Obama Walks Away From Social Security
[Guest post by DRJ]
I’ve given up on where Obama stands on taxes, except I’m sure mine will be higher if he’s elected President. As for Social Security, the New York Times’ The Caucus valiantly attempts a summary of his many positions but the bottom line is this commentary from a nonpartisan source:
“The thing about a doughnut hole is that it is empty,” Howard Gleckman, editor of TaxVox, the blog of the nonpartisan Tax Policy Center, wrote Thursday. “There is nothing. And that, it seems, is what is left of Barack Obama’s plan to fix Social Security.” He added: “Make no mistake, what Obama is really saying is that, at least for the campaign, he is walking away from Social Security and all of its problems.”
“Change We Can Believe In” makes hard choices about Social Security and sticks with them. “Politics as Usual” mouths platitudes and slinks away when the hard choices need to be made. Both candidates may go AWOL on Social Security.
That leaves me with McCain, the candidate who might keep my taxes low so I’ll have more money when I retire and don’t have Social Security.
— DRJ
On the other hand, if the budget isn’t balanced, everyone’s taxes will have to go up to pay back the debt. That might or might not happen while you are retired.
aphrael (e0cdc9) — 8/15/2008 @ 4:19 pmAphrael,
Do you honestly believe a Democratic Congress will pass up universal health care to balance the budget?
DRJ (a5243f) — 8/15/2008 @ 4:25 pmLowering taxes can increase revenue, aphrael. Spending is what Congress really fucks up.
JD (5f0e11) — 8/15/2008 @ 4:30 pmIf we end up with a Democratic Congress and Obama as President, we’ll look back at the present deficits with longing for how low they were.
The empty suit has no clue about economics and no intention of balancing anything.
SPQR (26be8b) — 8/15/2008 @ 4:45 pmAnother flip-flop? *Shock* Empty platitudes; false promises . . . Who could have seen this coming?
Icy Truth (824779) — 8/15/2008 @ 4:45 pmSPQR wrote: The empty suit has no clue about economics and no intention of balancing anything.
— The scary thing is that he does intend to do it; his method will be to copy Clinton: increase taxes to match the increased level of spending . . . hence, a balanced budget.
And a recession.
And an unprepared, diminished military.
Icy Truth (824779) — 8/15/2008 @ 4:55 pmMy Prediction:
Another Drew (3397e8) — 8/15/2008 @ 4:56 pmWith the Dems in Control of both ends of PA Ave.,
Congress, w/The One’s approval, will increase taxes, which will slow the growth rate of the economy and the tax-revenue growth of the Government; while, at the same time, Congress increases non-discretionary spending, and the deficits balloon.
How many hundreds of billions of new dollars of spending has Baracky proposed so far? The idea that we will ever see lower taxes or a balanced budget under any Dem President and Congress, much less Baracky the Hopey Shiney Changey One is laughable.
JD (5f0e11) — 8/15/2008 @ 4:58 pmThe numbers vary, but I think the minimum projection is $300 billion.
Icy Truth (824779) — 8/15/2008 @ 5:00 pmAnd, if Congress was to pass a tax-hike of that amount ($300B), I would bet that it would drive the economy into recession, and revenues would actually decrease (see CA, circa 91-94).
Another Drew (3397e8) — 8/15/2008 @ 5:02 pmAD – When Baracky crushes the economy, I guaranfuckintee that the Left will blame it on Bush. And, their solution will involve taxing the holy hell out of the actual taxpayers.
JD (5f0e11) — 8/15/2008 @ 5:24 pmJD – Left you a present on the home cooking thread.
daleyrocks (d9ec17) — 8/15/2008 @ 5:32 pmCongrats, JD.
Another Drew (3397e8) — 8/15/2008 @ 5:32 pmYou, unlike many others, have discovered the true essence of a Democrat (at least, one of the Left).
AD – Maybe a crushing recession or depression is what it will take to make everyone else learn. I hope not, but some lessons cannot be taught.
JD (5f0e11) — 8/15/2008 @ 5:50 pmSo, if Obama becomes president and spending during his administration is no more than equal that of George Bush, will everything be OK?
Alan Greenspan (d11f9a) — 8/15/2008 @ 6:25 pmOr will the credit card have melted by the time he gets it?
Congressional spending hasn’t been okay in a long, long time.
DRJ (a5243f) — 8/15/2008 @ 6:26 pmDRJ: no, of course not. Neither party actually seems to care about balancing the budget.
My point was more that, as a policy matter, lower taxes today might well leave us all in a worse state tomorrow than higher taxes will.
aphrael (9e8ccd) — 8/15/2008 @ 6:39 pmI don’t see how. Lower taxes means people have more money to spend. Higher taxes means government has more money to spend. When did government ever spend money more wisely than the sum total of its people?
DRJ (a5243f) — 8/15/2008 @ 6:41 pmLife is short. Eat dessert first. In the long run you’ll be dead.
daleyrocks (d9ec17) — 8/15/2008 @ 6:42 pmI’m going to outlive everyone and then I’ll have all the desserts.
DRJ (a5243f) — 8/15/2008 @ 6:53 pmSo let’s see:
1. The current deficit is how big??
2. The size of the government has grown to what record since Bush took office?
3. The price of gas is how much? The Iraq adventure took how much time and money (and still counting)?
4. The market has fallen how much?
5. People’s properties have lost how much worth?
6. McCain has supported these policies what percentage of the time?
7. And plans to continue with if for how many more years if he’s elected President?
8. The Berlin wall is in danger of being rebuilt under what tough talking President’s watch with zero moral standing in the world and even less respect from a country currently pummeling a former satellite?
9. And what former venerated president, now deceased, is now spinning in his grave like a drill bit as what great achievement involving a wall is in danger of being erased?
10. Yet once again, the reality of the moment is less important then the same old tired stereotypes applied to a man who has been president for how long??
11. And the current administration spent how long trying to work out a plan for Social Security that had nothing to do with being feasible and everything to do with ideological neocon wankery that was DOA?
Hmmm. Something stinks in Denmark.
Peter (e70d1c) — 8/15/2008 @ 7:22 pmHaw Haw I have a prediction… IF O manages to become Prez and raises taxes and the economy tanks then all rightys will start howling about how it’s ALL the Dems fault and has nothing to do with the Reps running the country the last 8 years. If the economy improves the rightys will all go on and on about the wise economic policies of the Bush administration that led to the current improving economy….
Opposite of the above for lefties…
EdWood (bdc134) — 8/15/2008 @ 7:29 pm“My point was more that, as a policy matter, lower taxes today might well leave us all in a worse state tomorrow than higher taxes will.”
Before you can say this with any confidence, first you have to prove that raising taxes increases revenues in the long run. They never do, and why so many pretend the opposite continues to amaze me.
Dmac (874677) — 8/15/2008 @ 7:31 pmDRJ: lower taxes without lower spending means more money we owe that must be repaid later. Unless we’re somehow immune from having to repay our borrowing, that’s a problem … because that repayment can only come through higher revenue or lower spending.
Dmac: “they never do” is an overstatement. Increasing taxes from a zero rate is pretty much guaranteed to increase revenue, for example. 🙂 It’s also pretty clear that raising tax rates on things like oil or alcohol, which have low demand elasticity, generally increases revenue.
The Laffer curve was right, as far as it went: when tax rates are higher than a certain point, lowering rates can increase revenue. Fair enough; but the converse is also true: when tax rates are lower than a certain point, raising taxes can increase revenue.
Do you know where on the curve we are? I don’t; I don’t think anyone does.
aphrael (9e8ccd) — 8/15/2008 @ 10:04 pmI don’t think the solution is to continually raise taxes. There’s no incentive to reduce spending.
DRJ (a5243f) — 8/15/2008 @ 10:08 pmPeter, the current deficit is $152 BILLION higher this year because of the stimulus plan pushed through by the DEMOCRAT Congress, and another $300 BILLION because of the mortgage bailout, neither of which should have been signed by Bush after they were passed, regardless of any deals made. The stimulus package is worse, however, since it is simply the Congress printing money that they don’t have, and tacking it right on top of the deficit.
And, respectfully, Barack wants more of exactly the same….
As for Social Security, if Bush’s plan had been passed 7 years ago, at least those people who would have been saving their own money would have some of it, as opposed to what the government has for them right now….
Not a single penny….
reff (b68a4f) — 8/15/2008 @ 10:16 pmWhere are we on the “Laffer Curve”?
Good question. Generally, every time that tax rates have been reduced, the activity that was taxed has increased, resulting in more revenue from a lower rate. I guess we’re still looking for that ideal point, which probably – over time – changes.
Of course, you could always check with Dr. Laffer at his current web-site:
Another Drew (3397e8) — 8/15/2008 @ 10:17 pm(https://www.myfef.org/bin/action.center.election
DRJ: granted, but I think borrowing is worse; it forecloses future options in a way that neither increasing taxes nor reducing spending today does.
Peter: “the Berlin Wall is in danger of being rebuilt”? Have I missed some earthshattering change in the state of German politics?
aphrael (9e8ccd) — 8/15/2008 @ 10:22 pmAnother Drew, I cannot load that webpage.
aphrael (9e8ccd) — 8/15/2008 @ 10:23 pmaphreal, I don’t agree with your converse point, that raising taxes will increase revenue, unless revenue has dropped below the level of discretionary spending by an average family. While the gasoline prices have made me flinch, I’m not a lot different than many Americans who have simply slowed spending in areas that I didn’t need to be spending anyway, like larger eat-out meals, or new clothes, or a bigger steak from the grocery. I’m not sure that the largest tax=paying wage earners in America have cut their spending all that much to start with, or we would surely have entered the second quarter of negative growth, which would signal the recession. We’re still growing, so the people who can spend income are still spending, althought obviously by not as much of an increase.
I hope my point is clear, since I’m not an economist, but, to try to simplify: People who have incomes AND pay taxes are still spending money, and still earning money. That upper 20% or so of wage-earners, who pay 90% of all taxes, if you raise taxes, they will cut their INCOMES, rather than pay the taxes, and if not their incomes when not possible, then cut back on their spending, which, at least in the immediate future, would bring the recession, and even lower income, even with new taxes. (And, remember, with only 54% of wage-earning families even paying ANY FEDERAL TAXES, and Obama’s plans always include moving more people off tax rolls and onto the group that DON”T PAY, at some point, there isn’t enough people making money to cover the bill, and those at the highest levels will just move their money in to lower income earning brackets or into other areas where they cannot be taxed. You can’t possibly agree that we should have a 70% or 80% tax bracket for those making $250K or more, do you???)
Obama’s plan then for Uni-health care, and more social wealth redistribution, would further increase deficits, which would lower consumer confidence even more, causing the upper 20% to cut back spending even more, causing the economy to suffer even more…
The spiral downward continuing…
The only solution is to hold tax rates, or even cut them slightly, and then CUT SPENDING, forcing even state and local governments to decide what they will pay for, and then, they’ll have to decide to pay for only necessities….
Which is what they should be paying for anyway, right???
reff (b68a4f) — 8/15/2008 @ 10:28 pmPeter, do you think that if President Reagan were in the White House that Russia would have invaded Georgia???
The answer is no.
Why? Because tough talking Presidents who are backed by Congresses that believe in backing allies, and facing up to those who attack and invade allies would give pause to tin-cup dictators like the Putin puppet in Russia.
However, President Bush is backed by a Congress that is trying to vote on losing in Iraq, and Russia knows that.
They smell the fear in our Congress, and are acting accordingly.
Thank you for helping that to happen with your belief system.
reff (b68a4f) — 8/15/2008 @ 10:33 pmAphrael,
Aren’t you assuming that increases in taxes will keep up with or offset increased spending? I don’t think that’s a given. Unlike a family or business, Congress has no borrowing limit and there’s no reasonable likelihood that borrowing and spending will even out. In fact, history tells us the more money Congress has to spend, the more it spends.
DRJ (a5243f) — 8/15/2008 @ 10:39 pm#21 – Peter
Something stinks in Denmark.
— So that’s where you live.
Icy Truth (824779) — 8/15/2008 @ 10:53 pmDRJ: Lower taxes means people have more money to spend.
I liked all that up until the spend part. My preferred ending to that would be lower taxes would mean more money to pay down debt and directed to savings and investment. The ‘spending’ is not eliminated, I will point out, just re-directed to productive purposes in terms of capital asset growth leading to an economy based on industrial and commercial expansion rather than on non-productive consumer debt expansion. Consuming isn’t the boogie man, it’s the debt part.
I’ rather certain you think that way, as well, from all I read here. I just wanted to flesh out the spending part. As for taxes being raised or lowered as an incentive device, I wouldn’t have much issue with raising taxes on ‘luxury’ consumption to appease the tax mongerers, as long as there is an equal or even more substantial reduction of taxation on savings and investment. Zero taxes on savings and investment would suit me just fine, actually. You wanna see an economy really take off?
Just how does anyone think the US got to the top of the heap? It wasn’t built on taxation or consumption based debt. Rather those two are combining to grease the skid off the heap. Note that consuming isn’t the boogey man here, it’s the debt part. Consumption from savings? Sure, knock yourself out. I don’t recommend it, but do what you like.
And, yes, there are those that will have no savings ever by misfortune of nature or accident. A vibrant economy can provide more than enough reserves for those that cannot help themselves. And substantial reserves allows a nation to no longer depend on foreign nations to fund its operations, like say a strong military? I really like that benefit.
Now about those unfunded liabilities….
allan (28f0b3) — 8/16/2008 @ 10:50 am#28
Nah, I’m exaggerating to make the point that Putin seems determined to put the fear of God back into its former satellites, But the lack of any coherent response from the Bush Administration is troubling.
Peter (e70d1c) — 8/16/2008 @ 11:32 amaphrael @ #29…
Another Drew (c3bf7a) — 8/16/2008 @ 11:47 amSorry for the bad link, got that off of the first hit on a Google search for “Arthur Laffer”. It is supposed to be a “think tank” that he’s doing with Larry Kudlow.
Allan,
You’re right. I think people should pay off their debts (particularly unsecured debts) and save more money before they spend on luxury goods. And I probably define necessities and luxury goods different than some.
DRJ (a5243f) — 8/16/2008 @ 12:44 pmSocial Security is not broken. There is no crisis.
McCain:
“Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that’s a disgrace. It’s an absolute disgrace, and it’s got to be fixed.”
It was a disgrace that it was designed to work that way, so I guess SS has been a disgrace for the past 75 years
JAR (ee241a) — 8/16/2008 @ 1:21 pmCan you spell “PONZI”?
Another Drew (c3bf7a) — 8/16/2008 @ 1:39 pmReff: That upper 20% or so of wage-earners, who pay 90% of all taxes, if you raise taxes, they will cut their INCOMES, rather than pay the taxes
I’ve never been convinced that this is true.
The simple version of it is certainly true: that as the tax rate goes up, the marginal value of the added income goes down. Which means that some people will decide that it’s no longer worth paying the cost (in effort, time, what have you) to produce the less-valuable income.
But how big the overall impact of this will be is debatable at best, and the picture you paint of people deliberately cutting their incomes in order to not have to pay added taxes is misleading … what’s driving it isn’t avoiding paying taxes, it’s that the dollars earned are less valuable when you get to keep a smaller percentage of them.
You can’t possibly agree that we should have a 70% or 80% tax bracket for those making $250K or more, do you???
No. But please note: nobody is proposing that. This is a strawman.
DRJ: I think it is likely that as revenue goes up, spending will go up, yes. My hope is that it goes up by less than revenue, and that some of the added revenue is used to pay down the debt. But that’s only going to happen if the voters stand up and say that borrowing is unacceptable, and that both tax increases and spending cuts are better than borrowing.
aphrael (12fba5) — 8/16/2008 @ 2:08 pm“I’ve never been convinced that this is true.”
aphrael – Be convinced. When personal income tax rates go up on higher tax bracket individuals you tend to see a proliferation tax shelter promotions, to the extent that legitimate ones are still available, income deferral mechanisms in executive compensation plans that spread the payout pattern to future years while attempting to finesse the vesting issues, and a variety of other hocus pocus.
daleyrocks (d9ec17) — 8/16/2008 @ 2:37 pmIncome deferral…
Another Drew (c3bf7a) — 8/16/2008 @ 2:59 pmYou will also see more compensation in the form of “perks”, instead of cash compensation. The perks are deductible by the employer, but are difficult to tax in many cases.
In Britain during the post-war years, the top income tax rate was 95%+. Virtually all upper-management took the majority of their compensation in un-taxed perks: Club memberships, apartments, cars, even servants. When the rates came down (particularly under Thatcher), they started to take cash.
AD – 401K contributions as a basic mechanism.
daleyrocks (d9ec17) — 8/16/2008 @ 3:09 pmAbsolutely.
Plus, deferred stock-option plans.
The mind boggles at what some creative accountants will come up with if tax-rate go back up.
An interesting twist, the Governator (h/t LAT) supposedly has agreed to a Dem proposal to eliminate certain deductions for three years, but wants them to agree to a “carry back” feature after the 3-yr period expires, which the Dems are opposing.
Another Drew (c3bf7a) — 8/16/2008 @ 3:33 pmI can remember when income averaging was allowed specifically with the Entertainment Industry in mind because of the wild fluctuations in earnings that can occur. Can’t do that anymore.
Just wonder how long it will take for CA gov’t vendors to force the state into BK court if they can’t get a budget passed?
Seems like there is a county in AL (Birmingham is the biggest city) that looks to be in BK on Monday. I wonder if their problem is like out here in CA – just too much unfunded liability in the public retirement accounts?
#40, aphreal…
First you tell me that you don’t think something is particularily true, then you explain in simple terms that it is true.
And, your example leads me to include in my mind the businesses, especially the small businesses, that will cut back on their efforts in order not to pay taxes.
I understand that I am, first of all, not exceptionally versed in economics. But, if I am working on my income, in a business, or, for example, faced with a choice to take a higher paying job where the time spent working is not worth as much to me as the value of my job now, why would I choose to work harder, for less???
As for how big an impact this loss of gross income would be to the government, if that top 20% are paying 90%, it seems that simple math will tell us that any cut in this, let’s say, if that cut is only 2%, it would be in the BILLIONS OF DOLLARS, wouldn’t it???
Now, Obama raises rates, yet, less money comes in, because less is earned, and with less earned, less spent, slowing the economy, which means that less will be earned by others, lowering the other taxes, such as sales, which then hits all governments nationwide, lowering their incomes, causing the local/state governments to raise theirs in the now proven mistaken goal of increasing tax income, which slows the economy locally…..
Simple version: seems to me the simple version of all this is to do two things: hold tax rates, and cut spending….
Obama proposes the exact opposite, and you still think I’m wrong???
As for the 70% or 80% rates: if you are right, and I am wrong, then yes, they might not get that high. However, if I am right, that is the only place they can end up. And, they were there in the late 50’s/early 60’s, right???
Oh, yes, and when they were lowered, government tax income soared….and as the taxes got raised by the Democrat Congresses of the 60’s, and 70’s, incomes flattened, the economy struggled, and….
Came the Reagan tax cuts, and what happened….
That same cycle…tax income soared, but spending didn’t….Democrat Congresses again slowly raised rates, and income flattened….
And, came the Bush tax cuts….
I may not be smart, but I can read charts, and the cycle is that rates should not be raised….
reff (b68a4f) — 8/16/2008 @ 3:54 pmCorrecting a point in 45…
That same cycle…tax income soared, but spending didn’t….Democrat Congresses again slowly raised rates, and income flattened….
That should read that spending didn’t stop soaring….
reff (b68a4f) — 8/16/2008 @ 3:56 pm