In a similar vein, check out McTasty's new time-travelling TV spot:
http://www.johnmccain.com/service/day2_webvideo.htm
This probably also resonates with people living in the Inner Core of The Moon, but only those lunatics who have taken up residence there since first arriving in 1889.
I particularly like the football uniforms taken straight out of The Great Gatsby.
Saturday, April 5, 2008
Friday, April 4, 2008
The Hilarity of the Brain's Mind
You guys seriously have to read this. It is well worth the toil.
I'm not convinced that it has any actual meaning in human English. To the extent that it does, it could be filtered down into an intelligible (but stupid) sentence or two. Perhaps this is some lunar dialect, spoken and understood only in the Inner Core of the Moon.
I'm not convinced that it has any actual meaning in human English. To the extent that it does, it could be filtered down into an intelligible (but stupid) sentence or two. Perhaps this is some lunar dialect, spoken and understood only in the Inner Core of the Moon.
Saving, Investment, Economic Growth, and the Capital Gains Preference
Regular readers (all four of us) will recall an earlier post where I mentioned that labor supply is unresponsive to tax rates. This is to say, the whole “if the government taxes me more than X%, then I just won’t bother going to work!” hypothesis is not supported by empirical evidence. The other part of the tax-rates-and-economic-growth equation is saving and investment. Many argue that low rates of tax on capital income in particular (you know, the kind only rich people have to any significant degree) help encourage saving, investment, and therefore higher economic growth. This argument is particularly important to refute because under current law, capital gains are taxed at a special, favorable rate of 15% (compared to a top marginal rate of 35% for “ordinary income”), and many major Republican figures advocate the total elimination of any tax on capital gains at all. Since the argument is demonstrably false, this “capital gains preference” is nothing more that a massive handout (to the tune of ~$92 billion in 2006) to the rich.
The first part of the pro-preference argument is that it encourages saving. By increasing the after-tax reward for deferring current consumption and investing in a capital asset (e.g., corporate stock, a partnership interest, a house, etc.), so the argument goes, the preference provides an incentive for people to save more, making more resources available for investment (we’ll ignore the fact that many forms of saving, such as 401(k) plans, IRA’s, and interest on bonds or saving accounts do not enjoy special capital gains treatment, which seems totally arbitrary). This sounds theoretically plausible. But it overlooks two important wrinkles. For one thing, it ignores the fact that individuals face two countervailing incentives when the rate of return on saving is increased. First, as the preference proponents point out, they have an incentive to save more and consume less, since the relative return of saving has increased (the “substitution effect”). Second, however, they face an incentive to save less because they can get the same level of future consumption for a lower cost in terms of deferred present consumption. As a result, a higher return on saving could theoretically increase or decrease saving, depending on which effect is larger. The question is therefore an empirical one, and the answer cannot be blithely assumed. As it happens, the responsiveness of private saving rates to an increase in the rate of return may be “small or even negative.” (p. 57, “The Labyrinth of Capital Gains Tax Policy,” by Leonard Burman).
(Note: the same competing forces apply to the question of tax rates and labor supply as well. Increasing taxes on work creates a substitution effect that discourages work but an income effect that encourages work, because more work will be necessary to earn the same level of after-tax income. This may be why tax rates have no significant net effect on labor supply.)
Second, this whole analysis recognizes only private saving and ignores the effect of a capital gains tax preference on public saving. The capital gains preference decreases government revenue (p. 2-3). If the resulting increase in the federal deficit (or decrease of the surplus) is greater than the increase in private saving, then the preference will cause a net decrease in total national saving. If it causes a net decrease in national saving, then interest rates will rise (because a larger amount of government debt will drive up the cost of borrowing) and the cost of capital for private business will increase. If the capital gains preference ends up increasing the cost of capital for private business, then it would defeat its whole stated purpose – i.e., to stimulate investment and therefore economic growth. It will not surprise you to learn that under any reasonable set of assumptions, a capital gains tax cut would in fact decrease public saving by more than it would increase private saving. (Id., p. 66)
There is another big reason why we should not be surprised that a capital gains preference would not increase investment: most capital gains are never taxed at all anyway. (Id., p. 51). This is because half of all individual capital assets held by individuals are either held until death or donated to charity. And on top of that, all capital gains attributable to foreign investors, tax exempt institutional investors like endowments and charitable trusts, and corporations, (which between them almost certainly amount to the greater part of U.S. investment) are not subject to the individual capital gains tax.
Since the preference most likely suppresses investment, it makes sense that capital gains tax rates do not have any empirically observable effect on economic growth rates. (Id., Figure 5-1, p. 82). And if this is the case, there is surely no sensible rationale for continuing the preferential treatment of capital gains. After all, any policy that ends up taxing the gains on assets that are so incredibly concentrated (the top 1% own ~40% of all financial assets) is repugnant from a distributive justice standpoint.
Bear in mind, part of the Box-Norquist-Sir Loin agenda is to totally eliminate the taxation of capital income altogether. So this battle is very current and highly significant for anyone who cares about our increasing economic inequality and our decreasing tax progressivity.
The first part of the pro-preference argument is that it encourages saving. By increasing the after-tax reward for deferring current consumption and investing in a capital asset (e.g., corporate stock, a partnership interest, a house, etc.), so the argument goes, the preference provides an incentive for people to save more, making more resources available for investment (we’ll ignore the fact that many forms of saving, such as 401(k) plans, IRA’s, and interest on bonds or saving accounts do not enjoy special capital gains treatment, which seems totally arbitrary). This sounds theoretically plausible. But it overlooks two important wrinkles. For one thing, it ignores the fact that individuals face two countervailing incentives when the rate of return on saving is increased. First, as the preference proponents point out, they have an incentive to save more and consume less, since the relative return of saving has increased (the “substitution effect”). Second, however, they face an incentive to save less because they can get the same level of future consumption for a lower cost in terms of deferred present consumption. As a result, a higher return on saving could theoretically increase or decrease saving, depending on which effect is larger. The question is therefore an empirical one, and the answer cannot be blithely assumed. As it happens, the responsiveness of private saving rates to an increase in the rate of return may be “small or even negative.” (p. 57, “The Labyrinth of Capital Gains Tax Policy,” by Leonard Burman).
(Note: the same competing forces apply to the question of tax rates and labor supply as well. Increasing taxes on work creates a substitution effect that discourages work but an income effect that encourages work, because more work will be necessary to earn the same level of after-tax income. This may be why tax rates have no significant net effect on labor supply.)
Second, this whole analysis recognizes only private saving and ignores the effect of a capital gains tax preference on public saving. The capital gains preference decreases government revenue (p. 2-3). If the resulting increase in the federal deficit (or decrease of the surplus) is greater than the increase in private saving, then the preference will cause a net decrease in total national saving. If it causes a net decrease in national saving, then interest rates will rise (because a larger amount of government debt will drive up the cost of borrowing) and the cost of capital for private business will increase. If the capital gains preference ends up increasing the cost of capital for private business, then it would defeat its whole stated purpose – i.e., to stimulate investment and therefore economic growth. It will not surprise you to learn that under any reasonable set of assumptions, a capital gains tax cut would in fact decrease public saving by more than it would increase private saving. (Id., p. 66)
There is another big reason why we should not be surprised that a capital gains preference would not increase investment: most capital gains are never taxed at all anyway. (Id., p. 51). This is because half of all individual capital assets held by individuals are either held until death or donated to charity. And on top of that, all capital gains attributable to foreign investors, tax exempt institutional investors like endowments and charitable trusts, and corporations, (which between them almost certainly amount to the greater part of U.S. investment) are not subject to the individual capital gains tax.
Since the preference most likely suppresses investment, it makes sense that capital gains tax rates do not have any empirically observable effect on economic growth rates. (Id., Figure 5-1, p. 82). And if this is the case, there is surely no sensible rationale for continuing the preferential treatment of capital gains. After all, any policy that ends up taxing the gains on assets that are so incredibly concentrated (the top 1% own ~40% of all financial assets) is repugnant from a distributive justice standpoint.
Bear in mind, part of the Box-Norquist-Sir Loin agenda is to totally eliminate the taxation of capital income altogether. So this battle is very current and highly significant for anyone who cares about our increasing economic inequality and our decreasing tax progressivity.
Thursday, April 3, 2008
Charter Schools and Private Schools
Take a look at these interesting links on education policy that came up in the comments on an earlier post. One is on charter schools and the other is on privately run schools in Philly; both compare the performance of each to traditional public schools. Not surprisingly (to us), both cast serious doubt on the free-market education agenda. Thanks to Casey for the Bland Corp. study.
Wednesday, April 2, 2008
Cuba Nueva
I think this makes sense.
Cuba still has quite a way to go before consumerism gets out of hand. It's hard to argue with letting people use cell phones and computers.
Cuba still has quite a way to go before consumerism gets out of hand. It's hard to argue with letting people use cell phones and computers.
Unemployment Adjustments
Take a look at this on the deteriorating U.S. labor market.
Highlights:
If you include the underemployed (those who want full time jobs but can only get part-time work) and people not currently search for a job, the unemployment rate is 8.9%. I'm not sure how our European brethren reflect these concepts in their numbers but it's very possible that our unemployment figures are simply not comparable to other countries' figures, and that our relative labor market situation is not nearly as strong as official unemployment numbers would suggest.
Also, as a former professor of mine noted, we should incorporate the number of people we incarcerate into the unemployment figures. This would noticeably increase our relative unemployment rate, since we are so incarceration-crazed.
The bottom line: Be skeptical when economic right-wingers point to our relatively low unemployment figures as a way of justifying right-wing style capitalism.
Highlights:
If you include the underemployed (those who want full time jobs but can only get part-time work) and people not currently search for a job, the unemployment rate is 8.9%. I'm not sure how our European brethren reflect these concepts in their numbers but it's very possible that our unemployment figures are simply not comparable to other countries' figures, and that our relative labor market situation is not nearly as strong as official unemployment numbers would suggest.
Also, as a former professor of mine noted, we should incorporate the number of people we incarcerate into the unemployment figures. This would noticeably increase our relative unemployment rate, since we are so incarceration-crazed.
The bottom line: Be skeptical when economic right-wingers point to our relatively low unemployment figures as a way of justifying right-wing style capitalism.
McTasty's Economic Advisor: " We have learned that government is not the answer... freedom and competition are the answers."
Thanks to column width I was unable to post this link in the comments part of our discussion of John McTasty.
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040102860.html?referrer=emailarticle
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040102860.html?referrer=emailarticle
Sunday, March 30, 2008
Rob Roy vs. H-K
The denizens of the "left-wing" of the Democratic Party have spoken. They maintain that Hickory Klinstone is too friendly with business to be trusted to implement a satisfactorily progressive domestic policy agenda. Some have even gone so far as to say that, should O'Bama lose the Democratic Party's primary, they will not vote for H-K. Brushing aside, for the moment, the very significant fact that Rob Roy's foreign policy figures to be wildly more aggressive than Klinstone's, this view is drastically, dangerously wrong.
It is true that, for a short time early 2000's, Rob Roy was a pretty moderate Republican (he opposed some of Box's tax cuts, he supported Sarbanes-Oxley, he supported Campaign Finance Reform, he opposed torture; of course, he has "flip-flopped" on many of these issues since and has always been a foreign policy hawk). But this is no longer the case. With respect to Roy's domestic agenda, consider his tax plan:
http://www.americanprogressaction.org/issues/2008/pdf/tax_agenda.pdf
Some highlights:
He would make the disastrous Box tax cuts permanent.
58% of the benefits from his promised his tax cuts will go to the top 1%. As a reference point, "only" 31% of Box's tax cuts went to the top 1%. Under Roy's plan, the bottom 60% would get 4% of the benefit and the bottom 80% would get 9% of the benefit.
He would reduce the corporate tax rate from 35% to 25%, and he would allow the immediate expensing of corporate investment (rather than cost recovery through depreciation over the useful life of the investment). The result is that corporations could face negative tax rates on debt-financed investment (since they could deduct the entire value of the investment AND deduct the interest on the debt).
His tax cuts would cost $2 trillion in lost revenue over the next 10 years, thereby forcing draconian spending cuts. My educated guess is that those cuts won't be made in defense spending.
Under his plan, the difference between the rate of federal tax on labor income and the rate of tax on capital income would be increased. Capital income is already taxed less than half as much as labor income (14% vs. 30.5%). His stated goal is to totally eliminate the taxation of capital income.
As the report demonstrates, his agenda is 100% compliant with the Norquistian radical anti-tax movement.
Please, for the love of God and of anything that remotely resembles a left-leaning agenda, PLEASE vote for either Democratic candidate over R. Roy. At least Kleinstein promises to repeal the Box tax cuts on people making >$250,000, and to stop taxing carried interest (part of the compensation for the grossly overpaid general partners of hedge funds and private equity funds) at lower capital gains rates.
Raibeart Ruadh also opposes any kind of universal health care proposal and wants to at least partially privatize social security. See https://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm and http://www.johnmccain.com/Informing/Issues/0B8E4DB8-5B0C-459F-97EA-D7B542A78235.htm. In short, he is the most Criminal of All Garbages and must be stopped.
It is true that, for a short time early 2000's, Rob Roy was a pretty moderate Republican (he opposed some of Box's tax cuts, he supported Sarbanes-Oxley, he supported Campaign Finance Reform, he opposed torture; of course, he has "flip-flopped" on many of these issues since and has always been a foreign policy hawk). But this is no longer the case. With respect to Roy's domestic agenda, consider his tax plan:
http://www.americanprogressaction.org/issues/2008/pdf/tax_agenda.pdf
Some highlights:
He would make the disastrous Box tax cuts permanent.
58% of the benefits from his promised his tax cuts will go to the top 1%. As a reference point, "only" 31% of Box's tax cuts went to the top 1%. Under Roy's plan, the bottom 60% would get 4% of the benefit and the bottom 80% would get 9% of the benefit.
He would reduce the corporate tax rate from 35% to 25%, and he would allow the immediate expensing of corporate investment (rather than cost recovery through depreciation over the useful life of the investment). The result is that corporations could face negative tax rates on debt-financed investment (since they could deduct the entire value of the investment AND deduct the interest on the debt).
His tax cuts would cost $2 trillion in lost revenue over the next 10 years, thereby forcing draconian spending cuts. My educated guess is that those cuts won't be made in defense spending.
Under his plan, the difference between the rate of federal tax on labor income and the rate of tax on capital income would be increased. Capital income is already taxed less than half as much as labor income (14% vs. 30.5%). His stated goal is to totally eliminate the taxation of capital income.
As the report demonstrates, his agenda is 100% compliant with the Norquistian radical anti-tax movement.
Please, for the love of God and of anything that remotely resembles a left-leaning agenda, PLEASE vote for either Democratic candidate over R. Roy. At least Kleinstein promises to repeal the Box tax cuts on people making >$250,000, and to stop taxing carried interest (part of the compensation for the grossly overpaid general partners of hedge funds and private equity funds) at lower capital gains rates.
Raibeart Ruadh also opposes any kind of universal health care proposal and wants to at least partially privatize social security. See https://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm and http://www.johnmccain.com/Informing/Issues/0B8E4DB8-5B0C-459F-97EA-D7B542A78235.htm. In short, he is the most Criminal of All Garbages and must be stopped.
Subscribe to:
Posts (Atom)
