Gonna be an Economy & Debt debate between Economic Nobel winner Paul Krugman & Joe Scarboro of Morning Joe... ... on the Charlie Rose Show Monday night... ... Mar.4th, 2013 11pm Eastern Time on PBS. Should be real interesting and informative. Granny gonna watch it `cause she's sweet on Charlie.
It's a pretty fascinating debate! Here it is on Hulu: http://www.hulu.com/watch/463654 Since we have this debate almost weekly on this forum, this is how the pros do it.
Paul doesn't want to do SSI and Medicare reform because it will crash the economy? Reform isn't taking people off SSI & Medicare immediately, but planning the near future so those effected have time to adjust their plans. We do need to plan for the boomers, and for a similar steady state (2:1 or 3:1) in the future. If we don't fix entitlements, they will fall of the face of the earth with disasterous results.
No matter which terms are used, from economy, to debt, to deficits, to taxation, to stimulus, etc., at the end of the day...taxpayers must pay for the actions taken. I don't care if it's Medicare, or Social Security, or military, or education, or beer in the water coolers...whatever we decide to do we simply need to pay for it. Deficit spending, for example, if we can't extract more taxes then lower the spending...duh. And whatever we do to act more fiscally responsible cannot be short term actions; when we're talking about $1 trillion deficits and $16 trillion debt any plan to mitigate these might take decades. But my angst about this is that we 'never' even start a process to correct our problems, even if it's a 20 year process...get it started and stick to it...
There was a long term bipartisan deal in the 1990s but then the republicans took over and tossed it under the bus. If they had stuck to it our problems now would be trivial.
IMO finger-pointing who is responsible for the deficits and debt is a 100% waste of time. Every Democrat and every Republican and all Americans are responsible for the deficits and debt...$20 trillion debt by 2020 is being caused by everyone...
No, it is very important to know how this happened. To think otherwise expresses a dangerous ignorance.
There have been deficits and debt accumulating for 100 years and there is NO possible way you can blame all the fiscal problems on a single political party. To do so is living with blinders on! Everyone has their hand out for something...
I'll agree the current administration has had some major deficit spending and will ratchet up the debt to around $20 trillion by the time they leave. But I also know over the decades that everyone has been spending money they don't have. At $20 trillion, this is such a large amount that it can't be paid down for many decades to come...what a burden this will be on Americans...
Sure it can, and pretty easily at that. Over the next 30 years the US economy will generate over $600Trillion in income, $20Trillion is about 3.3% of that, a rounding error.
First, unless government reduces spending or greatly increases taxes, in the next 30 years the national debt will be $40 trillion. Second, I will question your $600T in income. Today the GDP is what...$15T and growing at 1-2%. Unless the economy can achieve much greater growth, you will never get to $600T in 30 years. If $500T might be a more realistic number, and the national debt will be $40T, debt will be 8% of accumulated GDP. 3% interest rate on $40T is $1.2T so it will be interesting to see what percentage this is of the total annual budget in 2043? To pay down $40T in debt over 30 years equates to an annual average problem of about $1.35T per year. ALL the Obama and Congress BS for the past few months over budgets and sequester and fiscal cliff, etc. talks at the most $100 billion per year. And even with this measly $100 billion number US citizens are pissed about potential tax increases and/or spending reductions. YOU are talking about extracting 13 times as much taxes per year as if it is no problemo?! Finally, no matter what the actual numbers might be, we can agree they are very large numbers, these large amounts of cash cannot be taken from the private sector and given to government without negative economic effects. If 100 million Americans don't pay income taxes, and another 50 million feel they can't afford higher taxes, and most of America lives pay-check to pay-check, or no-check to no-check, IMO as I first stated it will be a daunting task, if not impossible, to pay down national debt in the next several decades...
No, we cannot all agree that large amounts of cash taken from the private sector will have negative economic effects on those most of Americans who live paycheck to paycheck. I certainly will not for a number of basic economic reasons. For one thing far too much of the nation's wealth is being sequestered in the speculative markets and history tells us that this is not a good idea if the rest of the economy, the part that employs people and pays them wages that they spend on consumption, is to grow. All the economic growth over the last decade has gone to the top 10% of income earners, which indicates that economic growth is being realized almost exclusively in the speculative markets since that is where the top 10% of income earners gain the vast majority of their income. The other 90% got no benefit at all from economic growth, this is a big reason why consumption has stalled, and with that wages and employment. It is a not unexpected result of reducing the capital gains tax to 15%. One thing about taxes is that they encourage people to favour certain choices over others. By lowering the capital gains tax the US encourages people to put their savings into the stock market. This includes many business owners who, because pay less taxes on profits from their stock trading than on their business income prefer to direct their business income into the markets rather than expanding, which has become relatively far more risky. You need to understand relative risk to get a handle on why lowering the capital gains tax to 15% was such a bad idea. With a high capital gains tax it takes steady good trading to make money because you pay a high tax on your gains, which means you need a lot more of them than losses to actually make money, which leads investors to be more wary and cautious. However, a low capital gains tax means that lower overall trading gains will lead to the same after tax income, which attracts a flood of money from other parts of the economy, inclines the entire market to riskier behaviour, and reduces the amount of money available for other economic endeavours. There are important economic reasons to reimpose high taxes on capital gains. The experiment of low capital gains tax has been an abject failure if improving the economic position of the average American was the goal. Removing $1.5Trillon a year from the capital markets through higher capital gains taxes would bother the markets a little but the far larger effect would be to encourage more of the nations wealth to be directed to growing the businesses that constitute the rest of the economy, where the jobs and wages and consumers are. Once that gets under way the capital markets will recover and grow because the rest of the economy is growing instead of growing at the expense of the rest of the economy as they have been doing lately.
Well...just do some math. Money spent in the private sector creates one job for about every $100K in spending while government spending is about $250K per job created. $1 trillion spent in the private sector will create about 10 million jobs while the same $1 trillion in government will create about 4 million jobs...IMO this is a negative economic effect. Most all of that money in your speculative markets is cash left over after taxes have been paid. Once people pay taxes they can spend it in any fashion they wish and ALL spending energizes the economy. Who cares how people invest their money...this is their choice. Every American owning property or stocks is subject to capital gains taxes...it's a flat rate equal for everyone. I disagree 100% with your statement that ALL economic growth went to some imaginary 10% group?? You must live like a mushroom? Lower and middle classes own more homes, more cars, more jewelry, more of everything and their lives today don't come close to resembling their lives 10-20 years ago! Please explain where you believe Americans should invest if not in capital gains instruments? 15% capital gains tax rate had nothing to do with 'improving the economic position of the average American'? It's an incentive to invest!
Those figures do not include the vast amounts of money traded in the speculative markets, which create jobs at a pace of between $1-5million in trades for each job. Because vast amounts of money flow into the markets from the economy we can figure that for every $1million that flows into the markets from the private sector without returning, 9 jobs are lost. Domestic private inflows into the capital markets have been over $2Trillion more than outflows since 2010. That is millions of jobs lost to speculation in the markets. Much of that money is money that would be deployed elsewhere in the economy, like in capital improvements and hiring if the tax regime did not provide such a powerful incentive to direct left over cash to speculation in the markets over all other endeavours. This is not true at all. Small investors and those whose own stocks through retirement accounts, which is most people, pay no capital gains tax at all. There are very few people subject to capital gains tax who are not wealthy. Believe what you want but the statistics say otherwise and the BEA has them all on their web site, which you might want to look into. If you don't want to believe the government there are a zillion other web sites with economic statistics reports and analysis that are only a short search away. They should invest in their local communities. A huge problem in the economy right now is the inability of small businesses to secure credit. A large part of that is because their traditional source of lending, local banks, are short on capital because savers have moved their retirement funds to market brokers. Placing savings in a local bank or credit union may bring lower immediate returns on your money but can improve the local community which will increase the gain of your largest investment, the value of your home. Removing your savings from the markets will also help to reduce their volatility and the chance that another market crash will occur, which would wreck your economic prospects. No, its an incentive to gamble for the wealthy that has absolutely no effect on the economic position of the average American (who pays no capital gains tax) except to make the markets more volatile and the economy more precarious. It is a perverse incentive that has redirected capital away from creating jobs and making capital improvements and starved the government of funds to do the same. The failure to make a distinction between the deployment of capital towards productivity improvement and the deployment of capital for pure speculation by describing it all as "investment" with the disingenuous implication that speculation produces the same economic improvement as capital investment is nothing less than a disingenuous misinterpretation of the word "investment" since speculation does little to nothing to improve the economy but more often than not leads to market catastrophe and economic chaos.
Taxes have already been paid on money used for speculative investments. All the cash that is invested in these markets is also energizing the economy; it is not sitting idle. You assume if you force high taxation on these types of investments that people will then spend on other things? Maybe they'll just go to the casino? Or take their cash off-shore? IMO it is a petty argument to moan about the capital gains rate of 15%. This is the rate ALL Americans pay! And this does include 100 million who own property and 75 million who own stocks in various investment portfolios. No business makes capital improvements or hires more employees simply because they have more cash; just look at any number of corporations to today sitting on billion$ in cash. They will invest in capital and employees only when demand of their products and services are growing and can be sustained. If you don't believe the lower and middle classes are doing better then I suggest you visit your local WalMart and look at all the new cars in the parking lot, all the crap people are buying, the clothes they are wearing, etc. If your lower and middle classes didn't buy all of this unnecessary stuff they would have plenty of cash available for improving their lives. Your local bank does not need your cash in order to loan out money. Money typically goes where it enjoys the highest ROI. It is up to each person to decide the risks and ROI they need no matter if this is buying stocks or property or leaving cash in local banks. When 75+ million Americans own stocks how can you say stocks are for the wealthy? Gambling, whether at the casinos or the stock market, is not meant to 'improve the economy'. Can you not see any downside to increasing capital gains taxes to 35%?
No, there is no downside to removing the perverse incentive of taxing gambling less than actually working for your income. Here's the thing, less than 1% of money in the stock, bond and commodity markets leaves those markets and enters the rest of the economy in any given year while the absurdly low capital gains tax rate attracts vast amounts of money that would otherwise be deployed in endeavours to increase business and create jobs. This is because the low capital gains tax rate makes it far easier to offset market losses than business losses. A high capital gains tax would make it far more risky to make speculative bets in the market because it would require greater gains to offset losses. This would encourage businesses to direct more of their money into growing their business instead of gambling it in the markets. In other words, a high capital gains tax would equalize the risk. If increased jobs and widespread economic growth is the goal, a capital gains tax rate of 50% or higher would work even better, redirecting capital from the speculative markets and into direct business ownership, where taxes would be lower. The hysteria that high capital gains tax will be taking regular people's retirement income is false. For one thing most people have their investments in IRAs, which are not taxed at all until withdrawal. In addition there is a substantial exemption of capital gain tax for middle class income earners, completely exempting those with incomes less than $68,000 from paying any capital gains tax.
Earned wages and capital investments have NOTHING to do with each other so why compare? Maybe you want the gasoline tax to be 39.6% as well? I totally disagree with your assessment that money invested in stock markets supposedly because of the capital gains rate is not being deployed in other areas. Money is invested in all areas for all reasons and not on one instrument. And you cannot invest directly in a private company unless they approve your ownership share. Companies will not expand unless their demand sees sustained increases and/or they need to do some R&D. A loss is a loss no matter the tax rates or business investment, and good investors analyze the loss potential, assess the risk and ROI, and spend where it makes sense to them. Pick a public company of your choice and explain how you believe they can arbitrarily grow the company simply because they have more cash...and explain why those currently holding billion$ in cash are not doing so? If you increase my capital gains rate to 50% I will remove my investments and then please explain where I can invest my money? Again I disagree with you; raising capital gains taxes, or any taxes for that matter, will cost Americans...
Your comparing the growth of GDP in inflation adjusted terms with the growth of debt in current value terms. Apples and oranges. Average GDP growth has average 5% over the past 25 years; 6% if you don't count the great recession. Even the lower 5% growth put the economy at about $65 trillion in 30 years. - - - Updated - - - They certainly do -- they are both income to an individual.
Why is it a benefit to the country to so greatly encourage speculative investment over earning potential? Seem our orgy with speculative investment has been a disaster with two major bubbles over the past dozen years.
Thanks. It's an easy mistake to make, and many people are just ignorant of the difference between real and currrent dollar figures, like you.
Here is the US GDP in 'constant 2005 dollars' from 1988 to 2012; 7,607.4 7,879.2 8,027.1 8,008.3 8,280.0 8,516.2 8,863.1 9,086.0 9,425.8 9,845.9 10,274.7 10,770.7 11,216.4 11,337.5 11,543.1 11,836.4 12,246.9 12,623.0 12,958.5 13,206.4 13,161.9 12,757.9 13,063.0 13,299.1 13,593.2 Starting in 1988 at $7.607T in GDP...if there was 5% annual growth, today it would be at $24.531T and it's about ONE-HALF of that. The last time I read current GDP growth is was like 1.2%. So I don't know where you get your 5% number? Capital gains tax and income tax have nothing to do with each other, except they are both federal taxes. The rates of each tax can move up or down 100% irrespective of each other, no ratios, no relation...
IPO's generate money for business. Bonds help fund the nation. Buying property which is subject to capital gains taxes is encouraged. Higher stock prices are potential cash for business. Not all investing is careless and risky speculative investments. And...capital gains earned on these investments provide cash to business and people of which is spent back into the economy. There's no 'disaster'? Investing is risky...there are no guarantees! Most people lack patience and want instant gratification but investing for average people and business is supposed to be 'long term' meaning who cares if the value drops a few times as long as the long term growth provides a reasonable ROI...
"Constant $2005 dollars" are "real" or inflation adjusted numbers. You are trying to compare the estimated growth of the debt in current or actual dollars against the estimated growth of the economy which you calculated based on inflation adjusted or real dollars. To compare the two, you either need to adjust the projected debt to inflation adjusted dollars so it can be fairly compared to the projected GDP in inflation adjusted dollars, or compare the projected actual size of the debt to the projected actual size of the economy. There are the actual GDP numbers for the same period: Year - GDP - % chng 1988 5,100.4 7.7% 1989 5,482.1 7.5% 1990 5,800.5 5.8% 1991 5,992.1 3.3% 1992 6,342.3 5.8% 1993 6,667.4 5.1% 1994 7,085.2 6.3% 1995 7,414.7 4.7% 1996 7,838.5 5.7% 1997 8,332.4 6.3% 1998 8,793.5 5.5% 1999 9,353.5 6.4% 2000 9,951.5 6.4% 2001 10,286.2 3.4% 2002 10,642.3 3.5% 2003 11,142.2 4.7% 2004 11,853.3 6.4% 2005 12,623.0 6.5% 2006 13,377.2 6.0% 2007 14,028.7 4.9% 2008 14,291.5 1.9% 2009 13,973.7 -2.2% 2010 14,498.9 3.8% 2011 15,075.7 4.0% 2012 15,681.5 4.0% Average: 4.9% Source: BEA.gov If you are projecting how big the debt will be and are comparing how big the GDP will be, you would start your projection with the current level of GDP, which is $15.6 trillion as of FY2012 (15.9 trillion as of 4thQ 2012), and not the value in 2005 dollars of $13.6 trillion. And, if you wanted to estimate how fast GDP will grow based on how fast it has grown over the past 25 years, you would use actual GDP figures, not inflation adjusted figures. You have to compare apples to apples. Repetitive. Both are income to an individual, as stated above. The fact that the rates of tax can be different is immaterial as that is the case on any number of things, including earned income.
