Almost Classical

English: A graph of the US GDP compared with Federal budget outlay. (Photo credit: Wikipedia ) The United States' federal budget spends a lot of money: between $3.5 and $4.0 trillion annually. How much do citizens of the United States earn each year? A little more than $6 trillion. In other words, the U.S. government is spending roughly two-thirds of the amount earned by all working  Americans. Two-thirds. The top 10% of income earners represent $1 trillion in earnings, certainly a lot, equal to the entire stock valuation of Apple (not the same as Apple's earnings, which are $9 billion per quarter, $36 billion annually). If every penny earned by the top 10% were confiscated  it would have no material effect on the federal budget. That's how out of sync spending is today. The total wealth  in the United States is nearly $70 trillion, meaning everything owned by every person or company, at current "fair value" is worth $70 trillion. Yet, if you were ...

A September 2015 report from the Brookings Institute demonstrates that significant increases in top marginal tax rates would have minimal effects on both income inequality and the federal budget. This report was prepared by William G. Gale, Melissa S. Kearney, and Peter R. Orszag. It should be stressed that Orszag was Pres. Obama's director of the Office of Management and Budget and a former director of the Congressional Budget Office. Nobody can claim Orzsag is a conservative or libertarian — he is an excellent analyst. Read the report here: http://www.brookings.edu/~/media/research/files/papers/2015/09/28-taxes-inequality/would-top-income-tax-alter-income-inequality.pdf A larger hike in the top income tax rate to 50 percent would result, not surprisingly, in larger tax increases for the highest income households: an additional $6,464, on average, for households in the 95-99th percentiles of income and an additional $110,968, on average, for households in the top 1 perc...

I'll be among those to admit we need more revenues to reduce the ludicrous debt of the federal government. We also need to cut spending dramatically to have any hope of balance in the future. Personally, I'd rather see the cuts first, and then we can slowly raise taxes to reduce the annual deficit followed by paying down the debt to a reasonable maintenance level. Unrestrained government expansion comes at a price. At least John B. Judis admits as much in a recent essay on the "need" for higher taxes. Obama's Tax Hikes Won't Be Nearly Big Enough http://www.tnr.com/blog/plank/111486/obamas-tax-hikes-wont-be-nearly-big-enough The New Republic John B. Judis December 28, 2012 | 1:23 pm [There] are a set of unpleasant truths lurking behind this debate over the budget and taxes that policy-makers in Washington need to acknowledge. First, that in order to meet public demands for affordable health care, quality public education, and retirement insurance, gove...

Apparently, Congress is populated by comedians with a penchant for satire. As evidence of this, they passed a "Fiscal Cliff" agreement that was supposedly all about protecting the middle class. Instead, it is 250-pages of muck. How bad is it? The New York Times offers one example: Fiscal Cliff Includes Big Favor to Big Drug Company   WASHINGTON — Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the “fiscal cliff” bill that did not mention the company by name but strongly favored one of its drugs. The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.  Read the full text of H.R. 8… it is depressing. It begins loftily enough, letting us know the Senate is adhering to the Constitution b...

I'm going to admit to contradictory positions: 1) If in Congress, I would vote against raising the debt ceiling. 2) I consider the debt ceiling an incredibly stupid concept. First, I would vote against raising the debt ceiling because it is one of the few ways to force cuts to the rate of growth  in government. In Washington, seldom are "cuts" genuine reductions in spending; cuts are reductions to projected increases in spending. Baseline budgeting is reckless — in households, business, or government. Imagine basing your spending for 2014 based on 2013 + a hoped-for raise. Baseline budgets assume population growth, inflation, increased revenues, and more. The calculations are prone to error. Consider how easy it is for baselines to go awry. An increase in interest rates leads to higher debt maintenance costs, leads to decreased available revenues. A recession leads to lower tax receipts, and less revenues, while it might also increase demands for some services. You ...

The announcement by Mitt Romney that he has chosen Paul Ryan as his vice presidential running mate means we will have a much needed discussion about the serious economic issues facing this nation. That Paul Krugman and other "progressives" dislike Ryan's budget proposals means the ideas deserve some consideration. You can find many articles describing the "Ryan Budget" and you can read the complete budget document. http://articles.cnn.com/2011-04-02/politics/house.gop.budget_1_house-gop-budget-medicare-program-voucher-program?_s=PM:POLITICS http://krugman.blogs.nytimes.com/2011/04/06/paul-ryans-multiple-unicorns/ http://www.cato-at-liberty.org/conservative-house-republicans-budget-proposal/ The House Budget Committee posts its documents online: http://budget.house.gov I disagree with some of Ryan's specific proposals, but the key to me is that he admits we are in a financial quagmire that must be addressed. As opposed to the Keynesian ideali...

Stimulus — oh, that's right, we now call it "growth policies — will not save Europe. How do we know? Because the countries in the greatest trouble were spending… and spending and spending some more. Spare the rod, spoil the child | TribLIVE : Johan Norberg, a senior fellow at the Cato Institute, summarizes the results: "From 1997 to 2007, government expenditures increased by around 6 percent annually in Spain, Portugal and Greece, while population remained mostly stable. Spending increased by 4 percent a year in Italy -- even while the economy shrank."  Consequently, "Between 2000 and 2010, Portugal increased its public debt as a share of GDP from 49 percent to 93 percent, France from 57 percent to 82 percent, Italy from 109 percent to 118 percent, and Greece from 103 percent to 145 percent," reports Norberg. How hard is this to figure out? There was no "austerity" even under conservatives in Europe, as I wrote in a previous blog entry. The U...

Many in the chattering class, especially the economists and politicians on the left, keep telling us "Austerity has failed!" No, austerity hasn't been tried. I won't even bother with links to Paul Krugman's near-daily calls for stimulus — and inflation — in Europe, which would require a complete disregard for European experiences and German biases towards savings and low-inflation. Such economic arguments are beyond silly: convince Germans that an 11 percent savings rate is a bad idea? Really? Cause inflation in the hopes it will force Germans to spend money? Krugman and other economists can suggest these solutions because they know, they must know, that German citizens are not about to go on a spending binge and buy Greek, Spanish, or Italian goods. Yes, Germans really do save more than 11.4 percent of their income. And for ten years, Germany employed true austerity and labor reforms. They loosened labor restrictions (compared to the rest of Europe), slowed...

For his Saturday address to the nation on March 31, the day before April Fools, Pres. Obama once again called of passage of the "Buffet Rule" guaranteeing a "minimum tax" of 30 percent on millionaires. The problem with this? It's political theatrics and genuine foolishness if the administration hasn't considered what the Buffet Rule would actually do to the tax system. Believe it or not, if the Buffet Rule were to replace the Alternative Minimum Tax (AMT), the federal government could collect less revenue, not more! So, either this is a joke, foolishness, or blatant deception. Whichever of the three it is, the call for the Buffet Rule reveals how poorly Americans (and the media) understand our complicated and often stupid tax code. Let us start by looking back a few months. Buffett Rule's impact? W.H. won't say By: Josh Boak January 26, 2012 07:42 PM EST From Politico: http://www.politico.com/news/stories/0112/72056.html President Barack O...

As I've written before, Paul Krugman exemplifies a problem with modern economics: his views swing with the politics of his choosing. For research supporting my assertion, see the post: http://almostclassical.blogspot.com/2010/06/do-economists-change-their-tune-on.html The New Year's Day column by Krugman is that frustrating mix of absolutely right and definitely wrong that come from economists. Again, I've posted on the astounding lack of accuracy among economists of all political persuasions, so this isn't a left/right debate: I'm opposed to the "scientism" behind dominant economic thought. Krugman's column left me with a dozen issues I want to address, so forgive the length of this post. I have beliefs (and they are beliefs) about economics that run counter to Krugman in several ways. At the same time, the differences between most (roughly) free-market economists and thinkers isn't as great as the media or the scholars might have the publ...

Political wisdom, fiscal malpractice. That would be my description for the much ballyhooed "payroll tax cut" supported by a bipartisan chorus of political leaders. The cut is good politics — and fiscal malpractice. Let's begin with some basic facts on the payroll "tax" situation: Most of us with 401K or similar retirement plans invest between 3% to 6% and employers match some portion of this contribution. That's basically how Social Security is also structured: the employee and employer contribute to the fund. The previous and supposedly standard payroll deduction for Social Security is 6.2% of your first $110,100 of income. With the "temporary" reduction, workers are contributing only 4.2% of that income to Social Security. If you are self-employed, you normally pay 12.4% to Social Security, but with the "reduction" you are paying "only" 10.4% (the employer's 6.2% plus the employee's 4.2% rates). The so-called ...

Some of my friends and colleagues in the "orthodox economics" camps have tried to make the case that debt is necessary at times for growth, or at least stability. While there is merit to this line of reasoning, it is also a risky simplification of economic realities. To argue their point, these traditionalists point to household spending. One friend, a left-leaning political scientist with solid economics knowledge, described it thusly: All of us assume debt to improve our lives, and government is no different. We take out loans on homes, cars, our educations, and to finance our businesses. Government has to do the same. You've taken on debt, I've taken on debt, and we did it for better futures. Arguments for a larger stimulus and more investment in some projects would have made sense ten years ago, but today those arguments ignore the experiences of Japan and southern Europe, where "investments" by the government did not revive flagging economies. I do...

After a great deal of research on the matter, I have been an outspoken critic of high-speed rail. The binary simplicity of the major political parties and our media outlets soon reduce this debate to a different, larger debate: public vs. private spending. Any nuance? That doesn't make for good two-minute "debates" on cable news. When people read that I cannot support high-speed rail, one side of the issue assumes I'm against all public projects. In fact, I agree with the American Society of Civil Engineers that we need at least $2.2 trillion (yes, that's with a "T") in short-term investment simply to maintain our existing infrastructure. Building a cool train while bridges are collapsing seems wasteful to me. And the notion we can spend on huge new projects without taking the money from other projects is idealistic. As a nation, we have limited funds. We must spend money in ways that have the greatest return on investment. A colleague said I was wantin...

Yesterday (June 22, 2011) on MSNBC's "Dylan Ratigan Show" David Stockman stood up to the nonsense of the left, in the person of Jonathan Alter. Read beyond my discussion of yesterday's debate for additional perspective on the debate participants. Alter's biases, in particular, were on fine display on MSNBC as he completely ignored facts and instead embraced the mythology of an Obama Miracle. (see http://vodpod.com/watch/11561241-david-stockman-on-the-dylan-ratigan-show ) My favorite moment was when Alter asked Stockman if he knew GE's business better than Jeffrey R. Immelt, friend and advisor to President Obama. "Yes," Stockman replied and proceeded to explain precisely how GE Capital was a financial mess, bailed out by the administration. Alter quoted Immelt as saying GE was near collapse. Well, duh? It was. But it was near collapse because of stupid choices made by Immelt and others within the company. GE was invested heavily in credit default swap...