Krugman on rolling back the tax cuts (oh, and he has a book out)

[AP]

LO: There seems to be a fault line forming in the Democratic primary, with one
side Howard Dean and Dick Gephardt wanting to repeal all the Bush tax cuts,
and on the other John Kerry, John Edwards and Joe Lieberman saying we
should at least keep the tax cuts for the middle-class.

Is one of those strategies better than another for the economy?

PK: Put it this way. If you do the arithmetic, take the estimates of where we are on
budget, we’re actually very deep in the hole.

The best estimates say we got a fundamental shortfall of about 4.5 or 4.6 percent of
GDP. The Bush tax cuts are actually about 2.7 percent of GDP.

So the truth is, even if we rolled them all back, we would still have a hole in the
budget.

If you wanted to…keep the tax cuts for the middle-class, there’s something to be said
for . Our tax system has gotten a lot less progressive over the past 20 years.

But that means that you’re going to have to come up either with some kind of
program cuts or some kind of additional revenue elsewhere.

Even with all the Bush tax cuts rolled back, we still have a long-run budget problem,
though it’s not nearly as severe as the one we’re right now facing.

So if somebody says, “I just want to repeal some parts of it,” I think it’s fair to ask,
“Well OK, what else are you going to do?”

http://www.liberaloasis.com/krugman.htm

And the book:

http://www.amazon.com/exec/obidos/ASIN/0393058506/qid=1062649755/sr=2-1/ref=sr_2_1/002-4033273-3794429

[AP]

1. And the follow-up Q

LO: So in either case, it doesn’t solve the entire budget problem. But is one
better than the other as far as the overall economy is concerned?

PK: The question of the tax cuts and the question of the economy are not very closely
linked.

Nobody thinks that we should be raising taxes, this year, now, right away. Because
the economy needs to find its feet again, so you don’t want to be sucking purchasing
power out of the economy immediately.

We’re really talking about what will happen over the course of several years, as the
economy recovers.

It’s not really… a question about what it does to the economy. The question is, who’s
got a real plan make the government solvent again.

[AP]

2. So, do you trust Eloriel, or do you trust Paul Krugman?

??

[FubarFly]

3. “Well OK, what else are you going to do?”

Krugman is saying that neither solution solves all the problems, although each has it's advantages. Very sensible.

But why single out another DU'er and make it personal?

[AP]

6. Something that fixes the economy -- spread some wealth among

the middle class. Pull an FDR.

[FubarFly]

12. So how would Edwards deliver health care without cutting services,

raising taxes, or making the deficit worse?

[AP]

17. check out his real solutions.

[FubarFly]

19. Please, enlighten me...

[AP]

22. It's 60 pages of plans

Do you really think ANY of the candidates is running on the single plan of rolling back tax cuts? The general theme for Edwards is to flow a little wealth down to the middle class, give them an opportunity to contribute to the economy, let them educate their children, and cut out a lot of the profit in the health care industry so that we can stay healthier for a little less money.

It's all in there. However, the response to every suggestion of weakness in your candidate's position isn't, "well, what the hell is your guy going to do." This isn't a race to the bottom. All the candidates better be rising to the occassion, and Krugman here is giving them a big hint as to how to do it.

[dsc]

24. and he also clearly said

it is fair to ask those who aren't repealing the whole tax cut what additional cuts they are going to make. That seems to be what the poster was asking. Or does Krugman's advice only matter when it is pleasing to you?

[AP]

26. Are you saying that Edwards doesn't have a 60 page booklet called

Real Solutions for America which lists all his plans for getting America back on track.

Just be Krugman didn't mention it doesn't mean Edwards doesn't have a plan.

What's Dean's plan?

[dsc]

32. I am saying no such thing

but you chastized the poster for having the termerity to ask you what the plan was. That is precisely what Krugman tells us to do. Again, funny how you like his message when you agree with it but don't when you don't.

[AP]

36. Notwithstanding the Edwards banner,

which sends us down the partisan road, I guess, it's just that it's so often the defensive posture is the equivalent of, "I know you are but what am I", or "I'm not a baby, you're the baby."I was reacting to the familiarity of the pattern.

In any event, although I'm not an official spokesperson for the campaign -- I think Krugman's point is that THE CANDIDATES should give the plan, not anonymous supporters on the internet -- I'm more than willing to provide the link to the candidate's web site so you can see WHAT THE CANDIDATE says.

The minute fubar says "what are you, AP, going to do about it" or Krugman says "AP over at DU should be giving all the answers" I'll be happy to step up to the plate.

Until then, DU'ers should probably turn down the dial on the control which makes us think we are the embodiment and the official spokespeople for our favorite candidate.

[dsc]

38. fair enough

But I think you were out of line to suggest that asking what your candidate's plan is was some sort of diversion when that is what this thread is supposed to be about.

[AP]

42. It's unfortunate that were all on edge here.

And I'd be lying to myself if I claimed I didn't contribute to the mood.

[dsc]

45. I shouldn't have been so snippy

either. I got a chip on my shoulder when you called me out and acted badly. I should have just ignored it.

[FubarFly]

29. These are Krugman's own words:

So if somebody says, “I just want to repeal some parts of it,” I think it’s fair to ask,
“Well OK, what else are you going to do?”

These are your words:

However, the response to every suggestion of weakness in your candidate's position isn't, "well, what the hell is your guy going to do."


So, am who am I supposed to trust: you or Krugman?


Perhaps you can start by providing a link.

[AP]

31. http://www.johnedwards2004.com/real-solutions.asp

Read up.

[FubarFly]

39. Thanks.

Edwards plan will cost 53 billion dollars, and Dean's plan will cost 83 billion dollars. Although Dean figures if there is extra money, he'll use it to pay down the debt. Hardly enough of a difference to quibble over. Both plans have their merits.

You can read the specifics for yourself.

http://www.deanforamerica.com/site/PageServer?pagename=policy_statement_health

[Eloriel]

5. Huh????

What in heaven's name do I have to do with tax cuts?

I can't remember discussing them in anything other than possibly (and even that I can't remember) passing way -- ?

And btw, it's against DU rules to name DUers who aren't participating in a thread. I am now, but I wasn't.

Edited to add: and yes, btw, if you're trying to find an anti-Dean message in Krugman (if that's why you singled me out), I don't agree there's one in there.

Eloriel

[AP]

7. I may have called out the wrong person, but someone (I'll check)

wrote a long post summing up how repealing the tax cuts entirely is a good economic move.

Thought it was you. I'll go check.

[Eloriel]

9. Lol -- no, I assure you, it wasn't me

Thanks for the clarification.

Eloriel

[dsc]

11. It was me

and to be blunt like all Dean bashers you evidently don't think rules apply to you. When you posted that call out I hadn't posted in this thread either. The DU rules are clear on this but evidently you don't seem to think you need to follow them. That is hardly shocking coming from a Dean basher as they have become accustomed to rules not applying to them. Yet, of course, it is Dean supports who somehow get the bad rep go figure.

[AP]

14. I await a firm rebuke from a moderator in my inbox

...

[dsc]

20. I chose not to alert you but

please tell me what part of the third sentence of what I quoted is unclear. And how what you did isn't breaking that rule. I would love to hear that.

"Do not "stalk" another member from one discussion thread to another. Do not follow someone into another thread to try to continue a disagreement you had elsewhere. Do not talk negatively about an individual in a thread where they are not participating. Do not start a new discussion thread with the purpose of "calling out" another member or picking a fight with another member. Do not use your signature line to draw negative attention to another member of the board"

On edit. Just once I would like a Dean basher to admit his or her error when called on it. When they don't provide links the people who ask for them are net nannies. When they get caught in a mistake it is Dean fault, or Rove's fault, or the devil's fault. When they use jimmied photo's it is my fault for either asking if it is jimmied, assuming it is jimmied after I am ridiculed for asking, or for not being able to divine the answer from thin air. And now it is my fault since I was classy and didn't alert you after you broke a rule. Can't any of you simply say I am sorry?

[AP]

27. that's mighty neighborly of you, ma'am.

Cheers.

[dsc]

30. BTW it is sir

eom

[AP]

10. appologies, it was dsc.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=104&topic_id=273299

[Forkboy]

33. Thats easy

Eloriel

[dsc]

4. I wish they had gone further with him

Those two questions don't really address which he honestly thinks is the right thing to do. I love Krugman and would like a more detailed interview of him on just this issue.

I do have one quibble though with his statement about the tax code becoming more regressive over the last 20 years. It sounds much more gradual and spread out than it really was. Take out the actions of 1981, 2001, and 2003 and there would be a very different story.

[AP]

8. You really don't think the way we raise taxes in the US is regressive?

I totally agree with Krugman about this, and I think he underemphasizes the problem.

[dsc]

16. Clinton's increase was not regressive

he lowered taxes on the poor, held them harmless for the middle class (aside from a puny gas tax), and raised them on the rich. That is 8 of the 20 years.

[AP]

18. There is enough solid data proving increasing regressivie

i don't feel that my not citing it is going to weaken the argument that Krugman knows what he's talking about.

[dsc]

21. If you have any data suggesting

an increase in regressivity of federal taxation between 93 and 01 I would love to see that. Incidently that isn't what Krugman said, nor is it what I said he said. My main problem with what he said is the passive voice he used. I also don't like the lengthy time frame since the change in question was more discrete than that.

[AP]

23. There was a report in late 91 which was confirmed with further

studies in 92 that said that the wealthiest Americans got 150% wealthier between 92 and 2000, but their tax burden reduced by something like 50%. Even adding a couple new tax brackets did nothing to keep the tax brackets in synch with rising incomes, and the fact that more people were entering the higher brackets (and that there was a larger range of incomes in those higher brackets) which has the effect of flattening, or making more regressive the overall burdens.

(eg, if you're a company or an individual making 5 million dollars a year, you're paying at the same marginal rate as someon making 300K per year. however, there's no way those two entities are in the same economic situation. For all intents and purposes, there's a flat tax on both those people and everyone within that band, and because people were getting so much richer within that band during the Clinton years, you had increasing regressivity.)

[dsc]

28. That must have been one Hell of a study

I can't fathom how a study conducted in 91 and another one in 92 could have told us anything about 93 to 00. Was the study conducted by Carnac? The very limited info you gave makes a rebuttal pretty hard but your description of marginal rates is out of planet bizarro. A person making 300k got his or her taxes raised by Clinton to a far less extent than did one making $5million. The marginal rate only applies to money over a certain amount. It is late, and I don't feel like looking up brakets so I won't give exact figures. But no matter what they are the $5million person had his taxes increased by 282,000 dollars more than the 300k person did. (4,700,000 * 6%). By any measure not designed on Pluto that is a progressive tax increase.

[AP]

34. typo. 2001.

And we're talking about TAX BURDENS here. Paying more absolutely isn't the same as having your tax burden increased or even held constant.

If you want a lesson in progressive taxation, I'd be happy to give it. Do you really not understand it? Do you know why the tax rates go up? Do you wonder why they stop at 300K. You acknoledge that an equivalent tax burden on a person making 25K and 300K requires that the 300K person is paying at higher marginal rates on income up to 300K, right?

Well, then why do we pretend that people making 5 mil and 300K are in the same economic position? They aren't, but they pay the same marginal rates. That's why tax burdens went down.

If there weren't so many more people earning money in that top, de facto flat tax range (which is very wide) it wouldn't matter. But Clinton saw a lot of people make a lot more money, and they made it all in a tax band which was taxing people very very regressively. Krugman's right.

[AP]

35. You don't have to go DOWN to far from 300K before you see the

marginal rates drop, but you can go up from 300K forever without seeing a new higher marginal rate. That's regressivity.

[dsc]

37. No it isn't

Get a dictionary for the love of Christ. Regressive taxes are taxes where poor people pay more. That senario, the 'poor' person making 300k pays less both in real terms and as a percent of income. In addition the discussion isn't about the taxes being paid but the increase in taxes being paid. That is what the words "became more regressive" means. Under that test there is no contest. The $ 5 million person pays way more both as percent of income and in actual money.

[AP]

40. Then why are flat taxes considered regressive?

Obviously you think that regressive means, for example, that everyone pays the same amount in taxes (like, say, everyone pays $3). That's regressive, but that isn't the definition of regressive. Regressive taxation is when the tax structure doesn't reflect the fact that when you make more money, you have a lower valuation of an additional dollar, which requires that, as you make more money, you need to pay higher marginal rates, so that you aren't less burdened by taxes compared to someone who has less money and has a higher valuation of an additional dollar.

You shouldn't require one person to work 5 months of the year to pay their tax bill, while someone else only has to work 1 month, or not at all, if all your income is dividend income and you don't even work for living.

That's why we have higher marginal rates as you make more money. That's why it's regressive to charge someone who makes 300K as a family the same marginal rate on 10,000 more in income that a 20 million dollar earner pays on another 10,000 bucks in income.

[dsc]

43. A flat tax

that exempted the poor and middle class wouldn't be regressive per se. Sales taxes are considered regressive due to the fact poor people pay a higher percent of income due to spending a greater percentage of their income. But a flat income tax, that had heafty exemptions would not be regressive. It wouldn't be progressive either. It also wouldn't require person A to work more months than person B to pay taxes. They would work the same amount of time.

[AP]

46. Obviously we're talking about effective tax rates and

still Krugman is right. Yes, a flat tax with no exemptions at the top and increasing more at the bottom would EFFECTIVELY be progressive, because it would be the equivalent of increased marginal rates.

And Krugman is talking about how, effectively, the tax structure is regressive. (Like, when you're rich and you pay a lower income tax because you take all your income as stock dividends and cap gains rather than earned income -- and I don't know any poor people who are able to decide how they get their income the way rich people are able to do it).

[dsc]

41. You are not understanding either Krugman

or for that matter me. Krugman used the words BECAME MORE REGRESSIVE. Not was regressive. To BECOME MORE REGRESSIVE, the additional tax burden has to have been borne regressively. It wasn't. The additional burden was borne progessively. Thus it didn't become more regressive. Under Clinton, the INCREASED TAXES fell on the rich. And yes, I think 300k a year is rich. Other than a puny gas tax all of the increased burden was borne by rich people. That is progressive. And again Became More Regressive means we have to look at the change not the product itself.

[AP]

44. Unfortunately, the tax code has never been all that progressive

And the point is that, a lot of the income fell in a bracket that is de facto flat (no other bracket taxes so people in as wide an income range at the same rate). Even though the rich are paying those taxes, they're loving it, 'cause it's like a big flat tax. The guy making 5 million is probably having an orgasm over the fact that he's less burdened by the person making 350K. And was it about 1998 that cap gains were taxed at a way lower rate than the highest income bracket. Those rich were lowering their effective tax rates down real low by taking a lot of their income in cap gains (stock options -- remember those). It's not even funny how much of the income of the super wealthy wasn't even taxed at personal income tax rates, making the whole discussion of what the top earned income rate was totally inconsequential.

[Eloriel]

13. Holy shit -- look at this

This just blows me away:

And the main thing to say is: gosh, if you let me run a 500 billion dollar deficit, I could create a whole lot of jobs. That’s roughly equal to the wages of 10 million average workers.



And this, which we all know anyway:

The key thing, in terms of the state of the world right now, is that the United States has gone mad.

Let’s get some return to fiscal and environmental and general governmental sanity in this country, and then we can talk about we manage globalization.



Eloriel

[AP]

15. this is an excellent point.

[dweller]

25. yeah, and that

would be Krugman.

PK:" I underestimated. I just consistently underestimated just how bad things were going to
be.

I thought, well they might blow the budget surplus, but I didn’t think we were going to have a
500 billion deficit. I thought they would politically exploit September 11. I didn’t think they’d
take us off into an unrelated war.

My finest hour, at least in terms of seeing something that you weren’t supposed to see, was
the California energy crisis.

Not that I figured it out. Smart energy economists in California figured it out. I listened to
them. This is not a shortage of capacity created by just the environmentalists. This is
market-rigging on a grand scale, and so it has turned out."


dp

[Merlin]

47. Here's something really important for us all to remember.

...confronted with people with some power, domestic or foreign, that really doesn’t play by the rules, most people just can’t admit to themselves that this is really happening.

They keep on imagining that, “Oh, you know, they have limited goals. When they make these radical pronouncements that’s just tactical and we can appease them a little bit by giving them some of what they want. And eventually we’ll all be able to sit down like reasonable men and work it out.”

Then at a certain point you realize, “My God, we’ve given everything away that makes system work. We’ve given away everything we counted on.”

And that’s basically the story of what’s happened with the Right in the United States. And it’s still happening.

You can still see people writing columns and opinion pieces and making pronouncements on TV who try to be bipartisan and say, “Well, there are reasonable arguments on both sides.” And advising Democrats not to get angry – that’s bad in politics. And just missing the fact that – my God, we’re facing a radical uprising against the system we’ve had since Franklin Roosevelt.

[AP]

48. a kick to plug discussions of progressive taxation, and

to plug Krugman's book.