We are just not a serious nation

[cthulu2016]

We just had a presidential election that never really discussed the economy (supposedly the big issue of the campaign) and created a truly foolish symbolic pretend economic fight about tax rates for the rich... just about the least important, least meaningful economic issue.

It is hard to identify anything that has less to do with the economy that tax rates for the rich. The stimulative/expansionary effect of tax cuts for the rich is so low that it isn't very different from 1:1. Tax cuts for the rich will neither add not subtract jobs. Raising taxes on the rich will neither add nor subtract jobs.

Tax rates on the rich have very little effect on economic growth. (Supply-siders were always lying about that.) Their only notable effect is on the deficit, but the deficit is not a problem today and should not be reduced. It should be increased.

Increasing upper-income tax rates is appealing, in a retributive justice sort of way. Sure, fuck the rich. They deserve something a lot worse than a 4% tax hike. It is probably excellent social policy, while having no real effect on the economy either way.

So of course this is the fight the two sides agree to have.

Meanwhile, the President and many Dems in congress and all Republicans everywhere spout absolute economic nonsense about the need to do something about the deficit and runaway spending, apparently too cynical or too deluded to recognize that the deficit and runaway spending are the backbone of our economy from 2008-present.

So yes, by all means, we must do something to undo the only thing keeping us afloat right now.

Both parties are offering economic gibberish, pre-chewed for a nation of dopes.

The republicans are worse, of course. Our party is about (-10) on the economy and the Republicans are about (-100), but that is not the same as us being right. In medical terms, the Republicans want to put ten leeches on the patient, and we want to put one leech on the patient, phased in over time. That's an easy choice to make, and we all made the right choice.

But that doesn't mean either choice is any kind of right answer.

Thankfully Ben Bernanke is about (+50), which is the only reason we have been able to afford the ongoing farce of two parties who reject economics to differing degrees... to a choice of wrong and wronger.

For the record, it is fine to raise tax rates on the well-to-do provided that none of the revenue generated be used to decrease the deficit. Any penny of new revenue that is used to reduce the deficit is an economic net negative. In the case of taxing a billionaire, that net negative is small, but still a net negative.

The right answer, if anyone in politics was in the right-answer business, is 1) increase taxes on the very well-to-do somewhat, 2) is to leave the deficit at least at current levels, and 3) devote every penny raised from the tax increase on the rich to new (additional) spending.

[leveymg]

1. Your points ignore the fact that progressivity of tax rates is essential to middle-class purchasing

power (lower effective taxes on the middle do have a stimulative effect) and the revenue stream from top brackets is key to the ability to maintain public sector employment and programs that smooth out instability and maintain demand in the long run.

Yes, I know the federal gov't has been pursuing military Keynesianism for a decade through deficit spending and borrowing, but that has ended up at the expense of other public employment and programs.

In addition, if prolonged, the real decline in middle class incomes leads to systemic hollowing-out of the economy, and the collapse of bubbles of the sort that we saw in '08. The shifting of the tax burden downwards leads indirectly to such crises.

No, not taxing the rich (enough) is not "irrelevant" to the economy.

[cthulu2016]

3. You are conflating economics and political choices

"deficit spending and borrowing, but that has ended up at the expense of other public employment and programs."

That is a political choice about budgetary priorities, not an economic reality. Nothing about tax rates requires cutting those programs, and nothing about tax rates prevents expanding them.

Taxing the rich (enough) is indeed irrelevant to the economy *today* which is what matters. If you want to say it would be relevant in a different world with a different economic conditions, that is surely correct.

But in this world with these conditions, it is irrelevant to economic growth. (Unless one did what I suggest in the last paragraph of the OP, in which case it would be a slight positive.)

[leveymg]

5. I don't see how one can separate the two in budgetary and fiscal policy matters.

Economics somewhat intrudes into tax and spend decisions, even now, and political choice has a lot to do with outcomes in national-level macroeconomics. Why are you trying to compartmentalize these subjects?

If you say that because the rich are presently undertaxed that fact is of no consequence or relevance (without specifying exactly what it it lacks relevance to), I strongly disagree in general. I've already specified where I see it as being of consequence. It would help me to better understand your point if you specified where you think it is not relevant, except in an ideal world, and why.

[cthulu2016]

6. I compartmentalize the two because there is no economic

*reason* to reduce the deficit today or tomorrow.

An economic reason would be like, "Our level of borrowing is pushing up interest rates to levels that do more harm than cutting the deficit does." The deficit is doing something net-undesirable in the world of money and employment and economic growth.

There is no such real world effect. In a different world there could be such asons, but in our world there is not. Even if 90% of the time cutting the deficit would make sense, the question is, does it makes sense today?

We are in a very unusual real-world set of economic conditions that we have not seen since the great depression, and in this unusual real world all "common sense" is turned on its head.

In almost every year of American history, dropping bombs on Tokyo was an insane idea. In 1943 it was policy. It all depends on the reality within which the policy exists.

Ask Obama why we need to reduce the deficit and he will be unable to offer any reason rooted in economics because there isn't any such reason.

He could say, "We can't keep going on this way" and people will nod their heads as if something wise is being said, but why exactly can we not go on this way... or else what? There has to be an "or else what..." a real world claim of economic effect that can be analyzed and discussed.

We must cut Medicaid. Okay... or else what? What is the bad effect of not cutting medicaid that makes it a "must?"

And in terms of TODAY.

Not in terms of what is generally good... some rule of thumb, some prejudice or predisposition.

[leveymg]

8. I think we agree that there is no good economic reason to cut social spending, regardless

of increase in federal debt and deficits. The reason for that, as you alluded to, is the fact that public spending in Europe and most of the rest of the world economy are in severe austerity and low growth conditions, so there is no real upward interest rate inflationary effect of US borrowing. In fact, we may be effectively staving off a global collapse at this point -- which is, of course, the point of QE3.

Nobody who understands this would actually move at this point to substantially cut overall federal spending. It's really a question of how things get divided up, and what's the most effective use of spending.

[NoOneMan]

2. In our current state, won't increasing spending & GDP increase carbon emissions?

For example, if we increase GDP by 3% this year, doesn't that virtually guarantee carbon emissions increase in 2013? Why or why not?

The ultimate can that we kick down the road.

[cthulu2016]

4. I agree with you that is carbon emissions are one's only concern that

another global economic recession would be desirable.

As to whether any morally sound person would favor such a downturn for its effects on emissions, that is a whole 'nother question.

[NoOneMan]

7. Why would a "morally sound" person care about making junk more than saving the planet?

My assumption is that its because our modern civilization has redefined morality to perpetuate its existance

[99Forever]

9. Bunk.

"...and created a truly foolish symbolic pretend economic fight about tax rates for the rich... just about the least important, least meaningful economic issue."

Guess it's obvious who butters your fucking bread.