For those interested, Elder Dallin H. Oaks is testifying right now before the Senate Finance Committee on tax reform, specifically incentives for charitable giving. He is testifying at the request of Senator Hatch.
For those interested, Elder Dallin H. Oaks is testifying right now before the Senate Finance Committee on tax reform, specifically incentives for charitable giving. He is testifying at the request of Senator Hatch.
I wonder if he will note that the incentives for charitable giving would be higher if the Bush tax cuts were to expire. Having the government pick up 39.6% of the tab beats 35%. (And 9%? …pffffft).
Does “the government” “pick up the tab” for anything?
@Last Lemming, let me see if we’re following here:
If someone is taxed at 10% and earns $100 then they have $90 remaining. Should they give $10 to charity the tax break is $1.00 meaning they have $81 to spend.
If taxes become 20% on the same earner they have $80, giving $10, discount of $2 leaving them with $72 dollars to spend. Giving the same proportion (1/9th) will be giving $8.88, discount of $1.78 with $72.9.
The statement that ‘incentives would be higher’ is false. While discounts/returns would be higher, the person would have more pressure against giving at the same income level because they would have less money. (“Taxation is the power to kill”) Considering that constant lifestyle costs like rent are relatively inelastic one could further say that a real consumer would be disincentivized to donate if they’re barely scraping by at $81, which is common presently and generally.
Taxing takes money from people. It follows that people with less money typically have less to give assuming scarcity. Isn’t economics fun?
Alison Moore Smith:
“Does “the government” “pick up the tab” for anything?”
Yes__ all those things you are unwilling or unable to pay for.
What you get for your tax dollar in a bargain!
Do you the Federal Goverment owns 60% of Utah land, 60% of Idaho land, and 80% of Neveda land? That alone must cost some dollars to manage? It’s not something I budget for.
Kurofune, Last Lemming is absolutely right. As long as we believe that taxation creates incentives, providing a larger deduction for charitable giving creates more incentive to give (because the cost of the gift to the giver is lower). So when I’m taxable at a 10% rate, it costs me $9 to make a $10 donation. If I’m taxable at a 35% rate, it costs me $6.50 to make a $10 donation.
What’s more, we’re not talking about people with less money: we’re talking about progressive tax rates, and about the declining marginal utility of money. As such, while capping the percentage at which deductions can be taken would decrease the incentive for a donor to give, so would decreasing tax rates. (If you’re interested in a longer version of this argument, look here.)
Isn’t taxation fun?
@ Bob(4)
“Yes__ all those things you are unwilling or unable to pay for.”
I am willing to save for my own retirement, I don’t need to be compelled by the government. I am willing to pay for my own insurance, I don’t need to be compelled by the government. I am willing to pay to send physical mail, I don’t need the government to do that cheaply. I am willing to let my child go online and learn about life and nature, I don’t need a government TV show to do that.
“Do you the Federal Goverment owns 60% of Utah land, 60% of Idaho land, and 80% of Neveda land? That alone must cost some dollars to manage? It’s not something I budget for.”
I think land got along just fine before the government decided it took billions of dollars to ‘manage’ it.
Just read Oaks’ Testimony. It was pretty basic. In sum-Private Sector NPOs create a lot of jobs and do a lot of good. Don’t mess with it.
@Sam Brunson
From the article that you mentioned:
“Again, an income effect would offset at least some of the gain—higher taxes reduce after-tax income so people give less.”
Actually, many economists would change this statement from the page you referenced to “would more than offset”. I noted in my math that the relative cost of giving would decrease just like you did. However, that cost is only part of the equation and what really matters is incentive to the tax payer. You focused only on the tax return numbers while ignoring the bottom line: how much the payer takes home.
If you go back over my figures you’ll notice that people end up with significantly less money at higher tax rates. The idea that giving would increase as people have less money due to giving is clearly false and requires that consumers give more readily when they have less. Notice, tax returns are not actual money gained but in fact, less money lost. You can never increase your bank account by donating using charitable donations!
You’re right that for those with decreasing marginal value of money you would see a more inelastic response (in raw donations) to marginal tax changes, but the curve would be toward less donations with more taxation. Claiming that the very rich would give more ignores the fact that they would end up with even LESS money overall by doing so.
Yes, taxation IS fun!
Cameron, anyone who lives close to an unpopulated area susceptible to forest fires should be grateful for government money spent on managing those areas.
@6 Cameron N.
Our kids watch nature and science shows online too. Of course, most of those shows receive some public funding for their production and distribution (online and on TV) and most of the scientific researchers features either work at public institutions like state universities and/or receive government funding for their work. This is not to say that there are no privately produced shows about nature or that all science is funded by the government. But a lot of it is, and I am grateful for it. And in our case, our internet service infrastructure is a direct result of local government investment, so if I want to use the high speed internet for my kids’ educational viewing in my community, I have my government to thank for that too.
McX, in Xstonia, makes $100K/year and is taxed at a 10% rate. Wyman, in Yatvia, also makes $100K/year and is taxed at a 20% rate. Basic living and luxury costs are the same in both countries. (I.e., same number of dollars will get you a loaf of bread/month’s rent in a comparable house/Porsche.)
Here are three lines of thought:
(1) Wyman will be happier to give $8 of his own net income (for a total gain to charity of $10) than McX will be to give $9 of his own net income (for the same total gain) because, hey, 8 is less than 9!
(2) McX will be happier to give $9 of his own net worth than McX will be to give $8 of his because, hey, 81K is greater than 72K!
(3) McX and Wyman will be equally happy to give $9 and $8, respectively, because, hey, .01% is .01%!
These all have some prima facie plausibility. It sounds like we’re (at 1, 3, 5, and 8) trying to work out from first principles which of these three lines of reasoning is right. But I’m guessing it’s going to depends on how people are thinking about their money when budgeting charitable giving (and other things): What kind of psychological factors influence giving? One reason to think it might matter is that evidence shows the same economic benefit for charitable giving can result in different outcomes depending on how it is distributed. I’d expect that, depending on how things are in fact set up, some systems would get people to reason as in (1), some as in (2), and some as in (3).
(2): … “than Wyman will be to give $8…” Sorry!
some systems would get people to reason as in (1), some as in (2), and some as in (3).
It’s not just the system. Within a single system, the price effect (your first example) will likely dominate for some and the income effect (your second example) will likely dominate for others. In fact, we can even predict who the more price sensitive folk might be–the rich, who have much greater discretion in how they spend their money than those of us scrambling to pay our bills.
One could even construct a narrative about how it makes sense to raise tax rates on the rich but not the middle class because that would maximize charitable contributions from both groups. (But that would be overstating the importance of charitable contributions in the political world. The rationale for proposals to raise tax rates on the rich but not the middle class has far more to do with votes than with charitable contributions.)
@ Jason (9)
I would just reduce/adjust logging regulation at the perimeter. Give boundaries where trees can be cut for free anytime. Secondly, have a $100 a year website that expounds the efficient and safety virtues of cement homes and the silliness of wooden ones, and have politicians publicize it. There are easy ways to save lots of money.
@ Rachel (10)
I wholeheartedly agree, since internet relates to interstate commerce, and is kind of the virtual equivalent of transportation infrastructure. But, I would add that having both is redundant. I grew up watching nature and sesame street. There is a lot of content already there. We have decades of archives to draw on. Little kids will not care if it’s from the 80s. We could slap it all on a web site and save money on producing new content. We could also avoid having opinion/biases government news figures employed by taxpayer money. I prefer to depoliticize unelected government jobs as much as possible.
And if we privatize PBS, it will naturally adjust to what their user base can support via donations and ad revenue from brands that are a good fit.
@Last Lemming (13): No argument here — I suspect you’re right. I didn’t mean there wouldn’t be some optimal tax policy here, but just that merely throwing around arguments like (1) or (2) wouldn’t settle it by themselves. (Kurofune seems particularly enamoured of (2).)
@Cameron: Hooray! I was getting tired of all that pristine woodland out my window. And I love the idea of baking in a cement oven in the middle of a forest fire rather than being crushed by falling embers.
Bob #4:
Wait, so if the American people are “unwilling or unable to pay for” stuff the government is paying for…how exactly is the government paying for it?
The American people only get “for their tax dollar” what they pay for with “their tax dollar.” Minus government waste, massive interest payments, and $16 muffins. I’m unsure where the “bargain” is hiding in that equation.
The link to the hearing still works so you can view it and read the statements which are available for download. In the video feed, Elder Oaks’ statement starts at about 62:00 and then he comments a number of times afterwards including the participation from the two other religious leaders, the Most Reverend Timothy C. Senior, Auxiliary to the Roman Catholic Archbishop of Philadelphia, and Russell Moore, Dean and Professor of Christian Theology and Ethics at the Southern Baptist Seminary. Elder Oaks mentions up front that those two men were in agreement with his statement.
Oh Alison… You know how they are paying for it…massive debt that will make impossible for us to pay for anything in the future. That’s the “bargain” you see…we pay for a product now (gov’t) that nobody is happy with in exchange for an extreme loss of control over our choices later (borrower is slave to the lender). Sounds great huh?
Alison Moore Smith:
What do you get with your ‘purchase dollars’? Hugh profits for some guy, dirty air and water, zillions spent on advertisement, and junk you don’t need.
Sorry Alison, but_for me_ the ‘Free Market’ does not hold the moral high ground over government.
Jax:
I think you will find the ‘free market’ has a bigger debt than the government.
It’s not the Governemnt stopping me from buying better house, it’s Bank of America.
I worry more about the ‘free market’ taking my stuff away than I do about the government taking it.
I second Bob.
If the GDP doesn’t have a greater increase, we all pay. We should consider tax increases on the wealthy (bear in mind corporations are making record profits right now, which they are not investing for fearing that there is a lack of aggregate demand in the market, they can afford the tax increases) as a means of pooling money to invest in increasing our productive capacity in the economy by putting the unemployed to work, thereby increasing our GDP. Once we increase our productivity and our GDP, we will hopefully be in a position to pay down the national debt. But the private sector is deleveraged and a combination of fiscal policy (increased government stimulus) and monetary policy (the lowering of interest rates and quantitative easing by the Federal Reserve) is the most effective way of resolving our economic problems. These ideas aren’t coming from the Communist Manifesto, it is Econ 101.
@Jason (11):
Great summary. Wish that I had written it. Psychosocial effects are important and the elasticity of giving relative to take-home cash.
Like you mentioned, I’m more for (2) arguing that there’s a fair amount of elasticity.
@Bob (20):
Thank goodness the banks are keeping you from buying a bigger house. It’s very easy to calculate how much house someone can afford and last time we had mass ignoring of that it resulted in the real estate bubble burst! Hopefully the banks will keep to that sanity and only loan you what you can be trusted to pay back!
“Reading Elder Oaks’ testimony” usually has different connotations within the LDS world.
Was anyone else disappointed that he didn’t end it with, “in the name of Jesus Christ, Amen”?
Free market has a bigger debt, but I am only responsible for the part of that debt that I freely agree too. The gov’t debt I have a share of no matter what I choose. That debt mind you is currently $47,521 per citizen, so my family of 7 owes $332,647 and will soon owe $380,168 – all for a product that is quite terrible frankly. With congressional approval in the teens I’m not alone in my feeling either.
You could blame BoA for not giving you money for buying a bigger house, but your neighbor could blame you for not giving you the money to do so either. You, your neighbor, and BoA are free to loan money to whom they want to. It’s not BoA stopping you from buying a house, it is everyone’s collective agreement that you are a bad loan. Otherwise you could approach any number of private individuals, or banks, and could buy whatever you wanted.
Your worried the free market will take your stuff? If you paid for it, then that would be called theft and we have laws against that. If they “take” it because you don’t honor your contracts (mortgage, car loan), then you’re the thief. But what if the gov’t wants to take your stuff? Too bad for you. The only way anyone ever legally takes something from anybody else against their will is if the gov’t is involved. Go ask the GM bondholders who got screwed out of legal contracts because the gov’t said they should be…
Kurofune:
I didn’t say a bigger house, I said a better one. Mine is a 65 year old track house that takes too much out of me to care for. My payments are to the better by $550 a month. My last house I purchased at $162,000 some 18 years ago. At the top of the ‘Bubble’, it’s value was $750,000. It ‘dropped to $450,000. Where did I go wrong? I gave my bigger house to my daughter and moved into her littler one.
Is one of your lines “the people/masses know how to spend their money better than the Government does”? As you say_ the people made the bubble.
Jax:
I am retired. To BoA, I have no income other than SS, therefore I will get no loan from them. I have lots of money in stocks that I will not sell in this market.
OH__on big debts? Don’t worry. The ‘free market’, (when it is ready), will hit it’s inflation button, and they, you, and I__ will be paying back our debts with $.50 dollars.
@ Jason (15)
You wanted safety from fires, that is what it takes.
@ Brad
You miss the point. At some point, the efficient yet shrinking private sector guided by informed decisions of those directly aware of the microeconomic details will no longer be able to afford supporting an expanding wasteful public sector throwing money at pet causes like Solyndra that we ignore financials of because solar power is clean. And corporations are sitting on cash because the administration is inconsistent and their economic policies scare them. Why invest when you have no clue what the President will propose in 6 months? In addition, our correction that caused unemployment probably more accurately reflects a less bubbly demand, and any additional tax funded temporary jobs are just a stall tactic in hopes that inflation doesn’t go crazy before election time, without creating any sustainable jobs and adjustments between markets.
Cameron N,
You’re repeating tired myths.
1) There certainly are examples of wasteful spending on the part of the government, but by and large the projects that it has backed have been successful. Solyndra was mismanaged, but it was a drop in the bucket (a half a billion out of trillions in yearly government revenue), and it appears that no one did anything illegal even if it was embarrassing:
http://www.nytimes.com/2011/09/24/opinion/the-phony-solyndra-scandal.html
2) Corporations and small businesses aren’t citing uncertainty about government regulations and increased taxation as reasons to not invest. It is the lack of demand. Here are some reports from the non-partisan Economic Policy Institute to that regard:
http://www.epi.org/page/-/old/briefingpapers/BriefingPaper305.pdf?nocdn=1#page=20
http://www.epi.org/publication/regulatory-uncertainty-phony-explanation/
http://www.epi.org/blog/uncertainty-response-clive-crook-atlantic/
3) Core inflation (headline inflation is usually all over the place and is not a good reflection of the overall rate) is currently very low (below target) as it usually tends to be during times of high unemployment. For a while we were heading in the direction of corrosive deflation. If anything inflation needs to be higher in order to reduce the value of debts owed by households so as to free up some of their money so that they can stimulatively spend it on the local economies.
Alison (#16),
A side note: politifact actually rated the $16 muffin claim mostly false:
http://www.politifact.com/truth-o-meter/statements/2011/oct/04/bill-oreilly/16-muffin-included-coffee-tea-event-space/
Have to watch out with Faux News claims.
Jax:
But when the borrower and the lender are the same person, then in essence you and your family owe you and your family $333K, no? Or are you part of the camp that thinks China owns us?
Kurofone:
You can play with the numbers all day long about increasing tax rates and charitable giving, and the numbers you show are indeed correct. There is less money in your personal bank account if tax rates increase and charitable contributions remain the same.
But Sam has you beat, because the reality doesn’t make sense. As a CPA in UT, I prepare tax returns for a lot of extremely wealthy billionaires in Jackson Hole, WY, who incidentally live there to escape state taxes. No matter how many times I remind them that charitable contributions are not dollar for dollar, they still don’t seem to mind writing a bigger and bigger check, as long as it keeps the money from Uncle Sam. Is it logical? Not really. But they have enough money that they are not playing the game over what to do with a measly $100 like you illustrate above. Sometimes behavior in the marketplace is not logical or rational but there you have it.
Jax (25) wrote:
“Free market has a bigger debt, but I am only responsible for the part of that debt that I freely agree too.”
Perhaps, but when the free market fails (as it did in the recent recession), you end up paying a portion of that “free market” debt also.
Like it or not, what others do have an effect on you. You can’t escape it.
Alison (16) wrote: “Wait, so if the American people are “unwilling or unable to pay for” stuff the government is paying for…how exactly is the government paying for it?”
Apparently, we are willing to pay as a group for what we are “unwilling or unable to pay for” individually. We elect representatives to make these decisions for us, if I’m not mistaken.
If this is illegitimate, then perhaps our constitution is illegitimate also?
Bob, my only income comes from the gov’t as well… VA disability. Just closed on a bank loan. If you’re a “good loan” someone will loan you money even if BoA won’t.
And I’m fully expecting the “inflation button” to be hit. Not sure what $.50 would do though, unless you mean I’ll be paying with silver because the paper money will be worthless. But the free market won’t be the cause, it’s the Fed printing money like comes from monopoly. I read (WSJ I think) that in 2007 the money supply was in the area of $800 Billion, that was the total sum of money out in circulation. But since then we’ve added someone in the neighborhood of another $800 Billion by printing money, quantitative easing, etc. That essentially means every $100 bill you did have will soon be worth about $50. That is why the banks are holding it in reserve rather than dumping it on the market… it will cause major problems. The free market is trying to hold back the inevitable results of the Gov’t mismanagement of the money supply. Eventually they won’t be able to stop it though.
I would love to hear other explanations about upcoming inflation though… what is yours?
Brad said
Inflation number are only low because the gov’t keeps changing the criteria to keep it that way. The CPI is reporting inflation at about 3.8% a year, but they change that formula so that it has no relationship to the past cost of living. If steak gets to expensive to buy for the average family, and they start buying more hamburger, then the cost of living for that family goes down because hamburger is less expensive than steak… and the CPI would go down when in reality the cost for that family to maintain their standard of living has gone up. Administrations have been changing the criteria for measuring inflation so they don’t have massive SS cost increases in their budgets. If you were to use the same criteria they used in the 1990’s (before Clinton changed it) then inflation today would be about 7.8% and if you used the same as they did in the 1970’s (before Reagan changed it) it would be in the 11%+ range. That is one of the ways in which our lifestyle is being reduced/destroyed without our even being aware of it. If any “corrosive deflation” is happening it is because people are substituting more expensive products for cheaper ones because they are out of work and the gov’t counts that as a reduced cost of living for the average family.
Increasing inflation would help people who were in debt because they can pay back amounts with inflated money but hurts those with money saved… Deflation on the other hand does the opposite, it would help the people who have money in savings,fixed incomes, and resources to work with and would hurt those in debt. Why do you say we should want more inflation? Why should we want to hurt one group to help the other? No sarcasm, please explain why you think more inflation to help people in debt, but that hurts savers and fixed incomers, would be good. Because my assumption is that I would rather see some deflation to help people who are on fixed incomes (retirees, vets, etc).
Kent,
But we ARE able to pay for it if the gov’t leaves it in our hands. If we are unwilling to pay for it then why should the gov’t do it? Perhaps that is why Congressional approval is in the teens… they keep paying for things we AREN’T willing to pay for.
But is it any different if the gov’t is controlling things? No. What others do will always have an effect on me, what the free market allows is the ability to control how a person reacts to those effects. Would my reaction to banks failing have been to give more money to them? No, but the gov’t choose to forced me to do it anyway. Would my reaction to failing housing markets have been to give more money to Fannie/Freddie? No, but the gov’t forced me to do it anyway. Would my reaction to 9/11 have been invade Iraq (or pay someone to do it for me?) No, but the gov’t forced me to do it anyway. Maybe some of the gov’t reactions are better than mine, but I still wouldn’t trade away the freedom of making my own choices to get the choices made by “experts” in gov’t.
Jax (35), last I looked we elect those in Congress. It turns out that everyone likes their own Congressman, but hates the whole.
Unfortunately, the suggestion that Congress on the whole is doing what we, those who elect them, don’t want suggests that you don’t believe the system works. However, last I checked, the system was the U.S. Constitution. Are you saying that the Constitution is no longer a good system?
Since I think the system generally works, I have to believe that your suggestion, that the majority of those who vote, don’t want to pay for at least the largest of the items that you claim they “aren’t willing to pay for” is probably just your perception.
Also, Jax, I’m not sure I can agree that government “controls things.”
And, I suggest that when you say that “the gov’t forced me to do it anyway” what you really mean is that your fellow citizens voted for a government that “forced me to do it anyway.”
Don’t leave out that we are a democracy, and that government is how we work together.
I don’t think the system works Kent, but not because the Constitution doesn’t work, but because the culture doesn’t. I agree with the Founders who said that this system is wholly inadequate to govern an unprincipled people, and that is what I think we have become. And rather than have a powerful system that will try to control all of the problems created by our unrighteousness, I’d rather see one with much less power/control/authority. IMHO, I’d choose the abolishment of the federal gov’t before I choose what we have now or something with even more power.
The biggest things are the safety net programs and defense. I think if we got kept those and got rid of everything else that most people would be VERY pleased. I think they are willing to pay something for them.
Your right when you say “what you really mean is that your fellow citizens voted for a government that “forced me to do it anyway.”’ But notice the end of that sentence is still that government forced me – doesn’t matter much where that gov’t came from.
did the wealthy give of their wealth during the 1950s when they were taxed at 90%? Just curious. Was there a dearth of donations to charitable organizations back then?
Jax:
When you says you want a Governement “with much less power/control/authority” by cutting out who knows what, and leave the *Crazy Defense Budget* alone___you lose me.
You also lose me when you say the government has money problems because WE THE PEOPLE are unprincipled and unrighteous.
Jax (#34),
If the average US household had their personal debt under control, I wouldn’t advocate raising the inflation target. But they don’t.
Here is an article by economist Paul Krugman that addresses the issue of inflation:
http://krugman.blogs.nytimes.com/2011/05/28/inflation-and-debt-wonkish/
Household debt as a percentage of personal disposable income has been steadily rising from about 35% in the 1950s to almost 130% by 2008 (thanks to the housing bubble) and back down to a little under 110% by 2011. Most households have more debt that they have savings. Therefore it would make sense to create a “period of modestly higher inflation [that] would help reduce that private debt overhang, which would help promote economic recovery, which would in turn raise revenues and help the fiscal situation.”
Also Greg Mankiw, economics professor at Harvard, former economic adviser to George W. Bush and current adviser to Mitt Romney (he’s no political liberal like Paul Krugman), who has written the most widely used Econ textbook in the US, suggested, back in July 2011, raising the inflation target as a means of helping the US economy: http://www.nytimes.com/2011/07/31/business/economy/whats-with-all-the-bernanke-bashing.html
i’m for some quantitative easing. Bring it on. :D
Dan (#39),
You should also note that the US middle class experienced a great economic boom between the 1950s and 1970s when taxes were high and government regulations were strong. Even if the wealthy were not donating as much, there was a larger middle class who had more disposable income to donate to charities. So charities had a greater pool of donors.
Jax #35
“Would my reaction to banks failing have been to give more money to them? No, but the gov’t choose to forced me to do it anyway. Would my reaction to failing housing markets have been to give more money to Fannie/Freddie? No, but the gov’t forced me to do it anyway.”
Unfortunately sometimes we’re damned if we and damned if we don’t. The government’s failure to bail out Lehman Brothers sent shockwaves throughout the global economy. The failing banking system had to propped up, or else we could have experienced economic catastrophe. What the government should have done is temporarily nationalize the banks to get them back upon their feet. Even monetarist Alan Greenspan, whose general economic worldview is closer to yours than mine, called for this: http://www.ft.com/cms/s/0/e310cbf6-fd4e-11dd-a103-000077b07658.html#axzz1bGqspeuA.
As for Fannie and Freddie, they had very very minor roles in the housing crisis. Countrywide had a lot more bad debt on their books than Fannie and Freddie. Other private companies also had way more bad loans on their hands too, which they began pawning off on Fannie and Freddie on the eve of the crisis. So I would phrase it differently. Would I have chosen the series of deregulation-driven bills passed in Congress since the 1980s that were influenced by charlatan economists and corporatists that enabled the financial industry to take increasing risks and to privatize gain and socialize loss? No! But the financial-elites coopted power in a way to force me to accept that.
Bob,
I wouldn’t leave the military budget intact… I’d slash it dramatically (same for safety net programs), but I would leave national defense in the hands of the Federal Gov’t, that is all I was saying when I said we should keep those. I’d go with MUCH smaller all the way around.
Brad,
I see the argument that more people have bad debt than have savings, and so we should help the majority with inflation… but it goes against my basic nature that we should be helping people who made good decisions (saving, living moderately) than those who made bad ones (spent lavishly with debt). Unfortunately there are many in that group who didn’t “live lavishly” who are also in the group with lots of bad debt. They shouldn’t really be hurt because of no fault of their own, right? So I’m neutral on this because I wouldn’t want to call for any premeditated manipulation that hurts one group or the other.
As for the banks…I’m torn there as well actually. I don’t like giving them money to stop them from failing since they were failing because of their own policies… except that they weren’t. Gov’t passed all sorts of regulations about lending (specifically home loans) that said they had to make loans to all sorts of people who the banks wouldn’t have lent money to on their own. This was meant to make money available for people who wouldn’t otherwise be able to buy a house thus making “the american dream” within reach for more people. The problem was that this meant the banks were required to make loans to people who were not really safe… otherwise the banks would have done it on their own. This made for trillions of dollars of bad loans and the opportunity for some bad banks to play the system to their advantage (Countryside). So if the banks say, “we don’t want to lend them money. It isn’t safe.” and the gov’t says, “well, you will or else! and here are the new regulations!” then when it all fails and the banks fail because of what they were forced to do… then it just seems right that they should be supported by the one who forced them to fail in the first place – the Gov’t.
So should they have been have been kept from failing?? I don’t know! If they had failed on their own, then I’d say absolutely not. But if they failed because they were forced to make bad loans that caused them to fail??? then probably. So I’m not very upset at TARP… don’t like the auto industry bailouts at all though.
I know that Fannie/Freddie had only a smaller role in the housing collapse. But they made easy references for the point I was making! If I was writing a paper on it, like you, ” I would phrase it differently.”
Jax,
Ah, the “blame the poor” argument comes out at last…trillions of dollars going to the poor…wow…see, it wasn’t the banks or the rich at fault. It was clearly the poor.
Essentially Jax, the conservative argument is that the laws that allowed poor people a chance at “the American dream” caused financial giants like Lehman Brothers to sell those mortgages as securities to other banks without informing the buyers that the mortgages may not actually have had AAA rating. Or in other words, Jax and the conservatives would have you believe that the poor people who borrowed for a $200k house forced the bank that gave them their loan to then sell that loan (with all its inherent risks) to another bank or investor, and they demanded that the bank not inform the investor that their mortgage was risky. See, it was the poor who caused banks to sell poor mortgages as AAA rated securities. Those darn poor. Why do they keep messing things up?!??!
Jax,
I am not writing any paper on econ. It is just my pet subject that I keep up on daily. And I like to correct misinformation when I hear it, especially overstatements about how big and bad the government is.
No time for a long reply. But I will say that the 2008 crisis is primarily the result of deregulation of the financial industry. Sure, the government made bad calls urging banks to make loans to people with bad finances. But that by itself didn’t cause the financial crisis. Most of the bad calls were made by greedy, high-risk-taking, unregulated financiers, who weren’t forced at all by the gov’t to make most of the bad calls that they made. The secondary mortgage market was a mess, and it was essentially designed so that in case of a bust, that the risk-takers would minimize their losses and instead pawn most of it off on the middle-class. Bankers and financiers managed to wire in laws that protected their unethical risk-taking behaviors. Unfortunately, even the most seasoned of investors caught speculation fever (a byproduct of deregulation, not government coercion) and created a bubble economy.
Dan, our bad economy is all the fault of those stupid poor people. They should have known better to not fall for the schemes of loan shark usurers. Preying on the poor and ignorant is perfectly ethical and legal. Long live Harold Hill.
Dan,
I never said anything about poor people, let alone blame them for anything. I think they are treated terribly and need some advantages. I blamed gov’t. Brad is telling me it isn’t the gov’t, but business. The only one talking about the poor is you. I don’t think trillions going to the poor is a bad thing, only the strings attached with the expectation that they are able to pay it back… giving it to them gratis would have been better. I only said banks made loans that weren’t safe. Wealthy people make bad loans too you know!
Though we should talk about them more (both to stay on topic and to do more to help them). If Sam is still reading along perhaps he could give some ideas on what could be done with tax code to help increase charitable giving…He seems to be resident tax guru!
Jax,
did the government force the poor to buy loans they could not manage?
So, um, how exactly can those loans bring down a bank like Lehman Brothers? What did the government do to force banks to sell these mortgages as securities? You blame the government because you are told to blame the government. But you have no idea what you are arguing here. You’re showing you do not understand the nature of derivatives and securities. This was an unregulated sector of the financial world. It was new, it had nothing to do with anything government related. Nobody in any government entity forced banks to sell mortgages as securities to other banks. NOBODY. And nobody in any government entity forced these same banks to lie to their investors about the risk inherent in these mortgages. Nobody in the government, Jax. You’ve developed a twitch to impulsively blame the government on everything. It’s such a terribly weak argument, particularly when the exact opposite is the case in regards to the financial collapse of 2008. The collapse happened BECAUSE OF banks, because of rich people. Stop blaming the poor, or the government.
It the government with big business. Or vise versa. They are in it together. One does the deed, rge other ignores it through deregulation.
So Dan, Jax, you are both right.
And Brad is too.
huh?
Just found this chart for Jax and others.
http://cr4re.com/charts/charts.html?CPI#category=CPI&chart=InflationSept2011.jpg
The inflation rate…still not exploding.
Dan,
Both the private and public sector are to blame . Wall Street is only as good as the laws that limit their insatiable greed. Yes, the poor and huddled masses are somewhat to blame for their ignorance, but not like the other two. That is why we vote for lawmakers to protect us. Otherwise, we could all have to get degrees in finance and law in addition to whatever degree interests us in support of our work. It is unrealistic to expect us to all have the ability to do that.
The system in broken. Those with the elected power and those with the money are the culprits.
So then one could argue that repealing the Glass-Steagall Act, which reduced regulation, which banks loved, which conservatives love, caused the financial collapse, right? After all, it is much closer in time than something that happened in the 1970s, and there are clear connections between unregulated financial transactions like derivatives and securities and unreliable gauge of the strength of those derivatives and securities. If there is no regulation guarding an investor from being fooled into a bad transaction…well, we see the result. I linked it before in comment #46. I don’t need to again, but go read up on how Citibank, among many of the other large banks, lied to their investors about the securities they sold them. Clearly the financial sector cannot police themselves. They’ve paid Congressmen to weaken regulations that held them in check over the past 60 years, and then voila! we have a financial collapse. Those nasty bankers and their allies then blame the poor and the government for “forcing” them to give loans to poor people back in the 70s! Could they be more out of touch with reality?
one more thing, if the system is broken, how do we fix it? A revolution? Are we gonna tell the 1% to stop giving money to politicians to buy them out? How are you going to fix this? You think Ron Paul can fix this? You think he and those around him cannot be bought by the banks? You think reducing financial sector regulations will send a message to banks that they should police themselves better? You think they will? The system will ALWAYS be broken when the top 1% hold 40% of the nation’s wealth. If you wish to fix this problem tax the hell out of the top 1%. I say, 90%. That seemed to work quite well under Eisenhower.
Dan,
I am with you mostly. Unfortunately, taxing that 1% will just make them leave. In the 1950s, developing countries were not an option for US corporations to run to. That’s all changed.
I want as many states’ rights as possible without bringing in Ron Paul. And Romney’s state-run medical sounds way better than Obamacare.
We are going to have to make a choice. We either lose our social programs or we are all going to have to pay higher taxes. And sadly, it’ll probably end up being both.
BTW,
I believe every candidate in both parties knows that taxes will have tp be raised in the middle class. We are in just too much of a mess not tpu expect that. But I don’t blame Republicans for not admitting it. They have to appeal to their base in order to get into office.
where are they gonna go to? Galt’s Gulch? Fine by me. Let them leave. There are 300 million others to take their place.
Are you referring to corporations?
riiight, because corporations are human beings…why do you bring corporations into this? to this point we are talking about people. And NO, corporations are not people.
I don’t think we have to do either if by social programs you mean the safety net programs of SS, Medicare, etc. If we cut military by ending our out of control overseas operations (all of them), we currently collect plenty of money to pay for the social safety net programs, provide the best DEFENSE in the world, and have sufficient money for a FEW side programs. Get out of the rest of the crap we’re into (NPR, Education, NASA, farm subsidies, etc) and there is no need to raise taxes. We can let Americans live free knowing they will be protected and taken care of if they come across hard times. The people who want to live on the bottom of the economic ladder can and those who want to try for more wealth/luxury can try to lift themselves if they wish…
Dan,
We will have a hard time producing jobs without corporations. Especially manufacturing. Ask Germany. Heck, ask us.
Jax,
I agree with you that we should get out of Europe this evening if not sooner. That’s one Ron Paulism I agree with. That and legalization of all drugs. Did any of you catch
Did either of you catch Ken Burn’s “Prohibition” recently? It about wrapped up our drug war IMHO.
Glass Ceiling:
Ever play Monopoly? It’s only fun when everyone has money. Once the “Rich’ starts to get all the money__the game soon ends.
Jax:
Did I read you right? You don’t favor the public education system? I LOVE the public education system. Seems like a great way to start everyone on the same foot, no?
Having lived in Hong Kong and India for a few years now, I can tell you that starting three year-olds on a different level only exacerbates the problem. Make good education accessible to all, I say.
Farm subsidies, hmm. As the grandson of a wheat farmer in the greater Lehi-Saratoga Springs area, again, they serve the purpose. Stability in the food commodities market tends to keep people calm and fed. What’s your beef here?
Glass,
What? Germany? The country that after the utter destruction of World War I grew to become the most powerful nation on the planet in a matter of 20 years? The country that after World War II became the 3rd most powerful economy in the world? Do you have any idea what you are arguing? It has no basis in reality. Ask Germany? Ask us? What does that even mean?
Secondly, you’re once again talking about corporations. I am talking about human beings.
Chadwick,
I went through public education and have 3 kids in it now… but it would still be public run at the state level or even more locally. No reason to have the feds involved at all. Dept. of Education is relatively new and spends lots of money, but hasn’t improved test scores or general education of the public at all. They were functioning fine for the many decades before and would function just fine without as well… though there might be a difficult adjustment period while the school admins detox from the Federal money.
Farms are businesses… I don’t want to subsidize banks, auto industry, farms, schools (esp higher ed, they are a business), or any other business. I’d rather let the people run the market…. If they crash it…so be it… As long as we have the good sense to stop the lawyers from protecting the criminals just because they have money, then we’ll be just fine. If we don’t have that kind of good sense (which it seems we don’t most of the time) then we deserve the crashes that will happen in a free market when we allow criminals to run it. But at least it will be an increase in personal freedom and responsibility, rather than less of it. IMO.
Glass Ceiling,
Out of Europe, Korea, Africa, Iraq, Afghanistan… that would cut the military budget needs considerably if we aren’t paying combat pay and fuel and equipment replacement costs and funeral expenses… Not to mention the money to rebuild infrastructure in other countries when our own is in need of repair. Use those troops to secure ourselves here by placing them along the borders (the troops from Korea know how to do that). What a joy it would be to see us defending our own country rather than another!
Bob,
The Monopoly analogy is quite poignant. Frightening as well.
Jax,
For any major shift in the military, it would have to happen one base at a time, one nation at a time, one continent at a time. Germany makes sense as a start. Then the rest of Europe. It will never happen however. Why would an empire ever relinquish power? No, we will die like every other empire in history, from overextention. That’s just how much we value history.
Dan,
Germany historically has lived and died by its manufacturing. It appears that we will eventually realize that we are no different. A nation cannot survive purely on a service based economy. You have to make things as well. All we make anymore is war.
If you go to western Europe, particularly Germany, toy will find
If you go to western Europe, particularly Germany, you will find the best THINGS that money can buy. When you buy things here that are quality, they come from somewhere else. These old countries in Europe know how to stay valid. Its not only small artisans, but corporations as well.
Our problem is deregulation, outsourcing, and the fascist relationships between Wall Street and the government. Corporations in and of themselves are good, not bad.
Glass,
It’s because of comments like this that I left Wheat and Tares saying that it had been taken over by crazy people. Look man, your comment has no basis in actual reality. No nation on this planet is “purely” a service based economy. And the US doesn’t make only war as your comment indicates. You cannot say “all we make anymore is war.” Saying that makes you sound utterly ridiculous. Really? All we make is war? So when a guy builds a car…like say the Tesla…all he is making is war? He’s making that in America. It’s American made. Is it used to kill people in other countries?
For your argument to make sense, you must create flimsy assumptions about things. That’s the only way your argument works. The United States, Germany, and all the rest are not “purely” service based economies. The United States doesn’t just make war. Why say these things if they are not true?
Um, oh i don’t know, the local Apple store has the best thing that money can buy at the moment, and that is here in America, by an American company…just sayin’…
I’m honestly trying to give you a chance here, but i have no idea what you are arguing. You ramble off between different talking points. What does deregulation, outsourcing and “fascist relationship between Wall Street and the government” have to do with the quality of products from this country versus the quality from somewhere else? Furthermore, what does this have to do with taxation levels? And to bring it back to the topic, what does this have to do with whether or not rich people will continue to contribute to charitable organizations if their income happens to be taxed at a higher rate?
Absolutely nothing.
Dan,
And I am trying trying to give YOU a chance. But time and again you just end up being a jerk.
You know we have lost most of the manufacturing that we had 20-30 years ago. And that its hurt us. I don’t have to give you grids for that. I don’t need grids for logic, nor do I need to give you a bibliography for common historical knowledge.
I mistrust internet references anyway. They are often relative to the writer’s political stance . You were giving me all sorts of “proof ” not long ago about Europe paying for most of its defense; and you were saying that my claims of the US paying for half of their defense was “ridiculous. ” Then you went on from there proving how right you were and how wrong I was. And “where was my proof?” Even though I lived in Germany for three years in the military and had spoken to German citizens and American officers on the issue.
Then others in the blog supported my claims, and I didn’t shove your nose in it. I didn’t try to tear apart your style of arguing, or your political stance. ( BTW, Ron Paul confirmed my argument the other night at the Republican debate in Nevada. No one asked him for proof of his findings at the debate. You know why ? Because it’s common knowledge that we are paying for half of Europe’s defense.)
I didn’t want to do this, but I am a little tired of your abusive games on the blog here. You often have interesting things to read. And some things I agree with. But you are a cyber-bully and it’s about time you get the word.
I agree, but I think for different reasons. Unlike the far-right that I’m usually accused of parroting, I welcome the loss. The Lord decreed a full end to all nations. I would take that over what we’ve been heading towards for the last 20ish years (and probably longer but that’s about as far back as I’ve been paying attention).
Jax,
Sounds good to me. It’ll take a while.
Elder Oaks can testify about charitable deductions because ge is not only a leader of a church, but also a former law professor at University of Chicago, former oresident of a major university that receives large gufts, and a former leader of the Corpiration for Public Briadcasting, which, along with its university affiliate stations, relies heavily on tax deductible donations.