Shameless Self-Promotion
My new book, which will be out next week, got a nice write-up by David Leonhardt in the New York Times.
http://www.nytimes.com/2009/10/07/business/07leonhardt.html
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Seattle Times Article
I read the article today that quotes you in regard to tax cuts. First of all, you are being very misleading. The Bush tax cuts increased government revenue just as the Reagan tax cuts did. What they did with that revenue is a totally different issue.
As a business owner, I can assure you that tax increases are a poor solution for one very simple reason. Employers pass the tax increase on to someone else. Either less pay and/or bonuses to their employees, or to increased prices on their goods or services, etc. Surely as a "conservative" author you would know this. It is basic economics 101. A large number of the "wealthy" are business owners!
The solution is simple. Cut taxes and cut government waste. The spending is unbeleivable at so many levels (didnt Obama promise to fix Washington?). Any decent business owner could walk into government and cut spending by 50% and it would be easy. There is that much waste. You call yourself a conservative yet your comments are reckless and hurt the conservative agenda. Health care needs fixing for sure, but the goverment is not the solution.
Here is the real question. Who regulates the government (a body of people that are just as prone
to corruption as the private sector and is the US to big to fail?)
garbage in garbage out
So how come the businessmen who run health care--for profit insurers, hospitals and doctors--haven't cut their spending by 50%. It's simple , right?
It's guys like you that have reduced all of public policy to a simple ideology based on a false notion of how the world works that are driving our country into a ditch.
Let me give you a lesson that
Let me give you a lesson that you can try at home. I'll keep it simple so try to follow along.
Give two of your children $10 and tell them they can buy anything they want but first take away taxes. For the first take away 70% (top marginal rate under Carter). For the scond take away 28% (top marginal rate under Reagan). Does the child with $3 or the child with $7.20 spend more?
The fact is that 70% of our economy is based on consumer spending. That's not a simple conservative idealogy, its just a simple fact and it IS how the world works. When you have more of the money you earn to spend, then you spend more. When you have less, you spend less. I am always amazed how well educated people ignore the obvious and apply some complex analysis to support their theories.
Businesses do cut thier spending by 50% when market conditions require them to do so. If they dont then they go out of business. The government doesnt worry about staying in business, instead they have piled up massive amounts of debt. A luxury any business doesnt have.
You may consider profit to be evil, but without it, every American except for those employed by the government would be jobless. Do you work for a poor person?
Don, Re: The Bush tax cuts
Don,
Re: The Bush tax cuts increased government revenue
Wrong, at least according to the consensus among even conservative economists, including W. Bush's own top economists. See http://swordscrossed.org/node/1671
You are confusing cherry-picked anecdotal observation with actual analysis. Revenues tend to go up whether we increase tax rates, lower them, or neither, simply because the economy is more often in expansion than recession. So simply pointing to increases in revenues after tax cuts (while ignoring the other cases) not only inappropriately implies causation, but does not even constitute proper correlation analysis (which would require asking what happens to the hypothesized dependent variable when the independent variable varies). (It also ignores subsequent tax increases in the Reagan case)
"Any decent business owner
"Any decent business owner could walk into government and cut spending by 50% and it would be easy."
Unless you consider defense, social security, and medicare as government waste, which voters do not, what you're saying is impossible in the long term.
http://en.wikipedia.org/wiki/Federal_budget_(United_States)
"The Bush tax cuts increased government revenue just as the Reagan tax cuts did."
That's absolutely false but I'm curious as to what marginal tax rate do you think will create the largest amount of government revenue? .01%?
I am not anti government,
I am not anti government, just big out of control government. THe programs you mention are not at all what I am referring to. Let me ask you this. If market rent for a building is $20sf and the goverment pays $25sf because of the red tape a landlord has to deal with in a goverment agency is that wasteful spending? What if a government agency is required to spend on something that they dont need but loses the money if they dont so they buy it anyway? Is that wasteful spending? What if the government grants millions of dollars to a group, based solely on the fact that they helped get that candidate elected? Not wasteful spending? Spend some time, as I have, dealing with government agencies and you will learn some streat smarts and basic commen sense that they dont teach in our universities.
As for the tax cuts I guess that coincidentally the economy grows each time we cut taxes and therefore tax revenue increases yet it is attributable to something completely different?
I, like most people understand that taxes are important and we all have to pay them. 25% is reasonable. THanks for the challenge.
Don, Re: waste, no one
Don,
Re: waste, no one disputes the existence of inefficiencies in government spending, but your error seems to be one of degree ("Any decent business owner could walk into government and cut spending by 50% and it would be easy. There is that much waste") and of much less relevance to overall federal spending than you seem to realize, given your apparent limitation of your assertion to non-Defense discretionary spending (which is only around 15 - 20% of overall federal spending).
Re: As for the tax cuts I guess that coincidentally the economy grows each time we cut taxes and therefore tax revenue increases yet it is attributable to something completely different?
You apparently aren't understanding what I said. To establish significant correlation (let alone causation) you can't just ask "What happens to Y (e.g., revenues) after X (e.g., tax rates) is lowered?", you have to also ask "What happens to Y when X is NOT lowered, and when X is increased (e.g, the 1993 tax rate increases), and how do the changes in Y tend to vary based on each of those three scenarios for X?" The point is that revenues tend to go up over time, period (due to economic growth, even if viewed in real [inflation-adjusted] terms, or that plus inflation if viewed in nominal dollars), whether tax rates are cut, increased, or left unchanged, and the consensus among even conservative economists (even W Bush's own top economists, as you can see at my link) is that revenues go up after tax rate cuts despite the net negative impact of tax rate cuts, not because of them. Tax rate cuts do increase incentives to work and invest and thus increase the tax base (and thus have "revenue feedback effects"), but not enough to offset the lower tax rate that is applied to that tax base, and thus not enough to yield higher revenues.
Waste in government ... it indeed may exist!
"Any decent business owner could walk into government and cut spending by 50% and it would be easy."
Unless you consider defense, social security, and medicare as government waste, which voters do not, what you're saying is impossible in the long term.
Oh, but this doesn't seem to consider the possibility that within government programs voters do like there is a great amount of waste that voters -- voters like you -- genuinely don't like.
Let's see...
Public education? Do you support it? I bet you do. Do you also support a public school system spending $19,000 per student with management like this? Read that and say "yes". (I dare you.)
How about health care for the poor through Medicaid? Are you happy with Medicaid graft -- not waste, but fraud and graft -- levels reported at 40% (!) in both New York and California?
Do you support having a postal service? How about a local post office, like here where I live, that drives people who want to buy stamps across the street to buy them for 75 cents each from a deli -- because the Postal Service has removed all stamp dispensing machines from post offices nationwide ... because it is incapable of maintaining vending machines. One small symptom of its larger politically dysfunctional management, that is causing it to lose $7 billion this year (10% of revenue -- as a monopoly!).
Medicare and Social Security. I'm sure you support them. Yet Obama himself says Medicare spending is 30% waste!! (And, strangely, this 30% waste for some reason just can't be cut from this single-payer government program unless we all first agree to "reform" private health insurance. Is that some sort of blackmail?) And that's not even considering the underlying reality that Warren Buffett's employees at Dairy Queen pay 15% in payroll taxes from the first dollar of their wages to pay for his SS and Medicare benefits. How economically efficient and progressive is that?
And as to military spending -- with all its dual-monopoly "bargaining", one-supplier cost-plus contracts, projects divided among all 50 states so politicians in all of 'em share the booty (and make sure the projects never die), projects voted in for electoral rather than military need purposes etc., ... need I whack that piñata?
Gee whiz ... if we don't actually want to eliminate popular programs like these, then it must be there's hardly any waste in government at all to cut!!
That's an argument so naive it is beneath intelligent discussion.
And it's only naive the first time. The second time it is made, after the naivety is pointed out, it is, um, willfully disingenuous -- dishonest.
But if one really wants to insist on naming significant government programs to eliminate outright, I'm happy to name a bunch.
For instance ... how about that auto manufacturing business the government now owns, at a cost of $70 billion, General Motors? Latest period results: sales down 45% from a year ago -- and that's 45% below the year-ago level that drove it bankrupt! If nobody in the private sector would pay more than $0 for a money hemorrhaging business like this, why should politicians force taxpayers to pay $70 billion?
That'd be one place to start.
To recap, even assuming you *do* want to have national defense and social insurance ... isn't it logically possible to imagine that there is significant waste in government?
Maybe even, a whole dang lot of it?
When one condisers the 40% savings from experience acheived from privatation of government services like public transport in many European cases (like Sweden) ... 100% waste of expeditures poured by politicians into patronage organizations like ACORN ... the tax expendutures budget of hundreds of billions of dollars of tax looholes favoring the rich (who are in the high tax brackes) ... notorious Medicaid fraud, not to mention waste ... Obama's proclaimed 30% waste in Medicare ... the massive "poor pay to the rich" transfers of today's model of social insurance ... hey, you know, "50% waste" seems entirely plausible to me!
You know, you guys always talk about waste, but I have yet to see one of you point out exactly where that waste is and what you would cut.
Well, if all the above wasn't specific enough, I can always suggest more!
Do you know that while NYC mangles its public schools with $19,000 per-student spending like above, and most major US cities actually do worse, Sweden has a 100% voucherized public school system nationwide, it's worked just as voucher proponents predicted, and everybody likes it, even the teachers unions.
That's one more thing.
Waste
I have no doubt that there is waste in government especially at the local level with public schools. Federal spending accounts for an extremely small amount of education funding. Anyways I'm sure a much longer list could be made about government waste, real or imagined(like the fraud numbers you have given about medicaid). I don't mean to say that cutting waste is impossible, and it should be a priority, but if you were to cut all the waste out of government and wanted to properly fund Medicare, SS, and defense, it is impossible in the long term with current tax rates.
Medicare, Medicaid, interest payments on debt, and Social Security will equal the entire federal budget sometime between 2030 and 2040 with the current levels of taxation. Unless significant waste can be cut from Medicaid, Medicare, and defense there is very little impact on the long term budget from cutting inefficiencies. Medicare as well as VA hospitals have actually had greater success in holding down medical costs than private insurers, private insurers must deal with fraud as well. The structure of the health care market(employer based coverage) is more of a problem rather than Medicare itself. I have my doubts how much waste can be cut aside from defense.
I'll add waste is hard to define(aside from fraud) with medicare/medicaid. Is it wasteful to spend tens of thousands on a procedure that only extends life by a month? Or a procedure with a .0001% probability of success? I think so but a lot of people aren't as rational. Those are the real cuts that can effectively hold down medicare costs while still achieving a high level of care.
Jim -- 50% or "a lot"?
Jim,
If we define "waste" as spending above what is necessary to provide a given intended level of benefits (in quantity and quality) -- e.g., healthcare coverage and transfer payments to those who the law intends to receive them, national security, infrastructure, etc. -- are you saying (1) that 50% of total federal spending is "waste" and (2) that this (supposed) 50% of fat ("waste") can be surgically removed without cutting significantly into muscle (the intended benefits to the intended people)?
Or are you just saying that, while not approaching 50%, there is "a lot" of waste and "a lot" that can be eliminated without much/any loss of intended benefits to intended people?
A closing irony (Re: Jim -- 50% or "a lot"?
Jim ... are you saying (1) that 50% of total federal spending is "waste" and (2) that this (supposed) 50% of fat ("waste") can be surgically removed without cutting significantly into muscle .
Well, if those "40% graft" reports for Medicaid in NYS etc. are credible, read them for yourself, I'd say we could provide all current such Medicaid services for up to 40% less.
But when we are talking about *such* a lot -- gigadollars and double-digit percentage amounts in *individual programs* such as Medicaid -- teradollars overall (did I mention the "tax expenditures budget"?) I wouldn't really get too hung up on speculating whether the overall govt waste percentage is exactly 50% versus 20%, 30%, 40%, 60%, whatever.
Being we are facing such a budget crisis, I'd be rather more upset about how little is being done about it ...
~~~
Federal supervision of [Medicaid] fraud-fighting efforts is almost nonexistent. The GAO reports that the federal agency responsible for overseeing Medicaid employs just eight people, wielding a minuscule budget of $26,000 annually ... [CJ]
~~~
... being one of countless examples. That $26,000 is in response to gigadollars annually of fraud.
Who cares? Why make any effort more than that?
Milton Friedman often said govt would be better at half the cost.
Nobelist Ronald Coase in this interview relates how he started out as a British socialist, but how during 18 years of editing the Journal of Law and Economics as it empirically reviewed government programs, it found not one -- not a single program -- that wasn't wasteful and self-defeating, making costs higher and welfare lower.
"I was not willing to accept the view that all regulation was bound to produce these results.
"Therefore, what was my explanation for the results we had?
"I argued that the most probable explanation was that the government now operates on such a massive scale that it had reached the stage of what economists call negative marginal returns. Anything additional it does, it messes up."
So we've got data and two Nobelists there indicating that govt waste is on **such a scale**. Massive.
But if the subject comes up as being a concern of "the people" -- maybe even something that should be addressed and considered before we go out creating new and higher taxes? -- the notion is ridiculed and dismissed. What do people know? They don't all use the same definitions so their opinions re all this are "meaningless".
Pethokoukis just listed 50 Examples of US Government Waste.
If times were plush, one could understand. But with the a huge budget crisis approaching it is amazingly the self-proclaimed budget hawks who don't care. Who among them is saying, "No tax increases until these teradollars of waste are addressed!" Hello? Anyone?
In the private sector, the first thing a private operator does in a budget crisis is slash waste -- say at Conde Nast.
In the public sector, it's "waste? what waste?" just add the costs to the $64 trillion of unfunded liabilities the govt already has. Raise taxes to cover it all as needed later.
Do you have any idea how big $60 trillion of "off the books" liabilities is? The liabilities that Enron kept off the books were a Fig Newton in comparison -- and they went to jail. For the government it is official policy.
There's a Federal Accounting Standards Advisory Board that sets accounting standards for the govt. A couple years ago all six of its expert "public" members unanimously sought to put the "off the books" liabilities on the books as part of the govt's official debt -- because, after all, the government legally owes them.
Guess who blocked the change. The government representatives.
This is what I always find so ironic: We set standards of behavior for the government that are so far lower than we do for the private sector -- in accounting, budgeting, management efficiency, cost-benefit analysis, waste control, personal accountability for results, you name it -- then we keep running to the government to save us from the private sector!
Cognitive dissonance?
Jim, Just trying to get a
Jim,
Just trying to get a sense of scale and proportion from you, since you were replying to (and challenging the point of) someone disputing the 50% figure. Any chance you'll answer my questions?
Jim, I don't see your point
NYC has, as many big cities do, figured out just how much taxes people will pay for, how little education they need to do, and spend the rest on administrators and support staff (who are usually relatives of the city council, etc.). The people of NY have known this since I was a child living there (1957-65) and have chosen to continue this system. Who the heck are you to tell them something different? 50 years of voters (probably 150), over 2 generations, have decided that they'd rather have a set of comfy jobs than well-educated children. Conservatives do not usually decry voting outcomes.
Of course, the costs are driven up by federal requirements that are not funded (special ed comes to mind), and safety precautions that normal communities do not need to take. There are many logical reasons why a large city school system would cost more (staff needs to be paid more for the location and the danger pay, for example). The people there do not seem to consider this spending as "wasted" or they would have stopped it. I simply don't see how you can look from the outside and declare that the good citizens of NYC are stupider than you. You haven't walked a mile, or even a few feet, in their shoes.
Consider, please, the disaster that was Edison Education Inc., the company that promised to take over city schools, run them cheaper while paying themselves high salaries and delivering profit to an investor community. Utter and complete failure. They failed in Philadelphia the minute they took over.
You talk about the postal service as if $.44 is a lot to ask for sending a letter from my house in rural Vermont to Huntington Beach, CA. I'm quite happy with them, actually.
I always wonder about conservatives who find waste in education and love everything about the military. It's hard for me to imagine that the military spends every dollar wisely...but there's something about those guns and planes and cannons...
The simple fact is that while nearly everyone agrees there is "waste in government", but there is nothing approaching a consensus about exactly what constitutes the waste. I laughed out loud at Don's notion that he could simply cut 50% out of any government budget...even if he tried, he would promptly be impeached and the successor would restore the spending immediately. He might want to come to a school board meeting once in his life...you couldn't even follow minimum state and federal laws for less than 80% of what we spend in our little town. The voters want the spending. Admit it. And, once you do, we can have the conversation we really need to have...do we pay for it now, later through borrowing, or inflate the deficits away?
Reagan
The Reagan tax cut did not increase revenue. Larry Lindsey found that the supply-side and demand-side effects of the tax cut reduced the static revenue loss by about a third. Any increase in revenue you may observe in the data resulted from the normal workings of the business cycle, inflation, and significant tax increases enacted in 1982 and almost every other year of the Reagan presidency.
Congrats on your book release
I liked "Imposter". It's great to read analysis from an insider.
"Any decent business owner could walk into government and cut spending by 50% and it would be easy. There is that much waste"
You know, you guys always talk about waste, but I have yet to see one of you point out exactly where that waste is and what you would cut.
Those words become so hollow and tiresome. And we have had many businessmen and women work in our government (you say they could walk in and easily identify and cut the waste, but none have been able to do so). The fact is it's not easy -- if it were we'd have done it by now. We just had a conservative in for 8 years (Bush) and for 6 of those years he had a Republican Congress. They drove the deficit up higher. What's with that? Bush WAS a businessman (he ran an oil company and something else -- can't remember), so why didn't he identify and cut the "waste"?
Conservative Republicans need to get new material to be credible. Craft your message based on evidence and facts, not wild assertions and speculation. Show us exactly where the waste is, and what you would cut without killing jobs and sending the economy into a downward spiral. Otherwise you are just throwing another baseless sound bite out there . . . sure it works for the uneducated masses, but in these parts people have brains and want solid analytical arguments.
Read the stimulas bill and if
Read the stimulas bill and if you cant identify waste then there is no help for you.
I completely agree with you on Bush. He spent like a liberal.
Let's "defund" the left!
http://www.youtube.com/watch?v=DGanl7zJdjs
Michele Bachmann is gonna solve all our problems.
One the Times article...
David Henderson has some interesting observations.
Pethokoukis too on Leonhardt on Bartlett
"Why the GOP shouldn’t embrace calls for a VAT"
I liked the article/column,
I liked the article/column, with the exception of the following from Leonhardt:
One of the country’s two political parties has no answer to an enormous economic issue — the fact that the federal government cannot pay for its obligations.
Excuse me, but just "one" of the country's two political parties has no answer to our projected long-term fiscal imbalance?? The Democrats do?? Someone please tell me what solution they have put forward. In fact, someone please tell me a solution that they have not indicated opposition to, explicitly or implicitly?
Both Parties
It's true that neither party seems to be willing to actually do anything to reduce the deficit. But in my conversations with Democrats I sense a greater degree of seriousness in dealing with the issue. Among Republicans I sense nothing except talk with no substance behind it. In part, that is because of an unwillingness to even consider the possibility of raising taxes as part of a deficit reduction package. Also, I don't hear from Republicans any real understanding of the nature of entitlements. Mostly I hear glib, totally uniformed comments like those above that the budget is 50% waste and could be cut easily by any competent businessman. That is just total BS.
Well, personally I don't care
Well, personally I don't care much, per se, if Democrats privately express more worry about the issue. Again, Leonhardt asserted that only one of the two major parties had no answer to our long-term fiscal imbalance problem, implying that the other party (the Democratic Party) does. What is/are the Democrats' solution(s)? What is the manifestation, even in substantive language (let alone legislation or proposed legislation) of this "seriousness"?
I see no legislation, proposals, or even substantive suggestions for how to significantly mitigate the long-term fiscal imbalance problem. And I see them moving in the other direction and maintaining explicit and implicit resistance to necessary sacrifices.
I see them adding a new, expensive entitlement, which, even if offset completely in an enduring and reliable way (rather than depending heavily on Medicare cuts that history indicates may not happen), would still make the long-term fiscal imbalance harder to solve, since those "offsets" will no longer be available for deficit-reduction (in other words, those "offsets" were sacrifices we were going to have to make anyway to reduce the fiscal imbalance that already existed, but now they will be used instead to "offset" a lot of incremental spending).
I see them as defenders of projected spending to a greater degree than Republicans, not advocating (in an even remotely concrete way, if at all) some combination of large scale cuts in projected spending and large increases in projected revenue, nor even just the latter.
In what ways are they "serious" about significantly reducing projected spending ("significant" meaning relative to the size of the problem) and "serious" about significantly raising revenues, and thus "serious" about solving this problem?
The best I can say is that they favor an increase in the top marginal tax rate (while resisting tax increases on the "middle class") and they are bringing back a fairly weak Paygo that exempts a huge portion of the drivers of projected deficits and that is not hard to override anyway.
As a note, I also have another problem with Leonhardt's column. He writes "Numbers from the Congressional Budget Office show that Mr. Bush’s policies are responsible for far more of the projected deficits than Mr. Obama’s.)" By "Bush policies" he seems to be referring mainly to the Bush tax cuts, which are scheduled to expire at the end of 2010. To the extent that they are extended, that is on Obama's watch. Unless he's referring to the CBO baseline (which assumes complete expiration of all the Bush tax cuts), his point is weak at best. (It's also worth noting that CBO uses static scoring and thus overstates the revenue loss from tax cuts, although the difference may or may not be significant in this context). So I have to pull back on my "I liked the article/column" and just say that I liked much of it and some of it stunk up the joint.
Perspective from fly over land
"I, like most people understand that taxes are important and we all have to pay them. 25% is reasonable."
I'm considered "wealthy" (my kids don't qualify for financial aid at colleges that cost around 50K a year to attend, so I guess that makes me wealthy), and I don't pay anywhere near 25% in federal taxes, not even close (last I checked it was about 13% of revenue). There's room to raise my taxes -- in fact, they've gone down over the past 10 years or so, and guess what? We have bridges falling down in Minnesota -- everybody here now understands what "no new taxes" gets us. As a business person, I think it's good business to have reliable roads and bridges to drive on --a transportation system gets goods from point A to point B, and it gets people to and from work.
About the stimulus package. No, it's not perfect. In a crisis and dealing with Congress you get what you get. But it has saved us from losing an additional 1-1.5 million jobs and making the "Great Recession" even worse.
AND it has had a huge (positive) impact on my community. We were driving on the most dangerous highway in the county (many people badly hurt and some killed there) daily, and our state (with gov "no new taxes" Pawlenty) DOT couldn't find the funds to upgrade the road. Thank God for the financial collapse! Without it we wouldn't have had a stimulus package, which provided the funds to fix the road. It just reopened Monday, and I drove it yesterday. It is so much safer, and my heart isn't in my throat while I'm hurtling my car through purgatory anymore. Personally, that ONE upgrade was worth the entire friggin' stimulus package . . . in my neighborhood it has saved lives, and maybe even mine, my husband's or my children's. Thanks Mr. Obama.
We're getting other infrastructure improvements out here that mean A LOT to the people. Guess who they'll be voting for in 2012? Yeah, the guy who did the "people's work" in this country, the one who created REAL change to help the people and get the economy back on track. Affordable and accessible healthcare is the next real change, and we desperately need it if we are to compete globally.