Assorted links

Comments

lmao

The world will be a better place when luck or a divine entity delivers a strategic stroke in DeLong's direction

...and the other half of the world would think otherwise! It really doesn't matter. Feldstein made a rudimentary math error which probably everyone of us has done at one time or another (but likely not in as public a venue as the WSJ). The whole thing is quite silly since one can come up with an infinite number of scenarios for a new tax code that would do what Feldstein and Romney/Ryan argue for. What is lacking at this point in time are ANY specifics about what tax preferences are to be sacrificed. Even then it really doesn't matter as once the Congressional meat grinder (e.g., lobbyist-influenced legislative process) is completed, the resulting sausage would bear no resemblance to the original proposal. The Federal budget can be balanced by humongous tax cuts, humongous spending cuts, or something in between. Neither party has told us, the electorate, how this is going to be done with the exception of the Norquist-Republicans; we know their approach.

That's over the top. However, I agree that DeLong's comments are a little misleading.
From De Long:
"No! No! Ten thousand times no!

If the maximum marginal tax rate is 28%, you cannot cut $1 of itemized deductions and increase revenue by 30 cents. It is not possible. The assumption that you can is unbelievable. Nobody should believe it.

There is a big difference between making a calculation error in an initial piece, and claiming that you "still believe the assumptions" after the error has been pointed out…"

The current tax rates on 100K+ single filers are:

28% on taxable income over $83,600 to $174,400;__
33% on taxable income over $174,400 to $379,150;__
35% on taxable income over $379,150;__

So, the Romney rates would assumably be: 22%/26%/30%. And only a portion of the 28% bracket is over 100K. So Feldstein was obviously high with his 30% figure but he's now revised it to 25%. Which seems an entirely plausible number. De Long's rant when somebody else is revising their numbers to more accurately reflect the numbers is in very poor taste. Furthermore, De Long hasn't really made the case that Romney's plan is mathematically impossible very well.

It appears that Feldstein is talking about a marginal *effective* tax rate and DeLong is talking about a marginal *statutory* rate. Those are two different concepts. Feldstein wrote:

"One further point on the appropriate marginal tax rate (objection 1 above): although the top statutory rate is 35 percent, the effective top marginal tax rate is higher because of various phase-out provisions that affect high-income taxpayers (PEP, Pease, etc.) so my original assumption of a 30 percent marginal tax rate could be appropriate even with the Romney rate reductions."

Related to this is also the issue of whether what Romney is really proposing is a cut of the top *statutory* rate to 28 percent as DeLong and the TPC assume. If one assumes that the cut is from 35 percent, then the new top statutory rate would be 28 percent. But, the Romney website does not specify what the "baseline" is for making that 20 percent cut. The CBO normally uses a "current law" baseline that assumes the tax cuts will expire (thus the rate cut would be from 39.6 percent, not 35 percent) and the current law baseline would also include the additional taxes imposed by the ACA (0.9 percent for earned income and 3.8 percent for unearned income). Quite often a "current policy baseline" is also used which assumes expiration of the tax cuts for those earning more than $250K. In either case, even if we exclude ACA, the new rate would be 31.68 percent---not 28 percent (The TPC analysis seems to have assumed the ACA taxes in their baseline). Romney has proposed eliminating the ACA, but does this mean that the tax cut will include *both* the ACA elimination *and* a 20 percent cut on top of that? Maybe, but that's not clear to me.

So, the *If* in DeLong's formulation strikes me as an IF in capital letters.

The bottom line is that Feldstein is correct---if one makes certain reasonable assumptions, the Romney plan can be revenue (and distributionally neutral). If one makes other assumptions, as the TPC has done, then it won't be. The two calculations really are not comparable and who has checked the math on the TPC's initial analysis? One of the reasons that Feldstein is forced to use the type of analysis he has used is because the TPC's study was based on their own simulation model, the details of which are not public. Feldstein is using actual 2009 IRS statistical information (the latest available), but where did the TPC's numbers on income, deductions, etc., come from? Their report does not say, so there is no way to directly check it.

Romney can perhaps be criticized by not providing more details about his plan, but I have not even seen a plan from his opponent. So, the criticism on that score seems pretty one-sided. In order to properly score a plan one would really need to have Romney write a draft bill. That's a pretty tall and unrealistic order for a presidential campaign. It's pretty clear to me the direction he wants to go (reduce deductions and rates on a revenue neutral and distributionally neutral manner) and even if his basic sketch is off $50 billion one way or the other; at this stage I'd say that's pretty damn close in the larger scheme of things. So what if to do that we'd have a top statutory rate of 29 or 30 percent. This whole thing is ultimately subject to compromise whoever takes office anyway. This scoring business is not a precise science and pretending that one can come up with a precise number (at least one closer than the discrepancies we are talking about) is wishful thinking.

"the Romney plan can be revenue (and distributionally neutral)"

But the Feldstein hypothetical would shift part of the tax burden from those below $100,000 to those over $100,000 and Romney has said that won't happen so Feldstein's exercise does not fit within the four corners of what Romney has said.

To say that Romney does not have to fully articulate his tax reform plan because Obama has not fully articulated a plan is ridiculous. Romney's "plan" is the centerpiece of his campaign. It is up to Romney to flesh out his plan. And you do not need a draft bill to get a much better idea of what he has in mind and whether it would work - a list of the deductions to be eliminated would be sufficient but Romney and Ryan have both refused to give such a list.

"But the Feldstein hypothetical would shift part of the tax burden from those below $100,000 to those over $100,000"

Please tell me how that is possible, if:

1. The tax rates of those earning less than $100K are reduced 20 percent (as assumed in Feldstein's WSJ article); and

2. None of the deductions of those earning less than 100K are eliminated to offset #1 (as assumed); and

3. Those earning less than $100K (single) and less than $200K (married) would no longer pay any tax on interest, dividends or capital gains.

Under these assumptions, those earning less than $100K get a tax reduction and no offsetting tax increase. Hardly a shift of tax burden to them, I would dare say.

Joe Smith,

Sorry for not reading your comment more carefully. I should have. I just re-read it and realized that. The Feldstein example *does* shift the tax burden from those below to those above $100K (and not the other way around) for the very reasons I outline, so it is not distributionally neutral---it makes the system *more* progressive, at least with that cut-off. Actually, what Romney has said about the issue is that he wants to maintain progressivity, but I did not read that as implying it could not be more progressive than it is now. He did not say "distributionally neutral" as I did, which was perhaps a poor substitute. I doubt *any* plan is going to strictly meet that latter criteria. Progressives should be delighted if his proposal would make the code *more* progressive. Since you raised the issue as an objection, I was initially lured into thinking that you were raising the same objection as the TPC---that the plan would somehow necessarily be at the cost of lower income cohorts. Sorry for the error.

The other point is that Feldstein's example is, well, an example. The example was presumably meant to show that within the parameters of what Romney is suggesting, the twin goals of revenue neutrality and progressivity can be met. That is not to say that Feldstein's example is Romney's plan, of course, so I would not give too much emphasis to that.

Feldstein made an embarrassing, basic mistake. It was fundamental to the calculation that formed the entire basis for his op-ed. Which is right in the middle of his supposed area of expertise.

When you do that the right way to respond is to say "oops, I made a mistake." Instead of admitting any error at all, Feldstein moves the goalposts.

I'm afraid I must add Feldstein to my list of "economists who can't be trusted." (DeLong and Krugman are already in there. The presidents-for-life of the group are Glassman and Hassett. Incidentally that makes 2 of Romney's top 4 economists who can't be trusted, and I'm starting to have doubts about Mankiw.)

Huh? He made a mistake but it did not matter to the conclusion, which was obviously correct.

His "conclusion" was the result of a flawed calculation. In his follow-up he needed to specifically acknowledge that his calculation was flawed. Not to do so is dishonest.

Now if he wants to present some new calculations to support a related (but not identical) conclusion, that is fine with me. But he should get off his high horse about how he's right and the Tax Policy Center is wrong. There is nothing wrong, as far as I can tell, with the TPC analysis (although it might be misrepresented by some Romney critics.)

What he says is that even if you accept the marginal rate should be lower, his conclusion is still correct, but he still thinks his original marginal rate could be right and says why. I suppose it would be nice if he said "oops, that was a mistake, BUT it still could be right..." (if true) But it's pretty dubious to say he's dishonest because he doesn't go out of his way to acknowledge a meaningless mistake he made.

#3 is really misleading. Most of the major Catholic universities are pretty much secular these days with the exception of their health insurance policies for employees. :-)

The article tacitly mentions that in one sentence, where they point out that the conservative muslim women attending them can be in for a bit of a shock when they find out that behavior on the campus isn't usually that religiously conservative or devout.

Yeah, worst health care plan ever. No birth control coverage (about six years ago) or vaccination coverage for kids.

And yes, I have been very surprised by the number of obviously observant Muslim females there.

It's pretty stupid that any insurance covers birth control or vaccination. "Hey I have a great idea. I'll pay you, you take 20% and then pay the doctor for these totally predictable expenses I am going to have. Thanks."

Please explain how the Feldstein plan becomes the Romney plan when Romney has not endorsed the plan. Could the Feldstein plan be called the Obama plan as well.

To be fair Feldstein is fielding numbers based upon Romney's current Tax plan, so I think it's pretty reasonable to classify as Romney's plan.

Link: http://www.mittromney.com/issues/tax

It would appear that the Feldstein plan is the only mathematically possible way for Romney not to be a liar on his more vague plan. In other words, to not lose revenue (increasing the deficit), he would have to follow pretty much all of Feldstein's plan.

So you agree that the people who have argued that Romney's plan is mathematically impossible are clearly wrong?

I didn't run the numbers, but Feldstein is a top-shelf economist, so yes I would agree that it is possible. By the way, I did run the numbers on my own household with an income in the low $200k range. My taxes would rise by about $3000. I have no mortgage though and live in a fairly low tax state, so my itemized deductions are modest anyway.

So from what I read from Feldstein, we can have 20% rate reductions by eliminating all tax deductions for those making 100k+, as well as tax exemption on health insurance for those people and no child credit for them either? I expect Romney will embrace that politically popular tax shift immediately...

It's a reasonable argument to make the case that Romney probably can't get the deduction eliminations through Congress to balance a 20% cut in all tax rates. However, several people have argued that it is mathematically impossible, which is not a reasonable argument.

Yes,, just politically impossible. Which somehow makes it better?

Mathematically feasible and politically impossible is not the highest of standards, but it compares favorably with the budgets proposed by their opposition.

Pretty much everything every candidate campaigns on is politically impossible.

#3. From the article. It does sound modest.
"Acupuncture, “typically provided only for the treatment of nausea or as part of a comprehensive pain management program for the treatment of chronic pain,"
There is $30 copay too.

The whole argument over whether Romney's half plan is mathematically feasible is ridiculous and it is ridiculous, and people are forced into it, because Romney has given only half the plan.

Romney should spell out how he would propose to broaden the base generally and show the calculation he relies on. Romney's tax plan is the foundation of his run for the Presidency and as a "plan" it is a farce.

I am sure he still has to work out with the lobbyists what will be cut...

The Romney plan is a good starting point. I think to get buy in from the under $100,000 income group, you would have to cut rates by 40%. Spending reduction and tax reform should be kept separate.

Catholic Schools have played an interesting role in Indonesia. By and large they provide the highest quality of education (compared with state or Islamic schools) and Catholicism can be usefully tolerant and syncretic in places like Java, where the majority religious practice is nominally Islam, but far from orthodox, with a large portion of traditional mystical practices. The Catholic role in educating Indonesians was recognized at Independence when most Dutch and Indos (of mixed Indonesian-Dutch heritage) were expelled, but Jesuits (and, interestingly, Jews, who were then viewed as sharing an anti-colonial stance) were allowed to remain.

This is almost a reverse of Sri Lanka's history. When the Dutch kicked the Portugese out, they pretty much allowed everyone to practice their own religion.

As long as it wasn't Roman Catholicism.

A lot of Catholic colleges had already adopted a liberal affirmative action agenda for minorities. As the Catholic middle class is shrinking, the schools need other revenue sources. Muslims fit in well with many Catholic colleges' liberal attitudes and tuition revenue needs.

There is a controversy you are likely aware about in which a Paralympic runner accused another of unfairly benefiting from longer prostheses (though it is unclear what the optimal length is): http://www.guardian.co.uk/sport/2012/sep/03/oscar-pistorius-rules-blades-paralympics.

#3: this info is consistent with previous findings. it seems that is easier for religious people to trust people from other religion compared to atheists or laid back/tolerant christians http://www.gallup.com/poll/155285/Atheists-Muslims-Bias-Presidential-Candidates.aspx?
utm_source=alert&utm_medium=email&utm_campaign=syndication&utm_content=morelink&utm_term=All%20Gallup%20Headlines%20-%20Politics

I think the more the Romney (Ryan/Feldstein et al) plan is discussed, the more feasible it looks. The critics are nibbling around the edges; the basic outline of the plan is surviving. This compares to the Obama plan, which is....

Empty Chair Day today - thank you Clint.

Prof. Feldstein's piece was an attempt to lend Gravitas to the Romney Economic Plan. It's hard to see how it did that. As well, when you say you're going to prove something is Not Impossible, you've already alerted everyone that there's something fishy about your project. Seldom is Not Impossible a winning argument.

Except when you are explicitly responding to someone accusing the plan of being impossible.

The real point is that all this debate over whether the numbers add up could be resolved through a simple expedient: Romney telling us exactly what tax deductions and exemptions he wants to abolish. Absent such an expedient, people have to speculate on what he plans to do and, not surprisingly, they will get answers that are heavily dependent on their assumptions of what Romney's secret tax plan entails.

If you say "I'm going to prove the PLan is Not Impossible", then you've conceded that there's something fishy about the plan. Fish...meet Hook.

"If you say “I’m going to prove the PLan is Not Impossible”, then you’ve conceded that there’s something fishy about the plan. Fish…meet Hook."

Were you following along? The sequence of events was: 1) Romney has a somewhat vague economic plan, 2) Ideological opponent says your plan is "Not Mathematically Possible", 3) Feldstein says, yes it is here's the math, 4) Opponents say you made Math error here. 5) Feldstein says, Ok, here is revised plan, still Mathematically Possible.

You can rag Feldstein for bad math and that's disputable, because it's more of what your base line assumptions are (whether Romney is going to use 2012 as a baseline or 2013), but instead of disputing the assumptions, he just re-runs the numbers giving his opponent the benefit of the doubt and adding a few other deductions to balance the math.

You can certainly argue that Romney's plan will never make it through Congress, but the whole attack on it as Mathematically Impossible seems to be the worst type of partisan politics.

J, I have a general policy of limiting myself to two comments per post in order to keep my sanity, as well as the reader's sanity. But I do want to thank you for your comment.

Feldstein's piece was the perfect illustration of why so many American economists are faced with so much intellectual ridicule. Here is the world's pre-eminent public finance theorist, saying he disagrees with a critique but instead of taking the critique head on (or conceding), trying to 'save his conclusion' nevertheless. Security analysts have been barred for life for doing this kind of stuff. Very disappointing.

How did he not take the critique head on? He accepted every premise of the critique and showed the plan is still workable.

Well the original error was pretty pathetic. BradD does seem to have glossed past the correction in a hasty reading of the latest Feldstien piece.

However, Feldstien corrects his error by doubling down on his abuse of the upper middle class. Joe hedgefund doesn't give a crap about employer deductability of health benefits. Joe Engineer sure as hell cares about it.

Eliminating the mortgage deduction and employer health care deductions may be good policies. However they are not a piggy bank to be raided to provide tax cuts for bankers and CEO's. Get bent Feldstien, for doubling down on your tax increase on the 80%. If you want tax reform, make it revenue and distributionally neutral. Don't use tax reform as a stalking horse for (yet another) upper class tax cut.

You seem to be the only one to point out that the no tax increases on the middle class only works if you accept that anyone who earns $100k a year is rich. Weren't these same economists claiming increases targeted at $250k+ a year would cripple middle class businesses filing as individuals? I guess they are richer than they thought they were.

This is a huge shift from those making 100k-500k to those making several million, but who cares, apparently once you make 100k you're sitting pretty.

You gotta love the sort of "journalism" that the New York Times practices today. It uses the University of Dayton as an example of a Catholic university with a growing female Muslim enrollment. Buried in the article you'll find out that the number of Muslim students has grown from 12 to 78 in a decade, with about a third of them being women. This is in a university with 11,000 students. Yawn. Wake me up if and when the Muslims reach 1%.

So I was a bit surprised at how ridiculous the comments were at DeLong's post and made a very mild critique to the effect that everyone seemed to be quibbling with minor points rather than the overall message. This post never made it out of moderation. Does the blog only allow comments that are supportive of the original post? WTH is the point of that?

Delong does not allow much in the way of commenting on his site. He's pretty reactionary about it. It's not personal.

No, you are wrong. He HATES Cliff.

You heartless snob.

You would let people lie un-punctured in the streets.

While it is slightly worrying that coverage for pseudo-medicine such as acupuncture may be mandated it will hardly be the undoing of the mandate concept. For that pseudo-medicine is too cheap compared to the most expensive effective therapies.

It it worrying on a different level: Acceptance of pseudo-medicine subverts the respect for rationality and science.

Here is another great Paralympic video

http://youtu.be/riR_SyhvB6s

#4: What aspect of this do you consider to be "good for New Zealand farmers"? Farm prices are eye-wateringly high here, and New Zealand has some of the toughest restrictions in the developed world on foreign purchases of land, which severely limits the pool of people who are prepared to pay those prices.

I am totally agree with your thoughts. Keep doing these type of work.

Comments for this post are closed