The Washington Post ran a front page piece on Governor Romney’s debate performance that was headlined, “Romney benefits from rigorous defense of tax plan.” The article begins:
“With his forceful denial of charges that he would raise taxes on the middle class, Mitt Romney used Wednesday’s debate to launch an aggressive new effort to regain his footing in the battle over taxes.
In one of the debate’s first exchanges, the Republican presidential nominee directly challenged President Obama’s assertion that Romney’s tax plan would finance big new breaks for the wealthy by wiping out popular deductions for those who earn less than $250,000 a year.”
As the article later explains, Romney’s assertion is inconsistent with his past description of his tax plan. Romney proposes to cut income tax rates by 20 percent but also to have a deficit neutral tax cut. He argues that the lower tax rates will be offset by eliminating tax deductions.
However, it is not possible to make up the lost revenue from lower tax rates on the wealthy simply by taking away tax breaks for the wealthy. (Romney explicitly rejected raising the tax rate on capital gains or dividends, so the main tax break for the wealthy is off-limits.)
The point here is very simple. If you cut Warren Buffett’s tax rate by 20 percent you will not get back the money by taking away his mortgage interest deduction. This is why every independent economist who has analyzed the tax cut has said that Romney’s plan implies large tax increases on middle income families. However the Washington Post is apparently proud of Romney for denying for boldly denying this fact.
The Washington Post ran a front page piece on Governor Romney’s debate performance that was headlined, “Romney benefits from rigorous defense of tax plan.” The article begins:
“With his forceful denial of charges that he would raise taxes on the middle class, Mitt Romney used Wednesday’s debate to launch an aggressive new effort to regain his footing in the battle over taxes.
In one of the debate’s first exchanges, the Republican presidential nominee directly challenged President Obama’s assertion that Romney’s tax plan would finance big new breaks for the wealthy by wiping out popular deductions for those who earn less than $250,000 a year.”
As the article later explains, Romney’s assertion is inconsistent with his past description of his tax plan. Romney proposes to cut income tax rates by 20 percent but also to have a deficit neutral tax cut. He argues that the lower tax rates will be offset by eliminating tax deductions.
However, it is not possible to make up the lost revenue from lower tax rates on the wealthy simply by taking away tax breaks for the wealthy. (Romney explicitly rejected raising the tax rate on capital gains or dividends, so the main tax break for the wealthy is off-limits.)
The point here is very simple. If you cut Warren Buffett’s tax rate by 20 percent you will not get back the money by taking away his mortgage interest deduction. This is why every independent economist who has analyzed the tax cut has said that Romney’s plan implies large tax increases on middle income families. However the Washington Post is apparently proud of Romney for denying for boldly denying this fact.
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Casey Mulligan takes another shot at explaining the downturn as a decision by millions of people to stay at home and collect government benefits (joining the 47 percent) rather than work, in response to the increased generosity of programs like unemployment insurance and food stamps under the Bush and Obama administration. I don’t have time to deal with all the points that Mulligan raises, but it is worth focusing on one implication of his story.
Not everyone was in a position to gain from these benefits. For example, young workers just entering the labor force with no work history would not be eligible for unemployment insurance. Also, if they have no children they will probably not eligible for food stamps or other government benefits. In other words, this group of workers would not have seen any increased disincentive to work as a result of any changes in benefits over the last 5 years.
For these workers the increase in benefits for other workers would imply somewhat of a bonanza in Mulligan’s world. It would effectively pull many of their competitors out of the labor force. Think of a situation where your employer just offered a very generous early retirement plan to everyone who had more seniority to you at your workplace. With these people out of the way, there will be great opportunities for promotions and pay increases.
The same would situation would exist if we believe Mulligan’s supply-side theory. This should mean that workers who stay in the workforce have much lower unemployment rates that we would have otherwise expected (i.e. lower than their 2007 levels) and higher wages. I haven’t looked closely at the data, but this doesn’t seem to fit the facts. The sharpest rise in unemployment rates or fall in employment rates has been among the young workers who are likely not eligible for the benefits that have become more generous. (The minimum wage story won’t help here, their employment rates have not risen as the its real value was eroded inflation.) In other words, this trip to the supply side again looks like a dead end.
Casey Mulligan takes another shot at explaining the downturn as a decision by millions of people to stay at home and collect government benefits (joining the 47 percent) rather than work, in response to the increased generosity of programs like unemployment insurance and food stamps under the Bush and Obama administration. I don’t have time to deal with all the points that Mulligan raises, but it is worth focusing on one implication of his story.
Not everyone was in a position to gain from these benefits. For example, young workers just entering the labor force with no work history would not be eligible for unemployment insurance. Also, if they have no children they will probably not eligible for food stamps or other government benefits. In other words, this group of workers would not have seen any increased disincentive to work as a result of any changes in benefits over the last 5 years.
For these workers the increase in benefits for other workers would imply somewhat of a bonanza in Mulligan’s world. It would effectively pull many of their competitors out of the labor force. Think of a situation where your employer just offered a very generous early retirement plan to everyone who had more seniority to you at your workplace. With these people out of the way, there will be great opportunities for promotions and pay increases.
The same would situation would exist if we believe Mulligan’s supply-side theory. This should mean that workers who stay in the workforce have much lower unemployment rates that we would have otherwise expected (i.e. lower than their 2007 levels) and higher wages. I haven’t looked closely at the data, but this doesn’t seem to fit the facts. The sharpest rise in unemployment rates or fall in employment rates has been among the young workers who are likely not eligible for the benefits that have become more generous. (The minimum wage story won’t help here, their employment rates have not risen as the its real value was eroded inflation.) In other words, this trip to the supply side again looks like a dead end.
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I’m not kidding. In his column today he complains about the Independent Payment Advisory Board (IPAB) for Medicare that was set up under one of the provisions of the Affordable Care Act. The IPAB will decide on which procedures will be covered under Medicare. If it determines that a procedure is either not effective or not worth the cost, then Medicare will not cover it, unless Congress overturns the decision.
George Will then trumpets this as rationing of health care. Of course under this system, anyone will be able to get whatever health care they want, they will just have to pay for it out of their own pocket. The fact that Will now calls this situation “rationing” of care shows the state of modern conservatism.
Btw, the same situation under all the plans put forward by Governor Romney and Representative Ryan. There is no insurance company that covers all care. So insurers will decide which procedures they want to pay for. Furthermore, unlike Medicare, there will be no elected representatives who can overturn their decisions. They can also change coverage on people unexpectedly — that is unless pointy headed bureaucrats in Washington stand in their way.
[Note — headline corrected 11:00 A.M. 10-6-12 and “IPAB” was originally written as “IPAD”]
I’m not kidding. In his column today he complains about the Independent Payment Advisory Board (IPAB) for Medicare that was set up under one of the provisions of the Affordable Care Act. The IPAB will decide on which procedures will be covered under Medicare. If it determines that a procedure is either not effective or not worth the cost, then Medicare will not cover it, unless Congress overturns the decision.
George Will then trumpets this as rationing of health care. Of course under this system, anyone will be able to get whatever health care they want, they will just have to pay for it out of their own pocket. The fact that Will now calls this situation “rationing” of care shows the state of modern conservatism.
Btw, the same situation under all the plans put forward by Governor Romney and Representative Ryan. There is no insurance company that covers all care. So insurers will decide which procedures they want to pay for. Furthermore, unlike Medicare, there will be no elected representatives who can overturn their decisions. They can also change coverage on people unexpectedly — that is unless pointy headed bureaucrats in Washington stand in their way.
[Note — headline corrected 11:00 A.M. 10-6-12 and “IPAB” was originally written as “IPAD”]
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The Washington Post was quick to do a fact check on the debate claiming that President Obama had misrepresented the budget plan put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson, the co-chairs of the deficit commission. The fact check wrongly describes the plan as the “Simpson-Bowles deficit commission proposal.”
In fact there was no proposal from the commission. According the commission’s by-laws a plan would have needed the support of 14 of the 18 commissioners to have been approved. This plan never had the support of more than 10 of the commissioners. It is therefore inaccurate to describe it as a plan of the commission.
The Washington Post was quick to do a fact check on the debate claiming that President Obama had misrepresented the budget plan put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson, the co-chairs of the deficit commission. The fact check wrongly describes the plan as the “Simpson-Bowles deficit commission proposal.”
In fact there was no proposal from the commission. According the commission’s by-laws a plan would have needed the support of 14 of the 18 commissioners to have been approved. This plan never had the support of more than 10 of the commissioners. It is therefore inaccurate to describe it as a plan of the commission.
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The NYT is badly confused. While most of us recognize President Obama and Governor Romney as politicians, the NYT somehow came to believe that they are political philosophers. That is the inevitable conclusion that would be drawn from a front page piece headlined:
“a clash of philosophies.”
The first paragraph tells readers:
“Somewhere in the wonky blizzard of facts, statistics and studies thrown out on stage here on Wednesday night was a fundamental philosophical choice about the future of America, quite possibly the starkest in nearly three decades.”
This theme is repeated throughout the piece.
Of course neither candidate has gotten their position based on their political philosophy. They both managed to get their party’s nomination as a result of their ability to appeal to powerful interest groups.
The effort by the article to imply clear philosophical distinctions falls on its face. For example, the piece reports that
“Mr. Obama expressed worry about those who would lose out if government programs are cut too deeply, while Mr. Romney talked about those who feel constrained by excessive government taxation and regulation.”
Mr. Romney presumably knows that taxes are no higher today than they were in the Bush administration and that they are considerably lower than they were when the economy was growing 4.0 percent annually in the last four years of the Clinton administration. He also knows that relatively few new regulations have been put in place in the Obama years, so this cannot be a major factor slowing growth. In other words, Romney is saying these things because he hopes that they will have some resonance with the public or at least people who will support his campaign, not because he actually believes them.
Later the piece tells readers:
“Mr. Romney talked about the impact of the continuing economic problems, noting that the cost of gasoline, electricity, food and health care has grown. ‘I’ll call it the economy tax,’ he said. ‘It’s been crushing.'”
In fact, gas prices have generally lagged behind the peaks reached in 2008, so Romney cannot “note” that the cost of gasoline has grown. Electricity prices have also fallen in many areas. Furthermore, Governor Romney surely knows that the price of gas is determined on world markets and the U.S. government’s actions have little or no impact on it. So these comments are being said for their political effect, it is implausible to believe that they reflect a political philosophy.
The same logic applies to the next paragraph:
“The Republican focused on the impact on small business of Mr. Obama’s policies. ‘It’s not just Donald Trump you’re taxing,’ he said. ‘It’s all those businesses that employ one-quarter of the workers in America.’ He added, ‘You raise taxes and you kill jobs.’”
Only a small percent of businesses are structured as proprietorships and owned by individuals who will be subject to the higher tax rate supported by President Obama. These businesses do not employ anywhere close to one-quarter of the workers in America. (If they did, they hardly could be considered “small.”) Romney surely knows these facts, so again these assertions cannot possibly reflect a political philosophy.
On the other side, the piece tells readers:
“Mr. Obama expressed worry about those who would lose out if government programs are cut too deeply.”
On several occasions, most notably the bailout of Wall Street banks and the promotion of trade agreements that will redistribute billions to the pharmaceutical and entertainment industries, President Obama has clearly put the interest of powerful corporate interests ahead of the interests of middle and lower income families.
In short, the effort to portray the contest between President Obama and Governor Romney as a debate over philosophy is an invention of the media. It has no basis in the world.
The NYT is badly confused. While most of us recognize President Obama and Governor Romney as politicians, the NYT somehow came to believe that they are political philosophers. That is the inevitable conclusion that would be drawn from a front page piece headlined:
“a clash of philosophies.”
The first paragraph tells readers:
“Somewhere in the wonky blizzard of facts, statistics and studies thrown out on stage here on Wednesday night was a fundamental philosophical choice about the future of America, quite possibly the starkest in nearly three decades.”
This theme is repeated throughout the piece.
Of course neither candidate has gotten their position based on their political philosophy. They both managed to get their party’s nomination as a result of their ability to appeal to powerful interest groups.
The effort by the article to imply clear philosophical distinctions falls on its face. For example, the piece reports that
“Mr. Obama expressed worry about those who would lose out if government programs are cut too deeply, while Mr. Romney talked about those who feel constrained by excessive government taxation and regulation.”
Mr. Romney presumably knows that taxes are no higher today than they were in the Bush administration and that they are considerably lower than they were when the economy was growing 4.0 percent annually in the last four years of the Clinton administration. He also knows that relatively few new regulations have been put in place in the Obama years, so this cannot be a major factor slowing growth. In other words, Romney is saying these things because he hopes that they will have some resonance with the public or at least people who will support his campaign, not because he actually believes them.
Later the piece tells readers:
“Mr. Romney talked about the impact of the continuing economic problems, noting that the cost of gasoline, electricity, food and health care has grown. ‘I’ll call it the economy tax,’ he said. ‘It’s been crushing.'”
In fact, gas prices have generally lagged behind the peaks reached in 2008, so Romney cannot “note” that the cost of gasoline has grown. Electricity prices have also fallen in many areas. Furthermore, Governor Romney surely knows that the price of gas is determined on world markets and the U.S. government’s actions have little or no impact on it. So these comments are being said for their political effect, it is implausible to believe that they reflect a political philosophy.
The same logic applies to the next paragraph:
“The Republican focused on the impact on small business of Mr. Obama’s policies. ‘It’s not just Donald Trump you’re taxing,’ he said. ‘It’s all those businesses that employ one-quarter of the workers in America.’ He added, ‘You raise taxes and you kill jobs.’”
Only a small percent of businesses are structured as proprietorships and owned by individuals who will be subject to the higher tax rate supported by President Obama. These businesses do not employ anywhere close to one-quarter of the workers in America. (If they did, they hardly could be considered “small.”) Romney surely knows these facts, so again these assertions cannot possibly reflect a political philosophy.
On the other side, the piece tells readers:
“Mr. Obama expressed worry about those who would lose out if government programs are cut too deeply.”
On several occasions, most notably the bailout of Wall Street banks and the promotion of trade agreements that will redistribute billions to the pharmaceutical and entertainment industries, President Obama has clearly put the interest of powerful corporate interests ahead of the interests of middle and lower income families.
In short, the effort to portray the contest between President Obama and Governor Romney as a debate over philosophy is an invention of the media. It has no basis in the world.
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Morning Edition’s fact check of comments in the debate badly misled listeners by implying that choosing between reducing deficits between higher taxes and greater growth through tax cuts are alternative paths to deficit reduction that people can choose from like flavors of ice cream at the ice cream store. They are not.
There is no plausible path through which a tax cut will generate enough growth to even pay for itself, much less produce additional revenue. The best analysis of this issue was done by the Congressional Budget Office in 2005, when it was headed by Douglas Holtz-Eakin, a Republican who was the chief economic advisor to Senator McCain in his presidential campaign. His analysis found that using the most favorable set of assumptions, additional growth could temporarily replace one-third of lost revenue. This revenue increase was largely offset by slower growth in the longer term.
The country also had the opportunity to experiment with cutting taxes as a way to increase revenue when President Reagan cut taxes in the early 80s and President Bush cut them at the start of the last decade. In both cases, deficit rose considerably as revenue fell. It would have been helpful to supply this information to listeners who may be less familiar with economic research or recent economic history.
The analysis also said that both President Obama and Governor Romney believe in energy independence. That is unlikely since it is almost inconceivable that the United States will become energy independent any time in the foreseeable future unless it imposed huge protectionist barriers on imported oil. Presidents and presidential candidates have been talking about energy independence for 40 years, there is no reason to believe that these two candidates are any more serious than their predecessors.
Morning Edition’s fact check of comments in the debate badly misled listeners by implying that choosing between reducing deficits between higher taxes and greater growth through tax cuts are alternative paths to deficit reduction that people can choose from like flavors of ice cream at the ice cream store. They are not.
There is no plausible path through which a tax cut will generate enough growth to even pay for itself, much less produce additional revenue. The best analysis of this issue was done by the Congressional Budget Office in 2005, when it was headed by Douglas Holtz-Eakin, a Republican who was the chief economic advisor to Senator McCain in his presidential campaign. His analysis found that using the most favorable set of assumptions, additional growth could temporarily replace one-third of lost revenue. This revenue increase was largely offset by slower growth in the longer term.
The country also had the opportunity to experiment with cutting taxes as a way to increase revenue when President Reagan cut taxes in the early 80s and President Bush cut them at the start of the last decade. In both cases, deficit rose considerably as revenue fell. It would have been helpful to supply this information to listeners who may be less familiar with economic research or recent economic history.
The analysis also said that both President Obama and Governor Romney believe in energy independence. That is unlikely since it is almost inconceivable that the United States will become energy independent any time in the foreseeable future unless it imposed huge protectionist barriers on imported oil. Presidents and presidential candidates have been talking about energy independence for 40 years, there is no reason to believe that these two candidates are any more serious than their predecessors.
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It will according to the Congressional Budget Office’s new method of measuring income as discussed in a column by Eduardo Porter. While Porter does present the view of Timothy Smeedling a critic of this new approach, it would have been worth expanding on some of the issues raised. In contrast to items that are directly under consumers’ control, we are measuring what the government pays for health care.
We know that the United States pays more than twice as much per person for care as the average for other wealthy countries with little obvious to show for this spending in terms of outcome. This suggests that the U.S. health care system has an enormous amount of waste. If that waste increases, say by paying specialists higher fees, paying drug companies more money, or paying for more unnecessary procedures, the new method would imply that we have lifted more poor people out of poverty.
Given the difficulty of measuring the benefits of health care it might be useful to have measure that looks at income net of health care spending and then looks at health care outcomes for different groups. Recent evidence suggests that the poor have not benefited much from the big bucks the government has been paying for their health care, since life expectancies have stagnated or even declined.
It will according to the Congressional Budget Office’s new method of measuring income as discussed in a column by Eduardo Porter. While Porter does present the view of Timothy Smeedling a critic of this new approach, it would have been worth expanding on some of the issues raised. In contrast to items that are directly under consumers’ control, we are measuring what the government pays for health care.
We know that the United States pays more than twice as much per person for care as the average for other wealthy countries with little obvious to show for this spending in terms of outcome. This suggests that the U.S. health care system has an enormous amount of waste. If that waste increases, say by paying specialists higher fees, paying drug companies more money, or paying for more unnecessary procedures, the new method would imply that we have lifted more poor people out of poverty.
Given the difficulty of measuring the benefits of health care it might be useful to have measure that looks at income net of health care spending and then looks at health care outcomes for different groups. Recent evidence suggests that the poor have not benefited much from the big bucks the government has been paying for their health care, since life expectancies have stagnated or even declined.
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A Washington Post piece on Jens Weidmann, the head of the Bundesbank, told readers of his anger over the European Central Bank’s bailout of debtor countries and his concerns about inflation. It then told readers:
“Many Germans fear that printing the money to buy the bonds will contribute to higher inflation in the long run — a violation of what they see as the ECB’s principal mandate and a bitter tonic for a country that gave up its cherished mark in exchange for assurances that the euro would be just as stable.”
It would have been helpful to remind readers that Germany enjoys low unemployment and a relatively healthy economy precisely because it has tied the southern European countries to the euro. If they still had their own currencies, they would have devalued against the “cherished mark.” This would make German goods less competitive, sharply reducing its trade surplus with the rest of Europe.
Apparently Weidmann and the Germans to whom the article refers are like little children who want everything their own way. Many Post readers may not understand the absurdity of their position so it would have been appropriate for the paper to point it out.
A Washington Post piece on Jens Weidmann, the head of the Bundesbank, told readers of his anger over the European Central Bank’s bailout of debtor countries and his concerns about inflation. It then told readers:
“Many Germans fear that printing the money to buy the bonds will contribute to higher inflation in the long run — a violation of what they see as the ECB’s principal mandate and a bitter tonic for a country that gave up its cherished mark in exchange for assurances that the euro would be just as stable.”
It would have been helpful to remind readers that Germany enjoys low unemployment and a relatively healthy economy precisely because it has tied the southern European countries to the euro. If they still had their own currencies, they would have devalued against the “cherished mark.” This would make German goods less competitive, sharply reducing its trade surplus with the rest of Europe.
Apparently Weidmann and the Germans to whom the article refers are like little children who want everything their own way. Many Post readers may not understand the absurdity of their position so it would have been appropriate for the paper to point it out.
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