Craig Bernthal’s Web Log: Commentary and Reviews with a Midwest Accent and a Catholic Perspective
Blaise Pascal, Penseé 347: “Man is but a reed, the most feeble thing in nature; but he is a thinking reed. The entire universe need not arm itself to crush him. A vapor, a drop of water suffices to kill him. But, if the universe were to crush him, man would still be more noble than that which killed him, because he knows that he dies and the advantage which the universe has over him; the universe knows nothing of this. All our dignity consists, then, in thought. By it we must elevate ourselves, and not by space and time which we cannot fill. Let us endeavor, then, to think well; this is the principle of morality.”
Episode 1: Several years ago I walked into a Starbucks at the Sierra Vista Mall. The music was on especially loud, machines were grinding away, and then two young women walked in the door. Their eyes met the eyes of one of the women working behind the bar. They screamed. The woman behind the bar screamed. Then the two ran up to the bar and they all three screamed together for about two minutes. Then they settled into merely yelling. They were really happy, I think. This is not unusual behavior in California.
Episode 2: When my daughter was in junior high, I went with her as a sort of parent/helper/chaperone/camp councilor for the three or four days her school was at the camp. One of the girls in her class, who I knew from other activities as someone past "extroverted" by several turns of the nob, was in her element, because there was a sort of award at the end of camper with the most spirit. She was a megaphone on legs, and I never saw her inactive or non-vocal. Your could have given her a thousand decibel handicap, and she'd still have won the spirit award--which she did--with no close competitor. We encourage this stuff
Episode 3: Laura Ingraham, Rachel Madow, Rush Limbaugh, Bill O'Reilly, Chris Matthews, Sean Hannity, etc., etc., on any weeknight. Screaming. Interrupting other people who then scream louder.
If you are having trouble coping with the world of screamers, if it exhausts you, you might want to watch this amusing TED Talk by Susan Cain, who has just written a book on introversion entitled Quiet:
In 1985 the Commodores did a tribute to Marvin Gaye and Jackie Wilson, two famous R & B singers who had died the previous year. I heard this song again and again, as I studied Latin in the Cafeteria over the Michigan State bookstore. It is a haunting and beautiful song:
Given that I would like to retire in the foreseeable future, anything that makes the economic future of California brighter--especially PERS--is welcome news.
All over the internet and radio this week are budget projections that California will not run a deficit by 2014. Let's hope.
Here is an analysis of how fragile that prediction is:
I plan to keep adding to this page as the drama proceeds. Here are the first two entries (11/10/12):
1. From "The Fiscal Cliff May Be Overblown" by Cyrus Sanati, CNN Money, Overblown
"Discussions around raising the marginal tax rate on the top 2% are simply just political fodder. Indeed, multiple studies, including ones by the CBO say that it would raise an insignificant amount of money (a negative for the Democratic view) but would also cause no real harm to the economy (a negative for the Republican view). In the end, if it takes changing the top 2% rate from 35% to 39.6% to end this whole fiscal cliff charade, you can bet it has already been agreed to.
As cynical as it may sound, it is simply irrational for either side to address the deficit in any meaningful way given how cheaply it is for Washington to borrow money. As we have seen in Europe, nations won't swallow the bitter pill of austerity unless the markets force them to. So while the equity markets are jittery about the fiscal cliff that is not enough for Congress or the President to present any real long-term compromise if the yields on Treasuries remain at near all-time lows. It will only be when it becomes too expensive to borrow that you will see the government act in any meaningful way to address the nation's long term fiscal issues, not a second before."
Sanati's column has the ring of truth. The real problem is the long-term debt, which will not be addressed until the arithmetic takes over, in California or the United States.
2. The Budget Control Act of 2011 seems to do almost nothing in the way of addressing debts and deficits, although President Obama keeps saying that he's already cut spending by $1 trillion. See Wikipedia: Budget Control Act of 2011
Quoting the Wikipedia section on "Projected and known impacts" of the Act:
"The act will not actually reduce the overall U.S. debt over the 10-year period it is specified for, only slow down the existing rate of growth of the debt.[12] That is partly because the cuts due to the act will not reduce federal spending in absolute terms, but rather reduce the year-to-year increases in spending from what had previously been anticipated.[2] Even with the slowdown, both federal spending and the debt are still projected to grow faster than the U.S. economy, due to the cost curve effects of health care, which the act does not address.[12]"
"Most of the $900 billion in the first tranche of cuts occur in future years and so will not remove significant aggregate demand from the economy in the current and following year.[4] Only $25 billion in federal discretionary spending is required to be removed for 2012.[2] Regarding the across the board cuts, these could not take place until 2013 and so if triggered, a new Congress could vote to eliminate or deepen all or part of them. Some top Republicans were particularly concerned that any defense cuts could not go into effect until after 2013.[4]
Passage of the Budget Control Act of 2011 was not enough to avert, three days later, Standard & Poor's downgrading the nation's credit rating for the first time in the firm's history, from "AAA" (highest) to "AA+" (highest, with qualifications).[29] They said they were "pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon."[29]
In short, like all long term budget deals or tax bills, this can be undone, at will, by any future Congress and only reduces the increase in deficits and debt growth. S & P projects U.S. debt to be at least $22.1 trillion in 10 years. At Current Rates we are scheduled to hit that amount in four years. See this pinball-like representation of U.S. Debt: U.S. Debt Clock
3. If Bill Kristol is OK with a tax raise on the wealthy, then who can be agin' it?
Speaking on Fox News Sunday, conservative commentator and Weekly Standard editor Bill Kristol went even farther than Cyrus Sanati (above).
"It won't kill the country if we raise taxes a little bit on millionaires," he said. "It really won't, I don't think. I don't really understand why Republicans don't take Obama's offer…. Really? The Republican Party is going to fall on its sword to defend a bunch of millionaires, half of whom voted Democratic and half of whom live in Hollywood and are hostile?" 4. "We don't want to kick the can down the road." Corker and Conrad with Chris Wallace: Democrats, Republicans seem more ready to compromise on deficit deal
Compromise already. If Republicans can actually get significant entitlement reform and more reductions in spending by going with Obama's tax rates, they ought to do it, even if they think it will slow job creation. It's better than a deadlock.
(11/13/12)
5. "The Hard Fiscal Facts," WSJ, 11/12/12 Link: WSJ Editorial
Gleanings from this editorial, which is in favor of keeping the Bush tax cuts permanent (despite William Kristol):
1. In the fiscal year that ended on September 30, the federal government rolled up another $1.1 trillion deficit.
2. The four largest deficits in modern history accrued during the last four years, the Obama years. See the editorial for a table.
BUT
3. "Tax Revenue kept climbing, up 6.4% for the [last fiscal] year overall, and at $2.45 trillion it is now close to the historic high it reach in fiscal 2007 before the recession hit. Mr. Obama won't want you to know this, but this revenue increase is occurring under the Bush tax rates that he so desperately wants to raise in the name of getting what he says is merely 'a little more in taxes.' Individual income tax payments are now up $233 billion over the lat two years, or 26%."
4. "This healthy revenue increase comes despite measly economic growth of between 1% and 2%."
5. "Now let's look at outlays, which declined a bit in 2012. That small miracle was achieved thanks to a 4% fall in defense spending, a 24% fall in jobless benefits, and an 8.9% decline in Medicaid funding. Note, however, that federal spending remains at a new plateau of about $3.54 trillion, or some $800 billion more than the last pre-recession year of 2007. One way to think about this that most of the $830 billion stimulus of 2009 has now become part of the federal budget baseline. The 'emergency' spending of the stimulus has now become permanent, as we predicted it would."
Conclusion: we are close to gathering more revenue than we ever have, as was true during the Bush II years; we are just spending far more than we are taking in. And this was also true during Bush II's presidency: then, tax cuts coincided with big revenue gains. We just spent way more than we took in.
7. New York Times, "Showing Backbone on Debt," November 13, 2012:
"Jay Carney, the White House press secretary, provided a bit of good news this afternoon to those worried about painful compromises ahead in the negotiations over the fiscal cliff. President Obama, he said, still wants $1.6 trillion in new tax revenue (over a decade) in any package to reduce the deficit.
That’s almost impossible to achieve without raising rates on high incomes. Reverting to Clinton-era rates on incomes greater than $250,000 would raise $1 trillion; the rest could come from capping deductions, the method Republicans prefer but which would be insufficient alone.
Of course that’s just an opening position; the White House presumably is willing to come down from that number in talks with Republicans. But it’s more than the $1 trillion or so the president wanted in his talks with Speaker John Boehner in 2010, and sends a strong signal that the talks will have to yield far more than modest changes in the amount that rich people can deduct."
The editorial goes on to lament Obama's advertised deficit cutting goal:
"Less heartening, Mr. Carney also cited an overall goal of reducing the deficit by $4 trillion, the same cut achieved in the Simpson-Bowles plan. There’s no need for the reduction to be that high. As the Center on Budget and Policy Priorities has repeatedly pointed out, just $2 trillion in savings would stabilize the debt at about 73 percent of the economy, far less than the current (and growing) level of 82 percent. That would mean the debt would no longer grow faster than the economy, removing the threat of economic harm from a too-high debt burden, and giving policymakers time to deal with the real driver of long-term debt, health-care costs.
A deep, $4 trillion reduction is not necessary in part because Congress and Mr. Obama already cut $1.7 trillion from spending last year, in the various deals forced by House Republicans. Adding $2 trillion in new debt reduction on top of that would be a “notable achievement,” as the Center puts it, in a capital supposedly bound by gridlock."
The $1.6 trillion dollar additional revenue goal is twice that which Obama asked for last year, which has people speculating that Obama wants a "fiscal cliff" deal to fail. See $1.6 Trillion? Obama Doesn't Want a Deal
Obama's request does remind me of my favorite Dr. Evil Scene. "Ah . . . Dr. Evil . . . $1.6 trillion isn't very much money . . .":
The only way to a sustainable budget requires extensive tax reform, reduction of "entitlements" and spending decreases in general, but I do not see Obama's tax proposals as unreasonable. They would produce overall lower marginal rates than under the Clinton years and slightly higher marginal rates than under the Bush years. I'd like to see a compromise in which Obama's tax proposals were accepted by Republicans and significant budget reductions accepted by the Democrats. Win/Win. We are so far in the hole that a $1 revenue increase tied to a $1 spending cut is necessary, and probably not a sufficient spending reduction. But see Brian M. Riedl who would just leave the cuts in place, "Ten Myths About the Bush Tax Cuts," Heritage
Riedl's conclusion: "The 110th Congress will be serving when the first of 77 million baby boomers receive their first Social Security checks in 2008. The subsequent avalanche of Social Security, Medicare, and Medicaid costs for these baby boomers will be the greatest economic challenge of this era.
"This should be the budgetary focus of the 110th Congress rather than repealing Bush tax cuts or allowing them to expire. Repealing the tax cuts would not significantly increase revenues. It would, however, decrease investment, reduce work incentives, stifle entrepreneurialism, and reduce economic growth. Lawmakers should remember that America cannot tax itself to prosperity."
You can find out marginal federal income tax rates back to the year 2000 (Clinton, pre-Bush rates)
by going to Moneychimp: Federal Tax Brackets
In 2000, for a married couple filing jointly, these were the rates;
15% 0 and $26,250:
28% $26,250 and $63,550:
31% $63,550 and $132,600:
36% $132,600 and $288,350:
39.6% $288,350+
Current marginal rates with the Bush tax cut in place are as follows, for a married couple filing jointly:
10% on taxable income from $0 to $17,400, plus
15% on taxable income over $17,400 to $70,700, plus
25% on taxable income over $70,700 to $142,700, plus
28% on taxable income over $142,700 to $217,450, plus
33% on taxable income over $217,450 to $388,350, plus
35% on taxable income over $388,350.
Under the Obama proposal for married filing jointly (see below):
10% $0 to $17,900 15% $17,900 to $72,500 25% $72,500 to $146,350 28% $146,350 to $223,050 33% $223,050 to $247,000 36% $247,000 to $398,350 39.6% $398,350+:
Under current policy, there are six taxable income brackets – 10%, 15%, 25%, 28%, 33%, and 35%. Obama’s proposal would let part of the 33% tax bracket and all of the 35% tax bracket rise to Clinton-era tax rates: 36% and 39.6%[1][2]. The split in the 33% tax bracket (where the upper part goes up to 36%) is set to be the number calculated above: $247,000. (The same calculation for single filers comes out to $203,600). So the marginal tax rates on taxable income under each scenario are as follows:
Filing Status
Tax Cuts Expire (2013 projected parameters)
Current Policy (2013 projected parameters)
Obama Proposal (2013 projected parameters)
Single
$0 to $36,250:15%
$36,250 to $87,850: 28%
$87,850 to $183,200: 31%
$183,200 to $398,350: 36%
$398,350+: 39.6%
$0 to $8,950: 10%
$8,950 to $36,250: 15%
$36,250 to $87,850: 25%
$87,850 to $183,200: 28%
$183,200 to $398,350: 33%
$398,350+: 35%
$0 to $8,950: 10%
$8,950 to $36,250: 15%
$36,250 to $87,850: 25%
$87,850 to $183,200: 28%
$183,200 to $203,600: 33%
$203,600 to $398,350: 36%
$398,350+: 39.6%
MFJ
$0 to $60,550: 15%
$60,550 to $146,350: 28%
$146,350 to $223,050: 31%
$223,050 to $398,350: 36%
$398,350+: 39.6%
$0 to $17,900: 10%
$17,900 to $72,500: 15%
$72,500 to $146,350: 25%
$146,350 to $223,050: 28%
$223,050 to $398,350: 33%
$398,350+: 35%
$0 to $17,900: 10%
$17,900 to $72,500: 15%
$72,500 to $146,350: 25%
$146,350 to $223,050: 28%
$223,050 to $247,000: 33%
$247,000 to $398,350: 36%
$398,350+: 39.6%
As Luke Bernthal notes, in the comment below, we now have the lowest "highest marginal rate" since the Depression years:
The graph is interesting, but those super high marginal rates after World War II were also connected to a very different scheme of deductions, including an interest deduction for all interest (not just mortgage) and no alternative minimum tax. What would be very interesting would be a graph showing effective federal income tax rates back to the thirties. I cannot find that data, and I'm not sure it exists. For effective rates back to 1979, see the previous blog.
As we get into the "fiscal cliff" Congressional contest, we are going to hear a lot about tax rates. Here are the current rates. Historically, the most relevant data with regard to revenue collection may be effective federal income tax rates, which stay surpisingly even, even though marginal rates have varied a lot.
(Interesting exchange on "fiscal cliff" and raising taxes)
Shields fails to acknowledge that one of the big reasons why we had "fiscal sanity" during the Clinton years was that a Newt Gingrich led Republican House blocked a lot of federal spending. This, in addition to deficit reducing taxes, laid the foundation for the prosperity of the Bush II years.
What the United States needs to do is very simple. We need a small tax increase, but not so much to interfere with economic growth. We need to cut discretionary spending. We need big "entitlement" reforms in Social Security and Medicare / Medicaid. (We await the full financial impact of Obamacare.)
I have not yet found official figures on all the popular vote splits in the swing states. In Ohio it was about 50 to 48, according to the Toledo Blade, President Captures Ohio. The national split was also 50 to 48. Florida has yet to declare a winner, even though the map above give the state of Obama. The popular vote is 49.9 to 49.3, with Obama in the lead but enough absentee and provisional ballots to be counted that Romney, for what its worth, could still win Florida.Florida Still Uncertain
I grew up in a little Michigan town in the 1950s and 60s. I remember going to the barbershop with
my dad on a Friday night and watching Fess Parker playing Davy Crockett, on The Wonderful World of Disney. I suppose that more than
anyone—John Wayne in his many westerns, Gregory Peck in Pork Chop Hill—Davy Crockett was my generation’s icon of what an
American was supposed to be. Our fathers, who had fought the Second World War
were living, breathing incarnations of that spirit. The astronauts we watched
going into space were the most modern counterparts of what it meant to be an
American pioneer. Courage, dedication, self-sacrifice, and a stoic attitude
toward pain and difficulty were preached to us all. And then came the sixties,
drugs, sex, and throwing it all up—for what? For what we are now going to get.
America has gone through several iterations: America from
the Revolution to the Civil War, American from the Civil War to the Great
Depression, America since the Second World War. And that could be parsed into finer categories: America since Vietnam. America after the Cold
War. But tonight, with the reelection of Barack Obama we have entered an
enormously different world, on par with the biggest changes in our national
life—the UnAmerica America. It has the following characteristics:
1.It is based not on an ethic of self-sacrifice
for the common good, as the fathers of my generation practiced in the second
world war, but on getting as much as you can from the government.
2.It is based not on an ethic of self-reliance,
but on claiming victimhood and demanding reparations.
3.It is not based on traditional Judeo-Christian
sexual ethics but on government subsidized birth control and abortion.
4.It is an America with no sense of boundaries or
reality when it comes to its own habits of consumption and desire. A 16
trillion dollar national debt? Why not a $22 trillion dollar debt? We’re likely
to see it at the end of 4 more Obama years.
5.It is an America that doesn’t lead the rest of
the world but is inexorably going to withdraw from it as defense spending is
cut in favor of “entitlements,” a word which speaks an entire history. This is going to be a very dangerous world.
6.It is an America that has been taught to be
ashamed of itself and its role in the world rather than proud.
7.It is an America that hates the authority of
religion and so wants to neuter it, by turning it into a private hobby, or by crushing it while regulating its social presence out of existence.
8.It is an America largely without a fourth estate—a media—that even attempts unbiased investigative reporting.
In short, it is an America that wants stuff, feels it’s
owed, and hates anything or anyone who would assert a limit. It is an America
that is ripe for soft-core tyranny. This America did not happen over night.
Its starting point began when I was a teenager. But we have never so
thoroughly embraced it as we did in the presidential election of 2012.
For anyone who thought the first election of Barack Obama a
fluke, that idea has been dispelled by returning to office a man who should
have been easy to beat, after a disastrous four years of fiscal
irresponsibility and arrogant disregard for anything like bipartisan politics. Those
of us who were hopeful that Romney, a moderate Republican, would win, must now
acknowledge that we live in a very different country than we were in even 10
years ago. What can we look forward to?
1.A big recession in 2013 as businesses remain
skeptical about investing in a country run by anti-business Democrats.
2.At least $20 trillion in government debt.
3.A deadlocked Congress as Obama proclaims any
real compromise an unacceptable retreat.
4.A declining military as spending cuts whittle
away at its effectiveness.
5.The disappearance of Catholic hospitals, as they
refuse to provide workers with insurance covering birth control.
6.Iran will get the bomb, causing a Middle East
arms race. We will do nothing.
7.American debt will be downgraded, interest rates
on government debt will go up, feeding the overall debt, pushing the country
toward insolvency. 8.The trend to see the Constitution as outdated
will grow; there will be a lot of talk about replacing it, and this will be the
preliminary to actually doing so.
9.Four years from now, the Republicans will still
be blamed for it all, and I wouldn’t be surprised if they lose again.
Blacks, Latinos, and single women certainly put Obama over the top. See this Rolling Stone article, which lays out what powered this election: How Obama Won. The 67 to 31 split among single women, who for the first time in U.S. history outnumber married ones, was perhaps the most important demographic. To see the kind of country this group thinks they live in, and the kind of country they want, watch Sandra Fluke and Elizabeth Warren's DNC speeches, shrilly proclaiming what the government owes them.
I suppose historians will try to date the decline of
America. Maybe they’ll pick 9/11. Maybe the Great Recession. But I pick tonight
as the real date, because this is the day American trumped reason with “what’s in it
for me?” and embraced decline. This is the day that America became a different
country.
November 8
OK, after one day to cool down, I refuse to abandon all hope. Still, unless courageous steps are taken both in California and in the USA to make significant spending cuts, the day of reckoning is simply going to be even more painful. California's Proposition 30 passage gives the university system in California breathing space, but each of these tax increases erodes California's tax base as more and more people with money--individuals and businesses--leave the state for others where the tax burden is lighter. Combine an eroding tax base with the likelihood of a recession this year, and Prop. 30 may be only a temporary bandaid.
see Victor Davis Hanson's column which has a very perceptive analysis of Democrat strategy in this election, Groundhog Day in America: "In textbook community-organizing fashion, Obama won the election by brilliantly cobbling together factions with shrill warnings of supposed enemies everywhere. Young women were threatened by sexist Neanderthal males. Minorities were oppressed by neo-Confederate tea partiers. Greens were in danger from greedy smokestack polluters. Gays were bullied by homophobic Evangelicals. Illegal aliens were demonized by xenophobic nativists. And the 47 percent were at the mercy of the grasping 1 percent. Almost any American could fall into the category of either an Obama-aligned victim or a Romney-aligned oppressor."
Although the following analysis by Bill O'Reilly is spoiled by the shameless self-plug at the end, it's thought-provoking, and I think right when it comes to Hurricane Sandy:
Much of what O'Reilly has to say is remarkably close to the Rolling Stone article, above. What the Republican party has to get across, if it wants a future for itself and a better future for the country, is that government help for those who need it is impossible if the state is insolvent. That seems obvious, but many people--at least 50% of voters--seem welded to the idea that our ability to extract money from "the rich" is infinite.To Democratic friends who are committed to more income equality: set aside the moral issues this would raise and the government power it requires. Just consider whether it is even possible to generate enough revenue to keep up with our current trend of expenditure.
One of the most interesting and most disturbing things about this campaign has been the anger level. In my estimation, the Democrats, from the convention on, have simply been angrier than the Republicans, and I think this also characterized the candidates. Sandra Fluke, Elizabeth Warren--the Republicans in their convention produced nothing close to that level of angry superiority. You can see that distinction in these speeches, especially in Obama's "vote for revenge" comment. This is corrosive. It is not effective leadership. The problem with anger is that it can become a drug that supports one's righteous indignation and vice versa--its a circle that's hard to break out of. I know this from my own experience, and it was on my mind last year as I blogged about Fresno State issues.
One of the things that impressed me most about the campaign was Romney's temperance. I admire that about him, as I admire his charitable giving.
