Moderate GOP candidate Jon Huntsman had brief attention recently for suggesting Dodd-Frank did not end Too Big to Fail and for proposing some solutions. After reading Matthew Yglesias, I have to agree that Huntsman doesn't propose anything serious to deal with this problem.
I don't completely disagree with Huntsman's analysis that Dodd-Frank financial reform bill did not end Too Big to Fail. While it provides for a way to wind down big banks if they face trouble, the government might still feel the need to provide a bail out instead (or in addition?).
Huntsman seems to call for a repeal of Dodd-Frank, then that a provision similar or the same as Dodd-Frank's wind-down be enacted. He also calls for a tax on these large institutions (which I think Republicans opposed). None of this seems new or too strong.
If we want to end Too Big to Fail, we need to actually break up big banks. Otherwise, I think we are doing all we can.
Saturday, October 22, 2011
My Move Left
For those of you that are long time followers of my blog (anyone?) or people close to me, you might be thinking that I seem to have moved left over the years*. One or two people have said this outright, and so I have given it some thought.
Ultimately, my conclusion is that I was more moderate during the Iraq War, mostly because I found that Democrats had no viable solution except to attack the war and attack Bush. I thought we had to stay in Iraq (you break it, you own it). So I wanted to support people that understood that and had good proposals. Along those lines, I liked people like McCain, Powell, Biden (though his solution was crazy).
But I don’t think my domestic policies have changed any. And now that domestic policy dominates, I think it appears that I have moved left, when in reality, the issues changed to things on which I am more liberal.
To be honest though, I cannot say for sure that I haven't moved left on foreign policy. I still think I was right to defend staying in Iraq. And I think I always supported the surge. But I do have a vague feeling that I was a bit more hawkish, at least at in 2004. Thoughts?
*There was a time when I had said that I would support John McCain for president. This was long before his 2008 campaign though, when he turned far to the right to appease his base.
Ultimately, my conclusion is that I was more moderate during the Iraq War, mostly because I found that Democrats had no viable solution except to attack the war and attack Bush. I thought we had to stay in Iraq (you break it, you own it). So I wanted to support people that understood that and had good proposals. Along those lines, I liked people like McCain, Powell, Biden (though his solution was crazy).
But I don’t think my domestic policies have changed any. And now that domestic policy dominates, I think it appears that I have moved left, when in reality, the issues changed to things on which I am more liberal.
To be honest though, I cannot say for sure that I haven't moved left on foreign policy. I still think I was right to defend staying in Iraq. And I think I always supported the surge. But I do have a vague feeling that I was a bit more hawkish, at least at in 2004. Thoughts?
*There was a time when I had said that I would support John McCain for president. This was long before his 2008 campaign though, when he turned far to the right to appease his base.
The Reason for Taxes
Democrats are often accused of favoring redistribution of wealth. I think that is inaccurate. Some liberals may feel this way, but I think most do not. And I especially do not feel this way. Instead, I believe in having energetic government that protects rights (courts, regulatory oversight), provides for growth (education, research, and infrastructure) and helps those at the bottom (by providing social safety net, food and housing) and helps them move up (education, job training).
In order to achieve this, we need to raise revenues. If we agree that we need these programs, and I think a majority of Americans do agree, than we need to pay for it. And to do so, the burden should fall on everyone, but the rich should pay more. This is why we do, and should, have a progressive income tax structure. It isn’t to punish the rich. It is to pay for necessary programs.
Furthermore, talking about who should pay for the services we need, and pointing out that the rich keep trying to get tax cuts at the expense of the poor is not class warfare. Implementing policies that actually do increase the burdens on the middle and lower classes so the rich can pay less is class warfare.
In order to achieve this, we need to raise revenues. If we agree that we need these programs, and I think a majority of Americans do agree, than we need to pay for it. And to do so, the burden should fall on everyone, but the rich should pay more. This is why we do, and should, have a progressive income tax structure. It isn’t to punish the rich. It is to pay for necessary programs.
Furthermore, talking about who should pay for the services we need, and pointing out that the rich keep trying to get tax cuts at the expense of the poor is not class warfare. Implementing policies that actually do increase the burdens on the middle and lower classes so the rich can pay less is class warfare.
A Mistake
I agree with this series at Foreign Policy - the Nobel Peace Prize given to President Barack Obama was a mistake. Here is the relevant quote:
Obama also surprised many by devoting much of his Nobel lecture to a defense of the legitimate use of force.
Indeed, the Nobel seems to have been given to candidate Obama -- the one defined by his opposition to the war in Iraq, promise to close Guantánamo, and pledge to foster dialogue with hostile governments -- rather than President Obama, better known for the Afghan surge, a massively expanded drone war, military intervention in Libya, and the extrajudicial killings of Anwar al-Awlaki and Osama bin Laden. Not to mention that Gitmo's still open and there's been little progress made on Middle East peace.
These actions may all be justifiable, but they're likely not what the committee had in mind.
Flat Tax v. Simple Tax
There has been a log of talk lately about the need to simplify the tax code. Let's start by assuming that is true (at the end of this post, I'll briefly address whether it is true). Right now, we have a tax code that is both progressive - meaning tax rates change as income changes - and has a lot of exemptions and deductions.
What makes the tax code complicated are the exemptions and deductions, which are numerous and the wealthy can use to decrease their tax liability. The progressive nature of the code is not what is complicated. In fact, without exemptions, figuring out your tax liability would be simple. You pay a certain percentage on your income below a certain amount, and a higher percentage on income above that amount.
What we are seeing from Republican candidates are proposals for flat taxes, which eliminate deductions and the progressive tax code. They are trying to make it sound like a flat tax is necessary to simplify the code while hiding that what will really happen is a tax cut for the wealthy. They are also adding back in some exemptions (Herman Cain's 999), which seems to be the worst of both worlds - a regressive tax that remains complicated.
Before I end, I do want to address whether the complication is necessary. The exemptions and deductions are used to incentivize certain behaviors. We can argue the merits of each exemption, but in general, we should decide whether we want a simple code and forgo providing incentives for things like homeownership, donations to charity, and affordable housing to name a few.
I don't have a strong opinion at the moment. I would rather affordable housing be provided through direct spending rather than tax spending. However, I realize tax spending is easier to implement than direct spending - contrary to rational economics models, there appears to be a psychological difference between the two. And I think charity spending is often to museums and private colleges, which may not be the most deserving or urgent needs. But I could be convinced that we need the incentives if there are better examples.
What makes the tax code complicated are the exemptions and deductions, which are numerous and the wealthy can use to decrease their tax liability. The progressive nature of the code is not what is complicated. In fact, without exemptions, figuring out your tax liability would be simple. You pay a certain percentage on your income below a certain amount, and a higher percentage on income above that amount.
What we are seeing from Republican candidates are proposals for flat taxes, which eliminate deductions and the progressive tax code. They are trying to make it sound like a flat tax is necessary to simplify the code while hiding that what will really happen is a tax cut for the wealthy. They are also adding back in some exemptions (Herman Cain's 999), which seems to be the worst of both worlds - a regressive tax that remains complicated.
Before I end, I do want to address whether the complication is necessary. The exemptions and deductions are used to incentivize certain behaviors. We can argue the merits of each exemption, but in general, we should decide whether we want a simple code and forgo providing incentives for things like homeownership, donations to charity, and affordable housing to name a few.
I don't have a strong opinion at the moment. I would rather affordable housing be provided through direct spending rather than tax spending. However, I realize tax spending is easier to implement than direct spending - contrary to rational economics models, there appears to be a psychological difference between the two. And I think charity spending is often to museums and private colleges, which may not be the most deserving or urgent needs. But I could be convinced that we need the incentives if there are better examples.
Wednesday, October 19, 2011
Who are the 99 Percent?
The recent Occupy Wall Street protests have been referencing the 99 percent versus the 1 percent - ie the percentiles of income distribution in the US. But I think it is important that we all see what the different income levels are at the different percentiles.
Income percentiles (from Tax Policy Center)
25%: $19,375
50%: $42,327
75%: $85,811
90%: $154,131
99%: $506,533
There is more nuance available if you want it. Numbers are different based on location (median income in NYC is $50,173) and tax filing status (median income for married filing jointly is $74,608). But this should give a general sense.
I won’t say where I am on this chart, but I will say that I don’t feel as high up as I am, which is apparently a pretty common phenomenon. I think I, and others, feel this way because purchasing power among much of the chart is relatively similar. I am still facing things I cannot afford that seem like basics. In other words, I would expect that someone at my position in the percentiles would have much more disposable income than I do. But overall, I am pretty comfortable, so I am not complaining.
Anyway, now when people talk about the 99 percent, we know who that is. And we know who the 99th percentile are.
Income percentiles (from Tax Policy Center)
25%: $19,375
50%: $42,327
75%: $85,811
90%: $154,131
99%: $506,533
There is more nuance available if you want it. Numbers are different based on location (median income in NYC is $50,173) and tax filing status (median income for married filing jointly is $74,608). But this should give a general sense.
I won’t say where I am on this chart, but I will say that I don’t feel as high up as I am, which is apparently a pretty common phenomenon. I think I, and others, feel this way because purchasing power among much of the chart is relatively similar. I am still facing things I cannot afford that seem like basics. In other words, I would expect that someone at my position in the percentiles would have much more disposable income than I do. But overall, I am pretty comfortable, so I am not complaining.
Anyway, now when people talk about the 99 percent, we know who that is. And we know who the 99th percentile are.
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