by Tyler Cowen
on December 4, 2012 at 11:42 am
in Uncategorized |
1. Legal precedents for charter cities?
2. Edward Conard on Warren Buffett.
3. Venkatesh responds to the NYT.
4. The Memory Palace works in virtual environments.
5. Take a trampoline in to your workplace (there is no great stagnation).
6. Some good photos from 2012.
#6: Photo #11 and this photo are the two that best capture the paradigm of early 21st century Western societies.
Agreed, especially the second one! Amazing.
And Photo #28 captures the timeless courage, justice, hope and virtue residing within each human, waiting to be unleashed.
Nothing from the Olympics? Oh, the Paralympics made the cut.
Also, I thought #23 catches the zeitgeist pretty well.
2- conrads arguments were logical and backed up empirically. I.e he will persuade nobody.
I didn’t get this:
“Today, higher taxes are needed to fund an increase in unproductive consumption”
I think this is wrong. Higher taxes (and lower spending) are needed to slow the growth of the $16 trillion in debt we have imposed on ourselves.
I think Ruth Marcus nails it: http://www.washingtonpost.com/opinions/ruth-marcus-the-shifting-line-on-tax-cuts/2012/12/04/e50bd63e-3e46-11e2-ae43-cf491b837f7b_story.html
Why is investment better than consumption? Is there a literature explaining why it is more ‘productive’, macroeconomically speaking?
@#1–a weakly argued piece on policy that really is a history article. It’s unlikely that countries will give up their sovereignty for cash; for example Greece could sell assets to get out of their debt problem but won’t. I did learn something new though: “Rio Rico is a city near the Rio Grande in the Mexican state of Tamaulipas; it and the surrounding land were part of the US state of Texas (in Hidalgo County) that was ceded by the United States to Mexico in 1970. This was one of only two cessions of land by the US to a foreign country after 1959.” (Wikipedia).
I read Conard’s Unintended Consequences, and his article post is a neat summary of some of the main points in the book. I largely agree with the overall sentiment of the thesis, and the contrast between the US and Europe and the role that financial markets play in creating the environment for innovation (or not). However, he leap frogs from Buffet’s claims to his thesis without a clear link. He doesn’t answer questions at the margin – ie will changing the income tax rate from 35 to 37% significantly curtail the innovation creation that the existence of the financial markets do. To me, those are two different questions: changing rates at the margin, and the existence of the financial markets to begin with.
That said, i do not see why “Changing Rates” has become the key issue. For Democrats, the issue should be saving (and expanding) the programs that they love. How to pay for it can come in a variety of different means. Increasing Rates is not a principle, per se.
On the other side, if the Republicans can get a meaningful change in the entitlements (in the current proposal there is a change to the formula for how cost of living increases are calculated), that is something reasonable that increasing rates would be ok to do. In another congress, the rates can be voted down again… but to get the meaningful entitlement reform and more on the path of fiscal sanity, that is something that will benefit the wealthy – being in a system that is seen as even more stable, able to correct itself. It’s worth paying a little more for right now.
“For Democrats, the issue should be saving (and expanding) the programs that they love. How to pay for it can come in a variety of different means. Increasing Rates is not a principle, per se.”
David Frum frames the issue nicely. The Democrats favor rate increases while Republicans favor eliminating deductions and credits. The difference between these two is that eliminating deductions and credits will impose a disproportionate burden on people earning in the low six figures while leaving the tax liability of the ultra-wealthy virtually unchanged. It would also disproportionately affect the upper middle class in blue states relative to red states, as blue state residents benefit more from the mortgage interest deduction (due to higher property values and more expensive mortgages) and the deduction for state and local taxes. The Republicans are willing to raise taxes on doctors and lawyers in order to avoid raising rates on CEOs and multi-millionaires — it’s not clear why Democrats should go along with this. If you want to raise money to pay for social programs, sooner or later, that’s going to involve rate increases at least back to 1990s levels.
“The Democrats favor rate increases while Republicans favor eliminating deductions and credits. The difference between these two is that eliminating deductions and credits will impose a disproportionate burden on people earning in the low six figures while leaving the tax liability of the ultra-wealthy virtually unchanged.”
If that is true, please explain to me why the President’s 2013 budget proposal contains the following:
1. Re-introduction of the PEP and Pease limitations on those earning more than $250K (aka “the rich”) (for the non-experts, the “Pease limitations phase out all allowable itemized deductions so that eventually only 20 percent are permitted) ;
2. Adding a new limitation on “the rich” (on top of the Pease phase-out mentioned under #1) so that only 28 cents on the dollar can be deducted on the remaining 20 percent and only 28 cents on the dollar can be deducted/excluded on certain other items, such as employer-provided health insurance.
The administration’s revenue estimate on these two items was $165 billion and $584 billion, respectively. That’s a total of $749 billion—a little bit short of Boehner’s $800 billion offer.
I assume that by those earning more than $250K (married couples) are “rich” and not “upper middle class”. So, please explain to me why this is a “burden” on the wrong crowd when the Republicans propose it, but it is not a “burden” when the President proposes pretty much the same thing in his own budget. It sounds to me as though Boehner, in offering $800 billion in revenues through reducing tax expenditures on “the rich” is giving Obama pretty much everything he’s asked for on that score, and even a little bit more.
“I assume that by those earning more than $250K (married couples) are “rich” and not “upper middle class””
I’m not interested in the semantics: call doctors making $300,000 per year “Ron” and private equity magnates earning $3 million per year “Mitt.” The point is that under Republican proposals, it is likely the case that Rons will see their effective tax rate increase by much more and surpass the effective rates paid by Mitts. Under the President’s budget, in the part you did not mention, it calls for eliminating the the low rates on carried interest and bumping up marginal rates on both Rons and Mitts to pre-2001 levels. Altogether, the President’s budget appears to raise $1.5 trillion over 10 years so only half of the additional revenue is coming from the changes you highlight.
It doesn’t sound like you are interested in the facts, either. Get real, the carried interest proposal will generate, at best $1.3 billion per year. That’s right—$13 billion over a ten year period. I guess to some people think that makes all the difference in a $1.5 trillion tax package. If you are not interested in semantics, you should reject outright the notion that the “rich” are those earning more than $250K. This concept, you may recall, was introduced by then-candidate Obama in a campaign speech he made on March 8, 2008. We have *him* to thank for that; but he certainly succeeded in framing the debate that non-sensical way.
The original contention you made was that the Dems “prefer” tax rate increases and the Republicans prefer reducing deductions. Your analysis is because “only half” of the Dem proposal comes from reducing deductions and exclusions they “prefer” raising tax rates? Faced with the facts, I thought perhaps you’d just face reality and conclude that the Dems prefer raising revenue on a select group of “the rich” *whatever that might take*—increasing tax rates *and* reducing deductions.
I wrote *selectively* on the rich because this package is designed to minimize the effect on the ultra-rich Dem supporters (and I don’t mean private equity fund managers). I doubt very seriously the Dem proposal will result in taxing more than a tiny fraction of the wealth of the 2nd richest person in the world. And, the distributional analysis of the 2013 budget proposal prepared by the TPC shows that some of the cost of that increased revenue falls on the backs of those “non-rich” earning less than $250K per year. Those are the facts.
For Democrats, the issue should be saving (and expanding) the programs that they love. How to pay for it can come in a variety of different means. Increasing Rates is not a principle, per se.
It depends on what the Democrats want. To use the crude language of the election, for the Party of Takers, increasing rates is a principle per se. The Democrat voters must know that they are going to suffer higher unemployment and lower economic growth but they don’t care as long as the sort of people who vote Republican suffer more. The aim is to make sure the government gives them more free stuff and hence they want higher taxes on the sort of people they hate.
A more sophisticated approach would be that the appeal of the European social model is the Love That Dares Not Speak Its Name in the Democratic Party. For that they need higher taxes. So now would be an excellent time to make sure they get them. The aim is a permanent and unreversible shift of power to the centre – and hence the Democratic Party when they are in power. For someone like Pelosi that has no downside. She can reward her clients with free goodies more often and people she doesn’t like pay for it. Win-win. If it also goes to create a new base of Democratic voters, so much the better.
Either way, raising taxes is the only principle the Democrats have.
#2 when I see Buffet and others discuss taxes on TV, I always wish that they would have an expert on tax incidence in the discussion. Much of what is said is wrong.
Greg Mankiw, Nov. 26, 2012:
Warren Buffett has an op-ed in today’s NY Times on one of his most popular themes: The rich should pay more in taxes. At first blush, his position seems noble: A rich guy says that people like him should pay more to support the commonweal. But on closer examination, one realizes that Mr Buffett never mentions doing anything to eliminate the tax-avoidance strategies that he uses most aggressively.
WB is a hypocrite and a crony capitalist.
Mankiw’s article is silly. Buffett has explicitly advocated an increase in the capital gains rate and, every year, he realizes tens of millions of dollars in capital gains. Unrealized capital gains are not taxed but they also, by definition, are not income and Mankiw knows as well as anyone that the price of an asset is determined by supply and demand and a sudden increase in the supply for sale (e.g. Buffett selling billions of dollars of his holdings) would cause price to fall and some of those unrealized capital gains wouldn’t be “gains” at all.
And his #4 is the most ridiculous of all: “When he dies, his heirs will get a stepped-up basis.” Yes, that clever fox Buffett plans on avoiding taxes by dying and leaving his wealth to his heirs. Except that Buffett has repeatedly and consistently called for higher inheritance taxes, has denounced the effort led by Mankiw’s favored political party to repeal it, and it’s not even clear he plans on leaving much money to his family.
Mankiw is still salty about not getting to be head of the economist counsel or whatever Romney promised him. Once he comes to terms that his only brush with power ended after Bush 2 the happier he will be.
Buffet is a two faced POS,
He calls for higher death taxes while carefully structuring his finances to avoid paying death taxes.
Gullible is the kindest description for people who worship what Buffett says while ignoring what he does.
I don’t really care all that much about Buffett’s personal finances. Even if Buffett was busy stashing billions in Cayman Island bank accounts, that would have nothing to do with the substantive policy discussion of whether and how the government should raise additional revenue. Mankiw’s article is an example of petty and, at times, misleading ad hominem tu quoque.
What Buffett is doing is what the very rich have always been doing: pulling up the ladders behind them.
silly characterization. c’mon man, you’re better than that.
He’s also a guy who lies his ass off in these things. Remember his secretary-s 37% or so tax rate?
Picture 35, “Protesters (and dogs) shield themselves from a police water canon”
The dogs look like they’re having the time of their life, not exactly shielding themselves.
#6 all the photos seem to represent one type of world view.
leftoid equalists dominate most artistic fields. a dark, realistic view of human nature is less likely to motivate the modern cathedral-indoctrinated mind to create works of glory.
I’m not sure what you’re saying, but I think the “dark…view of human nature” motivates “leftoid equalists” and other radicals to make their art. One is driven to change everything only if one think it sucks, or at least driven to produce Human Centipede. Conservatives seem sunnier in their view of human nature, they like stuff the way it is, they see faults as redeemable by personal efforts, and therefore don’t agitate to overturn the whole system, only modified by multiple viewing of Narnia.
And then you have Albert Camus who sees life as farce and implacable nobility.
There are plenty of photos which reflect the hopeful, the noble, and the horror of things which other world views find horrible, but clearly the one choosing this group aren’t interested.
2. says “If we tax, redistribute and consume income that otherwise would have been invested, the investable pool of savings declines. With a smaller pool of capital, less-attractive investment opportunities remain unfunded. Buffett tautologically claims investors will continue to invest in opportunities with expected returns above the cutoff point. Of course they will. Investment is lost at the margin.”
1) Of course, resources aren’t “lost”–they are simply converted from investment to consumption. Do we care if people choose to spend their money on consumption rather than investment? Consumer sovereignty?
2) Is the main economic concern these days a dearth of the “investable pool of savings”? With interest rates at zero and companies sitting on trillions in cash, are we really at risk of choking off investment due to the lack of available funds?
2) Isn’t people hoarding cash a problem of not enough cash, not a problem of too much cash?
add Venkatesh to the long, and unfortunately growing list of academics behaving badly (see also Shleifer, Frey, Mishkin, et al in Inside Job).
why can’t the academy climb down from its Catholic Church-like above the law perch and punish transgressors? i suppose Frey got ‘retired’ but that’s about the only case wtih any meaningful consequences that i’m aware of for committing financial or academic fraud.
Why is Venkatesh whining about someone leaking these auditor reports from inside Columbia? Wouldn’t these be open under FOIA anyways?
Presumably he needs to think that it was wrong because the alternative is that his colleagues hate him so much they want to see him out as quickly as possible.
It is a shame. Never met the guy but based on his books I was prepared to like him. Love the comments to that article.
Someone told me once that Amartya Sen was the most arrogant d!ck she had come across in academia. Which must take some work. One more data point and I am going to ask Steven Sailor to comment.
I’ve met three white men with tiny penises who are always terrified that black and hispanic men will sleep with their wives and daughters while asian men take their jobs and outproduce them in a modern information based economy. They try to couch their fear in statements of the superiority of white men and any present any of their failures as a result of the liberal establishment. I should ask Steve Sailer to comment.
How did you know their penises were tiny?
Aural acuity no doubt.
why can’t the academy climb down from its Catholic Church-like above the law perch and punish transgressors?
Comments on this entry are closed.
Previous post: Copyright Unbalanced
Next post: Does the theory of comparative advantage apply to dolphins?
Email Tyler Cowen
Follow Tyler on Twitter
Email Alex Tabarrok
Follow Alex on Twitter
Subscribe in a reader
Follow Us on Twitter
Marginal Revolution on Twitter Counter.com
Get smart with the Thesis WordPress Theme from DIYthemes.