Daschle could be "Wit of the Week"

[Udie at Work]

Originally posted by funkedup
I'm sure there are better things that could be done, but it's undeniable that Daschle's provisions WOULD stimulate the economy.

 Well I don't hate it as much if it is the payroll vs income tax thing.  But is it stimulating the right part of the economy?   Who spends more, the poor or the middle class?   And if they aren't paying in to SS or MC but recieving full benifits that is a handout, albeit one that I don't mind so much as it's not cash in hand perse.  I guess he's getting on the right track, though I reserve the right to reverse that statement.....  In reality they play us for fools.  I doubt if what we've said here ever seriously gets debated up in DC.


 Boggles my mind to think how somebody goes to Washington with little money and 15 yrs later they retire a millionare.  I think they have a secret scam that puts our tax dollars directly into their pockets.   Boy let somebody ever find out that is true, the country might actually yawn.



[edit]

 Could somebody do me the favor and tell me if Fdski's post added anything relivant to this conversation or was it more smart bellybutton remarks?   I have a fealing he painted us conservatives with that same old used up brush he's been using....

[Dead Man Flying]

Originally posted by Udie at Work
Well I don't hate it as much if it is the payroll vs income tax thing.  But is it stimulating the right part of the economy?   Who spends more, the poor or the middle class?   And if they aren't paying in to SS or MC but recieving full benifits that is a handout, albeit one that I don't mind so much as it's not cash in hand perse.  I guess he's getting on the right track, though I reserve the right to reverse that statement.....  In reality they play us for fools.  I doubt if what we've said here ever seriously gets debated up in DC.

[/B]

The problem with targetting the middle class instead of the poor with a payroll tax cut is that there's no guarantee that the middle class will spend it.  During tight economic times where people fear for their jobs, those who can save money usually do save money.  Money saved is money unspent -- if it sits in the bank earning interest, demand hasn't increased at all.  Cutting payroll taxes for the middle and upper classes presents a possible double whammy for the federal government: decreased SS intake with no benefit to the economy.  What we do know for sure is that those in the lower income levels tend to spend all of their paychecks to meet life's necessities -- food, rent, clothing, etc.  Whatever money they receive from a payroll tax cut will most likely be spent on these necessities rather than saved.  Increased money + the need to spend it = increased demand for goods and services.  Increased demand means increased production to meet it, and corporations will hire as many new employees as necessary to increase output to meet the higher demand.

Could somebody do me the favor and tell me if Fdski's post added anything relivant to this conversation or was it more smart bellybutton remarks?   I have a fealing he painted us conservatives with that same old used up brush he's been using....

[/B]

I guess you'll need to unsquelch him to find out.  

-- Todd/Leviathn

[Toad]

I did read the link. A "supply sider"; I'm a bit surprised.

Todd: Cutting the payroll tax rate on lower income families doesn't shift the burden more to middle or upper class families unless their payroll tax rates increase proportionately; as it stands right now, the proposal simply decreases the money going into the SS fund overall without shifting the tax burden upward.

So tell me... if the bottom income earners stop paying in and no one else contributes more... what happens then? Social Security in a "lockbox"? Social Security "protected"?

We simply get to the point where the SS Trust Fund cannot meet its obligations that much sooner, right? In fact, probably MUCH sooner.

Would this be Daschle calling for more "deficit spending?" Wasn't he just bashing the Reps for this?

Secondly, let's remember that ORIGINALLY if you didn't pay into SS, you could not recieve SS payments. For a while, my pilot group did not participate.. and thus were not elegible for SS.

What we're doing here is setting a precedent, is it not? Won't this be the first time that folks who stopped paying in while employed will still receive benefits?

This is a MAJOR revision to SS policy, isn't it? I'm not sure this is an entirely good idea. Seems like one more sneaky step into the "welfare state". If we're going to go that way, let's get it out on the table without the camoflage.

BTW, I'm pretty sure I don't agree with your hypothesis that you can't trust the middle class to spend the money.

I'll wager the records of the credit card companies and banks/mutual funds/stock brokers would show that the "middle class" is heavily in debt and continues to spend while their savings and investments are a paltry percent of thier income.  

In short, the "middies" are spenders, not savers.

Guess it depends on how you define middle class. Seems like to Daschle anyone making $50,000+ is excessively rich.


BTW, for those of you who thirst for knowledge and find this SS debate interesting, I suggest:

Brief History of Social Security

It starts with the Greeks (but it does move fast) and it pretty clearly shows how far we've drifted from the original intent of SS as first enacted.

"As President Roosevelt conceived of the Act, Title I was to be a temporary "relief" program that would eventually disappear as more people were able to obtain retirement income through the contributory system."

Oops... not quite Franklin.

[Eagler]

DMF

thanks for keeping your cool and the rational explanation.

I get alittle excited at times

it still sounds like another robin hood move to me, robbing peter to pay paul, while paul is your voter...

seriously, I think the gov needs to stay out of it - both parties. they are already up to their necks. I think the economy will get along just fine the farther they step back.

[Dead Man Flying]

LOL D'oh!  I just realized that I'd posted the wrong link.  I bet a lot of you guys were scratching your heads about what I was referring to in that link when, in fact, it wasn't even there.

http://www.house.gov/jec/fiscal/tx-grwth/payroll/payroll.htm

That's the one I meant to post.  I thought I'd set it to copy, but it pasted an older link I'd copied instead.  Mea culpa.    This should help everyone make more sense of my argument.  I'll go back and fix it in the original post as well.

-- Todd/Leviathn

[Dead Man Flying]

Originally posted by Toad
I did read the link. A "supply sider"; I'm a bit surprised.

[/B]

Hehe, that's not the link I intended.  I sent to that someone on ICQ earlier to explain a bit of supply and demand to them.  Not sure why the link I meant to send didn't paste properly.  In any event, it's fixed now.  

So tell me... if the bottom income earners stop paying in and no one else contributes more... what happens then? Social Security in a "lockbox"? Social Security "protected"?

[/B]

I think it's a short term versus a long term strategy toward Social Security.  If you have a lot of unemployed people, the SS fund receives substantially less money than if there are lots of employed people.  After all, if you're not on a payroll, you're not paying payroll taxes.  The idea behind cutting payroll taxes on the segment of the population whose spending patterns will most impact the overall economy is that, in the long run, it creates more employment.  More employment, in turn, means more money for SS via payroll taxes.  The best thing for SS in the long run is a strong economy, so short-term payroll tax cuts or rebates help the bigger picture.

We simply get to the point where the SS Trust Fund cannot meet its obligations that much sooner, right? In fact, probably MUCH sooner.

Would this be Daschle calling for more "deficit spending?" Wasn't he just bashing the Reps for this?

[/B]

A strong economy is the single best thing for increasing the longevity of SS.  The more people who are working, the more people who are paying payroll taxes.  It's doubtful that SS would go bankrupt in the interim period between slashing payroll taxes for the poor and the economic stimulus this creates, and in the long term it more than pays for itself.

What we're doing here is setting a precedent, is it not? Won't this be the first time that folks who stopped paying in while employed will still receive benefits?

[/B]

My understanding is that it wouldn't be an elimination of payroll taxes for those who didn't pay income tax, merely retroactive rebates for the difference between the new tax rate and the old one.  Correct me if I'm wrong.

This is a MAJOR revision to SS policy, isn't it? I'm not sure this is an entirely good idea. Seems like one more sneaky step into the "welfare state". If we're going to go that way, let's get it out on the table without the camoflage.

[/B]

I'm pretty certain steps like this have been taken before -- not an elimination of payroll taxes, but certain reductions in them at all levels.  Like I stated before, taxes can be used to adjust levels of aggregate demand, so increases and decreases in all sorts of taxes aren't entirely uncommon throughout the years.

BTW, I'm pretty sure I don't agree with your hypothesis that you can't trust the middle class to spend the money.

[/B]

It's not that we can't trust them... it's just that overall spending generally declines with economic downturns for a variety of reasons except for those who have no choice but to spend their money.  Lower classes are more of a sure thing when it comes to economic stimulus because their income goes toward maintaining a minimum standard of living.

I'll wager the records of the credit card companies and banks/mutual funds/stock brokers would show that the "middle class" is heavily in debt and continues to spend while their savings and investments are a paltry percent of thier income.  

In short, the "middies" are spenders, not savers.

[/B]

I'm not denying that they're spenders, but general levels of spending do decrease among the middle class during economic downturns.  The Federal Reserve lowers interest rates in the hopes that it will decrease the cost of borrowing money (i.e. spending), decrease the incentive to save money, and increase the incentive to invest in stocks.  In other words, there's far greater variability in levels of spending for the middle and upper classes than in the lower class.  For this reason, in the macro-economic sense it's a good idea to target payroll tax rebates at the lower class for the short term.

Guess it depends on how you define middle class. Seems like to Daschle anyone making $50,000+ is excessively rich.

[/B]

I'd go by what the Census determines are lower/upper/middle class by income percentiles.  

Thanks for the SS links!  I'll check those out.

-- Todd/Leviathn

[Toad]

Overall, I see what you're saying but I'm still not sure I agree with the methodology. The part that particularly bugs me is the participating/non-participating distinction.

SS was (initially) clearly instituted as a benefit for those who chose to particpate. Now we're moving to full benefits for those who DO NOT participate. I'm not going to be comfortable with that.

Perhaps there's another way to put cash into the hands of the lower income group.

As to the census divisions, somehow I think the Census, the Republicans and the Democrats all use different definitions for defining a group by income level.

BTW, what the heck do you do for a living? You are a little too familiar with all this stuff to be the average AH joe!

[ispar]

Most eeeeenteresting...

Nothing to add, but I'm enjoying this discussion . Good stuff in here.

[Kieran]

Just reading and learning. Carry on.

[Dead Man Flying]

Originally posted by Toad
Overall, I see what you're saying but I'm still not sure I agree with the methodology. The part that particularly bugs me is the participating/non-participating distinction.

SS was (initially) clearly instituted as a benefit for those who chose to particpate. Now we're moving to full benefits for those who DO NOT participate. I'm not going to be comfortable with that.

[/B]

Well now this is another matter entirely that deals with the fairness of SS in general rather than the efficacy of a targetted payroll tax cut.  Regardless of whether I agree or disagree with the redistributive and progressive nature of SS participation, the fact remains that a payroll tax cut for the lower class within this institutional framework is a good idea.

Perhaps there's another way to put cash into the hands of the lower income group.

[/B]

Possibly, but I haven't seen anything from Democrats or Republicans that's a better idea thus far.

As to the census divisions, somehow I think the Census, the Republicans and the Democrats all use different definitions for defining a group by income level.

[/B]

hehe This is probably true.  The White House and Congress both use different budget projections, so who knows when it comes to defining income levels.  I'd guess that there has to be some standard for tax purposes.

BTW, what the heck do you do for a living? You are a little too familiar with all this stuff to be the average AH joe!

I'm a graduate student in Political Science at UNC with a major in American Politics and minor in Methodology.  My area of interest is interinstitutional relations, particularly between Congress and the Executive Branch, though I've also done some work on state politics and state interest group systems.  Lately I've been focusing on presidential persuasion.

Economics was a love of mine undergraduate, but I never majored in it because I couldn't stand the Calculus.  My wife's an Econ major though.

-- Todd/Leviathn

[Toad]

the fact remains that a payroll tax cut for the lower class  within this institutional framework is a good idea.

Disagree.

There are other ways and I really don't like the precedent being set within the SS institutional framework.

For example, you could expand the Food Stamp program into the "lower class" (lower income) group. It's still a direct transfer of wealth but it occurs within a framework that clearly marks it as welfare. Since it provides "same as cash" monetary assistance for a basic need (food) it would then free up cash for other "disposable income" items.

Problem here for Daschle, I think, is that the transfer of wealth from SS would be "off budget" would it not? It would be a "raid on the SS Trust Fund!" (Lions and Tigers and Bears! Oh My!.. nobody has ever done anything like THAT before!) Thus he and his party would not be seen a contributing to "Bush's deficit".


OTOH, an increase in Food Stamp funding is more likely (admitting I don't know) to be a bugetary item. Thus, it DOES have to be funded sort of "in public" and they won't be able to point the finger where they want too.
 
Comments?

[fd ski]

Increasing the food stamps range would cause the "welfare state" type of ourcry, among with the complaints about how abused the system is ( ie: people buying a 30 cent candy for 5$ stamp and getting cash back for beer... )


HI UDIE !!!

[Udie at Work]

and reading "ignored" posts

Originally posted by fd ski
Increasing the food stamps range would cause the "welfare state" type of ourcry, among with the complaints about how abused the system is ( ie: people buying a 30 cent candy for 5$ stamp and getting cash back for beer... )


HI UDIE !!!

 But damnit you said something I agree with you on.   Though I would add that the complaints would be true.  Before I went to college I worked at 7-11 in Killeen, Tx.  During the training week they warned us over and over and over to watch out for people wanting to buy gum w/ a $10 food stamp and want cash change in return, it was illegal BTW  That and selling booze to minors were there two biggest worries.

 When I started behind the counter I couldn't believe the ammount of people that tried that.  They wouldn't take no for an answer either.  They'd tell me they were going to call my boss and have me fired, one threated to kick my ass.  The best was the time that one lady w/ her boy friend called me racist and actually called the cops on me.   I wish you could have seen the look on her face when the cop explained to her that what she wanted me to do was against the law.


 Thanks for stickin to the debate

[Toad]

WRT the "welfare state outcry" that's simply a smokescreen of political expediency.

As Todd said:

What we do know for sure is that those in the lower income levels tend to spend all of their paychecks to meet life's necessities -- food, rent, clothing, etc. Whatever money they receive from a payroll tax cut will most likely be spent on these necessities rather than saved.

The theory hre is that what is needed to stimulate the economy is a direct transfer of wealth to the "lower income levels" from higher income levels. (Let's not sidetrack on this as it's not the point of the discussion.)

Now Daschle wants to subtly transfer the wealth from the SS Trust Fund. He wants to crack open the "lockbox".

The problem here as I see it is two-fold:

1. This is a subterfuge; it's typical Washington BS, an attempt to pull the wool over the eyes of the electorate.

If a direct transfer of wealth is needed to stimulate the economy, so be it. Let there be debate about it, let a vehicle to do so be agreed upon and let's get on with it. Food Stamps are just one possible way to do this.. there have to be others.

But let it be an open part of the FEDERAL BUDGET. If this is necessary, there's no need to try to hide it, is there?

This move is a dishonest means to circumvent Congresses responsibility to determine budgetary priorities.... IMO, of course.

If this gets done, the money will have to come from somewhere. Other programs get cut or deficit spending increases.

Daschle doesn't want to take the heat for proposing more deficit spending and he doesn't want to cut the Federal Budget. So, hey, Presto! we'll use the invisible off-budget  money from the SS Trust Fund instead. What happened to that "lock box"?

2. SS was designed and intended to be a "no pay, no play" system. That is, if you didn't pay in you didn't get any payment back at retirement. Further, if you were in and opted out, your payments were reduced/capped at retirement.

Daschle's move RADICALLY alters this philosophy. Obviously, it provides a basis for moving on to the "Everyone is elegible of SS whether they pay in or not" theory. (Again, let's not sidetrack)

Like my mamma told me... honesty is the best policy. State the need, have the debate, vote for what you think is right.

Is that so hard for a Congressman? Apparently so.

[StSanta]

Man, very interesting discussion. Sure has been an eye opener to me: don't know much about this tax stuff.

It also seems like the US has a much more dynamic tax system (for better or worse) than we have here. Here it's been the same: taxes have steadily increased, and when the UE told the Danish social democratic government that it isn't acceptable, they begun adding 'fees' instead of taxes. Basically here, you pay between 40 and 50% income tax. Then 25% sales tax, and then all the 'fees', like the 180% of cars value 'fee' on cars.

I've long wondered why it's been that a country like Denmark isn't much stronger economically. Overall, because of our very small and homogenous population, we have a highly trained and educated public, yet our economical progress is far from spectacular.

Think I am beginning to see why now.


Interesting discussion, thanks chaps.