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If We Can’t Laugh About It…

July 20th, 2011 . by economistmom

debt-ceiling-crisis-cartoon
(Cartoon by Marshall Ramsey of Creators Syndicate.)

…then all we’d have to do is cry! For your amusement (just try to smile!), here’s a collection of “budget and deficit cartoons” put together by U.S. News and World Report. I found it via a link on this blog post by Leslie Marshall discussing what the new CBS News poll tells us–and why we should be a bit depressed about it and need cartoons like this to cheer us up:

To read the polls is not only confusing, but it shows how confused we the people are. Some polls show Americans want to cut spending, but they don’t want to raise taxes. Other polls show a majority of Americans want the Bush tax credits to end for the wealthy. And after Rep. Paul Ryan put forth his machete to Medicare, he was booed at town hall meetings, and a Democrat won a congressional seat in a district which had been a Republican stronghold for decades…

It sickens me when I hear the GOP talk about leaving something for our children and future generations when their proposals cut more education and Medicare and Social Security, making those programs a memory for our children. And without them, our children will be financially strapped, taking care of sick and elderly parents and grandparents.

Here’s another cartoon from the collection I want to highlight (this one by Chan Lowe for Tribune Media Services), because for awhile I’ve been wondering if someone could make a visually-informative video of this taking all the big things off the table–to make this same point:

off-the-table-cartoon-chan-lowe

8 Responses to “If We Can’t Laugh About It…”

  1. comment number 1 by: AMTbuff

    That off-the-table cartoon is priceless.

    What defies simple presentation is the temporal factor. In particular the exponentially higher value of a permanent solution compared to a temporary patch. From what I’ve seen, only Coburn’s plan qualifies as a permanent solution. Ryan’s might qualify if it became more specific (and therefore less popular). Nobody else has presented a plan that will actually close the fiscal gap permanently.

    I for one am not in a mood to support any more temporary solutions. Keeping the pressure on for a permanent solution is probably better than settling for something temporary yet again.

  2. comment number 2 by: AMTbuff

    Off-topic for this thread, but there’s a superb new paper listing many misconceptions about tax expenditures at: http://taxprof.typepad.com/files/132tn0255.pdf

    I promise this paper is worth your time to read. Brooks and Steve, I’d like to hear your opinions after you read it.

  3. comment number 3 by: Jim Glass

    The MMTers have come up with a solution to the debt ceiling crisis: Mint a $2 trillion coin, and by the power of seigniorage all becomes well.

    I found that to be worth a smile. :-)

  4. comment number 4 by: Brooks

    AMT,

    Thanks for the link. I’m swamped with work right now, so don’t know when I’ll have a chance to read it.

    Just based on a very quick scan, I’d just say that I’m still generally opposed to tax code-based subsidies for purchasing Product X (just as I am opposed to explicit expenditure subsidies) even if the net benefit to the Treasury is less than what would be calculated by some overly superficial approach, and even if the distributional effects would be different. Such issues, broadly speaking, would exist to some extent if we were talking about reducing explicit expenditure subsidies. I just generally don’t like such subsidies, regardless of form, due to economic distortions and cost to taxpayers generally.

  5. comment number 5 by: SteveinCH

    AMT,

    I read the piece quickly (I’ll try to read it more slowly when I have time). I think it’s a thoughtful (although somewhat technical) assessment and in the main, I agree with the author’s point of view.

    It would benefit a lot from more concrete and well laid out examples. I did an analysis which I posted on a blog (as a way to capture it) that compares the progressivity of tax expenditures to that of the personal income tax code that pretty clearly demonstrates that the elimination of tax expenditures makes the code less progressive.

    This is, of course, why Diane and the Obama administration (and the CBPP) prefer caps to actually eliminating tax expenditures. Progressivity is the highest goal. Revenue is only number 2.

  6. comment number 6 by: AMTbuff

    Furthermore, adherence to fundamental tax principles such as horizontal equity is number 3 at best.

    It’s amusing to see the ostensibly principled argument to eliminate tax expenditures morph into a progressivity-driven proposal to compound the complexity of existing tax expenditures by retaining them for some and eliminating them for others. It was never about principles, only money and who gets targeted for taxes and spending.

    The funniest part is that the advocates of progressivity could have achieved their desired ends in a principled way by outright elimination of tax expenditures coupled with adjustments to the tax rates (possibly including negative rates or demogrants) for progressivity. They must believe that they lack sufficient public approval for an honest version of their plan, so they resort to a sneaky approach. That’s nothing new, but it’s nothing to brag about either.

  7. comment number 7 by: Brooks

    AMT,

    You falsely attribute to to advocates of reducing tax expenditures the principle of tax simplification as their supposed ostensible primary rationale, only to then say that reducing them in a way that adds complexity belies these advocates’ supposedly claimed principle. Seems like a straw man on your part. As far as I can tell, they (we) have never indicated that tax simplification per se was the primary rationale.

    Rather, the rationale, at least for many of us (and I’d even guess most) is that reduction of subsidies is a good thing to include in the mix of means to reduce deficits, and certainly better than tax rate increases.

    Some advocate only reducing such subsidies currently going to higher income taxpayers, and/or capping how much of a subsidy some people can get. So instead of saying that anyone can get a subsidy for purchasing Product X (at the expense of taxpayers in general, and the economy due to distortions and due to higher tax rates, ceteris paribus), and that anyone can get more of subsidy if they spend more on Product X, they are saying that the subsidy will be limited in terms of eligibility and/or amount of subsidy so that at least we’re spending less on subsidies going to higher income folks and folks who spend a lot more on Product X.

    If these were government vouchers for Product X going out to people would you be criticizing advocates who wanted to stop sending the vouchers to high income folks or to limit the amount of vouchers high income folks could get? Perhaps you’d prefer eliminating the vouchers altogether, but would you prefer the status quo or reducing the vouchers for high income folks? If the government were offering to pay 10% of whatever someone pays for a car, would you rather (1) keep that in place or (2) means test it and/or cap the amount so people couldn’t get a 10% subsidy on a Ferrari? If the latter, it seems your negativity toward advocates re: tax expenditure subsidies is tied to the view that there is some fundamental difference involved simply because the subsidies in question are provided via the tax code. Is that correct?

  8. comment number 8 by: Vivian Darkbloom

    Interesting article, but I didn’t think it added much, if anything, to the general discussion of what, exactly, a tax expenditure is and whether such a thing is good or bad tax policy or how we should go about reforming the tax code to make it better.

    For example, I thought it rather odd the author accepted the argument that the deduction for state and local taxes is arguably not a tax expenditure because the purpose is to avoid double taxation of the same source of revenue (and that the foreign tax credit is definitely not a tax expenditure for similar reasons). At the same time, the author blithely accepts the idea that reduced rates of tax on CG and dividends is a tax expenditure and goes on at length to discuss the distributional and revenue raising aspects of a change to current law. Of course, that’s what it’s all about.

    On the other hand, he did have a few good observations. First, the idea that tax expenditures, as such, have not really increased significantly since 1986 (he mentions the reduced rate on CG and dividends as an exception, but again, I think that is wrong conceptually). The value of those expenditures have increased significantly in terms of lost revenues, largely due to the increase in two major areas of the economy, that is, increased home ownership and health care costs and the tax subsidies associated with each.

    The other area of contribution is the discussion of the revenue scoring and distributional aspects of any change in tax expenditure policy which was, in fact, the main focus of the article. This only re-inforces what I’ve said here many times and what AMT succinctly states at 9:36; this is all about distributional effects and whose ox is gored. It is not about deficit reduction, per se, or making the Tax Code a less inefficient means of raising revenue from the macro economic perspective. If we are really serious about the latter issues, we would, as AMT suggests, focus on eliminating those expenditures completely and using the rate structure to maintain (or introduce, depending on your point of view) an appropriate level of progressivity.

    As far as revenue scoring is concerned, the article demonstrates just what a futile process it is. There are simply too many moving parts. However, the futility is largely due to the fact that everyone is attempting merely to reduce the size of those parts rather than their number. And, in the process, no one really knows for sure who the winners and losers would be.

    This reminds me of Economist Mom’s promise to come back to us here with some solid numbers behind her plan to cap the value of (certain) tax expenditures at 15 percent as the means of eliminating our debt problem. I would suggest EM read that Tax Notes article first and when she comes back to us here with her numbers, explain exactly the methodology she used to score those revenue gains. We can all then take those numbers with the proverbial grain of salt.

    Another observation on the side: the author discusses at length the mortgage interest deduction and suggests that eliminating it might not be good for housing prices. He also discusses certain transition issues associated with tax reform.

    I have a somewhat different take. I think eliminating the mortgage interest deduction over time actually could be a good tool to stimulate the housing market in the short term and stabilize it over the longer-term. If Congress were to say tomorrow that it would phase out the mortgage interest deduction over, say 10 years, (much like we did with the personal interest deduction) would that not have the effect of accelerating the demand for home purchases and eliminate some of the overhang? If I know that I can get a deduction for 100 percent of my mortgage interest in 2011, but only 90 percent in 2012, 80 percent in 2013, etc., this should have the effect of front-loading demand somewhat.