don't know what what future GDP will be. Remember, of the three social security estimates put out each year, according to one of them the program will never (at least not in the next 75 years) run out of funds.

With that, no one is doubting that Medicare has a big problem.

The issue is that these guys adopt the typical Republican framing that the problem is Medicare costs too much, so it should be cut. Whereas most sane people point out that the issue is medical costs themselves are ridiculously high in the US and just paying less doesn't actually solve that problem. (and actually makes it worse by dumping more people/procedures into the inefficient private insurance market) The ACA does some things to address this, but not enough afaik.

[Guest Raidne]

I can't tell if you're making fun of me or Krauthammer's argument.

Krauthammer I can kind of understand. He's committed to a kind of old fashioned conservatism that holds that cutting spending is the preferred way to cut deficits, but the point is to cut deficits. As such, he's not in favor of tax cuts where they create deficits - he wants spending cuts that offset the loss of revenue when taxes are cut.

Must be frustrating. Many liberals, including myself, can relate, since we want revenue increases that offset spending increases. This agreement in principle is why I as a liberal and my husband as a conservative can neverthless find common ground.

I suspect that everyone else thinks of us - both groups - as economic simpletons.

Where Krauthammer loses me is where he redefines all of the positions based on his own idea of conservativism. Republicans are conservative, therefore, they must want a balanced budget. Democrats are not conservative, therefore they must want deficits. More deficits = win for Democrats.

Where you lose me is where you hold up Krauthammer's article as evidence that Obama actually cut a good deal in 2010, when his point was that deficits were increased via tax cuts, which is, by any measure made by someone who doesn't intentionally game the argument with a bunch of sophistry by stipulation, rather the opposite of a win for Democrats. No?

...most sane people point out that the issue is medical costs themselves are ridiculously high in the US and just paying less doesn't actually solve that problem. (and actually makes it worse by dumping more people/procedures into the inefficient private insurance market) The ACA does some things to address this, but not enough afaik.

The elephant in the single payer argument is the assumption that government would actually put more downward pressure on costs than private industry.

I think there is good evidence that government as an insurer cares a lot more about reducing long-term costs by up-front expenditures on preventative care, because government doesn't care about quarterly earnings statements and can afford to invest in things now that pay off years down the road.

As for anything else, I really don't know.

[TrackerNeil]

And I think part of the miscalculation by the GOP may have been how much the deal was likely to help Obama's re-election which takes their leverage on the tax cuts largely away. Obama had to win for this to be a good deal, and he did...possibly because of the deal (though that's sure hard to say for sure). Whatever one thinks of deficits, the recovery was nascent enough that keeping taxes lower on most of the population and adding more of a payroll tax cut was probably worth pushing out the overall Bush tax cut argument by two years.

Exactly. By trading a payroll tax cut and extended UE beneftis for an extension of the Bush tax cuts, Obama was essentially getting two kinds of stimulus: one more direct and effective than the other, true, but both would have the effect of helping drive the recovery. The historic achievements of the START treaty and the repeal of DADT are the cherries on top. That bought him two years in which to bolster his own position so that the next time he had to take the field he'd hold the higher ground. (Which he now does.) Sometimes you can win by postponing the battle until you're ready to fight it.

[Balefont]

Well, call me an ignorant moron but my feelings about this past election shows me that liberals do actually know how to win elections and the GOP was totally caught with their pants down.

From a personal standpoint, I'm thrilled with the momentum behind the liberal social agendas and have much higher expectations for the Obama administration than I thought I would. I feel like there are some crafty, intelligent people running the show and it's fascinating to watch.

[lokisnow]

Why in heaven's name would you tax anyone in society making less than $8,000?

Marginal tax rates: if a person makes 100,000, the first 8000 they earn is taxed at 10%

credits etc get that $800 back to a person that makes only 8,000, unless you're like the vast majority of people making less than 8,000 and are a teenager with a 10-20hr/week summer job (ie you're a dependent and then $800 isn't about you surviving but is just morespending money)

Also, conservative boogeyman: dontcha know that 99.99% of americans don't pay any taxes at all!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! That is entirely because people making 8000 aren't paying their fair share, amiright?

And nothing wrong with a little 'buy-in' to the system, everyone should share in the burden of paying taxes because everyone benefits from the government.

[Fragile Bird]

Just to compare, Canadian federal marginal rates plus Ontario marginal rates. http://www.taxtips.ca/taxrates/on.htm

The basic federal exemption in 2012 was $10,822. ie the first $10,822 of income is exempt from federal tax, slightly less from provincial tax - $9,405. Does the US tax system use basic personal exemptions? That's why I asked why anyone would tax someone making less than $8,000.

Note the rate on earnings from $135,054 and $509,000 is 46.41%, and 49.53% on income above $509,000.

In Canada, 50% of a capital gain is taxable, so we have "capital gains" and "taxable capital gains". While Canada was deeply in debt in the 80s and 90s, the taxable capital gain was 75% of the gain. That changed, IIRC, around 1999 or 2000.

The rate on eligible Canadian dividends is very low, so the wealthy will often hold dividend paying stocks and pay very little in tax until minimum tax rules kick in.

[The Marquis de Leech]

Why in heaven's name would you tax anyone in society making less than $8,000?

Adam Smith had an argument that we should feel good about paying tax: it shows we're contributing, and gives us a 'stakeholder' role.

For what it's worth, New Zealand has no tax-free threshold on income. It also has no capital gains tax (making it unique in the OECD, and giving rise to perverse property bubbles).

[Guest Raidne]

...some of their own were like "bad deal."

It was a bad deal for Republicans. That doesn't mean it was good for Democrats. We passed a spending bill that also cut taxes. It was a bad deal for everyone.

...how much the deal was likely to help Obama's re-election which takes their leverage on the tax cuts largely away.

Cutting a deal, any deal, was good for Obama's re-election efforts. I would say that there is an argument that can be made that it was a savvy deal to make at the time if we actually actually see a repeal of the Bush tax cuts for households making more than $250K/year, and, more importantly, a return to pre-Bush estate, capital gains, and dividend tax rates.

Is anyone even talking about a return to pre-Bush estate, capital gains, and dividend tax rates? Is this even on the table?

I feel like there are some crafty, intelligent people running the show and it's fascinating to watch.

And yeah, it's such a double-edged sword for me, but it IS nice to not just lose all the time. I'm just conflicted about watching what it takes to win.

[Shryke]

It was a bad deal for Republicans. That doesn't mean it was good for Democrats. We passed a spending bill that also cut taxes. It was a bad deal for everyone.

That's a compromise for ya.

The thing is, the Democrats came out better then the GOP. So it was a good deal for them. Especially since the Bush Tax cuts (or parts of them) can still be repealed.

It's politics. It's not about a good deal, it's about the best deal you can get.

Cutting a deal, any deal, was good for Obama's re-election efforts. I would say that there is an argument that can be made that it was a savvy deal to make at the time if we actually actually see a repeal of the Bush tax cuts for households making more than $250K/year, and, more importantly, a return to pre-Bush estate, capital gains, and dividend tax rates.

Is anyone even talking about a return to pre-Bush estate, capital gains, and dividend tax rates? Is this even on the table?

Who knows? At this point, most of the talk is from the GOP because they are trying to get ahead of this and frame the issue first. (That's how you know they are desperate) Obama et all are content to sit back and let them squirm for now.

[Guest Raidne]

Oh come ON. You don't think there's all this coverage about Grover Norquist because polls show that Americans resent the idea that some guy that nobody elected controlls our elected representatives? Do you think McCain stood up and announced that he was breaking with Norquist? Or is that the logical interpretation that someone put on it?

John McCain wouldn't even address this question when asked directly on Fox News today, yet this is the story that's been reported for the last couple of days.

Don't you think it's naive to think that only Republicans care about framing the issue? Don't you think it's worth wondering if Obama is just way, way better at framing the issue and controlling the narrative and working the media cycle than they are? And now I'm back to agreeing with Bale again.