Thursday, November 11, 2010



DI: You lost.

B: The Democrats lost. I’m a liberal, and it’s certainly a blow to hopes for any kind of a liberal agenda, but honestly the liberal agenda in this country’s been a little haphazard.

I see a potential for hope- or maybe it’s just a silver lining I’m picking out of a cloudy sky. But the country needs two things; there are a lot of things we want and that we’d like, but for the country to continue to exist and thrive, it needs two things. In the short term, we need a stronger economy; in the long term, we need fiscal solvency.

Being a Keynesian, I think spending is the answer.

What’s strange about that is that cutting taxes without trimming spending is actually another form of government spending- it’s in fact raising future taxes. We can argue over the best ways to spend, but I think economic modeling pretty effectively shows where this kind of spending is most effective.

Lower income people are largely more likely to spend new money, because their immediate needs are likely more salient. If the government cuts me a check for a quarter of a million dollars, it goes right into my piggy bank, because I’ve already bought basically everything I want or need, and you can generalize this, statistically. The top 10% of earners take home 50% of the money, but account for only 20% of consumption.

I think a payroll tax holiday is the best of all possible solutions. And because of our trickle up economy, the wealthy will gain too, because their companies will sell more products, their stocks will do better; even property values will rebound somewhat.

I think now is the best possible time for it. Congress could pass the holiday in time for the holiday splurges; the fact that it’s passing out of a Democratically controlled Congress would marginally benefit them, but the recovery would largely happen with a divided government- and Republicans being the superior salespeople, I have no doubt they’d get at least their fair share of the kudos.

But that’s why I think it has the best chance of getting passed, and that’s only one factor. I also think that it has the best chance of having long-term benefits, too.

As an alternative, I think Jon Stewart had an excellent idea. Basically, if people are overly concerned with the proportion of their debt, the federal government can bail out the American people. Basically, figure out the average debt per person, and cut everybody a check. If you’ve overspent, you can regain peace of mind which would help the economy by both injecting further capital into the banks and rejoining the consuming portion of the economy. If you don’t have any debts, then you get a big wad of cash for a down payment on a car or a home or to throw into the stock market. The only two caveats, really, are that you’d want to prohibit people from squirreling away more than 10% of it in savings, and that it’s complicated enough as to be virtually unfeasible. But it’s still an interesting idea.

DI: But we’d be federalizing debt, and basically borrowing from ourselves in the future.

B: But that’s what debt always does. Except this time we’d all benefit, and in this particular case, it’s important to include in your calculus the fact that our economy is depressed. A depressed economy is less productive- so we’re losing out on all the productivity that our economy is not making use of. So even though such a measure would certainly cost money, as long as the effects on the economy were positive enough that our economy recovered faster, there’s a good chance we’d make up whatever it cost for those stimulating funds in the first place. Last year tax revenue was a full $600 billion dollars short of what it would have been without the recession. If another stimulus cost us say $1.8 trillion, but we got back to booming three years earlier, then the net cost of the stimulus would be zero. And right now our recession resembles the Japanese recession, which lasted a full decade, so the odds of us coming out ahead on such a transaction are pretty good.

And even if our government ended up losing a little money in the long run, isn’t it worth it to get unemployment down? Obviously the degree is important. $1 trillion for a .1% decline in unemployment isn’t acceptable, but there’s a sweet spot where the cost of intervention is justified.

DI: We’ve talked about Paul Krugman a bit, off the record, but there was an item in his blog I wanted to ask about. Republicans have stated their intention to put global warming science, and particularly the recent “scandals” through the testimonial ringer. Thoughts?

B: I imagine they won’t. Because what most climate deniers, at least in the professional arena, know but don’t want their constituents to know is that they’re full of crap. The science is about as tight as any other science right now. The supposed scandals involve, at best, professional secrecy, and the reasoning for it is pretty understandable. You know how people say that statistics can mean almost anything? It doesn’t mean that truth is fungible, or that there aren’t any abstract, measurable facts, but that through statistics you can obscure the truth. The scientists involved were reticent to disclose all of their raw data because raw data can be misused by people with an economic or philosophical agenda. That’s it. Nothing sinister about it.

DI: And we would be remiss if we didn’t at least mention the Deficit Commission.

B: God. I can’t imagine why the commission was staffed the way it is. Its co-chairs are a small-government Republican and a Wall Street executive; predictably the commission’s suggestions consist almost exclusively of tax cuts for wealthy and corporate interests, and spending cuts for everyone else, including cuts in Social Security, Medicare and even defense. Deficit reduction is absolutely an important and serious issue, but if we’re going to pay back our debt, we all have to share the burden. It might mean the rich pay more in taxes, it might mean that some people see a reduction in benefits, but we can’t, as responsible citizens, expect somebody else to bear the brunt.

My taxes should increase. As a multibillionaire, I have a lower effective tax rate than anyone in my entire company; even the custodial staff pay a higher proportional tax rate than I do. That’s because everyone pays about a 15% tax rate for Social Security and Medicare only on the first $100,000. I pay 37% in federal income taxes from my salary, which is modest for a CEO, and only 15% from capital gains, which is where most of my income comes from. Even if the capital gains tax goes back to 28%, I’d still have an effective tax rate equal to someone earning $80,000 a year. And that’s stupid. I can afford higher tax rates because of my affluence. Someone earning that much is certainly better off than someone earning $25,000 or even $50,000, and their tax bracket should reflect that, but when I bring home degrees of magnitude more money annually it doesn’t make sense that I would be paying a lower tax rate.

DI: What do you think about the proposed increase in the retirement age?

B: Apparently, since the 70s, life expectancy for most workers has increased by a year, and if everyone is living a year longer, then delaying Social Security benefits by a year makes a certain degree of sense- especially if it helps stave off benefit cuts. It’s all a delicate balancing act. To create a responsible budget, it’s highly likely that we’ll have to endure some pain, but hopefully when we get to the light at the end of the tunnel we can do better; sharing our triumphs as well as our torments is what makes us a society- it’s what keeps us human.

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