@toaster: "maybe the private sector actually needs the government to raise revenues and spend money right now"

Exactly correct -- for this economy to recover, "demand" has to recover so businesses will start hiring again and investing some of that cash they have stockpiled. Yet, the relentless asault on the Middle Class continues unabated in DC.

IMO, everybody in Washington needs to focus on jobs, jobs, jobs - to the exclusion of almost everything else. But, with the Tea-baggers demanding no new revenues, the government is starved for the resources it needs to pull us out of this recession.

quiz, I recommend listening to a recent episode of This American Life: Job Creators. It's farcical when politicians take up the cause. 

In reality job creation tailgates the health of economy by 6-12 months. Same way rental markets trail heath of real estate markets. To only focus on jobs, jobs, jobs, is to put a band-aid on a knife wound. 

toast - many WallStreeter's are Democrats (look at Cramer and Buffet, for example).  If you look at what is given to campaign's, it is pretty close (although Obama is raking it in now).

And yes, cuts are HORRIBLE thing to do now.  Probably the worst thing that could possibly be done (short term).  Thank you TP'ers, for f*ck@ng things up even more.  How someone can say cutting jobs will help unemployment is beyond me (that was Bachman's quote, which has anyone see the Newsweek cover?!  Hilarious!).

Rusty - jobs are a lagging indicator, but it has simply been too long with too little growth. When corporate profits were skyrocketing it was nice to think that jobs would follow.  That didn't happen.  Now we are stuck, corporate profits can't just keep going up (particularly since most of it was due to cut backs/increased productivity, or rather, wrangling more work out of less people for less money).

So yeah, jobs, jobs, jobs are what we need to see.  Without those, there is no spending, less confidence, which equals a slower economy, round and round and round we go, down and down and down.

"Yet, the relentless asault on the Middle Class continues unabated in DC."

»Based on a study of savings statistics by the Bank of Israel, the plaint of middle-class families that they can't live on their income is questionable. The central bank found that the middle class does save, a lot, and that saving by the top 50% of earners has been trending upward.«

»And the second qualification? In absolute terms, the state of the middle class has improved, from the perspective that it saved more (until 2009 at least ). But relative to the richest class, the middle class' condition deteriorated.«

Middle class claim of hardship is specious, BoI finds

While this is only relevant really to Israel, the situation is kind of parallel to the United States. The middle-class isn't deteriorating absolutely, it's only deteriorating relative to the richest of the rich. Plenty of people in the middle of the middle to the upper middle class are still saving. Overall though, the savings rate in the U.S. is 1.0% ±0.5%. That's still positive growth.

There's some cultural differences between the U.S. and Israel, sure. But Israel is pretty much a Western country. The biggest difference between the U.S. and Israel is primarily urbanization.

And this isn't just a feature particular to Israel. You can survive without a car in the UK, Japan, France, Norway, Sweden, Denmark et cetera. All of the countries that have the highest personal savings all share the similarity of being car optional.

Hmm.

I'm sorry ... how is a study of the middle class in Israel even remotely relevant to what's happening in the US?

Seems to me the "assault" is focused primarily on the increasing inability of the middle class to pay for its own health care, the education of its own children, and the proper preparation for retirement.

Why dont' we see billboards about this?  Why do people keep supporting giving tax breaks to the wealth..er..."job creators"??

it's ayn rand's fault.

and steve jobs :(

so - the US govt is a safer bet than private (publicly traded) companies?

Considering that most of the big "100% American" companies in the U.S. are generously paid by the Government, more expensive government financing would only lead to thinner profit margins. And it's not just companies like Lockheed Martin and Honeywell at the mercy of government borrowing costs.

If we start making drastic budget cuts, one of the first programs to reevaluate are farm subsidies and taxes on food imports. Corn syrup, although cheap for manufacturers for a number of reasons, is highly government subsidized. Out of the $24,000,000,000 of corn grown in this country, the government spends about $8,000,000,000 in subsidies.

Just as a comparison, Starbucks revenue is $11,000,000,000. Minus subsidies, Starbucks generates as much revenue as a single company comprised of 137,000 employees as the Corn industry. That's 780 acres of space consumed across 17,009 stores. That's one Manhattan block 143 stories high. On the other hand, corn consumes 92,828,000 acres or one Manhattan block 17,032,660 stories high (35484 miles or 14% of the distance to the moon).

Starbucks revenue per acre is $14,102,564. Corn's total revenue is $258 per acre, $170 per acre sans subsidies. To make a $100,000 year profit ($200,000 gross revenue), you'd need 775 acres subsidized or 1176 acres or between 1 and 2 square miles.

If your entire business model is based off of 5 cents per pound or gallon (like Coca Cola), removing something like subsidies literally means going broke. And not just you but the million or so people who have dedicated the entire life to an inferior product propped up by government payments.

own health care, the education of its own children

Owning a single car costs more than these two things combined. Count it. And if you don't want to, Bureau of Labor Statistics has all over the juicy relevant data to support this claim.

Dow back 200, interest rates holding steady, the world didn't come to an end...

Anyone else think the relentless 24-hour news we inject ourselves with is a whole lot of sound and fury signifying nothing. I think we'd all benefit from stepping away from the digital abyss every now and then.

And yes, cuts are HORRIBLE thing to do now.  Probably the worst thing that could possibly be done (short term).  Thank you TP'ers, for f*ck@ng things up even more.  How someone can say cutting jobs will help unemployment is beyond me (that was Bachman's quote, which has anyone see the Newsweek cover?!  Hilarious!).

people keep forgetting that government is the single largest collective employer in the country - I think something like 15-20% of employed people work directly for the government/public agencies (and I'm not even sure if this counts education).  even more people in the private sector deal directly with the government (federal, state, local) for their work or funding.

^ that's the problem

^ it's also misleading. this counts the armed forces, which makes up a huge chunk of this total.

http://www.bls.gov/oco/cg/cgs041.htm

starve that beast tea party.

^ 'team america/world police' is unsustainable

not starve, just go on a 10% diet

1.3 million out of 1.9 million total government employees is more than 10%, unless you mean 10% of the total workforce, and that's not even including homeland security.

but let's take a look at the problem according to the right:

dept of education + EPA + social security admin = a whopping 86,000.

the parasitic international banking cartel has contributed to the civil unrest currently unfolding in Europe. And the average taxpayer will have to pay for it.

http://www.guardian.co.uk/uk/2011/aug/09/uk-riots-cost-taxpayer-100-million

dot, i'm not talking about eliminating armed forces

i'm talkin' 'bout a 10% across the board budget cut including changes to third rail issues of social security, medicare, medicaid, blah blah blah

increasing the size of government with no changes to entitlement programs will lead us to a greece-ian end

that's all fine and good (except our economy is much more productive than greece). my point is that the right uses this notion of large government to justify no revenue increases, but when you look at the actual numbers, the 'bigness' comes from defense,  and the rest only has a marginal impact on the deficit. like most americans, i'm in favor of cuts and revenue increases, but we're not allowed to have that because there are crazy people in congress.

revenue increases or tax increases?

Tim Do, do you have an opinion on whether this "trigger" in the budget that causes major cuts to defense in 2012 is actually likely to happen, or is it a farce?  I can't seem to find any discussion of whether it's a true victory for us who want cuts to defense, just people screaming "It'll never happen!" or "It's gonna happen!" one way or the other with no justification.

won and done: Anyone else think the relentless 24-hour news we inject ourselves with is a whole lot of sound and fury signifying nothing. I think we'd all benefit from stepping away from the digital abyss every now and then. Yes.  I do, and I'm trying.  but I swear internet political rage is more addictive than heroin.

Tim - I was referring to local + state + federal = government (or I should have said public service).  true that military is the largest chunk of federal govt employment, but counted with all public servants at the local level it's really not that much.

While this is more than a year old now, the Washington Post published some really interesting graphs that illustrate some big-picture areas of income and expenditure by the Federal Government -- see: http://www.washingtonpost.com/wp-srv/special/politics/budget-2010/

I find these charts (there are five separate tabs) very useful in developing a mental picture of some of the things we argue about here (and elsewhere).

Apropos the most recent series of posts, the third tab (Spending by Type) illustrates fairly well what's happening already with  military spending.

FRaC - revenue increases or tax increases?

I presume you'll declair allowing the Bush Tax Cuts on the wealthy to expire as a "tax increase"?  Or eliminating subsidies as "tax increases"??

Clearly, it is semantics and the differentiation is more or less meaningless - the result is lowering the deficit.  Balance and compromise is needed, and without that we will get nowhere.  Those that stand in the way of logical solutions (per every economist and business person out there) will be responsible for bringing the US down, possibly the world.  

Sadly, some seem just fine allowing/fostering an apocalyptic disaster, leading to the euphoria of anarchy.

i ask because you can increase revenue without increasing taxes

in some instances you actually decrease revenue by increasing taxes

So then you do consider those items tax increases?

Do you disagree with my statement?

Hi Donna, I don't know the numbers, but I remember an article describing how the pentagon was rejoicing over how their budget cuts will not be as deep under the current deal, so yes there will be cuts, but nothing substantial I guess.

FRaC - This is what irks me so much about the tea party. Rather than argue from the standpoint of clarification or basic logic, they get puritanical with the concept of tax increases, and hang on words as political fodder. So here you go: TAX INCREASES, TAX INCREASES, BEETLEJUICE.

You can be against deficits. You can be for preserving tax cuts. You cannot be for both. 

Fair point FRaC, but I think in this economy, we're clearly talking about tax increases in order to increase revenue.

Hey, remember when Al Gore was talking about using the Clinton-era surplus to pay down the debt, and Bush wanted to cut taxes on rich people because saving money was boring?

I think we've had about a decade of voodoo economics, and it got us here.  Time to make proper investments in those areas that make money - schools, infrastructure, and other systems that create a net benefit for society (and profits for businesses).  It seems fair to ask the rich to step up to the task of supporting their country in its time of need.

Even Reagan raised taxes.

So then you do consider those items tax increases?

Do you disagree with my statement?

yes, trace™, i agree that tax increases are always tax increases.

do you disagree with my statement (that tax increases may actually lower tax revenue which would not result in lowering the deficit)?
 

"do you disagree with my statement (that tax increases may actually lower tax revenue which would not result in lowering the deficit)?"

I'm not trace, but I like fielding ultra-dumb questions.

Dear FRaC,

Thank you for your interest in the Laffer Curve. Prominent economists have argued that the peak of the curve is anywhere between 32 to 70%. Noone knows. Noone cares. The important thing is that I've used the exact same argument to lower my own tax from 70% to 31%! And the idiots to this day still buy it! ha ha ha

Ronald Regan

ps. keep fucking that chicken

FRaC I think this goes back to my previous comment. There is dogma, and there is economic reality. Supply side economics does in fact increase revenue if there is growth economy. However, we are not in a growth economy (according to most projections). In fact: "In 2003 CNBC’s Washington, D.C. bureau chief Alan Murray commented in the Wall Street Journal on a Congressional Budget Office study in which dynamic scoring models forecast that tax cuts enacted under President George W. Bush would decrease revenues." - he was right.

Tax cuts, not tax increases will lower revenue in this economy.

I believe that there needs to be a balanced approach (as with almost everything in life, success is rarely achieved by extreme, one sided approaches).

On a very broad, over-generalized statement, of course your hypothesis could occur.

However, increasing taxes on the wealthiest of society (what is it, the top 400 earners pay an average of 16%? More insanity) clearly will not change the economy for the worst.  To the contrary, we have been shown that #1 "Trickle Down Theory" does not work, as the wealthiest have grown massively during this down turn and #2 Corporations will not hire simply because they have money, there needs to be demand.  Neither have helped with jobs or the silly talking point of "job creators".

Personally, I find the entire debt/deficit debate insanely premature.  It looks (to me) like political posturing at it's finest.  Why now?  When the economy is so fragile?  It simply makes no sense.  We knew what the debt/deficit was for ages.  Obviously it needs to be addressed, after the insane wars and their debt burden, etc., etc., but let's at least have the wound sewn shut.

This ridiculous idea that you can just cut everything and that prosperity will result, due to extreme cuts, is just insane.  There needs to be a balanced approach, asking those that are at the wealthiest side of the equation, that have profited so incredibly during this mess, is the clearest first step.

I am all for tax breaks for those that need it, like small/mid sized businesses, less regulations where appropriate, more lending encouragement/incentives, etc.  

Did I use the word insanity too much??  :-)

I don't know why tax breaks for the wealthy wouldn't help more. I mean, I'd do it. It would attract a lot more investors to the country.

Hell if I ran the ship, I'd actually *reduce* taxation as the people got richer, since 1 percent of 1 billion is worth more than say, 20 percent of someone who makes 500 bucks a month. More rich people = more money, and you know what they say...a rising tide lifts all boats.

Sure, some people may be poor...but better to poor in America than poor in, say, Rwanda or Pakistan. 

Donna et al, I think part of the hope is that republicans have historically been very opposed (except that some of newer Tea Party types) that to defense cuts that they will be "forced" to come up with other cuts/revenue options, as part of the super committee. Since the two biggest areas hit by trigger are a) defense and b) medicare cuts to providers (not cuts to end user benefits)...

That being said these two news items (Reid Picks Murray, Kerry, Baucus For Super Committee — Here’s The Upshot and GOP Leaders Pick Conservative Members To Serve On Deficit Super Committee) over at TPM seem to indicate that the people that both sides have already appointed to be on the super committee (particularly on the republican side) are highly partisan and unlikely to be inclined towards any deal which includes revenues..

@Ryan002 i would argue the last 20+ yrs have proved that trickle down economics in form of tax cuts for the super wealthy don't actually generate more jobs/employment...

The "trickle down theory" was genius marketing, nothing more.  Just like the catch phrase "job creators" resonates with people.  Great marketing, no substance.

Why can't the other side come up with some good marketing??  "Change" was good, but we need something "real".

R002 - yes, the wealthy pay "more", but they also take a substantial larger part of the economy.  I don't see how anyone can argue that it shouldn't proportional.

Hell if I ran the ship, I'd actually *reduce* taxation as the people got richer, since 1 percent of 1 billion is worth more than say, 20 percent of someone who makes 500 bucks a month. More rich people = more money, and you know what they say...a rising tide lifts all boats.

how does lowering the tax rate on rich people make more rich people?  all it does is make rich people even richer and poor people get less services and opportunities to get out of poverty.

as someone who benefited from "entitlements" - i.e. need-based college scholarships and grants, statements like these are incredibly disturbing.  you do realize I wouldn't have been able to go to college without government assistance - right?  I am more than happy to help pay into this particular entitlement system so that people in the neighborhood I grew up in also have a fighting chance of making a better life for themselves.  the "look what all you poor people in america have compared to ____" argument is perhaps one of the worst examples of motivated reason from people in power (i.e. white males) in order to justify cuts to programs that actually help create a more egalitarian society.

but toast, the whole point is "they" don't want to  create a more egalitarian society.

Ryan, there are families in my Midwestern middle class suburban school who can't afford to participate in a little fundraiser we have sometimes wherein the kids are allowed to forgo wearing a uniform for a day if their family donates some money.

The price is a dollar a week.  One dollar.  So let me be clear: we have working traditional families in my school who are so tightly hewn to a budget that they cannot come up with ONE DOLLAR every week.

Do you honestly believe that it's fair for people with very little extra to pay 20% of their total income while someone making a million a year should only pay 1%?  I mean, WTF?!  

We live in a society.  We live in a society.  WE LIVE IN A SOCIETY.

amen...

I really suggest watching this. Episodes 3 and 4 in particular

http://www.justiceharvard.org/2011/02/episode-three/#watch

Excellent debate on the concept of taxation and fairness.

I agree with trace that discussing the national debt at this point is act of economic sabotage.

The Dems really missed an awesome opportunity for rebuttal. Wanna talk about the debt and balanced budget? Fine. Last time we had a balanced budget was under Clinton in the late '90. Three things happened since then: a) war(s), b)recession/reduced economic output (and thus reduced tax income), and c) tax cuts courtesy of junior.

Boring Gore was going to use the surplus to pay down the debt, but Bush saw better use for it in tax cuts.

So let's restore the budget to last fully operational state (the way you would treat a broken windows machine), and name it "Bill to restore Bill's balancing act; 2011-1998 hot tub time machine". 

I'd get in!

are you sure you'd want to get into a hot tub with bill clinton?

"Ask not what Bill will do to you (in the hot tub). Ask what you can do for Bill (take one for the team)"

Sure, some people may be poor...but better to poor in America than poor in, say, Rwanda or Pakistan.

I'd much rather make $800 a month in the Czech Republic or Germany than in the U.S. If I was in India, China. Vietnam, Jamaica or even Indonesia... that $800 a month would make me middle-middle-class. Hell, I can even rent a flat in some shithole in the UK like Swindon, Exeter or Grimsby for $300 a month.

I couldn't even rent a toilet in Florida for $300 a month.

James, I thought half of Florida lives rent free while waiting for 3rd eviction notice from the bank.

That's if you were "smart enough" to buy a $250,000 home 5 years ago when paying too much for faux-stucco-on-stick was the cool thing to do.

Otherwise, if you've always been a renter in Florida and get evicted... well, they just forcibly throw you out on the street and then the police arrest you for loitering. Then they deem you incompetent-to-insane and hold you indefinitely in one of our many open-air non-air-conditioned jails or prisons until you've been rehabilitated by the Lord Jesus Christ.

rusty - i swear, i nearly blew beer out all over my keyboard getting to the reagan letter. classic...

i'm having to work late tonight to try and continue my climb into the top 2%, but in all seriousness, i really think all this is being fed by a huge, huge, crazy huge pile of money that's looking for a 'sure thing'. i'd contend that the last 20+ years, which has clearly allowed the top 2% (globally, not just here) to accumulate more and more and make the gap between top and middle grow ever wider, has also created a sea of 'wealth' - paper money which is now so large that it would outsize any individual country. i've heard one estimate that the pool of money (sovereign funds, insurance pools, retirement funds etc. basically, all invest-able assets) is close to 20 or 30 trillion - and the problem is this big old stash has to find something to invest in, to get returns that people are expecting. the problem is everyone starts piling in anywhere they think the returns may be. you can see it the last few months - so much money has been piling into swiss francs, that prices there have increased nearly 20% (relatively) in that span. the same thing's happening in brazil, was happening in china and dubai and is definitely responsible (in a large part) for the housing boom here. and these places know it (now) and desperately want to control the flows in because they know what will happen when the tide rolls out (and it always will). the landscape may have been fractured a bit the last couple of years - (everyone nervously looking around for the 'safe harbor), but there's no way this phenomena is good in the long run. those gyrations distort the markets to increasingly wilder and bigger swings. we're living through it...

point being, with time short: there's a reason taxing the wealthy can bring balance to the force - the fewer hands it gets concentrated into, the more easily a 'group mentality' can push whole societies to the brink (good and bad). bubbles always pop - if the money's more evenly spread out, how is this a bad thing?

Greg, the benefit of having most of the money tied up in middle class is not a question of 'fairness' but sound economic policy. Middle class keeps the money flowing every which way, and generally stays away from locust infestation investment schemes so dear to richer investors.

America (the rest of the world used to envy) was just a giant middle class which had spending power to prop up things such as Hollywood and auto industry (later computers). And that's how the American myth is born.

Sad part is that those completely destroying the middle class are doing it in the name of saving it. To a thunderous applause.

yup. have to agree. especially since that big old pool of money needs to keep making 7-10% a year, compounding, to keep up with the actuarial tables or the smith's next door. it's really scary - i found something which pegs that wad at 70 trillion (which seems nuts, but the imf is the one backing the figure), with half of that generated since 2000. staggering.