Monday, December 6, 2010

Obama Unveils Broad Accord To Extend All Bush Tax Cuts

UPDATE: False alarm, it looks like status quo for fiscal policy, see comments.

CNBC reports this evening; this could be close to what many here have been looking for, excerpt:

"President Obama announced a broad "framework" agreement with Republicans that would extend all Bush-era tax cuts for two years, keep the dividend and capital gains tax at 15 percent and temporarily cut payroll and Social Security taxes."


New to this package is the cuts in payroll and Social Security taxes, and this could be significant. Not much detail provided so far. If anyone sees any details on the package with respect to these two items please post a comment.

23 comments:

googleheim said...

Just like we saw before, there was a deal with the Republicans and the Bluedogs that in exchange for ObamaCare part I ( earlier ) there would open driling in the East coast ( now cancelled due to BP who has a lot at stake in the Carbon Credit business in London ).

SO the deal now is that extend the tax cuts in lieu of something ... perhaps leaving Afghan ? no ... leaving Iraq ? no ...

probably ObamaCare II is coming. Anyone can think of another trade ?

googleheim said...

Sorry to be so coy.

The trade was more stimulus for extension of existing and creation of new tax cuts.

welfarewarfare state said...

This is very destructive if spending cuts don't happen in coordination with the extension of tax cuts and welfare benefits. This is my problem with the Repubs. They always talk about lower taxes and somtimes get them pushed through, but they never seem to get around to cutting the size of government. They don't understand that it isn't what government taxes but what it spends that counts. We are just going to end up paying for all of this with debt and an inflation tax. How many time does this movie have to be replayed?

Also, looks like Mr. Obama wants to get re-elected afterall. This stunt won't save him though.

Mike Norman said...

Matt,

The media is touting the 2% payroll tax reduction as equating to a $120 bln "kick." I don't see how they come up with that number. Payroll tax deposits last year amounted to $1.7T. A 2% cut would mean only $34 bln. No?

rvm said...

Welfarewarfare state,

What are you talking about!?
You are like a broken radio who nobody listens. Why don't you go some place where you could enjoy some audience. I see you don't listen, only talking wrong, dangerous and useless things.

Mike Sandifer said...
This comment has been removed by the author.
Mike Sandifer said...

rvm,

welfarewarfare state is the equivalent of a Christian fundamentalist on an evolution message board. They claim the earth is 4000 years old and that Adam and Eve rode dinosaurs no matter the evidence, calling scientists fools.

bubbleRefuge said...

welfarewarfare state is the equivalent of a Christian fundamentalist on an evolution message board.

Mike S. thats right. As soon as you get into the nitty gritty of reserve accounting or the sectoral balance equation to them, they shut up or try to change the subject because they can't deal with the facts. Why are some people so dogmatic and not open to new ideas.

Matt Franko said...

All,

From WSJ:

"The payroll-tax reduction under discussion now would cut the 6.2% Social Security tax levied on a worker's wages to 4.2%. A worker making $40,000 a year would save $800, and some economists say that could help stimulate demand at a time when the economy remains relatively weak.

The employer's half of the tax—also 6.2%—wouldn't be affected under the White House proposal, and thus the cost of hiring new workers wouldn't be directly affected.

The payroll tax reduction would take the place of a $400-per-worker income-tax break that Mr. Obama included in the 2009 stimulus bill. That break, known as Making Work Pay, provides a tax credit of 6.2% on the first $6,450 of a worker's wages. It phases out for workers making more than $75,000."

Looks like, for 2009 data of $808B total received for just the OASI/DI (698. + 109.) portion of “Soc Sec”. Cuts are to employee side only, so 0.5 (employee half) = 404B paid by employees in 2009.

This is a flat tax so it should be linear. Now they will not take 2% of the 6.2% (reducing rate to 4.2%) so the ratio of the 4.2/6.2% of the 404B would lower those revenues to 275B, so a cut of $129B based on these 2009 numbers….about a breakeven vs the WSJ above referenced witholding thing (elsewhere reported at 120B/yr) they are deleting.. if I’m right here I guess about a wash as of course others have pointed out

….more muddle through, no fiscal help. Resp,

welfarewarfare state said...

Normanites,

I don't like to go to websites that are really just echo chambers of the like-minded for those in need of daily affirmation. I would much rather challenge and be challenged. It's the only way we grow.

It looks like I get a lot of attention for someone who "never gets read or listened to."

I always thought of leftists as the religious fundamentalists on economic matters because much like the intelligent design set they believe that the economy or market order must have been of deliberate human design or should be.

I, on the other hand, believe that the market order is the result of a spontaneous order that is the result of human action but not of deliberate design. So: in this way I am analogous to evolutionists who don't think the world around us could ever have been the result of an "intelligent designer" whereas some of you are akin to economic televangelists.

BTW, If Mr. Norman resents my presence here then he is free to ban me. There's no "net neutrality" on the internet yet afterall.

Matt Franko said...

Welfare,

Both sides in the "political economy" (traditional left/right politics) actually are religious in that they have unproven/unsubstantiated beliefs or values that drive thier approach to policy...again check out the MP3 from several posts ago....Mike makes this point very effectively.

The "Normanites" are not. They seek an objective description of the economy via stock/flow consistent macro analysis and observable data from the national accounting/Treasury data. Everything is observable.

welfarewarfare state said...

Matt,

MMT is an ideology in that the adherents of it think they can micromanage an economy which inevitably spawns state collectivism. Many think they can reduce a human science to mathematical models, but it can't be done. It's central planner's disease. Those formulas that treat individuals as aggregates ignore individual plans, human action, and motivation. Economics is a behavioural science and should never be treated like the physical sciences. Mathematics is a useful tool for understanding some economic phenomenon, but the science of human action can't be reduced to simplistic formula. It can never be treated as a purely empirical science. MMT'ers claim empirical knowledge, but it is really just the pretence of knowledge that they possess.

The reason that I was drawn to Austrian econmics is because it is the only school of economic thought that practices methodological individualism. Aristotle and Einstein gave good advice when they said: "Reduce what ever it is you are studying to its most basic element until it isn't practical to reduce anymore." The basic element in economics, the science of human action, must be the individual--not the group, the collective, agrregates, the nation, etc. This is why I think the Austrian methodology is the only school that even has achance at finding the truth. The classical school, which the Austrian school is an extension of, also practiced this methodology.

cheers!

Mike Norman said...

Welfarestate:

This is an open blog. In order to ban you it would be necessary that everyone register. For the time being I have decided against that, but believe me, I have given it some thought. Moreover, even if I made this a site that required registration I don't think that I would ban you. You are at least civil. There are others, however, that I would certainly ban. Please feel free for now to enjoy the privilege to speak with some very educated people.

Matt Franko said...

Welfare,

"MMT is an ideology in that the adherents of it think they can micromanage an economy"

No they dont. The only place it brushes up against policy is the advocacy for establishment of full employment as they show (thru an accounting analysis) how when the non-govt sector surrenders it's monetary sovereignty to the govt sector that taxes, unemployment is immediately established so to be fair, the govt must implement full employment policies as consideration to the non-govt sector in this 'public-private' partnership.

"which inevitably spawns state collectivism. Many think they can reduce a human science to mathematical models, but it can't be done."

I agree!

It's central planner's disease. Those formulas that treat individuals as aggregates ignore individual plans, human action, and motivation. Economics is a behavioural science and should never be treated like the physical sciences."

I agree!


" Mathematics is a useful tool for understanding some economic phenomenon, but the science of human action can't be reduced to simplistic formula. It can never be treated as a purely empirical science."

I agree!

"MMT'ers claim empirical knowledge, but it is really just the pretence of knowledge that they possess."

No they dont, rather they claim to know the accounting!

"The reason that I was drawn to Austrian econmics is because it is the only school of economic thought that practices methodological individualism."

Welfare, this is where you start to be drawn into a religion...be careful here.

"Aristotle and Einstein gave good advice when they said: "Reduce what ever it is you are studying to its most basic element until it isn't practical to reduce anymore."

If they did, did they ever hear about the fallacy of composition?

" The basic element in economics, the science of human action, must be the individual--not the group, the collective, agrregates, the nation, etc. This is why I think the Austrian methodology is the only school that even has achance at finding the truth."

Welfare 'finding the truth'? I think this statement makes clear that you think you have already found it. This is what I believe is called a normative statement. OK, you are now practicing a full blown, pure religion here, be careful.

"The classical school, which the Austrian school is an extension of, also practiced this methodology."

All religions have their doctrine, hierarchies, leadership, membership, descipleship etc... this is not surprising.

Welfare, you are practicing an economic religion, and I'm not here to say that is a bad thing per se, many if not all other schools of economics do too, but we do need to realize this fact and decide if this is what we really want for ourselves. Is this the religious faith that we think we are really practicing or a false/deceptive one?

Resp,

welfarewarfare state said...

Mr. Norman,

I appreciate your willingness to allow dissenting opinion on this site.

Matt,

The Fed has failed in achieving its full employment mandate. It has succeeded in diverting human resources to the financial services sector with its cheap money policy for the last 20 years though. If the Fed isn't engaged in central planning then what is it doing? You have taken an ideological position when you posit that the Fed is capable of full employment or any of its other mandates.

MMT'ers do claim that economics can be an empirical science. What you identify as "accounting" looks suspiciously like excessive aggregation and orthodoxy disguised as empiricism to me. It is based on this "acccounting" that MMT'ers (and other schools) advocate policy measures. How many times have I endured a lecture by posters on this site about the need for more "fiscal" which is nothing more than a call for more government spending? Why deny that you guys are advocating policy measures?

The problem with your fallacy of composition claim is that it only applies to things that are a part of a tangible whole. An individual is autonomous--not a part of some greater whole (I mean this purely in the physical sense). Society is not an actual entity but, rather, an abstraction. Notice that the end of the quote reads, "reduce...until it is no longer practical to do so." Hence, it isn't a fallacy of composition. Given that your starting point is society as a whole, maybe you are guilty of a fallacy of division.

I don't know how exactly the technique of methodological individualism could possible be "dangerously close to regligion."

Lastly, it is somewhat amusing that you admonish me for thinking I have found the truth (I actually think I have been exposed to ideas that enable me to get closer to it)while you and many of the others on this site make routine claims with a zealot's certainty. Hypocrisy, heal thyself.

Cheers!

bubbleRefuge said...

The Fed has failed in achieving its full employment mandate. Right and MMT'ers have criticized the fed for it. I know that I have probably written this sentence before but I'll do it again. Make a cogent, reasoned argument contra-MMT based on facts insight and I would love to hear it. But this abstract argument about methodological individualism is akin to saying nothing. Lets discuss economics using logic, math, accounting, economic metrics and economic principles.

welfarewarfare state said...

bubbleRefuge,

The Fed can't achieve full employment. Everything it does distorts the economy and results in more unemployment than would exist in its absence.

You ask for a "reasoned argument contra-MMT", but any dissent with MMT will be identified as irrational, religion, wrong-headed, etc.

You did correctly point out that methodological individualism is an abstraction, but so are the words that you used to compose your post. I don't use the term abstraction with opprobrium as many do though. The amount of concrete knowledge that any individual possesses is very limited which is why dependence on abstraction is necessary. Abstraction isn't so much a product of the mind as it is what constitutes the mind.

Severus said...

WWS,

Not sure why you're spending so much energy writing intelligent posts on this not-so-widely-followed blog. Your writings could actually make a difference if they were read widely by open minded people. In fact, you should have your own blog, à la Mish Shedlock.

Keep up the good work, even though you must constantly feel that you're preaching in a desert...

oops a religion analogy...

Matt Franko said...

Welfare,

This right from Bill Mitchell's (MMT Thought Leader) blog today:

"I am pretty much a social libertarian who hates government dictates but understands that in a modern monetary system there is a government which has important capacities by dint of its currency monopoly and should use those capacities and its regulative powers to ensure the economy delivers outcomes that benefit all of us rather than a selective few."

Notice the qualifier that I put italics. We have granted the govt sector a currency monopoly and we (non-govt sector) should expect some Consideration from them in return, just like any legitimate contract must have legal Consideration for each party to the contract. The govt is reneging on the deal , and we (non-govt sector) are getting screwed. We need to 'restructure' the contract so to speak, that's all.

It's not 'big government' or such nonsense, it's just a demand for some consideration here.

Resp,

googleheim said...

I think Welfare Warfare
should make his dissent less spiteful and it might be constructive here. Otherwise he's just a hench person for Schiffless.

bubbleRefuge said...


You ask for a "reasoned argument contra-MMT", but any dissent with MMT will be identified as irrational, religion, wrong-headed, etc.
Because you seem to ignore arguments that most intelligent open minded people "get" and your counter-arguments seem irrational, abstract, un-substantiated similar to religious dogma.

welfarewarfare state said...

Severus,

I do go to Mish's site, and I disagree with him about deflation. He's a terrific economist though. I think he may be changing his tune soon. I like this site because the people here are intelligent, and the number of regular posters is limited. We just have different understandings.

One of you claimed that my posts were spiteful, but if a neutral observer read through the posts in this thread he would conclude that I have tried very hard to abstain from personal attacks. I wish I could say the same for others.

googleheim said...

Ok not spiteful.

however you took some bait and returned the favor.

i don't have a problem with WSWS