Obama intensifies push for ‘Buffett Rule’

[Ridgerunner]

So, let’s say we follow the ideological path (deontological libertarianism, Ayn Rand-style) of the Ryan-budget to its eventual end – either a dismantling or serious reduction of welfare programs. Do people really think that charity would pick up the slack? I am going to say no. If people disagree, how about some arguments to support the notion that charity can serve people just as well as government programs? Certainly, there is no current organization capable of this, but perhaps one could see this developing in some way. I have to ask, though - if charity works so well, why was welfare implemented in the first place?

Now, if we suppose that charity will be insufficient, we are apparently left with a position saying that it’s more important that rich people keep more of their money (the Ryan budget will cut taxes for the rich), even though almost all of the wealth-generation over the last 30 years has been going to the top. Look at the statistics on the ongoing increase in income inequality in the US. The US has the worst income inequality in the western world, with a gini-index of 40+.

So given that fact, perhaps we can say this to the rich: “Look, over the last 30+ years, almost all of the economic growth has been going to you guys. Between 1979 and 2007, the top 1% have seen their income increase by 275%, whereas income for the working class and the middle class has stagnated. In 2007 (it’s probably worse now), the top 10% took home 50% of the income. The top 1% took almost 24% of the income. You have gotten all the increases in income, so you have to pay more of the taxes. Either that, or the working class and middle-class gets paid more, so they can afford to pay more in taxes. Your choice. But you have to choose between the two. You cannot have all the increases in income without taking on the burden of higher taxes.”

The “Ryan Budget” doesn’t reduce government programs at all. It reduces their rate of growth to be more consistent (but still at a deficit) with the economy’s capacity to pay.

In 1929, the government first started keeping statistics on the relative shares of national income going to property (capital) and labor. Ever since then, it has varied almost not at all. Both basically move up and down together, but labor’s share is greatest at full employment.

There are reasons for all of that.

But transfer payments all come from labor’s share. When one looks at income stagnation for working people, one really needs to look at increases in involuntary transfer payments. They, and the take from working people to sustain them, have increased tremendously in the last few decades.

Some of that is due to the slowly encroaching “demographic winter” that abortion on demand has brought about, and the resultant increase in non-working people relative to working people. Clearly, then, increasing involuntary transfer payments (due both to aging and increased welfare) presses down on earnings from work.

But the whole thing is a downward spiral. The lower the income from work, the lower is the birth rate. That’s because income from all sources only goes to two places; individual consumption and transfer payments. Transfer payments are of two kinds; voluntary and involuntary. Voluntary transfer payments go to things like raising children, educating them, gifts, charity, support of a spouse, etc. Voluntary transfer payments tend to have a beneficial economic effect. Involuntary transfer payments are of two kinds: taxes and theft. We are all aware how we can be impoverished by theft. We are less aware how we become impoverished by taxation. Regardless, involuntary transfer payments reduce voluntary transfer payments. That’s just simple math.

That’s why childlessness and taxation are the primary enemies of prosperity for working people. That’s also why it is not only incorrect, but destructive, to think of increased taxation as a route to prosperity. And increasing taxes on those who invest in property (capital) is destructive to the income of labor because they both move up and down at the same time, and have ever since the government started analyzing it statistically. You can’t improve your food supply by eating the seed corn.

So, the real cures for low income are full employment and child-rearing. Neither is being encouraged today as a matter of policy. On the contrary, both are being mightily discouraged by government policy.

And it will get worse the way things are going. Right now, every man, woman and child owes $140,000 as his/her portion of the government debt. I have four working adult children. When my wife and I die, their share increases by $70,000 apiece, to $210,000. Just like that. And that would be if the government never borrowed another dime. It is fashionable to talk about the burdens of college debts (average about $30,000). But at least education confers a measurable economic benefit. Government debt doesn’t. Under no circumstances should we be blase about increasing that individual debt even further. Yes, they will have to pay it, in one way or another. They will do so by increased taxes, inflation and/or higher interest rates. There is no way out of that.

So, while it might be emotionally satisfying to raise taxes, it is a worthless enterprise or worse if, by doing so, the downward spiral is accelerated.

 

[tqualey]

Hi, Estesbob,

Would you kindly provide a working definition of ‘marginal rates’ and ‘effective rates’? I thnk this will come up again and it would be good if we are all on the same page.

Thanks

God bless

The problem with these discussions is the left delights in comparing the secretaries marginal rate with their bosses effective rate The truth is their bosses pay a much higher effective rate
Than their secretaries do.

 

[tqualey]

Hi, Ridgerunner,

This was an excellent post!

God bless

The “Ryan Budget” doesn’t reduce government programs at all. It reduces their rate of growth to be more consistent (but still at a deficit) with the economy’s capacity to pay.

In 1929, the government first started keeping statistics on the relative shares of national income going to property (capital) and labor. Ever since then, it has varied almost not at all. Both basically move up and down together, but labor’s share is greatest at full employment.

There are reasons for all of that.

But transfer payments all come from labor’s share. When one looks at income stagnation for working people, one really needs to look at increases in involuntary transfer payments. They, and the take from working people to sustain them, have increased tremendously in the last few decades.

Some of that is due to the slowly encroaching “demographic winter” that abortion on demand has brought about, and the resultant increase in non-working people relative to working people. Clearly, then, increasing involuntary transfer payments (due both to aging and increased welfare) presses down on earnings from work.

But the whole thing is a downward spiral. The lower the income from work, the lower is the birth rate. That’s because income from all sources only goes to two places; individual consumption and transfer payments. Transfer payments are of two kinds; voluntary and involuntary. Voluntary transfer payments go to things like raising children, educating them, gifts, charity, support of a spouse, etc. Voluntary transfer payments tend to have a beneficial economic effect. Involuntary transfer payments are of two kinds: taxes and theft. We are all aware how we can be impoverished by theft. We are less aware how we become impoverished by taxation. Regardless, involuntary transfer payments reduce voluntary transfer payments. That’s just simple math.

That’s why childlessness and taxation are the primary enemies of prosperity for working people. That’s also why it is not only incorrect, but destructive, to think of increased taxation as a route to prosperity. And increasing taxes on those who invest in property (capital) is destructive to the income of labor because they both move up and down at the same time, and have ever since the government started analyzing it statistically. You can’t improve your food supply by eating the seed corn.

So, the real cures for low income are full employment and child-rearing. Neither is being encouraged today as a matter of policy. On the contrary, both are being mightily discouraged by government policy.

And it will get worse the way things are going. Right now, every man, woman and child owes $140,000 as his/her portion of the government debt. I have four working adult children. When my wife and I die, their share increases by $70,000 apiece, to $210,000. Just like that. And that would be if the government never borrowed another dime. It is fashionable to talk about the burdens of college debts (average about $30,000). But at least education confers a measurable economic benefit. Government debt doesn’t. Under no circumstances should we be blase about increasing that individual debt even further. Yes, they will have to pay it, in one way or another. They will do so by increased taxes, inflation and/or higher interest rates. There is no way out of that.

So, while it might be emotionally satisfying to raise taxes, it is a worthless enterprise or worse if, by doing so, the downward spiral is accelerated.

 

[ishii]

Well, yeah. Those who are against the “Buffett Rule”. Do tend to be republicans.

ATB

So you’re saying that if someone is a Republican that they are against looking after the poor, handicapped and elderly? I am one of those Republicans - but I don’t necessarily think it is the federal government’s job to look after the less fortunate. For starters, what you’re saying is insulting and an ad hominem - we may have different methods as to how to help the less fortunate, but I believe we want to help them. Second, why does it make sense to tax someone in Florida, send that money to Washington DC, pay a bureaucrat to decide who should get that money, send it to another bureaucrat, and so on… then the money filters (or trickles down to the poor finally. Why not let the state of Florida, or the city government in addition to private charities help the poor? If you are for the federal government doing everything, then you’re really for “trickle down charity.” Lastly, the methods you propose seem to go against the Catholic principle of subsidiarity - which holds that problems should be dealt with at the least centralized authority - it doesn’t get more centralized than the federal govt. Moreover, the Buffett tax wouldn’t even effect the deficit or debt much. I would be interested in hearing your answer to these points, but only if you acknowlege that both Democrats and Republicans can want to help the poor, but disagree on the methods. Let’s not engage in ad hominems and insults, okay?

Ishii

 

[Suudy]

In their zeal to pass the “Buffett Rule,” President Obama and Vice President Biden leave the false impression that many, if not most, millionaires (people who earn $1 million or more a year) are paying a lower tax rate than the middle class. The fact is that even without the Buffett Rule “more than 99 percent of millionaires will pay” a higher tax rate than those in the very middle of the income range in fiscal year 2015, according to the nonpartisan Tax Policy Center.

The president and vice president have given a series of speeches in recent days to gather public support for the Buffett Rule. The proposal is named after billionaire investor Warren Buffett, who famously wrote that many of his office staff pay a higher tax rate than he does. It would require high-income taxpayers to pay an effective tax rate of at least 30 percent of their adjusted gross income. (The effective tax rate includes not just income taxes, but also the employee share of payroll taxes and other federal taxes.) The proposal is expected to come up for a Senate vote during the week of — yes, you guessed it — April 15.

factcheck.org/2012/04/obama-and-the-buffett-rule/

 

[Suudy]

Here’s a link to the actual legislation:

gpo.gov/fdsys/pkg/BILLS-112s2059is/pdf/BILLS-112s2059is.pdf

It is an amendment to existing law. However, since it didn’t originate in the house, I don’t see how it could have been considered Constitutional.

 

[CRUE_CAB]

Communism? Man, you really are scared.

ATB

Of Obama’s plans for America’s future? Yes Iam.

 

[CRUE_CAB]

I refuse to be wealthy. Besides, I think it’s called voodoo economics if I’m not mistaken.

ATB

So if you won the lottery, you would just give all the money away in your refusal to be wealthy?

 

[Mickey_Finn]

So if you won the lottery, you would just give all the money away in your refusal to be wealthy?

I have a plan for that.

 

[Mickey_Finn]

Of Obama’s plans for America’s future? Yes Iam.

No, I mean to summon the “Red Scare”.

 

[Mickey_Finn]

So you’re saying that if someone is a Republican that they are against looking after the poor, handicapped and elderly? I am one of those Republicans - but I don’t necessarily think it is the federal government’s job to look after the less fortunate. For starters, what you’re saying is insulting and an ad hominem - we may have different methods as to how to help the less fortunate, but I believe we want to help them. Second, why does it make sense to tax someone in Florida, send that money to Washington DC, pay a bureaucrat to decide who should get that money, send it to another bureaucrat, and so on… then the money filters (or trickles down to the poor finally. Why not let the state of Florida, or the city government in addition to private charities help the poor? If you are for the federal government doing everything, then you’re really for “trickle down charity.” Lastly, the methods you propose seem to go against the Catholic principle of subsidiarity - which holds that problems should be dealt with at the least centralized authority - it doesn’t get more centralized than the federal govt. Moreover, the Buffett tax wouldn’t even effect the deficit or debt much. I would be interested in hearing your answer to these points, but only if you acknowlege that both Democrats and Republicans can want to help the poor, but disagree on the methods. Let’s not engage in ad hominems and insults, okay?

Ishii

I’m saying, if someone is a Republican. They need to be taken by the hand, and led away from that place.

ATB

 

[St_Francis]

He said: “Not the governments to spread around to people that wont work.”

Sounds like social security, not many of those recipients work, although many could.

I asked you about this before: are you in the US or in a different country? Because here in the US, people *pay into *Social Security. And the deal that the government made was, you pay into SS now, we pay current retirees, then when you retire, we will pay you.

Yeah, a gigantic Ponzi scheme which was further messed up by the Pill and ZPG, but SS is not like welfare, where a person can get on welfare without ever having paid into the system.

And I would like to point out 2 things: there are a lot of people well over 65 working at WalMart, nothing like seeing someone who can barely walk handing out stickers at the doors; and it is very hard to get hired if you are over 50-55. A lot of places won’t hire someone who is old enough to get SS, because, duh!, they get SS. They hire younger people who “really need” the job.

And why are you so upset about SS anyway? I mean, I can see a lot of reasons for being upset, but you seem personally ticked off about individuals receiving the benefits for which they paid (and usually could have gotten more from if they had invested it themselves, not to mention the fact that if they had not been forced to pay it to the government, they could have left it to their heirs.)

 

[stinkcat_14]

I asked you about this before: are you in the US or in a different country? Because here in the US, people *pay into *Social Security. And the deal that the government made was, you pay into SS now, we pay current retirees, then when you retire, we will pay you.

Actually, Social Security is no different than any other welfare program, in all welfare programs working people pay taxes and those who don’t work receive benefits. It is just that people feel entitled to welfare when it is called Social Security. Also, have you not noticed, the country is broke.

Yeah, a gigantic Ponzi scheme which was further messed up by the Pill and ZPG, but SS is not like welfare, where a person can get on welfare without ever having paid into the system.

And I would like to point out 2 things: there are a lot of people well over 65 working at WalMart, nothing like seeing someone who can barely walk handing out stickers at the doors; and it is very hard to get hired if you are over 50-55. A lot of places won’t hire someone who is old enough to get SS, because, duh!, they get SS. They hire younger people who “really need” the job.

There are a lot of SS recipients on golf courses, if you are strong enough to play golf, you are strong enough to work.

And why are you so upset about SS anyway? I mean, I can see a lot of reasons for being upset, but you seem personally ticked off about individuals receiving the benefits for which they paid (and usually could have gotten more from if they had invested it themselves, not to mention the fact that if they had not been forced to pay it to the government, they could have left it to their heirs.)

There are several problems with Social Security:

1. We have a huge deficit, we can’t afford Social Security any more. For a senior to collect $ while passing off the bills to future generations is pretty selfish.
2. Any government program that encourages takes from those who work and gives to those who don’t work is a bad program. There is no legitimate role of government to spread the wealth around like this.

 

[LisaA]

He said: “Not the governments to spread around to people that wont work.”

Sounds like social security, not many of those recipients work, although many could.

Complete misrepresentation. I suppose Granny COULD work and lots of elderly do work but Social Security was instituted as a (forced) insurance program. The “I” in FICA is for INSURANCE. Unfortunately it has simply turned into another slush fund for the federal government to raid for other uses but there is nothing about the Social Security program that indicates the purpose or effect is spreading money around to people who won’t work.

Can you explain your statement. I find it quite confusing.
Lisa

 

[stinkcat_14]

Complete misrepresentation.

Actually, you are the one with the misrepresentation. In the 1880s about 75% of men over 65 were in the labor force, today that number is under 20%. Are you saying that old people have become less healthy and less able to work in the last century?

 

[LisaA]

Actually, you are the one with the misrepresentation. In the 1880s about 75% of men over 65 were in the labor force, today that number is under 20%. Are you saying that old people have become less healthy and less able to work in the last century?

Not at all and that doesn’t address my confusion with your post as stated SS is a way of transferring from the workers to the non-workers. I think Ender pointed out that there is a huge difference between SS which people pay into (although whether they get out more or less depends on multiple factors) and thus is completely different than a simple transfer such as welfare where we taxpayers pay those who do not work although it’s entirely possible that those receiving have never paid anything into the system. Ditto with unemployment which a lot of people THINK they pay into but it is simply another cost of doing business and of having employees.

So claiming SS is some kind of ‘welfare’ is not true although there are those who get more than they give and others who never collect a dime even after paying in for decades.

As to your statement, how many men in the 1880s were “in the workforce” in the current sense of the word? America had a lot of agricultural enterprises and having grown up on a farm, in farm country I am aware that the very elderly continue to work on the farm. My 97 year old great grandmother continued to work in the garden…guess she was in the “labor force?” Not sure what any of this has to do with the issue at hand. Help me out here and connect the dots. Thanks!
Lisa

 

[Ridgerunner]

Not at all and that doesn’t address my confusion with your post as stated SS is a way of transferring from the workers to the non-workers. I think Ender pointed out that there is a huge difference between SS which people pay into (although whether they get out more or less depends on multiple factors) and thus is completely different than a simple transfer such as welfare where we taxpayers pay those who do not work although it’s entirely possible that those receiving have never paid anything into the system. Ditto with unemployment which a lot of people THINK they pay into but it is simply another cost of doing business and of having employees.

So claiming SS is some kind of ‘welfare’ is not true although there are those who get more than they give and others who never collect a dime even after paying in for decades.

As to your statement, how many men in the 1880s were “in the workforce” in the current sense of the word? America had a lot of agricultural enterprises and having grown up on a farm, in farm country I am aware that the very elderly continue to work on the farm. My 97 year old great grandmother continued to work in the garden…guess she was in the “labor force?” Not sure what any of this has to do with the issue at hand. Help me out here and connect the dots. Thanks!
Lisa

I’ll let him speak for himself, but the following might be worth considering;

1. Social Security has nearly always been “pay as you go”. In other words, what people were paying in was never a whole lot more than was going out, except during a fairly brief period when the baby boomers were in their prime earning years. Even then, there was really not some large surplus.
2. FDR sold SS as a “trust fund” concept, but even he knew it wasn’t. He said that so it would pass congress. But it was never an actuarially sound system.
3. Many people receiving SS need it. But not all do. I know a guy who is worth about $40 million. I don’t know if he put in for SS, but he and his wife are entitled to it. Should struggling working people pay for it? I know others who are worth millions; wildly guessing, perhaps as many as 200 of them. Should somebody working in a factory for $12-15/hour pay those peoples’ SS.
4. Almost nobody newly receiving SS today ever thought they would actually receive it. Baby boomers, by and large, knew it was an unsound system all along. Sure, the wealthier among them would like that extra money, but the truth is that not many have really believed in it being a 'trust fund" for decades.
5. I don’t think anybody is proposing that all elderly should be cut off SS. Some really do need it, particularly those who do not have an education or profession that would allow them to continue working, and most particularly those whose jobs have taken a heavy toll on them physically. But a lot of them can work and a lot of them do, and not just as Walmart greeters, either. I don’t know a whole lot of doctors who have worked past 65, but I know some. I have never known of a local lawyer who quit at 65. They just keep going until they die or lose their minds. I know a banker who is in his mid-seventies who still works every single day. He’s the president of the bank, which helps, of course. I know realtors who are over 65 and who do quite well.

The proper objectives are not to deprive anybody. The big question is whether the whole system will melt down in the face of an aging population. I don’t think anybody thinks it’s sustainable. So, what do we do to fix it? Well, one way to do it is to not give it to people who absolutely don’t need it. You know, if a person retires at 62, he is going to receive a reduced SS benefit, and he is not allowed to earn more than $30,000/year from working. If he does, his benefit is offset by (I think) $1.00 for every $2.00 he earns over that limit.

If it’s just to do that when a person is 62, why not at 65 or 66 or 67?

I do know this. One of the current proposals is to change the retirement age to 70. Is that more fair? I don’t think it is, precisely because some people are “all in” at 65. Much better to leave the retirement age lower but reduce the benefit to the vanishing point for those who have sufficient other income on which to live.

 

[LisaA]

I’ll let him speak for himself, but the following might be worth considering;

1. Social Security has nearly always been “pay as you go”. In other words, what people were paying in was never a whole lot more than was going out, except during a fairly brief period when the baby boomers were in their prime earning years. Even then, there was really not some large surplus.
2. FDR sold SS as a “trust fund” concept, but even he knew it wasn’t. He said that so it would pass congress. But it was never an actuarially sound system.
3. Many people receiving SS need it. But not all do. I know a guy who is worth about $40 million. I don’t know if he put in for SS, but he and his wife are entitled to it. Should struggling working people pay for it? I know others who are worth millions; wildly guessing, perhaps as many as 200 of them. Should somebody working in a factory for $12-15/hour pay those peoples’ SS.
4. Almost nobody newly receiving SS today ever thought they would actually receive it. Baby boomers, by and large, knew it was an unsound system all along. Sure, the wealthier among them would like that extra money, but the truth is that not many have really believed in it being a 'trust fund" for decades.
5. I don’t think anybody is proposing that all elderly should be cut off SS. Some really do need it, particularly those who do not have an education or profession that would allow them to continue working, and most particularly those whose jobs have taken a heavy toll on them physically. But a lot of them can work and a lot of them do, and not just as Walmart greeters, either. I don’t know a whole lot of doctors who have worked past 65, but I know some. I have never known of a local lawyer who quit at 65. They just keep going until they die or lose their minds. I know a banker who is in his mid-seventies who still works every single day. He’s the president of the bank, which helps, of course. I know realtors who are over 65 and who do quite well.

The proper objectives are not to deprive anybody. The big question is whether the whole system will melt down in the face of an aging population. I don’t think anybody thinks it’s sustainable. So, what do we do to fix it? Well, one way to do it is to not give it to people who absolutely don’t need it. You know, if a person retires at 62, he is going to receive a reduced SS benefit, and he is not allowed to earn more than $30,000/year from working. If he does, his benefit is offset by (I think) $1.00 for every $2.00 he earns over that limit.

If it’s just to do that when a person is 62, why not at 65 or 66 or 67?

I do know this. One of the current proposals is to change the retirement age to 70. Is that more fair? I don’t think it is, precisely because some people are “all in” at 65. Much better to leave the retirement age lower but reduce the benefit to the vanishing point for those who have sufficient other income on which to live.

Ridgerunner you probably haven’t read my previous posts in which I am in full 100% screaming agreement with you. I think SS and Medicare should be means tested although perhaps with respect to SS some return of one’s investment might be appropriate, particularly if we are trying to exact cooperation from those who paid in for decades thinking they WOULD get something out of it…whether they “need” it or not.

I work for very successful high income individuals and they certainly have substantial incomes after retirement and don’t need the additional SS to put food on the table. I don’t think they would object to either a means testing or extended retirement age (one is still working at age 85 and collecting SS!)

My point is with respect to Stinkcat’s premise that SS is a “welfare” type system where money is transferred from working people to non-working people. I think it’s a different sort of animal. Had the feds not raided SS for other expenses, the “trust fund” might have lasted longer. DId you hear today’s news? It’s going bankrupt sooner than we thought.
Clearly something needs to be done, it’s just a matter of the method!

Lisa

 

[St_Francis]

Actually, Social Security is no different than any other welfare program, in all welfare programs working people pay taxes and those who don’t work receive benefits. It is just that people feel entitled to welfare when it is called Social Security. Also, have you not noticed, the country is broke.

SS is different in that people were promised that if they paid in, they would get the pay-out. But obviously we have a different opinion here; I happen to believe that if people are told that if they do X, they will receive Y, that they should receive Y.

There are a lot of SS recipients on golf courses, if you are strong enough to play golf, you are strong enough to work.

If retired folks are playing golf, they have other money to live on besides SS, because SS payments are not sufficient to cover golfing, which is a fairly expensive activity.

There are several problems with Social Security:

1. We have a huge deficit, we can’t afford Social Security any more. For a senior to collect $ while passing off the bills to future generations is pretty selfish.

I do not have a problem with means-testing at this point, esp if it is gradually implemented and effected, since we are in such a bad economic situation.

1. Any government program that encourages takes from those who work and gives to those who don’t work is a bad program. There is no legitimate role of government to spread the wealth around like this.

This is not a spread-the-wealth program; it is *supposed *to be a retirement program. Unfortunately, the government mis-used the funds.

 

[Mickey_Finn]

Actually, you are the one with the misrepresentation. In the 1880s about 75% of men over 65 were in the labor force, today that number is under 20%. Are you saying that old people have become less healthy and less able to work in the last century?

You can’t be serious.