Taxing

Today's Paul Krugman column on John McCain's tax cut mania directs us to this analysis from the Brookings/Urban Tax Policy Center where they note that "Even with the loophole closers, these proposals would reduce federal revenues by about $5.7 trillion over ten years if they could be enacted immediately." Since they can't be enacted immediately, the true cost of what he's proposing to do if he becomes president is something more like $5.4 trillion which is still an awful lot of money, way more than could possibly be saved by porkbusting and the like.

Krugman calls it "a gap so large that eliminating it would require cutting Social Security benefits by three-quarters, eliminating Medicare, or something equivalently drastic" but even that is probably an underestimate of the budgetary implications of McCainism. After all, alongside Social Security and Medicare the other big ticket item is defense, where McCain has called, albeit somewhat vaguely, for large increases in defense spending over and above the costs of eight more years' worth of war in Iraq.

Photo by Flickr user Paul Keleher used under a Creative Commons license

Comments

Porkbusting is just another one of John McCain's policy piques, like campaign finance reform, immigration, steroids, Iraq, immigration, and so on. He is always going on these holy crusades against whatever issue he thinks is the moral challenge of a generation, and three months later he's forgotten all about them. By that time, there's a new crusade.

Now I know why Republicans don't like him. I've yet to encounter another politician with half of McCain's self-righteousness.

Posted by Lev | May 2, 2008 5:05 PM

So when do those hard-hitting "journalists" from ABC report on this, and tell their viewers that McCain wants to bankrupt the country?

I won't hold my breath.

Posted by LFC | May 2, 2008 5:15 PM

Shouldn't he release his wife's tax returns so we know exactly what she stands to gain from his policies?

Posted by R | May 2, 2008 6:27 PM

Not today's Paul Krugman column. That was Monday's. Today's Paul Krugman column returns to recent form and explains that "Mr. Obama is doing much more harm to the Democratic cause" with his health care and social security positions (someone explain the latter --- advocating private retirement accounts in addition to social security makes you a renegade deviationist?) than Hillary Clinton is doing by running a race-baiting, red-baiting, religion-baiting, not-real-America-baiting, and most recently gay-baiting campaign to render the Democratic nominee for president unelectable.

I mean, wow, Krugman really does care about minor and possibly functionally indiscernible discrepancies between health care plans much more ambitious than what Congress is in a position to pass.

Posted by Daniel Koffler | May 2, 2008 6:41 PM

Indeed, that is not today's column. Today's, as Daniel Koffler above indicates, is about Barack Obama. Of course Daniel then compares the facts about Obama with his personal feelings about the Clinton's. "Red-baiting"??

As usual, it is a terrific piece, and another example of why Krugman will be seen, by many now and in retrospect by most, as the top observer of the 2008 Democratic Presidential Primary in the MSM or the internets.

Posted by Andruw | May 2, 2008 7:36 PM

Krugman calls it "a gap so large that eliminating it would require cutting Social Security benefits by three-quarters, eliminating Medicare, or something equivalently drastic"

Feature, not a bug, etc. etc.

Posted by Notorious P.A.T. | May 2, 2008 7:55 PM

Yes Andruw, red-baiting. For example, spreading innuendo suggesting that Obama is a furtive supporter of the Weather Underground. That is red-baiting.

Posted by Daniel Koffler | May 2, 2008 9:06 PM

"Yes Andruw, red-baiting. For example, spreading innuendo suggesting that Obama is a furtive supporter of the Weather Underground. That is red-baiting"

Actually, that would be evidence he supports VIOLENT TERRORISTS, not a socialist ideology per se. The two aren't the same. Sorry if you don't distinguish; I do.

For the record, Sen. Obama supports neither. And Sen. Clinton would agree.

Posted by Andruw | May 2, 2008 11:23 PM

Andruw, this is not so difficult. The Weather Underground was both a revolutionary Maoist group and a terrorist group; the two are not incompatible, as is shown by cases like the Weather Underground. In addition to promoting innuendo suggesting Sen. Obama is cozy with VIOLENT TERRORISTS, the Clinton campaign is promoting innuendo suggesting Sen. Obama is cozy with REVOLUTIONARY MAOISTS, because the basis of the innuendo is, in this instance, one and the same, and the Clinton campaign, in its promotion of the innuendo, has variously emphasized both the VIOLENT TERRORIST and REVOLUTIONARY MAOIST aspects of their innuendo.

For the record, Sen. Obama supports neither. And Sen. Clinton would agree.

In the sense that she is fully aware that it's a preposterous slander, that stating that Obama has had some casual associations with William Ayers is not any more informative than stating that he is a) a Chicago academic, b) a Chicago Democratic politician, or especially c) both, sure. Clinton is fully aware.

Has that led her to hesitate about spreading the innuendo? Not at all.

Posted by Daniel Koffler | May 3, 2008 1:15 AM

Matt,

What are your thoughts on Will Marshall's op/ed in the WSJ today, "Let's Pop the Deficit Bubble"? Considering that this was written by the president of a "progressive" think tank, maybe you should read it. Here it is below.

The U.S. Treasury recently reported that the federal deficit will hit a record high of $311 billion for the first half of the fiscal year, thanks in part to plunging corporate profits and revenues. The report was greeted with stifled yawns by official Washington. Similar indifference greeted the Social Security and Medicare trustees when they issued their annual spring warning about an even bigger fiscal time bomb: exploding entitlement costs.

The trustees are used to being ignored, but this year's warning is more serious than ever: In 2008, the oldest of 77 million baby boomers will reach the age of eligibility for Medicare and Social Security. It is the beginning of an unprecedented demographic surge that threatens to overwhelm the nation's finances if we don't act, and soon.

To this end, members of the Brookings-Heritage Fiscal Seminar, a nonpartisan group of 16 federal budget and policy experts, of which I am member, have hammered out an innovative plan for averting a fiscal meltdown. The basic idea is simple: Take entitlement spending off auto-pilot, and establish a fixed, overall budget for the programs.

Political leaders, we say, can no longer afford to let the big entitlement programs grow automatically each year, with no deliberation by Congress, no pressure to reconcile spending and revenues, and no attempts to make trade-offs among competing public priorities.

When it comes to entitlement reform, the future is now. In the report, "Taking Back Our Fiscal Future," we say: "Our political leaders have been avoiding this enormous issue – largely because it requires that the public be told that not all past promises can be met. Our group has come together, from diverse points on the political spectrum, to sound an alarm: if America is to remain strong, such evasions must end."

The best solution, of course, would be for the next Congress and president to agree on ways to reform Medicare, Medicaid and Social Security so that they continue to provide health and retirement security without running up massive deficits. But our highly polarized political class is a long way from consensus on how to modernize the nation's biggest and most popular social insurance programs.

In truth, we aren't there either. So what we propose instead is essentially a stopgap – a way to prevent automatic entitlement spending from devouring the federal budget while elected officials summon the courage to act.

The plan, conceived by Gene Steuerle and Rudy Penner of the Urban Institute, works like this: Congress and the president enact explicit, long-term budgets for Medicare, Medicaid and Social Security. With this one step, entitlements would be forced to compete for budget dollars with other vital national priorities.

Either the trustees or the Congressional Budget Office would review the programs at regular intervals, possibly every five years, to determine whether they stay within their budget. Failure to do so triggers automatic adjustments in benefits, premiums, provider payments, or tax revenues.

Of course, Congress could override these adjustments – but it would have to take explicit action to jettison fiscal constraints. This is preferable to its current passivity in the face of automatic, formula-driven spending growth.

Amazingly, discretionary programs, including defense, now constitute only 38% of all federal spending. Our proposal would end the ever-narrowing scope of congressional decision-making, and fully restore lawmakers' constitutional power of the purse.

Congress has imposed disciplinary mechanisms on itself before. The budget caps adopted in 1990, the Military Base Closing Commission, and the 1983 Social Security Commission led by Alan Greenspan are all instances in which Congress recognized the need to establish procedures that provide members political cover for unpopular decisions.

Our idea for budgeting entitlements thus reverses the "Doomsday Machine" logic of automatic entitlement spending, calling instead for the automatic tax and spending adjustments necessary to keep the programs solvent. And if the composition of our group is any guide, it could have broad, bipartisan appeal. Meeting under the auspices of the Brookings Institution and the Heritage Foundation, the gang of 16 includes prominent liberals and conservatives from eight Washington think tanks, as well as no less than three former directors of the Congressional Budget Office: Mr. Penner, Alice Rivlin and Robert Reischauer.

What unites us is fear of what unsustainable growth in entitlement spending portends. Conservatives worry that taxes on working families will have to rise to crippling levels to pay for the promises made to retirees. Progressives want to prevent automatic entitlement spending from squeezing out space in the federal budget for such vital public investments as educating the young, fighting poverty, protecting the environment, keeping our military strong, and modernizing our energy and transportation systems.

Inaction in the face of the looming budget crunch is not wise. Putting entitlements on a fixed budget will, we hope, set the stage for the long-overdue debate over how to ensure that our venerable social insurance programs continue to serve future generations of Americans.

Mr. Marshall is president of the Progressive Policy Institute.

Posted by Fred | May 3, 2008 1:43 AM

If Mr. McCain is implying that he will gut Social Security and Medicare, I will vote for him in every state on November 4.

I would rather invest in my kid's college fund than pay for some fat baby boomer's popcorn shrimp, viagra, and coronary bypass.

Posted by Sittin' on the Electric Fence | May 3, 2008 5:28 AM

Excuse me Andruw, I almost forgot about Clinton's campaign pushing around some nonsense about Obama having a Communist mentor. That, in addition to the other red-baiting, is red-baiting.

I do with you success in your ongoing fight with reality, however.

Posted by Daniel Koffler | May 3, 2008 9:16 AM

Koffler we have private retirement accounts atop Social Security, they are called IRAs and are available to everyone right now. Krugman's objections go well beyond that deceptive sound bite.

First a cap increase actually does nothing for Social Security finance as a stand-alone measure, in fact less than nothing, it simply increases total future debt while giving additional cover for general fund deficits. To understand why this is requires some thinking about the mechanics of Social Security finance that maybe you haven't but which Senator Obama should.

Which leads to a second point. A cap increase is an important and necessary component to the system of Personal Retirement Accounts that are central to Obama's advisor Jeffrey Liebman's Liebman-MacGuineas-Samwick Non Partisan Social Security Reform Plan, otherwise known as LMS. There is nothing in Obama's rather vague rhetoric on Social Security that rules out LMS (PRAs as structured in LMS can be fairly defined as not being 'privatization', there being an important difference between 'private' and 'personal').

LMS is a horrible, anti-worker plan. It proposes a totally wage worker financed fix at a cost triple what a straight out fix via taxes and then doesn't actually fix what it purportedly set out to . It does accomplish the task of bailing out current capital from some of its medium term obligations to repay Social Security all at the long term expense of everyone.

When people like Krugman, who does understand Soc Sec finance, and knowing that Liebman was one of the top three Obama economic advisors, heard 'crisis' and 'cap increase' he not unreasonably thought 'LMS' and rightfully called him on it. Whereupon a bunch of the blogosphere who do not in fact understand the financing, could not explain 'crisis' in context, and don't understand why a cap increase that sounds obviously progressive but is actually regressive in effect went berserk.

From what outside observers can see Obama has bought into the same kind of nonsense that Marshall has in the blockquoted piece. Per the 2008 Report Social Security's unfunded liability whether taken over the standard 75 year window or the Infinite Future dropped by $400 billion in a single year down to $4.3 trillion, a lot of money but a heck of a lot of improvement considering we didn't actually do anything to address 'crisis'. Why did it improve? Because it truly is the Phony Crisis that Dean Baker called it in his 1999 book. Social Security is not broke, not when using any reasonable set of economic and demographic projections. Instead it has been lumped in with Medicare, which does face challenges, in an attempt to kill it. And Obama hired the lead assassin to work on his economics team. That is worrisome. To people who know something about this topic that goes beyond right talking points.
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As for Mr. Sitting on the Electric fence. Try googling 'Butler Germanis Leninist Strategy'. You have simply been the victim of a deliberate propaganda campaign consciously designed in 1983 and printed in the Fall 1983 issue of Cato Journal. The entire strategy revolved around a divide and conquer strategy to convince Gen X and Gen Y that the problem was fundamentally one of Boomer selfishness. None of it actually holds up under numeric examination, but the Strategy was executed flawlessly with the result that a couple of generations of gormless people like you firmly believe things that simply are not true at all.

You've been played, you bought the con, congratulations.

Posted by Bruce Webb | May 3, 2008 2:04 PM

Part of the beauty of Butler and Germanis' Achieving Social Security Reform: a "Leninist' Strategy is that the propaganda campaign was carried out with such success that you can't tell the duped from the dupers.

Does Will Marshall actually understand Social Security 'crisis' in actual context? Who can tell? Because once the overwhelming majority of the population and more particularly the MSM have all bought the Big Con and internalized the Big Lie, it is kind of hard to blame the victim for the Groupthink when really all credit should go to the Ministry of Truth, in this case known as Cato.

You have to take your hat off to privatizers, at least those that are fully in on the con. They are evil bastards, but they are also really capable evil bastards that know how to sell a message.

Posted by Bruce Webb | May 3, 2008 2:18 PM

Mr. Webb:

I don't have to be "conned", because every April 15th, I am reminded in big bold black letters how much I am contributing -- involuntarily -- to the welfare (pun intended) of people I never met.

All I need to see is the proportional distribution of federal outlays:

http://www.nationalpriorities.org/Total+Federal+Outlays+FY2006

and I'm done. That money is either coming out of federal tax inflows now, or they're borrowing it. So either I'm paying for it, or my son will pay for it. And that money is not going to build America's future. It is a sop to America's most powerful bloc of practically useless people.

Now, as far as that generational divide goes -- yup, I'm gen X. No one in my family is now reaping the benefits of Social Security or Medicare. The beneficiaries are boomers. Period. Prove me wrong.

I am conducting my own personal finances with no expectation that Social Security or Medicare will be around when I retire, because they won't. Mr. Webb, I would suggest you do the same.

Posted by Sittin' on the Electric Fence | May 4, 2008 10:20 AM

"You have simply been the victim of a deliberate propaganda campaign consciously designed in 1983"

A 1983 campaign aimed at gen X and gen Y would have been targetting grade schoolers and toddlers. Forgive my disbelief.

Posted by Sittin' on the Electric Fence | May 4, 2008 10:28 AM