Taxpayer involvement of Nashville park unclear

I'm not certain, but I think he means that if middle-class income still accounted for the same percentage of the overall US income as it did in 1980, every US family would have an additional $13,000.

As for where this money comes from, I believe he's suggesting that balance be re-achieved by shifting some amount of tax burden onto everyone not in the middle-class.

Without knowing more regarding about how he reaches these specific conclusions, I'm not sure where I stand on them. But I think the fundamental points (specifically regarding keeping the economic "circulatory system" flowing) are solid.

Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.

The guy needs to take a basic economics course. Bank deposits are a huge clot in our nations economic circulatory system? Flat out wrong. Its bank deposits that allow banks to make loans which are the life blood of our economy. No deposits. No loans. Companies can't start/grow. Any shifts in the percentages of incomes doesn't disappear.
Would also be helpful if the guy provided cites for his stats. Can't tell if they are correct or just made up to fit his agenda.

I don't necessarily disagree, but I'm wondering why it's seemingly much more difficult to get a loan right now, when income disparity is at its peak in the US, than it was when income disparity was less severe.

Although it has come down somewhat from record levels, consumer debt is still very high. Home mortgage interest rates are at historic lows. So I am not sure its the case that its more difficult to get a loan right now (certainly not compared to the 60s which the author seemed to point to as the height of our economic prosperity). Is it harder to get a home loan today than it was in say 2006? Yes. But should all of those loans been made back in 2006? Is it a bad thing that those loans are not being made today?

Loans are tough right now on the commercial side. Good companies can get loans though. Ones that are doing ok are having a tougher time but many are still getting loans. Struggling companies are definitely hurting for loans (probably have an existing lender looking to give them the boot at the first opportunity). Much of that has to do with the economic downturn (loans typically are harder to get after a downturn). This one is continuing though longer than typical downturns.

Loans that are being made are into companies with less leverage and interest rate spreads are higher now than there were before the downturn. I think its more the case that leverage/margins were too high/low before the downturn and companies unfortunately got addicted to that cheap/easy credit. Now they are being weaned off that and its not easy or quick.

GoBucks89 said:
Much of that has to do with the economic downturn (loans typically are harder to get after a downturn).

Much of what you said makes sense, though this comment sort of jives against your earlier point - that money sitting in the top 1%'s bank accounts facilitates lending.

It suggests to me that there's a balance somewhere, where the wealthiest among us paying more in taxes would facilitate lending by helping lubricate the "economic engine" in the US.

I think in this case, the lubrication of cash isn't affected by its availability as much as the risk of lending it. Risk sensitivity is a lot higher than it used to be.

djDaemon said:
I came across this piece, which ties in quite succinctly to the discussion. It's written by Nick Hanauer - a successful startup investor.

A couple notable excerpts:

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

I think the idea is that entrepreneurs become consumers too. It's not a one way street.

It goes back to what I (we?) said earlier. If two people are standing there with their hands out, do you give to the one who's going to spend and then put his hand out again or the one that's going to try to spend so he doesn't have to put his hand out again?

It's seems as simple as hedging your bets. As corny as it is, it's the 'teach a man to fish' proverb in practice.

djDaemon said:
It suggests to me that there's a balance somewhere, where the wealthiest among us paying more in taxes would facilitate lending by helping lubricate the "economic engine" in the US.

To the extent banks aren't making loans right now, it isn't because they do not have the capital to do so. Its because they don't want to take the risks. And there is a lot of uncertainty right now. Providing more capital to banks won't change the risk/uncertainty dynamics. Not unique to this downturn (though its duration is).

And we have poured hundreds of billions/trillions into the economy (openly through Congress and behind closed doors through the Fed). We have had stimulus packages, cash for clunkers, payroll tax holidays, spent trillions of borrowed dollars, etc. What will taking more money from the wealthy (and how much more do you want to take?) do that all of that money did not?

If banks aren't lending due to increased risk, does it not make sense that increased economic activity would reduce that risk?

If we tax the wealthy to the extent they were taxed in, say, the 90's, that means we could make the same financial outlays while borrowing less money. That seems like a positive thing to me.

Depends what that increased economic activity is. And how are you going to get that increased economic activity? What is it about increased taxes on the wealthy that will supposedly increase economic activity in ways that all of our other spending (at much higher levels) since the downturn haven't?

Ranges on the costs of the Bush tax cuts vary. But I have never seen any that put the costs of the tax cuts on the wealthy at more than $100 billion per year (many put them at significantly less than that). So its less than 10% of our current annual deficits. (Costs for the tax cuts on everyone else are 3-4 times that amount). Its certainly a start. But we have a long way to go in terms of getting back to even (and thats before entitlements explode with the boomers retiring en masse).

Here's a site that estimates the cost of the Bush tax cuts that are nowhere in the same universe as yours (5-second Google rule in effect - no cherry-picking, first site with relevant information):

http://costoftaxcuts.com/

That puts the cost of the Bush tax cuts on the top 5% at 1 trillion. But that is since 2001. Divide by 11 years and the cost per year is less than $100 billion per year.

^Ah, OK, gotcha. I missed the "per year" verbiage in your prior post.

Still seems like a staggering amount of revenue to "pass up" in the hopes that people will use that extra trillion to create jobs in the absence of consumer demand.

What about the $3 trillion in revenue that was "passed up" from the non-wealthy over that same time period? And the trillion dollars we borrow every year to fund the federal government's deficit? And the 50+ trillion of unfunded promises the federal government has made going forward?

And income tax revenues increased in the years after the tax cuts.

lubrication

Ha...he said "lubrication." :)

djDaemon said:
If banks aren't lending due to increased risk, does it not make sense that increased economic activity would reduce that risk?

Actually, I might suggest that the risk hasn't changed, just the tolerance for risk. It was a lot of stupid risk that caused the mortgage crisis.

Its a mix of both. Risks have changed. If nothing else, some of the downside risks that were always there have now be realized which changes the view of any credit decision. And there was a lot of unsustainable demand (people using houses as ATMs, credit as income, etc.) that isn't coming back soon. You need a lot of growth just to get back to where we were/should have been without that unsustainable demand.

"It was a lot of stupid risk that caused the mortgage crisis."

I agree...but the risk was not so great early on. They just kept repackaging and selling. They knew they were selling crap. They meaning the bankers. Everybody was making money every step of the way. Bankers knew that "some other bank/fund" would take the risk off their hands...until nobody could/would.

I'd had never bailed them or the automakers out. I believe that if you practice recklessly, the consequence IS bankruptcy. This is true for automakers AND banks.

I do not believe the "crisis" was EVER as bad as sold to us, but there is no way to ever know for sure. I believe that many of our politicians, and more importantly friends of politicians who fund campaigns stood to lose their asses. And as always...it us...Joe taxpayer who is left footing the bill because they took the unnecessary risk.

You buy a house you cannot afford, you should lose your house. If the bank buys risky loan packages they cannot afford, they should lose their bank. Somehow these prior two sentences are considered "extreme" for many in our society.

I still believe we would have come out of the whole situation stronger and faster had we let the market spit out those who took unnecessary risks. I'm not certain we will EVER return to the golden days.

From the article Brandon posted on the previous page:

It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France by Dassault Aviation SA), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.

That's where the real change starts. People on the right will scream and yell about creating more government jobs, but these kinds of jobs are badly needed right now. Infrastructure is crumbling and most municipalities are severely understaffed in their police and fire departments. Those are jobs directly created by increasing tax revenues. That broadens the middle class base, giving them more purchasing power, which spreads to the rest of the economy.

GoBucks89 said:
And income tax revenues increased in the years after the tax cuts.

Not according to what I've read.

From CBS News:

A review of data from the White House Office of Management and Budget shows that tax revenues did not consistently increase after the Bush tax cuts went into effect.
...
As a percentage of gross domestic product, the amount of tax revenues as a part of the economy has also varied widely, though it is still less today than in FY2001, when it represented 19.5% of GDP. It has dipped from as low as 16.1% in FY2004, to as high as 18.5% in FY2007, before finishing out FY 2009 at 14.9% - its lowest level since 1950 (14.4%).

From a report by the Congressional Research Service (page 8), extending the tax cuts will further erode tax revenue:

Over five years, extending the provisions are estimated to reduce tax revenues by $1,141 billion. The 10-year revenue loss is estimated to be $2,805 billion. By far the costliest provision to extend is the reduced individual income tax rates (which includes keeping the 10%, 25%, 28%, 33%, and 35% tax rates), accounting for ver 50% of the total revenue loss.

From CBO data on tax cuts & revenue (particularly this chart):

Since 2001, federal income tax revenues have remained below the 30-year average of 8.4% of GDP with the exception of 2007, and did not regain their 2000 dollar peak until 2006 (see chart at right).

Quote taken from Wikipedia article.

Based on what I'm reading (and have read over the years), the argument that the Bush tax cuts increased revenue is, at best, contentious. Certainly not as cut-and-dry as your statement indicates.