Ladies and Gents! A political discussion!
This originally was a facebook post that mushroomed into something much more. And since my eyes tire of reading that tiny print, and because I like political discussions, I figured I’d put this on my blog.
Here's the context: I first posted this video about the Bush tax cuts and the debate over extending unemployment benefits. I added the text, "It's kinda long (14:32), but the gist is this: if you cut taxes, the government makes less money."
I was surprised at how many responses I got, but that's a good thing. Even if my friends disagree with me, I'm glad they feel comfortable expressing their views. In fact, I was just lamenting to my step-dad that in my experience, I have few political dialogs with my friends but many bouts of cursing/namecalling at the television. Anyway, the point is: I'm only too happy to promote real people discussing important issues with intelligence and civility. Here are their responses (names abbreviated for privacy):
J: You really think it's that simple??? There are many arguments as to why lowering taxes in certain areas will actually increase government revenue. To say that increasing taxes would increase government revenue would be similar to saying that a company which raises it's prices will increase their profits...in the short term that would often be true statement, but in the long term the effect could be the complete opposite.
Think of all the companies out there...now stop and think about some of the most successful and profitable ones. What makes them profitable? Most likely it's either, 1) they have an exceptional or unique product that is worth paying more for, OR 2) they have the lowest prices/best value. Well the same basic principle goes for taxes and government - if people actually have more of their money, then they'll spend it, which in turn generates more revenue for the government through the taxes they do have AND at the same time it stimulates the economy at the same time. If people have less money, then they won't spend it, the economy won't recover and the government will get even less revenue.
Now if the government actually produced something "exceptional" for once, then perhaps people would mind as much letting the government take more of their money...but when was the last time government ever did anything exceptional that didn't also cost some ridiculous amount of money such that it wasn't even worth it? How often does the government spending more money actually provide enough stimulation to offset the money they spent? (seriously, if you can find such an instance I would like to know about it so i can correct myself)
Historically, all attempts to specifically tax the "Rich" have never worked. When the wealthy are taxed heavily they are not encouraged to take risks and invest in businesses (which stimulates the economy and creates jobs). They will instead invest in things like tax-exempt securities or some other lawful method of avoiding the new taxes, thereby creating no jobs and the government gains no additional revenue.
K added...
I agree with J. It's basic economics, it's not complicated. Rich people don't like to pay taxes anymore than the middle class or poor. It's the way people work, not the way it "should" work. You have to look at history and see how people behave in given situations, that's what makes a leader wise. That's how we make other big decisions in life, so why not do it in economics and taxes? J is correct, history shows that taxing the rich has never worked, so why beat your head against the wall and keep trying it over and over again? Makes no sense...things need to change I agree, but make a sensible change, not just any change.
Then M said...
when i took macroeconomics at Campbell they taught us about this: http://en.wikipedia.org/wiki/Laffer_curve
And finally, R pitched in...
I agree that taxing the rich does not solve anything. And J is right that growth of both big and small businesses is key to the health of the economy. There are other places besides taxes in which the government should be looking to reduce the deficit.
1st should be getting out of Iraq and stopping the occupation of countries we have no business being in. $1 trillion later, and we haven't achieved anything, except gained more enemies. If we could focus more on trading with other countries instead of occupying, I bet we would see less hostility, more cooperation, and reduce our defense spending. We are spending as much on defense as the rest of the world combined. That's just ridiculous.
Also, the "war on drugs" (we just love war or using the term war) is not only a big waste of money and resources, but absolutely futile and has produced no positive results. This abomination has wasted nearly $1 trillion as well. Plus our prison population/cost of nonviolent criminals (50% of total population) would be reduced from decriminalizing it. And cartel wars along the border and drug running would also be reduced over time. Cartels love the anti-drug laws, because it keeps them in business.
Reducing entitlement spending is another they could look at. We are constantly seeing stories about fraud and abuse of programs, such as M's link about the New York teachers getting paid to do nothing, and fictitious schools receiving funds. They also have to stop these ridiculous stimulus packages. The only people seeing those funds are the elites. And none of them have worked. IMO, That money should have gone to the bottom line, to the people. People then would be able to pay off bills, shop more, and it would circulate all the way back to the top.
There are lots of ways to reduce the deficit, but higher taxation is only a "quick fix" without the fix part. The spending needs to be addressed. It has to be reduced or in some areas frozen.
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Now, here are my responses. In an effort to streamline this discussion, I’ll try to focus on the primary issue in my original video: Comparing unemployment benefits to the Bush tax cuts of 2001 and 2003. First, to J:
"You really think it's that simple???" No, I don’t think it’s that simple – I was summarizing a 14 minute video. I'll readily admit that I'm no economist, but there are a few points/questions I'd like to make/pose. Are you comparing the government to a company? Because, if you are, that seems like comparing apples to oranges. Companies are out for profit, while governments (in theory) seek the good of their citizens, like providing libraries and education, services like roads and trash pickups, and of course, national defense.
"When was the last time government ever did anything exceptional that didn't also cost some ridiculous amount of money such that it wasn't even worth it?" Well, we put a man on the moon (though the space program is pretty expensive), and that was exceptional. I tend to think that helping the poor is an exceptional thing, too, albeit less glamorous or flashy as space travel or bombs. But again, this is the government providing services, not a company churning out profits. I'm not saying that we shouldn't expect efficiency from Uncle Sam, but I believe there are activities and programs with values that don't begin with dollar signs. I've already mentioned the poor; there's also the arts, our parks and forests, and keeping oil off wildlife and off beaches with regulations and oversight.
"How often does the government spending more money actually provide enough stimulation to offset the money they spent?"
Stimulation is one thing, unemployment benefits (the topic of discussion in the video) are another. I will focus on the latter. These benefits are an investment into the economy, since people who have money can buy things and pay taxes on those goods, as Sherrod Brown points out in the video (12:30-end). It's funny, because we both point this out: people with money buy stuff. I want the unemployed to have money to spend on necessities, and you want the rich to have money for discretionary spending - presumably to invest in business. But again, I think it's fair to note that the 3 million net jobs created under Bush pale in comparison with the 22 million under Clinton, so I'm skeptical of the claim that if rich folks' taxes go up, jobs will plummet. Here's another video (2:00-4:15) where Ezra Klein rattles off Bush's and McCain's economists who think the tax cuts do not pay for themselves. Remember, Bush proposed these cuts in the face of a surplus, so it wasn't a big deal if they didn't pay for themselves. W's own words were, "I'm asking for a refund," not, "This money will get back to the government eventually."
J, one last thing. You say that "Historically, all attempts to specifically tax the "Rich" have never worked." I beg to differ. In Germany, depending on which source you use, they tax about 36 to 40 percent of GDP, and they’ve got the fifth largest GDP in the world. Here, we tax about 28 percent of GDP with the number one economy. If we raised the tax rates by 10 points to something comparable to Germany, would it really be so bad? They’re doing just fine over there with those rates. And it's not just Germany - Great Britain, France, Brazil, Russia, and others have tax rates higher than ours but still rank among the world’s top economic powers. (Thanks, by the way, to M; his link led me to my sources)
To K I can only say: I think ending the Bush tax cuts in fact, can be sensible.
R: Amen about getting out of Iraq; you're preaching to the choir. I wish we could walk away from many of our commitments across the world right now so we could lend a hand in places that could use it - like Darfur. But that's a whole 'nother can o' worms. And sure, there are lots of places we could cut waste and fraud; gimme a sensible plan and I'll sign up for it. The drug war I'm not so sure about - mainly because I haven't given that much thought to it. I'm open to persuasion on that front.
Here's how I can best summarize my perspective: Let’s say that I make a billion dollars this year (hey, I can dream, right?). If the government takes half of that, I’m still one rich son of a gun and I can buy and do pretty much whatever pops into this ol’ noggin of mine - like rocketboots! However, if I've lost my job and can't provide basic necessities, you can bet I won’t be getting new shoes, much less rocketboots.
And finally, my sources:
