The following post is a comment in response to Stan Collender's poston Capital Gains and Games http://capitalgainsandgames.com/blog/stan-collender/1519/dear-budget-commission. I felt this reply was too long to submit as a comment, but I encourage anyone who wishes to reply to my post to do so over on that CG&G thread. _____________________________________________________
I do not think it is necessary – or would even be beneficial – to demand of commission members public, a priori agreement on ideological compromise even in principle (i.e., Republicans agreeing to at least some tax increases and Democrats agreeing to at least some reductions in projected entitlement spending and other social spending), nor to demand of them agreement upfront on particular targets for deficits and debt, other than at least meeting the particular target for 2015 that Obama has assigned to them.
While the commission has been assigned by Obama a particular goal for 2015, the overall goals of such a commission should be to (1) develop a politically viable plan to get us on a fiscal course that is sustainable and avoids excessive economic harm and risk (or at least gets us substantially closer to such a course), (2) identify trade-offs related to alternative plans, (3) to try to shape public opinion to affect that political viability now of the commission’s recommended plan, and (4) to increase the political viability of implementation of either the commission’s plan or adoption and implementation of some other subsequent plan in the future.
Goal #1 would be based on a target debt/GDP curve – i.e., the plan’s projected debt/GDP each year for the next 20 or 30 years (even with the greater level of uncertainty the farther out projections go). The target curve reflects not only the longer-term debt/GDP target(s), but also targets for earlier years, reflecting the path to the longer term (when and to what degree to reduce debt/GDP along the way). Target deficits for each year are implicit in the debt/GDP curve target. The plan would, of course, lay out how to achieve that target debt/GDP curve via fiscal policy (spending and revenue sides) per assumptions regarding current GDP outlook and dynamic effects on that GDP baseline of fiscal policy changes, as well as underlying assumptions regarding interest rates, healthcare inflation, etc.
It is indeed best if at least 14 members of the commission are at least privately open to the possibility of a combination approach of tax increases and reductions in projected spending, as opposed to insistent on all of one or the other. But I don’t think it is necessary – and probably not even wise – to require that would-be commission members from each “side” publicly accept, even just in principle (without specifics), this ideological compromise a priori as a pre-condition for a commission getting started.
On the other hand, anyone (particularly politicians) who have publicly taken a hard stand against such compromise would likely obstruct to the extent they could any agreement by the commission on a recommendation, since any recommendation the commission can achieve is highly likely to reflect such a compromise. Thus, such individuals are highly undesirable as commission members, and enough of them could indeed doom the commission to failure to reach agreement on a recommendation, although there is some chance that even such individuals could end up supporting a compromise approach (or at least compromise in principle) if the commission lays out an alternative per that member’s supposed ideological ideal and if he/she sees supporting the sacrifices therein as even more politically costly than supporting the compromise approach. There is, therefore, a significant difference between requiring commission members to agree in principle on ideological compromise a priori vs. presenting them (and their constituents) with alternative plans and related trade-offs and then seeking their agreement on compromise.
Even such a “failure” scenario would most likely be better than no commission at all, since at least the commission would likely identify the trade-offs, and the public could then see how much of what must be sacrificed in order to take an extreme, ideological pure approach, and posturing hyperpartisan politicians (and to a lesser extent, media ideologue blowhards) could then be held accountable to at least some extent for the types of pain they wish to impose on the people in lieu of the types of pain they prefer to avoid. Those on the right who refuse to accept tax increases would have to explain why it’s better to, say, reduce seniors’ benefits by X% rather than to combine at least some tax increase with a less severe reduction in those seniors’ benefits. Similarly, those on the left who insist on maintaining projected spending (at least for much of the budget) would have to explain to voters why tax increases of Y% are preferable to a combination of at least some reductions in projected spending combined with less severe tax increases. The result of the above could be a change in the political calculus that is conducive to achieving a solution (which, in terms of political plausibility, must be a compromise, combination approach) sooner than would occur otherwise, even though not via this commission.
In addition to making clearer to the public the trade-offs from an ideological perspective, the commission could also make clearer to the public the trade-off between accepting a higher overall scale of sacrifice now (i.e., greater reduction in our projected fiscal imbalance sooner rather than later) vs. delaying sacrifice to a greater extent.
The above two potential effects could diminish the two main obstacles to fiscal responsibility: (1) Insistence by some of ideological purity largely due to unrealistic views of what is politically feasible and, in many cases, also a lack of understanding of the trade-offs, and (2) a general resistance to substantial sacrifice regardless of ideology (people unwilling to pay more in taxes but also unwilling to forego spending when programs are identified specifically.
Similarly, the commission can lay out alternatives and related trade-offs regarding both the long-term target debt/GDP and the speed with which to get there, so commission members will be in a better position to choose, in effect, among alternative trade-offs after the commission has conducted some of it’s work than before, and it’s not necessary for them to agree on particular targets upfront, although I would think at least some consideration of such targets would precede consideration of alternative fiscal plans. Ideally, time and resources permitting, a commission would develop alternatives along at least two dimensions: (1) different debt/GDP curves, with discussion of related differences in costs and risks of carrying the respective levels of debt/GDP, and (2) alternative fiscal plans to achieve each debt/GDP curve.
All below are quotes, other than titles for each which are mine.
Peter G. Peterson Foundation print ad (President and CEO of PGPF is David Walker, former Comptroller General / Head of GAO) we urge creation of an action-oriented bipartisan commission to engage the American people, consider all options, and make sensible recommendations requiring a vote by Congress. Such a commission would be an excellent first step toward improving the government’s financial health. http://www.pgpf.org/resources/Peterson_IcebergAd_Summit.pdf
Isabel Sawhill, Senior fellow, Brookings Institution December 1, 2009 We will probably need a bipartisan commission to jump start the process since our political system seems paralyzed by partisanship, but our ability to regain some measure of economic stability may well depend on whether our elected officials can find a way to place the public interest above their own more narrow interests.
Statement offered by members of the Brookings-Heritage Fiscal Seminar. The views expressed are those of the individuals involved and should not be interpreted as representing the views of their respective institutions. For purposes of identification, the affiliation of each signatory is listed. the regular political process has been incapable of dealing with long-term fiscal issues. We see no alternative but to create an independent and truly bipartisan commission or other mechanism capable of bringing about decisive action that has broad public support. We therefore urge the President to support such a commission…
Recommendations must go before Congress for an up-or-down vote with few if any amendments. Such a game-changing process is not without precedents; controversial military base closings or the ratification of international trade agreements, for example, have long been governed by special rules along these lines, not by business as usual.
From paper by The Fiscal Seminar Group (The Fiscal Seminar is a group of scholars who meet on a regular basis, under the auspices of The Brookings Institution and The Heritage Foundation, to discuss federal budget and fiscal policy issues.) November 16, 2009 the current political environment creates strong disincentives for individual politicians to tackle the tough choices required to put our fiscal house back in order. An appointed commission could offer an alternative mechanism through which to address these thorny but critical issues by undertaking the heavy lifting of developing options and building the political consensus necessary to enact legislation. http://www.brookings.edu/papers/2009/06_commissions_sawhill.aspx
Bipartisan Entitlement Commission Needed to Control Spending and Debt by Stuart M. Butler, Ph.D., Vice President for Domestic and Economic Policy Studies at The Heritage Foundation. A bipartisan group of seven Senate Budget Committee members, including Chairman Kent Conrad (D-ND) and ranking member Judd Gregg (R-NH), have declared that they will refuse to support an increase in the debt ceiling unless a bill to create a bipartisan fiscal reform commission is included. They see such a commission as essential to tackling the coming tsunami of entitlement spending and deficit red ink that threaten the economy. The commission idea has surfaced because these members, like others in the Senate and House, have lost patience with the inability of the legislative system to deal with the prospect of runaway entitlement spending and staggering federal debt. They recognize that they, too, are caught up in the procedural and political briar patch that today makes it impossible for Congress to take firm action on spending and debt. They are right to demand a change in the way Congress deals with the problem… Creating an entitlement commission, properly designed and with clear boundaries, is a critical element to enable Congress to make hard decisions instead of systematically avoiding them… a commission … does not bypass Congress, but it does make it politically and procedurally easier to enact steps that the parties agree on after hard bargaining… Some might argue that enacting a commission is merely punting the issue and that it would be better to take strong action now. There has been bipartisan agreement for years that it would be preferable for Congress to tackle the problem directly and immediately--and in that time, the problem has only gotten worse. [S]upporters of the commission proposal and other measures that should accompany it recognize that the political and procedural barriers to immediate fiscal action are simply too great to overcome. The commission and other procedural measures would create the conditions needed for action to be accomplished. Like an alcoholic recognizing that he or she has a problem, a commission is only the first of several necessary steps, but without it there will be no treatment for the root problem itself… America …faces a legislative crisis because even lawmakers who recognize the fiscal problem are paralyzed into inaction. That is why a commission--together with other procedural actions to acknowledge the problem and change the way Washington spends money--is the first and necessary step on the road to recovery. http://www.heritage.org/Research/Budget/wm2698.cfm
Washington Post Editorial 1/8/09 Ideally, Congress would make the necessary hard choices through the normal legislative process. Its repeated failure to do so, however, may necessitate a commission to recommend reforms for the House and Senate to accept or reject. Reps. Jim Cooper (D-Tenn.) and Frank R. Wolf (R-Va.) and Sens. Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.) have offered proposals for such a panel.
Statement of Maya MacGuineas, Committee for a Responsible Federal Budget -- Hearing before the Senate Budget Committee on Bipartisan Process Proposals for Long-Term Fiscal Stability Tuesday, November 10, 2009 The Committee for a Responsible Federal Budget supports the creation of a bipartisan commission to help tackle the nation’s long-term fiscal challenges. Our former co-chairman, Leon Panetta, has previously testified in support of such a commission, and many members of our board, myself included, have worked with a number of Members of Congress to develop the details of how such a commission might work. The benefits of a Fiscal Commission are many. It would: 1) send a credible signal to creditors and financial markets that the US is serious about tackling its fiscal challenges; 2) establish a shared fiscal goal; 3) create a bipartisan forum where these issues can be discussed; 4) establish a process to ensure that the recommendations are considered; and 5) lend political cover. First, establishing the budget commission is one potential way to meet the twin goals of sending reassuring signals to markets that we are serious about fiscal rebalancing without implementing contractionary policies too quickly and harming the recovery.
I cannot overemphasize the importance of this. If large amounts of borrowing will be necessary to keep the economy from falling back into recession, we need to be able to access to global funds at low rates... The Peterson Pew Commission on Budget Reform strongly believes that establishing a fiscal goal is a critical part of moving forward on improving the fiscal landscape. We know that the policies to achieve any of these fiscal improvements are difficult, involving spending reductions or tax increases, and in all likelihood both. In the absence of a single fiscal goal, though, it is too easy for lawmakers to oppose any set of hard choices others suggest without offering alternatives…
it will be quite beneficial to create an organized forum where the discussion of how best to achieve these fiscal goals can be hashed out between members of different parties. As a political independent and a member of a bipartisan organization, I strongly believe in the benefits of creating safe environments for bipartisan discourse; environments away from the cameras and the pollsters, where Democrats and Republicans can engage in real policy discussion….
the commission lends the political cover that will be necessary in actually passing a plan that will be effective in stabilizing the budget situation. Any plan that realistically tackles our budgetary challenges is, from a political perspective going to be—to use a technical term—brutal. It is going to involve spending cuts and tax increases, they are going to have to be big, and almost all parts of the budget will take a hit. There is no way that a politician or political party that is understandably concerned about their own future can go out on a limb and advocate any set of policies that will be large enough to fix the problem on their own. The benefit of the commission, or any similar collaborative process, is that each member can support the total package while acknowledging that it is not their first choice and there are parts they do not support on their own. This type of cover will be critical in passing a final agreement…. a Fiscal Commission may well be the best mechanism to jumpstart the process and make the decision making process a bit easier… …as a mechanism to send a reassuring signal to our creditors, help focus on a single fiscal goal, provide a collaborative environment to work out the details, help move along the final recommendation, and lend political cover, a commission could be immensely helpful. http://crfb.org/document/testimony-maya-macguineas-senate-budget-committee
(Testimony before Senate Budget Committee) William A. Galston, Senior Fellow, Governance Studies at Brookings…senior fellow at the Brookings Institution as well as a member of the bipartisan Fiscal Seminar convened under the auspices of Brookings and the Heritage Foundation, but testimony was in his “personal capacity, and unless otherwise noted, the views I express are mine alone.” First, these issues are difficult, engaging them is risky, and in today’s intensely polarized national politics, no one wants to take the first step. Second, ordinary budget procedures are not well designed to address problems that develop over not years but decades. While we need sharp distance vision, what we mostly have is institutional myopia. For these reasons, business as usual is unlikely to produce better fiscal results in the next decade than it has in the past…
Fortunately, there is an alternative—namely, institutions specifically designed to address the problems of polarization and near-sightedness...
There is of course no guarantee that a commission will succeed where ordinary procedures have failed. Because fiscal policy raises issues that go to the heart of partisan and ideological definition in our politics today, a commission could yield yet more gridlock. And there is a possibility that both Congress and the White House could use a commission to evade their own responsibilities and defer a debate that needs to occur. Nonetheless, the potential gains outweigh the possible costs. http://www.brookings.edu/testimony/2009/1110_senate_budget_galston.aspx
By Bob Kerrey and Warren Rudman -- Washington Post Op-Ed, August 28, 2006 Since the regular legislative process seems incapable of dealing with the impending crisis, some alternative has to be found. President Bush has suggested a commission. Having served on many commissions, we understand their potential value. We also understand how they can go wrong. In our view, a new commission could be very useful, but only if it recognizes fiscal and political realities. It needs five elements to succeed. First, it has to be truly bipartisan. Any perception that the commission's purpose is to facilitate swift enactment of a partisan agenda would doom it to failure. It must have bipartisan co-chairs and equal representation. Doing otherwise in the current partisan environment would be a waste of time and money. Second, it must have a broad mandate. While it is critical to control the growth of entitlements, particularly Medicare and Social Security, the commission should examine all aspects of fiscal policy. Third, all options must be on the table. If either side sets conditions, the other won't participate. Republicans cannot take tax increases off the table, and Democrats cannot take benefit reductions off the table. Fourth, the commission needs to engage the public in a genuine dialogue about the trade-offs inherent in realistic solutions. When people are armed with the facts and given the opportunity for honest dialogue, they are willing to set priorities and make hard choices. Fifth, the commission's recommendations should be given an up-or-down vote in Congress, allowing for amendments that would not reduce the total savings. Absent that, the report would likely join many others on a shelf. Rep. Frank Wolf (R-Va.) and Sen. George Voinovich (R-Ohio) have put forward a proposal that satisfies most of these elements. They would create a bipartisan commission with a broad mandate to examine long-term fiscal challenges. All policy options would be on the table. The commission would solicit input from the public and develop legislation that Congress and the president would be required to act on. Its work would address four key concerns: the unsustainable gap between projected spending and revenue, the need to increase national savings, the implications of foreign ownership of U.S. government debt and the lack of emphasis on long-term planning in the budget process. A commission with these attributes could give all parties the political cover they need to tackle the tough choices and develop a bipartisan consensus for solutions. This would be invaluable regardless of who controls Congress or the White House. In the end, of course, elected representatives, not a commission, will have to make the hard decisions. But a commission that produced solutions with meaningful bipartisan support would provide a catalyst for action. If Congress were required to vote on the commission's recommendations, opponents would be challenged to produce solutions of their own. Advocates of extending tax cuts would be challenged to say how they would restrain spending enough to avoid cascading debt once the baby boomers begin to retire in large numbers. Those who oppose reductions in current entitlement promises would be challenged to say how they would fund those promises without squeezing out other priorities or raising taxes to unacceptable levels that could damage the economy. …Time is running out to enact reforms. Wolf and Voinovich have come up with a credible way to get the process started. Any takers? http://www.washingtonpost.com/wp-dyn/content/article/2006/08/27/AR2006082700557.html
Blue Dog Coalition Endorses SAFE Commission Act [From the Committee for a Responsible Federal Budget website] Nov 20 2009 The Democratic Blue Dog Coalition, a group comprised of fiscally conservative members of the House, officially endorsed [2] the Securing America’s Future Economy (SAFE) Commission Act (H.R. 1557). The bill, introduced by Representatives Frank Wolf (R-VA) and Jim Cooper (D-TN), would establish a fiscal reform commission to develop legislation to address the country’s unsustainable imbalance between long-term spending commitments and projected revenues. The SAFE Commission would create a 16-member panel, including the Treasury Secretary, OMB Director, four members appointed by the Senate Majority Leader, four by the Speaker of the House, three by the Senate Minority Leader, and three by the House Minority Leader (with no more than a total of four Members of Congress on the commission). On Nov. 10, Maya MacGuineas, President of the Committee for a Responsible Federal Budget, testified before the Senate Budget Committee [3] on bipartisan process proposals for long-term fiscal stability. She argued that while a commission could be first step and not a final resolution of the country’s serious fiscal situation, a commission could be extremely helpful in focusing on a single fiscal goal, in providing a forum for working out the details, and in signaling to our creditors that we are serious about bringing down the debt. http://crfb.org/print/1743
Alan Greenspan, Dec 17, 2009 TESTIMONY BEFORE THE SENATE HOMELANDSECURITY AND GOVERNMENTAL AFFAIRS COMMITTEE HEARING ON SAFEGUARDING THE AMERICAN DREAM: PROSPECTS FOR OUR ECONOMIC FUTURE AND PROPOSALS TO SECURE IT, AS RELEASED BY THE COMMITTEE
The recommendation of Senators Conrad and Gregg for a bipartisan Fiscal taskforce is an excellent idea. http://www6.lexisnexis.com/publisher/EndUser?Action=UserDisplayFullDocument&orgId=574&topicId=25151&docId=l:1094418092&isRss=true
IMPORTANT NOTE:
Normally I would not post an email exchange on this or any blog without permission, but on another blog, after I pointed out how wrong Tamny is on fundamental assumptions of fiscal policy, Tamny made a baseless -- and bizarre -- charge that I had "stalked" and "harassed" him, even though my only communication with him of any sort had consisted of the email exchange above, nothing before, nothing since, and nothing else during the four day span of that exchange, which, as you can see, was a one-for-one, taking-turns exchange of emails (not repeated emails from me without response from him).
See his strange comment at http://www.capitalgainsandgames.com/blog/bruce-bartlett/1211/desperately-seeking-me#comment-4563 and my reply at http://www.capitalgainsandgames.com/blog/bruce-bartlett/1211/desperately-seeking-me#comment-4566
Additional notes:
The yellow background for Tamny's emails was added by me for ease of following the exchange.
In my second email, the first and second link (to Heritage) now go to updated pages on the Heritage website that contain updated versions of the charts to which I was linking, along with other charts. I believe the charts to which I linked were those showing long-term projections of deficits and of spending as a percent of GDP (using CBO numbers). And I believe my fourth link was to this particular document http://www.concordcoalition.org/act/fiscal-wake-tour/fiscal-wake-call
I have replaced my email address with "[Brooks]".
From: [Brooks] Sent: Fri 1/18/2008 12:38 PM To: Tamny, John Subject: Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
John,
Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
You write, "it should at least be remembered that as federal revenues have pretty consistently amounted to 18 percent of GDP irrespective of the tax rate, the policy answer for newly generous Republicans should not be one of shunning tax cuts."
Why not just state what you're implying, intentially or not: that tax cuts in general essentially pay for themselves -- and then some. (The "then some" part is because, assuming incremental GDP growth from a tax cut, revenues would have to more than break even to maintain even revenues as a percent of GDP.)
Perhaps you didn't state what you were implying because you didn't want to explicitly assert something with which just about every well-credentialled economist disagrees. Was that it?
Good point/question. I guess my thinking there is that I did not want to say what's true; that tax cuts pay for themselves. I didn't because everyone says that.
I figured in pointing out the consistency of 18% that this might wake these people up to the truth that it's the size of the economy that matters. Marginal rate cuts grow it, so cut rates and get your 18% of a larger pie.
Thanks for reading my article, and have a great weekend.
John
From: [Brooks] Sent: Fri 1/18/2008 3:53 PM To: Tamny, John Subject: Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
John,
Thanks for your reply. I hope you realize that my point was no nitpick, but rather extremely important in terms of choosing fiscal policy wisely and averting fiscal and economic disaster within a couple of decades.
Here's what's really important -- and there is consensus on this point among economists and other fiscal policy experts: under current tax rates and spending policies, we are on an unsustainable long-term fiscal course, due mostly (but not entirely) to projected Medicare costs over the next couple of decades, which is driven by both the retirement of baby boomers and medical inflation. Our debt-to-GDP and accompanying debt service burden will reck our economy and standard of living. We need to start reducing our long-term fiscal imbalance through spending cuts and/or (almost certainly "and") tax increases, and the longer we wait, the greater the ultimate pain will be.
Some suggested reading/video on our unfunded liabilities problem and related long-term fiscal imbalance:
And lest you or anyone else buy the pervasive "free lunch" myth that tax cuts "pay for themselves" (or better), see my collection of quotes from conservative economists on that question at http://logicizer.townhall.com/
If you wish to do your readers (and the nation) a service instead of contributing (inadvertently, I assume) to the problem, you really should educate your readers on the real economic threat we face and realistic, responsible fiscal policy options based on valid economic assumptions, not on popular myth nor cherry-picked, anecdotal evidence, presented as supposed support for some erroneous assumption regarding the relationship between tax rates and revenues. I don't mean to sound like a prick, but this is an important issue for our nation so I have to be frank.
As much as I HATE government spending and would like government to return to its constitutional mandates (ie. doing very little), I don't worry about our ability to pay off these ridiculous unfunded liabilities.
If we were really in trouble, this would show up in the yields on long-term government debt. That the yields are low tells us that markets believe what I believe; that we'll pay for these silly programs with ease. The clear answer is to get taxes lower and truly grow the economy. If/when we do, these mandates will not look so burdensome.
Conversely, they will become burdensome if we raise taxes and reduce substantially the tax base that would otherwise pay them. So I hear you about the costs, but I say we're well positioned to cover them even if we shouldn't have incurred them in the first place.
JET
From: [Brooks] Sent: Friday, January 18, 2008 4:55 PM To: Tamny, John Subject: Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
No offense, John, but I'd encourage you to get your head out of the sand on this matter. Please -- for your own edification and more importantly for that of your readers -- read/view the links I provided regarding the unfunded liabilities and related projected long-term fiscal imbalance. Again, THERE IS NO DISAGREEMENT AMONG EXPERTS on this question. We are on an unsustainable fiscal course, and the longer we wait to make substantial fiscal adjustments, the greater the ultimate harm will be. I know it doesn't "feel good" to consider what I'm saying and to look into it enough to discover that I'm right, but I urge you to do so.
And to address a couple of points you made specifically:
- No, we can't simply grow our way out of this problem. That notion is specifically rejected in some of the links I provided (which are consistent with the consensus of experts).
- I'm sure you know that many factors affect bond yields and that the straight line you are trying to draw is an inappropriate oversimplification.
AGAIN, PLEASE CHECK OUT THOSE LINKS. Your reply indicates to me that you have not done so, nor looked into and considered the matter thoughtfully.
And again, I don't wish to offend. This is just too important an issue for me not to press this point and try to get you to offer more useful information and responsible opinion to your readers. Ultimately, of course, I can't force anyone to make a good-faith effort to look into and consider this matter objectively, but I'm doing my best. Read up on it, John. Listen to what the most credentialled and credible experts are saying. A lot of people just want to believe what they want to believe (what feels good), and with such people I largely waste my time, but I hope you're not such a person. Please check out those links.
Thanks,
Brooks
-----Original Message-----
From: Tamny, John
To: [Brooks]
Sent: Mon, 21 Jan 2008 10:06 am
Subject: RE: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
Brooks:
The experts think global warming will implode us. The “experts” have been saying long before you were alive that debt would crash England, the US, and all manner of other countries. The markets are my guide far more than “experts,” and the markets suggest something completely opposite of what you’re presuming.
JET
From: [Brooks] Sent: Monday, January 21, 2008 11:55 AM To: Tamny, John Subject: Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
Sorry, John, but I have to say that your global waming comment shows a lack of intellectual sophistication, not just because it sounds like you are one of those folks who emphatically reject the sceintific consensus (not 100%, but vast majority) views on global warming out of some combination of emotional bias and cherry-picked information that you've given an undeserved weight because it fits the conclusion you feel better reaching, but because it's such weak argumentation in our discussion of the question of the degree of revenue feedback effect from tax cuts. While I'm guessing, based on your reply, that I'm probably wasting my time -- because you are probably not the kind of person who wants to make a good-faith effort to think through the question rationally, but are instead simply committed to your assumptions and conclusion -- but let's think about this rationally:
First of all, have you read/viewed the info at the links I sent? I'm guessing not, at least not at all thoroughly (not that there's a ton there), and you haven't not despite the fact that that information challenges your assertions convincingly, but because it does -- you want to avoid information that casts doubt (and then some) on the assumptions and conclusions that make you feel good.
Now, since you probably haven't read/viewed the info, let me just tell you that it substantiates what I've been telling you: There is a strong consensus among well-credentialled economists of all political stripes that (1) cuts in tax rates on individual labor and investment (capital gains & dividends) income generally have a very substantial net NEGATIVE impact on revenues (net of incremental growth in the economy and tax base stimulated by the tax cuts), and (2) under current tax rates and spending policies (most notably entitlements eligibility and benefits), our nation is on a fiscal course that will devastate our economy and standard of living within a couple of decades.
ok, now if you're with me so far, that means that almost all the experts -- the people with the expertise and resources for appropriate, professional analysis, and who have conducted such analyses -- say you are clearly wrong. Now, credibility is not just a function of level of expertise but also of sincerity (a used car salesman may be an expert on the car he's trying to sell, but that doesn't make him credible when he's trying to sell it to you), and I'm aware that folks who vocally challenge the scientific consensus on global warming claim that all those pointy-headed college professor types have a political bias or agenda that casts doubt (or more) on their sincerity, but in the case of the consensus on the two points above (#1 and #2), there is no question of such bias or agenda -- the consensus view on point #1 includes many economists who SUPPORTED the Bush tax cuts and who SUPPORT making them permanent, and in fact includes Bush's own current and former top economists (as you'd know if you bothered to read the info I sent). They obviously have no incentive to falsely claim that tax cuts have a negative impact on revenues -- to the contrary, they have the opposite incentive -- but they have reached the same conclusion as the other economists on this point. On point #2, the consensus again includes economists from across the political spectrum, spanning, for example, economists from the Heritage Foundation and the Brookings Institution (again, something you'd know if you read/viewed my info).
ok, hopefully your still with me. Now, regarding both points #1 and #2, we have a situation -- actually questions involving two enormously important policy matters with huge consequences for our nation -- in which there is strong consensus among top experts, including many who have no reason to be biased or insincere, that your assumptions are just flat out wrong, and needless to say, the combination of your two erroneous assumptions is very dangerous for America. You reply -- using a lame example -- is an assertion that experts are not always right?? And, based on that obviously true but not very meaningful or useful observation, you make the apparent nonsensical leap to the conclusion that therefore the expert consensus on these two points is essentially worthless and should simply be discarded?? And you base this weird logic, in the case of #2, on some way, way, way oversimplified view of what you think some market indicators (yields on long-term government debt) are saying about #2?? Are you kidding me? Here's my suggestion so that you can be straight with your readers and so you'll save me some time: Just say "I believe what I want to believe, period, and I'm not going to let any sort of rational thought get in the way."
In a message dated 1/21/2008 1:07:57 PM Eastern Standard Time, jtamny@realclearmarkets.com writes:
Brooks:
Understand first off that this is what I do for a living. Does that make me all-knowing? Far from it, but at least it will hopefully clarify for you the certain truth that the stuff from Heritage and the Concord Coalition was in no way new or some kind of revelation to me. Rest assured that I’ve been writing about unfunded liabilities for years and am very familiar with the arguments.
Secondly, you should do two things to wrap your own hands about something you’re very certain about. For one, you should ask yourself if you as an individual would eagerly lend money at the lowest interest rate in the world to someone certain to go bankrupt. Once you answer that question, then ask why it is investors price US debt at the LOWEST rates in the world despite a looming calamity that you and the “experts” are sure is on the way. Have you ever asked yourself why it is you and the experts (and to end one line of your thinking right away – NOT all experts share your view, don’t be ridiculous) are so smart and the infinite inputs that comprise the marketplace are so stupid? Think about that. Do you really know more than the markets?
If your answer to the above is yes, I’ve got a HUGE moneymaking opportunity for you. Rather than send out rude e-mails, put your money where your mouth is. Short the US 30 year, and I mean REALLY short it. This way since you’re so right you’ll be a billionaire in no time. Simple as that. Until then, this is a waste of time because rather than engage in thoughtful discussion, you instead call into question the thinking of others while insulting them. I’m sure you can find someone else to insult (let’s end our exchange now), but in the mean time, go make yourself a lot of money shorting US debt. You’re certain about what’s ahead, the markets disagree, so this is where profits exist. Best wishes.
JET
From: [Brooks] Sent: Monday, January 21, 2008 2:04 PM To: Tamny, John Subject: Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)
Questions for you to ponder, even though you won't:
1) One important definition of "validity" in use of a measurement to draw a conclusion is that the measurement is truly measuring what the conclusion assumes it is measuring. You point to "yields on long-term government debt" and assert that they strongly support the assertion that "we'll pay for these silly [entitlement] programs with ease", and I presume you mean without sharp, monstrous tax increases, which would by no means necessarily work anyway (could kill the goose that lays the golden eggs, so to speak). You draw a line from your observation directly to your conclusion without considering other plausible explanations for those yields and other interpretations for what they mean vis a vis this question, interpretations that call into question that straight line you so conveniently draw (convenient to what you feel good believing, that is. Unlike you, this is NOT what I do for a living, but my advantage here over you is objectivity, rationality, and a good-faith effort to arrive at valid conclusions, and as a result of that advantage, I am able, as just an intelligent, rational layperson actually taking a moment to think this through a bit, to offer just a few reasons (all independent of one another) why that line you're drawing is not as quick and simple as you seem to think it is:
- Perhaps markets expect that at some point we'll severely cut projected entitlement spending, rather than "paying for it with ease" as is, something that every expert would laugh at you for saying.
- Perhaps markets expect that we'll raise taxes very substantially to cover this projected tsunami of spending (on entitlements as currently structured plus discretionary spending as projected).
- Perhaps markets expect some combination of the two above.
- Perhaps the attractiveness of alternative investments is low (or lower than previously).
- Perhaps the global pool of investment capital has expanded.
- Perhaps to some extent there is some irrationality -- e.g., the bigger fool theory -- and an expectation to sell before the market adjusts to a rational level.
I'm sure there are much, much more, but the point is that you are taking your observation of yields and holding it out as the be-all-end-all proof of your assertion that we'll be able to pay for everything "with ease" on our current course, even almost every expert would find that assertion obviously ridiculous. And although obviously no one can predict long-term growth rates with anything close to certainty, we are talking probabilistically here, and the expert consensus is that it is certainly NOT highly likely or even more likely than not that we can "grow our way out of the problem".
As for the "tax cuts increase revenues" baloney, I've given you plenty of reason to think that claim is false (expert consensus), and you've got nothing to support the belief that it's true, yet you persist with that belief. I guess that's the definition of irrationality...or insanity, but I assume the former. You just want to stick with the belief that feels good, period. Hey everyone, FREE LUNCH !! WE CAN HAVE OUR CAKE AND EAT IT, TOO !!
Have fun in your feel-good dreamworld. In a way, I envy you. Must be nice to be able to avoid unpleasant conclusions (and perhaps even be rewarded for it by others) by simply dismissing contradictory evidence despite its strength. As long as the erroneous conclusions don't lead to decisions that harm one's self, I guess that capacity for / tendency toward self-delusion is an emotional plus. Good for you. Now go back to your regularly scheduled affirmations and forget all about the bad man who challenged your feel-good beliefs. There, there.
In a message dated 1/21/2008 3:21:46 PM Eastern Standard Time, jtamny@realclearmarkets.com writes:
No, I’m doing nothing but saying that if the “experts” shared your view, then yields would be high and you wouldn’t have to so vainly try and prove something that evidently you’ve failed to prove to others.
If it makes you feel better though, no doubt the markets expect any number of scenarios including variations of what you put below such that the unfunded question is not the calamitious one your expertise brings you to believe it is. To note one, “- Perhaps the global pool of investment capital has expanded.”, true or not true, if it is and if it explains why the markets mock what you’re certain about, it doesn’t change the reality that you might seriously overrate this subject matter.
Whatever you do, once you’ve made your billions, buy yourself a copy of Dale Carnegie’s book on winning friends and influencing people, then luxuriate in your certain retirement with a study of “expert” predictions past. Even if ALL the experts shared your views (begging the question once again of why you’re insulting my person and time with these e-mails), there’s lots of history showing the folly of “expert” opinion.
Anyway, PLEASE erase my e-mail and stop harassing me. Since I’m so wrong you’ve surely got a whole group of “right” people eager to know what you believe. Count me as not one of them, and please stop e-mailing me.
From: [Brooks] Sent: Monday, January 21, 2008 [time not recorded] To: Tamny, John Subject: Re: "Disagreeing with David Brooks on Taxes" (RCM 1/18)]
"Harassing"??? Grow up. Takes two to tango. All I've done is reply one-for-one to each of your emails. If I had not gotten a reply, I would not have written again. Again, grow up and learn to deal with reality in a rational way.
As for you arguments below, they amount to straw men -- pretending my argument, and yours, were things they were not -- and non sequiturs, although in fairness to you, it may be inadvertent; you may simply be fundamentally confused. But it is possible that you're not so confused, but realize that you can't defend the statements you actually made or refute mine, and are deliberately mixing up concepts/arguments/assumptions, etc. just so that you can reply (for your own odd satisfaction, I guess) with some ostensible argument.
Rather than trying to deconstruct and explain your straw men and non sequiturs, let me just say this: If a large part of the reason for those yields is that the markets assume that we will fundamentally change course on fiscal policy via very substantial cuts in projected entitltement spending (via reductions in benefits and eligibility, and perhaps some changes to our healthcare system to reduce projected medical inflation) and/or very substantial tax rate increases, then that market assumption is predicated on the assumption that rational, responsible people like me who are urging rational analysis and responsible policies will prevail over irrational, feel-good, head-in-the-sand, "don't worry, be happy" folks like you who say basically "Don't worry, everything will be ok on our policy current course, and anyway, if we need more revenue to cover all that projected spending, we can just keep cutting taxes until we have enough -- problem solved!"
Grow up. Or at least recognize your lack of rationality and/or maturity and ask anyone who would give you a forum to express your irrational beliefs and advocate irresponsible policies to please take that forum away from you before you influence others with such garbage.
