Commentary: On December 2, 2011 I was excoriated by a young "conservative" named Mike, who wanted to give me a hiding for my communist views on "unregulated" capitalism. He called me or more precisely my views "ridiculous" I'll let you decide who is ridiculous. His tirade was quite lengthy so I am publishing my response in 9 parts as "A series of letters from Left to Right: Dear Mike Since his attack was full of vitriol I have taken off the gloves as I see no point of entertaining his bombastic rhetoric. Parts 5-9 are in-response to the object of his real distain—my post called "Adam Smith Re-examined." Note: Due to length Part 9 is broken into 9a,9b,9c and 9d.
I have color coded my blog post that he critiqued in red—his critique in blue—and my response to his critique in black.
On Taxation and Tax Fairness
Make no mistake every dime of tax cuts for the “job creators” comes from you and I and adds to the “debt ceiling.” Every dime they receive is coming out of your pocket.
Again, Weber demonstrates his lack of understanding of how a tax cut works. Here’s an example: Job Creator X has $100. Instead of taxing X at 30% and taking $30 from X and leaving them with $70, the government taxes X 25% and takes $25 dollars, leaving X $75.
And your lack of understanding of how tax cuts—really work—is only exceeded by your pomposity and condescension.
Your premise is inaccurate and therefore false—here a more accurate premise: A, B and C go out for a night on the town at fancy club at the invitation of A. B and C work for A—a "job creator." They run up a bill for three hundred dollars. (A) says: "Damn I forgot my wallet guys you're going to have to pay the bill and cover me. B and C get stuck for their hundred plus another 50 dollars each to cover the "job creator's" bill.
Simple right? B and C get screwed by A who makes a fifty million a year while B and C only make 50,000 thousand a year each.
Did I mention A never pays them back—in fact A lays them off the next day—and ships their jobs over seas to China—and is subsidized to do so by legislation his, personally bought and paid for, Representative pushed through a corrupt Congress the week before. Oh—and before he goes— A raids B and C's pension fund which is then "covered by the hated government."
Make no mistake—money is extracted from you and I by these unfair and egregious tax cuts for "job creators." Anyone who claims otherwise is naive.
For your edification my young friend here's a little reading for you:
On September 28, 2006, Stanford economist Edward Lazear, chairman of the CEA in Bush’s second term, testified before the Senate Budget Committee and asked: “Will the tax cuts pay for themselves? He said: "As a general rule, we do not think tax cuts pay for themselves. Certainly, the data…does not support this claim. Tax revenues in 2006 appear to have recovered to the level seen at this point in previous business cycles, but this does not make up for the lost revenue during 2003, 2004, and 2005.” Source: Senate Budget Committee
As director of the Office of Management and Budget under Ronald Reagan, David Stockman knows a thing or two about trying to balance the national budget. And he's convinced that Reagan would never support extending the Bush tax cuts of today. Stockman, who still considers himself a staunch conservative and a staunch Republican, told Guy Raz he thinks: "extending those tax cuts would be akin to a bankruptcy filing by Congress and the White House." Stockman went on to say "we're spending $3.8 trillion in defense, non-defense, entitlements, everything else, and we're taking in only 2.2 trillion. So we got a massive gap. You have to pay your bills; you can't keep borrowing from the rest of the world at that magnitude, year after year after year. So in light of all of those facts, I say we can't afford the Bush tax cuts."
Further on in the interview Raz asked: "You seem to suggest that many of our economic troubles are the result of Republican economic policies over the past few decades. You are a Republican. You are a conservative. Why do you think Republicans are largely to blame?
Mr. Stockman said: "Because the Republicans abandoned their old-time fiscal religion in favor of two theories, which I think are now proving to be both wrong and highly counterproductive and damaging."
"One was monetarism, which said let the dollar float on the international markets. Let 12 men and women at the Fed decide whether to raise or lower interest rates, and use the Fed to try to run this massive economy. What they've done instead is run the printing press; they've flooded the world with dollars. The whole monetarist policy has been a mistake."
"The second thing was the perversion of supply side. Yes, there was a good idea that in certain circumstances, lower tax rates will encourage economic activity and savings. But when you make it a religion, when you make it a catechism and you say you cut taxes no matter what the circumstance, what the season, what the condition, then I think the whole idea has been perverted." Source: Interview by Guy Raz on NPR's "All things Considered"
Bruce Bartlett another conservative economist in a interview with Bill Moyers added his voice to Stockman's when asked by Moyers: You write the Bush tax cuts have added at least $3 trillion to the debt. When Bush took office, budget projections showed a $6 trillion surplus, enough to pay off the pending $6 trillion national debt.
Instead, by the time Bush left office, the national debt had ballooned to over ten trillion, and the Republicans are refusing to take responsibility for having driven the borrowing binge that put the nation in the hole it is in now.
BRUCE BARTLETT: That's exactly correct. One of the things that Bush argued during the campaign, not so much after he took office, is that budget surpluses are a bad thing. Because they might get spent.
It really sounds silly (I prefer stupid) when you say it. But he did say this over and over again.
And so, the idea of cutting taxes was a part of a policy that I call "starving the beast." He went on to say: ..."conservatives believe that there's only so much freedom out there. And the more the government, the more power government has, there's less freedom for the people."
And they have a tendency to look at this in terms of spending as a share of GDP. So it can be measured very precisely. So if the federal government takes 25 percent of GDP, then essentially, we have only 75 percent freedom. We're not 100 percent free. You know, if we could cut government spending down to 20 percent of GDP, then we would gain five percent freedom. We'll go from being 75 percent free to being 80 percent.
I'm serious. This is the way they think. And this drives a lot of these policies that on the surface don't make any sense.
They're just about taking away the government's resources to force it to shrink to -- if you cut the budgets of the regulatory agencies, then they can't regulate. This is a good thing.
They really believe that there's absolutely nothing good that comes out of government, unless it comes out of the Pentagon.
And the "starve the beast theory" is really extraordinarily pernicious, because one of the things that it is related to is the so-called tax pledge, which my friend Grover Norquist came up with. And which has become a ban on raising taxes at any time for any reason.
But at the same time, all tax cuts are okay. So you just have this constant ratchet down. Every time you can cut taxes, you've lowered the threshold that you can never then go up against. So it's like you're coming down a series of stairs. And this is all very conscious, because Grover believes that if you take away the government's ability to tax, it will necessarily be forced to spend less. Government will shrink. Freedom will increase. It's that simple." Source: Interview of David Stockman by Bill Moyers
The truth is that no serious Republican economist has ever said that a tax rate reduction would recoup more than about a third of the static revenue loss. Not even Reagan's own economists ever claimed that tax cuts would pay for themselves. Some like Stockman and Bartlett even think that the entire Conservative movement has swept up by this theory to the point of moronic fanaticism, and an absolutely rigid ideology that is indefensible. These are the guys that authored the "temporary" tax cuts in the first place.
They are definitely costing taxpayers plenty!
Accounting 101 Fail
Simple, right? No money was taken from you or I — Job Creator merely kept more of the money it already had. They received no dimes from our pockets, unless you had previously given it to them in exchange for a good or service.
You're too clever by half. Try an follow me. To wit—the Republicans are insisting on a "paid for" to extend the middle class payroll tax holiday. If they are revenue neutral—as you so simply put it—why do they need a "paid for" to cover them. Opps!
POINT: Tax cuts—increase the deficit—which requires more US bonds be sold (to China or other creditors or US citizens who own the majority of them) which is a "debt obligation" that is THE DEBT THEY ARE TALKING ABOUT—US BONDS—that have been issued for centuries to finance American debt—its how we paid for WWII—I know my parents bought me some when I was a kid—that adds to the deficits. Tax cuts are NOT revenue neutral. That is outright bullshit to say otherwise.
We incurred most of that debt during the Bush administration—with two unfunded wars, 3 trillion in tax cuts over ten years, a Drug subsidy program called Part D that was a "crony capitalist" giveaway. Economist have said that without those items that the debt would be declining when the tax cuts expire, and the wars end. If they continue the deficit will continue for the foreseeable future. Obama has ended one war and is phasing out of the second. The tax cuts without an extension will end in 2013. But the revenue is lost and will never be fully recouped. Instead of listening to Rush and FAUX News try some independent research its all out there. LOOK IT UP!
Economics 101 Fail
See Continued Part 9c