It's The Tax Policy, Stupid

By Big Tent Democrat, Section Economy
Posted on Wed May 23, 2012 at 09:46:09 AM EST
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In a column arguing for short term stimulus, Peter Orzag writes:

When policy makers put in place measures carefully designed to reduce the federal deficit in the future, most of them happen. This is a good thing, since enacting more stimulus today and more deficit reduction to take effect later is exactly what the U.S. needs. It’s also what makes the ongoing jobs-versus-austerity debate so frustrating. What we really need is to be bolder on both jobs and austerity, by pursuing a combination policy.

Those who are most concerned about the weak labor market should be most willing to do whatever it takes -- including combining delayed budget cuts with stimulus -- to get the most stimulus passed. And those who favor a combined approach shouldn’t be characterized (as I have been) as pro-austerity and anti-stimulus.[...] [Emphasis supplied.]

Someone hurt Peter Orzag's fee fees. A couple of points: Orzag is arguing for "maximum stimulus now." Where was he in January 2009? Second, his statement about spending cuts in the social safety net is true. But tax increases for deficit reduction NEVER survive. It's funny how to Orzag, the Clinton tax increase of 1993, the most important deficit reduction measure of the last 25 years, is not even worth a mention. Of course we know why, it undermines his argument. THAT deficit reduction measure did not hold. Taxes were cut twice during the Bush Administration. So Orzag says we should agree with him to cut spending in the future for more spending now. But what about the Bush tax cuts?

Sorry Mt. Orzag, you are pro-austerity and pro cutting the social safety net. It's what you don't write about that proves it to me - tax policy.

Speaking for me only

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It's The Tax Policy, Stupid | 41 comments (41 topical)

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Also, you can (5.00 / 3) (#11)
by dk on Wed May 23, 2012 at 12:27:14 PM EST

have spending cuts in healthcare by moving to single payer (medicare for all). Spending cuts without cuts in quality of care. Somehow, though, I doubt that's what Orzag is talking about.

I'm so glad (none / 0) (#1)
by Ga6thDem on Wed May 23, 2012 at 10:10:17 AM EST

that you are posting on politics again BTD!!!

Yeah, where was this guy in 2009? Seem like just another example of how the beltway is out of touch with the average American.

I think if Obama loses reelection it can all be traced back to the deal he signed with the GOP in December of 2010.

: The Beltway (none / 0) (#37)
by cal1942 on Thu May 24, 2012 at 09:31:28 PM EST

isn't just out of touch with the average American.
The Beltway is out of touch with all reality.

Also, see AP re CBO report: (none / 0) (#2)
by oculus on Wed May 23, 2012 at 10:21:14 AM EST

CBO warns of US falling off 'fiscal cliff'

The economy would contract 1.3% (5.00 / 3) (#3)
by Militarytracy on Wed May 23, 2012 at 10:43:32 AM EST

in the first half, and then rebound 2.3% in the second half.

The problem of allowing the rich to never get hungry, is that they don't need any new profits so they create nothing....they just sit on their pile of money and buy elections like the overlords they have been allowed to become. When the rich must compete again in the real world with the rest of us real worlders, that is when our economy will heal.


Ah the world of fantasy (5.00 / 3) (#6)
by Dadler on Wed May 23, 2012 at 11:21:10 AM EST

It is impossible for a sovereign nation that mints its own currency to fall off any "financial cliff." It can only happen if we choose to leap off. And that only happens for one reason: if those in power want to treat those not in power like sh*t. Nothing more, nothing less. The soundness of a fiat economy is based literally on how well or not well human beings treat their fellow human beings. That's the entirety of it. All the rest, as the old rabbi said, is commentary.


: "Marching towards the cliff" (none / 0) (#7)
by NYShooter on Wed May 23, 2012 at 11:28:55 AM EST

Is the phrase being used for the double whammy due at the end of the year: The expiration of the Bush tax cuts and the spending cuts/austerity programs.

That contraction will probably EAT (none / 0) (#4)
by Militarytracy on Wed May 23, 2012 at 10:47:39 AM EST

the bloated unreality based stock market though.


Leading to reduced incomes for those (5.00 / 1) (#9)
by Anne on Wed May 23, 2012 at 11:41:26 AM EST

drawing from retirement accounts based on a formula that uses as one of its variables the value of the account at the end of the calendar year. If the market's down, the annual amount is less; you can take out more, but then you're reducing the ability of the account to grow - downward, vicious circle.

If the already-sluggish market performance continues through the summer and into the fall, there are going to be a lot of nervous retirees heading into the end of the year - not to mention a lot of people forced to give up on the idea of retiring soon because they can't afford it.

I just don't see this going anywhere good.


: Nope (5.00 / 1) (#10)
by Militarytracy on Wed May 23, 2012 at 11:47:58 AM EST

It's going to happen one way or the other though that the bloated fluff is going to come out of the market. All the more reason we cannot gut Social Security and safety net programs. We need to spend more money on those.

And the credit default swaps will spew (none / 0) (#5)
by Militarytracy on Wed May 23, 2012 at 10:50:32 AM EST

Peter Orzag's polemicized (none / 0) (#8)
by KeysDan on Wed May 23, 2012 at 11:36:09 AM EST

contribution says it all with ...."if it is combined with future budget cuts", illustrated by naming social security and Medicare as examples. While it would not be expected of the vice chair of global banking for Citigroup, to suggest new revenues such as by not treating carried interest as capital gains, it would have been thoughtful to have considered something other than cuts to social safety nets.

But, this seems to be in our bipartisan future: Pete Peterson's hugely funded obsession with entitlements (aka social safety net) is beginning to pay off. At the "fiscal summit" last week, hosted by Peterson Foundation, even Bill Clinton was beginning to sound like "Catfood Bill" when he said: "our party's problem is, we are always reluctant to give up the gains of the past to create the future. Democrats are reluctant to commit to longer-term health-care savings; they don't want to touch social security."

ugh (5.00 / 2) (#12)
by sj on Wed May 23, 2012 at 01:27:55 PM EST

"our party's problem is, we are always reluctant to give up the gains of the past to create the future. Democrats are reluctant to commit to longer-term health-care savings; they don't want to touch social security."

Well, duh! Of course we don't want to give up the gains of the past. Giving them up is backsliding. That isn't a future I want to live in. I'm pretty sure that the wherewithal to create longer-term savings does not have to come at the expense of the "saved".


Agreed. (5.00 / 3) (#15)
by KeysDan on Wed May 23, 2012 at 02:54:22 PM EST

To create the future means, to me, not only our legacy, but also, our present. And, in the case of social security, the present should reveal that income shifts have occurred above the $107,000 per year cap. Increasing the cap seems a better way to preserve the gains of the past, recognize the present income trends, and, then, provide for the future of the program.


: Yes, and none of us are against this that (5.00 / 1) (#17)
by Militarytracy on Wed May 23, 2012 at 03:05:21 PM EST

I know of

I know (5.00 / 1) (#16)
by Militarytracy on Wed May 23, 2012 at 03:04:22 PM EST

Disgustingly putrid.....we are proving difficult in creating the future what?


caseyOR's plan to fix the deficit and save (5.00 / 7) (#18)
by caseyOR on Wed May 23, 2012 at 05:00:06 PM EST

entitlements:

Let the Bush tax cuts expire. Oh look, we just cut the deficit by half.
Have Medicare negotiate drug prices just like the VA and every insurance company does. Oh look, we just saved half a billion dollars in Medicare spending.
Raise the FICA cap so that 90% of earned income pays into SS, just like we did during the Reagan years. Oh look, we just saved Social Security for the 21st century.
Put people back to work so that they are once again paying taxes and contributing to FICA. Oh look, now we can fix our infrastructure and create even more jobs and collect more in taxes.

When are people going to wake up and let me run the country?


I'd vote for you (5.00 / 3) (#19)
by jbindc on Wed May 23, 2012 at 05:06:41 PM EST

heck - I'd even work on your campaign.


I'd vote (none / 0) (#20)
by Ga6thDem on Wed May 23, 2012 at 05:57:43 PM EST

for you too! But what you're saying is so simple but somehow Washington sees this as something that's impossible to do.


Because (none / 0) (#38)
by cal1942 on Fri May 25, 2012 at 12:04:11 AM EST

the only people Washington hears are the people who don't want to pay back the money borrowed from Social Security.

The whole damn cut entitlement thing, entitlements will bust us thing, the very term entitlement and what it implies thing is, when exposed, nothing more than the masters of the universe trying to welsh out on a debt.

They can't entertain the obvious, sensible solution, raising the cap because it would be "raising a tax" and since that's unthinkable the only solution is to cut.

Cut without regard for the social, economic and moral consequences. Just build the wall a little higher and bring in more guards.


: "Because" (none / 0) (#41)
by NYShooter on Fri May 25, 2012 at 02:00:09 AM EST

once you've gone "beyond the point of no return" (2008 world economies blown up) you're left with two choices:
1. Give it all back, beg forgiveness, and return to the principals of our Founders, "Equality for All"
or
2. Kick in the afterburners and complete the mission, authorized by the 1980 election of Raygun, 1% Plutocratic Aristocracy, 99% perpetual Serfdom
based on the "Unitary Presidency" laws aka Imperial Presidency, from the patriot act thru indefinate confinement, to executive drones, enacted over the past few decades, which will it be, Hmm?

go for it (none / 0) (#22)
by diogenes on Wed May 23, 2012 at 07:51:14 PM EST

1. If the Bush tax cuts expire in toto then everyone pays more. From Wikipedia--
"The non-partisan Pew Charitable Trusts estimated in May 2010 that extending some or all of the tax cuts would have the following impact under these scenarios:
Making the tax cuts permanent for all taxpayers, regardless of income, would increase the national debt $3.3 trillion over the next 10 years.
Limiting the extension to individuals making less than $200,000 and married couples earning less than $250,000 would increase the debt about $2.2 trillion in the next decade."

"Half a billion"?
Why not just make Social Security a welfare program then--then you save it for sure.
How exactly are you planning to put people back to work if your only economic program is increasing taxes?

Yes, half a billion. (5.00 / 1) (#24)
by caseyOR on Wed May 23, 2012 at 09:56:12 PM EST

Medicare now pays a ridiculous amount of money for prescription drugs because the law forbids Medicare from negotiating the prices, a big wet kiss to BigPharma.

Read this study. Some interesting numbers.

Yes, if the Bush tax cuts expire, everyone pays more. We go back to the Clinton era tax rates which were hardly egregious. And, if we use some of that money now to pay for infrastructure and aid to schools, etc., then we up employment. After we have people working again, then we can talk about the deficit, which is the least of our problems right now.


So the deficit is more than a trillion (none / 0) (#25)
by me only on Wed May 23, 2012 at 10:22:11 PM EST

dollars and you think 500 million is a lot of money?


I think that when you are talking about (5.00 / 4) (#26)
by caseyOR on Wed May 23, 2012 at 11:08:19 PM EST

Medicare savings that $500 million a year is a lot of money.

I don't buy into the idea that oh-my-god-the-deficit! It will eat our young!

Putting people back to work will be a huge help with the deficit. So will ending, once and for all, our various wars and actions and incursions and whatever.

Let's not forget that we got the Bush tax cuts because Cheney and Bush and Greenspan and so many of the current deficit scolds decided that it was bad idea to pay off our debt. They told us that the Clinton budget surplus would be harmful to the economy. They insisted that, as Cheney said, "Deficits don't matter."

I have a hard time taking anything they say seriously anymore.


A friend (5.00 / 1) (#28)
by Ga6thDem on Thu May 24, 2012 at 05:06:12 AM EST

of mine suggested that Medicare recipients could buy their drugs from the VA and that would save money. I guess the VA can negotiate and that would be a way around the Medicare Part B law?


Maybe that would work for veterans, but (5.00 / 3) (#31)
by caseyOR on Thu May 24, 2012 at 07:35:00 AM EST

not everyone on Medicare is a vet. My mother and my aunt, both on Medicare, were never in the military.

Also, the Medicare drug plan is Part D. Part B is doctor visits and tests and out patient stuff, and Part A is hospitalization.

Another thing about Part D, and this is what makes the claims that pushing people into the private market is good because of the choice so stupid, every autumn people have to research and investigate and try to figure out what plan will be best for them in the coming year. This difficult for those of us who are still able to work our way through the minutia. For many on Medicare it is too hard. Add to that the fact that there is no way of knowing what drugs you might need in the coming year. So, no way of guaranteeing that the plan you choose really will cover the drugs you need.


I think (none / 0) (#32)
by Ga6thDem on Thu May 24, 2012 at 07:41:07 AM EST

he was suggesting that the VA drug program be opened up to everybody not just vets.


Given that there is talk of cutting veteran (5.00 / 3) (#33)
by caseyOR on Thu May 24, 2012 at 07:46:49 AM EST

benefits, not the weapons and the wars, just the help for the vets who fought those wars carrying those weapons, I can't see this Congress, or frankly, this administration, making the decision to open up those benefits.


: Not (5.00 / 1) (#34)
by Ga6thDem on Thu May 24, 2012 at 08:16:11 AM EST

saying that it will happen. Just saying that I thought it was an interesting suggestion. It seems like it's something that COULD easily be done but not something that probably WILL be done because of the pharmaceutical industry.

Not sure you know this (none / 0) (#35)
by vicndabx on Thu May 24, 2012 at 05:07:47 PM EST

you don't have to research each year (assuming your plan continues to be offered,) you can just do nothing and automatically re-enroll. The choice is there so you can find the best plan for the coming year.


Yes, the VA (none / 0) (#29)
by Zorba on Thu May 24, 2012 at 05:57:48 AM EST

can and does negotiate. Back when my father was alive and on Medicare, he had no drug coverage. His meds cost him $600/month. Then he switched to going to the VA for his meds and much of his medical care. Through the VA, the same meds cost $60/month. Quite a savings.
Sadly, I don't see the laws or regulations or whatever being changed.


Bush v Gore (none / 0) (#39)
by cal1942 on Fri May 25, 2012 at 12:24:29 AM EST

just looks worse by the day.

Think of the absolute catastrophe that was the Bush Administration.


Agree it's the tax policy, but (none / 0) (#13)
by vicndabx on Wed May 23, 2012 at 01:31:03 PM EST

in line w/your other post on what's in the news and themes that should be pushed by non-Republicans, Orszag speaking of addt'l stimulus spending should be touted as a good thing no? Pushing for everything all at once (i.e. tax policy and stimulus,) seems, unreasonable to me. It's not like he has any pull in the policy dept. anymore anyway. It's more about "leading voices" expressing an opinion in ways we've not seen before, IMO.

Just for fun, you should read/skim (5.00 / 6) (#14)
by Anne on Wed May 23, 2012 at 02:18:06 PM EST

the Domenici-Rivlin proposal that is referenced in Orszag's Bloomberg column, and which he touts as the "combination" approach.

I'm sorry, but when someone is praising the potential of a plan that taxes the employer on employer-provided insurance, chains COLA increases in SS to the CPI, raises Medicare co-pays - to name a few - that tells me pretty much all I need to know about Peter Orszag.


: Downloaded and am reading it. (none / 0) (#36)
by vicndabx on Thu May 24, 2012 at 05:09:28 PM EST

Thanks.

myopia (none / 0) (#21)
by diogenes on Wed May 23, 2012 at 07:45:01 PM EST

Wasn't it George HW Bush who turned the corner on the deficit (at the cost of his own reelection) by, as per Wikipedia, "Domestically, Bush reneged on a 1988 campaign promise and after a struggle with Congress, signed an increase in taxes that Congress had passed."

: IIRC (5.00 / 1) (#27)
by Ga6thDem on Thu May 24, 2012 at 05:04:45 AM EST

what he did is instate a Medicare tax. So he did do something and is probably the only Republican in my lifetime that has ever been concerned about the deficit. But it was really Bill Clinton that got the deficit going down.

What is going on with Pelosi? (none / 0) (#23)
by lilburro on Wed May 23, 2012 at 09:30:40 PM EST

The California Democrat sent a letter Wednesday to House Speaker John A. Boehner (R-Ohio) calling on him to schedule an immediate vote to make permanent the Bush tax cuts for income below $1 million annually. President Obama's position has been that the tax cuts should be extended, but only on income of $250,000 or less. Republicans, of course, insist on maintaining the upper-income tax cuts in their entirety, a move that would cost an estimated $850 billion over the next decade -- $1 trillion, including the cost of paying additional interest on the debt, according to the Center on Budget and Policy Priorities.

(WaPo)

As tired as I am of the Obama Administration's dithering/technocratic approach to the economy, at least they're not supporting that (that we are aware of). Ugh * shakes head *

Do you not even have a twinge of (5.00 / 3) (#30)
by Anne on Thu May 24, 2012 at 06:33:44 AM EST

doubt that, somewhere in all of this there wasn't a conversation with Pelosi where she was told that the president, anticipating more trouble with the GOP over this issue, wasn't going to be in a position to back off the $250K line in the sand, so he needed her to do it for him?

Could Nancy really be going rogue on this?

Somehow, I have a hard time believing this doesn't have some administration fingerprints on it; for me, it seems like a prelude to eventually giving in and extending, once again, all the Bush tax cuts.


: Sadly (none / 0) (#40)
by cal1942 on Fri May 25, 2012 at 12:31:01 AM EST

you're probably right.