Here's a great chart, via TPM
This chart is a future model of a dynamic system that is largely controlled by factors that can’t be predicted. Do you seriously believe it shows anything besides the preconcieved notions of whomever created it?
You are a gullable guy, Michael…
(Ask yourself if somewhere in the basement of the CBO is a similar chart from 1990 that showed the troubles now… Maybe they are keeping it from us! And maybe NOAA knows exactly how many hurricanes will hit us during these next years!)
Besides, tax cuts or raises, whatever the name attached to them, do nothing of themselves. They are 100% dependant upon what the individuals taxed do. It also does not show the as yet uncreated Congressional budgets for those years, which is what will have the greatest effect on deficits – obviously (the prtediction is meaningless without such unknown data). If that chart shows anything, which it does not, it shows that it is predicted, based on conjecture, that the President and Congress during these periods will continue to lower the incomming tax revenue by adversely affecting economic stability and predictability (the main factor in growth, which is what raises revenue). So while the chart is utter nonesense anyway – it’s interesting how it purports to show exactly the opposite of what it does show. (It’s not really a slam on Bush at all, it actually shows that later-created situations will have a more adverse effect.)
You sound like Axelrod, who finally owned up for the Administration for dropping the ball on the oil spill, only to then say it was Bush’s fault that they weren’t paying attention! Stop living in the past Michael.
The continued drop beat of “oil spill” and the harsh tone aside, Vic makes some points. Still, cool chart. Thanks for posting so much material today.
btw…Michael, I hope your recovery continues going well. I am guessing by your general silence on the topic and your regular posts that you are doing well.
ooops…I mean “drumbeat” not “drop beat.” Damn autocorrect on Word (I often run my posts through spell check before submitting them).
Like most projections, this one assumes that all other things remain equal. That isn’t a realistic assumption; it’s a baseline. The point of course is to guide policy by pointing out what happens UNLESS changes are made. It is thus a very weird criticism of the chart — which seems AFAIK to be accurate given its assumptions — to suggest that there will be changes in the future. One can only hope.
Looking at this chart, for example, one might conclude that the full impact of the Bush tax cuts has yet to be felt, and thus they need some changes. On the other hand, the long run impact of TARP seems much less than its current rather sizable contribution to the deficit would suggest. This is useful data. Unless of course one opposes reality-based policy-making….
I thought I was saying that, but I guess I wasn’t clear.
However, disregarding the purpose of the chart for a moment, it displays no accuracy in the sense of “here’s what will happen if we change nothing” because in a dynamic system, the reactions are not always predictable. A model of any sort, to be accurate, requires an accurate understanding, accurately translated to an algorythm, of how the system works. On the basis of our current financial peril, we KNOW we don’t fully understand how the system works. This is so clearly obvious that I can’t believe we’d even need to think about it.
yet we do live in a country that makes a huge deal out of NOAA’s meaningless hurricane predictions every year, and AAA’s holiday driving predictions every long weekend, so…
(Pssssst: Here’s a hint for you: sometimes various entities make these discussable predictions not because they actually believe them to be accurate, but because it gets them face-time in the news and gets us talking about them. It’s publicity. Like when NASA came out a week or two ago to tell us how we were all going back to the stone age if we didn’t do anything about upcoming (predicted) sun storms. Obviously, NASA doesn’t know what will happen, but it serves the better purpose of keeping them in the news (now that the shuttle is dead), and justifies funding claims (now that the shuttle is dead)).
But someone (the guy who made the chart) decided that he DID understand how everything works, so he made a model and charted it. It becomes inaccurate as soon as he fails to absolutely accuratly account for the individual free wills and diverse goals of 5 billion people.
It’s accurate until then, I’ll give you that though.
The value of a baseline depends in large on magnitudes of the effects of things left out. Sure, if a giant asteroid hits the earth and kills most life, the chart is pretty worthless. But to what extent is that also true if the economy substantially improves or substantially worsens? In particular, is there any reason to believe that barring a truly massive economic shift, the relative values of these effects will shift much? I don’t see one but I’m happy to be educated. The absolute size of the deficit likely moves with the business cycle (which could get better or worse or both in the lifetime of this projection), but the war looks set to go on and on. What is likely to make the projected relative magnitudes wrong in two years? In four? (Note that the relative magnitudes change a lot less after four years.)
So I still don’t see on why the hostility to pointing out unless we change our policies that Bush’s tax gifts to the richest people are going to be a much bigger component of even near-term future deficits than they are now … unless of course you don’t like the implicit policy recommendation because you like the Bush tax policy.
I think if the chart is a decent straight-line projection, at least as regards the near-term (say, under five years) the burden is on people who say we should not use it as something to orient our thinking about fiscal policy to explain why — not just “the world is complex and changes” (which it is and does), not just “other people have made silly predictions,” not just “I don’t think we can make policy based on our best, even if limited, understanding of the future” but rather, *this* set of numbers is not meaningful because *that* plausible or likely factor swamps it. And even as we move out towards a ten-year horizon, this sort of understanding remains valuable even as we all understand that the actual numbers (but not necessarily the relative numbers) are likely to come out differently.
The problem with the chart is that it leads people to make some narrow presumptions that are not necessarily true. Or perhaps, more accurately, it’s based on a assumptions that lead to a conclusion that’s not necessarily true. The presumption is that a tax cut must also lead to lower revenues and adversely affect the deficit. Neither is true all the time, but it feeds to empty-headed idea that the tax rates control the revenue. Anybody who doesn’t get all of their understanding of the world from the Jon Stewart show knows that there are numerous things that can create the kinds of balances that you see on that chart. Probably the most important thing is the budget, not the taxes.
Most importantly however, the chart just makes no sense at all. It’s displaying a set of disparate things as if they all go together that way. It’s an apples an oranges set of data that looks pretty to someone who wants to see what it purports to show, but doesn’t actually show anything at all. You can’t simply subtract the supposed revenue attributable to the tax cuts or the defense budget and display it as separate data. You don’t know the presumptions made in separating the data – which is the entire game. Nor can you just take some completely different economic numbers and pile them on top. It all interrelates in a very different fashion. The idea that if we didn’t have the Bush cuts, and we weren’t at war, that there would be no deficit (or very little), is utterly ludicrous. (ignoring the fannie/freddie and tarp stuff, which is arguably a different issue).
Do you SERIOUSLY think that in 2013 the deficit will be 100% attributable to Bush, the war, and the recovery measures? That otherwise, Congress has a balanced budget being dragged down by other things! Really!!!
It’s not a baseline, because it doesn’t show anything real. It’s not even a question of whether I disagree with tax cuts or not, it’s just a silly chart meant more to appeal to the uninformed that our fiscal sense.
I’m sorry, but if you are going to invoke the Laffer curve, I’m just going to laugh. While there may be occasional real-world circumstances in which it applies, there is not one serious economist who thinks the Bush tax cuts are among them.
And I do seriously think that if we don’t change current policies, the chart provides a good rough and ready estimate of the relative contributions to the deficit of the listed costs for at least the next five years. That’s valuable information.
I’m not invoking the Laffer curve.
Although LOTS of “serious” economists believe in it (and many don’t). Spending always has the greatest effect.
It’s simply a fact that tax rates have absolutely no meaning EXCEPT within the context of real-world behavior. You can’t just take a percentage, multiply it by some acertainable income number, even a valid one, and come up with revenues. It just doesn’t work that way. There is absolutely no way to know revenues UNTIL they come in. This is particularily true when there is economic turmoil like we are seeing now. It’s not a simple calulation, even assuming staticly. You you to be able to show how much of the money “lost or gained” here, comes from what’s going on there. You can’t just lump together a bunch of different “losses” and call it the total loss. It just doesn’t work that way. You can believe that or not.
Look, the top 1% of tax payers pay about 39% of the total revenues. 86% are paid by the top 25% of earners. (this is data from ’03 I believe – but current enough to make a point (in the meantime, the % paid for eachj class has increased)).
If you believe the stereotype of these top earners being greedy and wanting to pay as little as possible, then it is not hard to imagine that these (especially the top 5% or so) are people who have the money to pay accountants and tax lawyers to avoid as much tax as possible. Though note that the above figures are still accurate as to % of the total paid. (I am in the top 10%, and have a money guy who manages my investments/retirement (you are a fool not to) and without actually checking, I can say pretty positively that I pay less tax now than I would if I did it myself. AND my behavior under the current econ conditions IS different regarding these funds and I probably pay even less tax now). You’d have to live in a complete fantasy to think that in tough economic times, that what is received as revenue, from the same income in theory, under the same tax rates, is the same, when such a high percentage of the revenue is taken from such a small pool. You’d have to live in an even bigger fantasy world to think that one can predict how even a small pool, any few of which can hugely affect revenues, will behave.
I am done with this thread. If you can’t see the difference between “believing in the Laffer curve” and “believing the Laffer curve has anything to do with Bush’s tax cuts” then this isn’t a productive conversation.
Similarly, the suggestion that a major, or defining, aspect of the growth in the deficit is the ability of rich people to evade taxes is absurd. Rich people have paid more substantially taxes on income in the past then they do now; I don’t think the capacity to evade income tax is that much greater today then during the Clinton administration.
Fine, take your ball and go home again.
But I didn’t say anything at ALL about the Laffer curve. You brought that up. All I said was that while some don’t believe in it, some do – simply refuting your incorrect statement that no serious economist believes in it. Plenty do, plenty don’t. But it was never part of any argument I’ve made here. That you think it is is not my problem.
As for your second statement, I’m not sure you even understood what I wrote. I never said that tax evasion is what defines the deficit. I said that decisions that people with lots of money can make, the LEGAL rerouting of cash into various investments can have a major effect on how much revenue is collected by the feds. This is the reality of how money works. And you should be happy it does because you wouldn’t have a job if it didn’t. The fact that these same people also have a disproportionate effect on revenue is the main reason revenue goes up and down. A whole bunch of Donald Trumps varying the tax they pay by 5% makes a big difference in revenue – a LOT more than all of your associates at the University ever will by saving 5% on theirs. If that’s not obvious to you, then I can’t help.
I sure hope you treat your students’ writing with more attention and respect that you bother with mine.
Comments are closed.
Enter your email address to subscribe to this blog and receive notifications of new posts by email.