[quote]
(http://news.yahoo.com/s/nm/20080905/pl_nm/usa_politics_dc) from Obama ‘saying he would enact tax cuts that would benefit 95 percent of Americans, end tax breaks for companies that ship jobs overseas and make health care more affordable’.
My question is, does this even make sense to you guys? I know that the details of Obama’s plan to do this are probably not available, but does it even make sense that we can have tax cuts to 95% of American’s AND all the other programs he is talking about, while still having things like Iraq/Afghanistan, new alternative energy initiatives and the quasi-recession thingy (etc etc) over our collective heads?
Unless you are going to radically alter the tax structure in this country, simply eliminating the ‘Bush tax cuts’ isn’t going to get enough money to pay for all that…even if you could somehow actually get all the theoretical money back. So…in your minds Obama supporters how will this work?
Couple of things about this debate please. Let’s keep it real. Let’s keep it focused on Obama and not on McCain (I know he was mentioned in the article I quoted, but the only reason I quoted it was for that one line). Let’s try and keep it narrowly focused on Obama’s tax plans and how they may play out wrt tax cuts and tax increases vs proposed programs and ‘sunk costs’ like the existing programs. Let’s TRY and keep it as unheated and civil as possible. I’m genuinely curious how something like this could work…seems like there are a ton of mutually exclusive things playing out here that would make it impossible. But, I’m trying to keep an open mind here and am curious on Obama 'dopers thoughts on this.
First, I don’t care if he cuts my taxes. Seriously. I’d just as soon send the money from the tax cut he proposes to help pay off the debts the government has incurred.
Second, the tax cuts he’s describing for middle and lower class are small. Miniscule, even, and the 95% of the population is a much smaller percentage of the GNP, thanks to the disparity between the super-rich and the ordinary. I honestly don’t think the tax cuts Obama promises have much of an effect on the country’s bottom line.
Third, it’s a start. Obama is talking about fiscal responsibility. Even if his current plan won’t 100% solve our economic problems, it’s a start for dealing with it, which is more than I can say for the Republican platform.
When you find yourself in a hole, and you’re holding the shovel, the first thing you do is stop digging.
Obama claims that his tax cuts benefit 95% of Americans, but I think the idea is that his tax plan would be revenue positive. So most people get a tax cut, but over all, the government brings in more money than before. Additionally, ending ‘tax breaks for companies that ship jobs overseas’ is also essentially a tax hike for certain companies. (Honestly, I’ve never been clear on how this idea is supposed to work, and am dubious about its effectiveness. Certain jobs are probably going overseas, and they’re probably never coming back.)
So we’ve got two ways in which he’s proposed to increase revenue, and he also mentions getting out of Iraq as a way to save money. And the idea behind his health care program is that it would also end up saving money overall, compared to health care expenditures as they are under the current system. Uhm, maybe that’s the case.
Anyway, I’m an Obama supporter though I’m skeptical about how feasible his suite of economic policy initiatives are. Fortunately, I’m confident that if he is elected, they’ll be modified to fit real-world considerations.
I understand, but that’s really not the question here. I want to know how this would work.
There are, what? 300 million Americans? How many are tax payers? Half? Say 150 million? Say 140 million (give or take gods know how many) would then get a tax benefit. Even if you only gave them each a dollar (I assume it would be more), that’s still $140 million dollars. Ok, that’s nothing…‘the rich’ can absorb that no worries (though it’s not exactly a one for one even there). However, that’s only part of the story because ‘the rich’ ALSO have to then presumably pay for all the OTHER new stuff he’s talking about, right? Health care, say, alternative energy initiatives, various new social programs, etc etc.
Obviously he could cut spending in other things (say the military, always a popular favorite), but you aren’t going to get big savings there since most of those costs are sunk costs (paying for salaries and benefits and such)…so, equally obviously we are talking about more than simply getting rid of the Bush tax cuts. But how much are we talking here exactly? How can we give tax benefits, even small ones, to 95% of the people while bring on line a bunch of new programs in a time when the economy is so shaky?
I’m not wanting to talk about the supposed Republican platform here…I’m asking how OBAMA’S plan would work.
Well, maybe. But it doesn’t seem to me that’s where Obama is headed with this (thus my questions in the thread). Instead, it seems like he is simply digging holes in other places.
Ok, let me give you some broad strokes why I think the plan is reasonable.
Roughly speaking, the Bush tax cuts for the top 1% of earners, compared to what they paid under Clinton, results in a delta of approximately $70 to $100 billion each year. See “Not So Fast.” Assuming that the top 5% of earners would pay more under Obama’s plan, we’re talking some substantial amount of money, which I haven’t seen a good estimate of, but we’re certainly talking about $200 billion in annual funds to be redistributed to tax cuts or spending.
Now add in the money we’d avoid paying if we drew down our presence in Iraq. That is a harder figure to ballpark, depending on the speed of the withdrawal and the costs of the war yet to be realized (e.g., getting all our equipment back and replacing busted stuff will be tens of billions of dollars for a few years, but then the cost avoidance kicks in). Since we’re spending roughly $100 billion per year in Iraq (included in that is a substantial amount for replacing broken equipment), we’re talking about savings of tens of billions in the first year, and growing in subsequent years.
Now what does Obama propose for new spending? Health care is the big thing, and he estimates about $65 billion in new spending per year once fully phased in (which will take a couple years). Linky. His energy plan would cost $150 billion over ten years, which again means less spending in the short term, and more in the out years. Link. His education plan would be roughly the same cost as the energy thing, although that spending would probably be more front loaded. (It is easier to spend money to build new schools quickly than it is to invest in R&D programs quickly – I can explain more if really needed.)
So yeah, the numbers get a little fuzzy, but in general, I think the math pretty much adds up, even though how much tax relief would be provided for the 95% of Americans he talks about is certainly a very large number, but I haven’t seen estimates of how much that would actually cost. But in general, we’re looking at a conservative estimate of $150-$200 billion in increased revenues each year, another $80 billion in savings from the Iraq war, and increased spending of about $100-$140 billion each year on his major priorities, plus the cost of what tax relief most people would get. Even with considerable fudge factor, and I’ve ignored Social Security because that’s a different ball of wax, I think the math is generally okay. And more importantly, I think it is fairer, and I’m getting close to those who would be paying more; and I think the benefits of a national health care program would be a boon to businesses, in terms of mitigating increasing health care costs from the inefficiencies of the current system, and having a healthier workforce.
If you don’t mind, link them into the thread and quote the parts you think are most relevant to the topic being discussed. This is a good forum (heh!) for getting this subject discussed.
Missed the edit window – I should have said we’re likely talking about $200 billion, since the top 5% pay roughly 60% of all taxes, and the top 1% pay about 35% of all taxes. I’m extrapolating and rounding.
For whatever reason, the video is no longer available but there used to be a video on RCP showing David Wessel, economics editor for the Wall Street Journal, saying that Obama’s spending plans are “plausible”. He admits that there’s missing details and some of it relies on unknowns (such as revenue from a cap & trade program) but it seems like it could work. Here’s a Wessel quote gleaned from some Obama “response” memo after a McCain attack ad:
I realize there’s an appeal to authority going on here but I’m not about to comb all the numbers myself in my spare time. Wessel’s opinion on it made me think that Obama’s plan has some basis in reality even if it might not go 100% as advertised.
I wish the video was still up – it made for a pretty interesting view.
Sorry…for some reason I’m having troubles posting again tonight. Keep timing out.
Ok…so, you (and presumably Obama) are figuring that by repealing the Bush tax cuts we’ll ‘get back’ a theoretical figure of $200 billion (aprox.) (my rough calculation is this would be approximately $5.7 million per family, assuming my ~35k families in the top 5% of earners is ballpark…that’s a LOT of money per year, especially considering that the top 5% starts at less than $150k/year) ? The thing is that even if you DID repeal the tax cuts immediately it would take time before it went into effect…and of course there is the problem of actually GETTING all that money back. Unless Obama is planning to completely restructure the tax system (no idea…I assume not), much of that money will simply be sheltered in different ways from my understanding. You may get back (just a guess, not an expert and doubt anyone really knows for sure) half I suppose.
I don’t see how we could save anything at all in the first year actually…or the second or even the third. IIRC (and definitely correct me if my memory is faulty here) Obama is saying he’d like to start a phased withdrawl culminating in a 16 month time table. It’s going to cost MORE money to get the troops home (and presumably the bulk of our equipment) than simply maintaining it in the field. Also, all that equipment coming home is going to need to be refurbished…which is going to have some fairly hefty short term costs associated with it. Plus we’re STILL going to be in Afghanistan AFAIK.
And all this presumes or assumes Obama is actually going to be able to get those troops out of Iraq and start the clock on his 16 month time table as soon as he gets in office…which quite frankly I doubt. We could be in Iraq spending that same ~$100 billion/year when Obama comes up for re-election, so those chickens shouldn’t be counted until they are back home in the carton.
I’ve heard double or even more for a realistic estimate for the kind of health care plan he’s talking about (especially the front loaded costs which will be higher), but let’s say it averages out to that over his entire 8 year term. Assuming you get back at least half of the Bush tax cuts in real revenue to the government it should just about cover the costs of this one program (give or take).
Then there is the energy one you mention…again, I’ve heard higher costs for that, but lets play with those numbers. That’s (at least) an additional $15 billion there as well. Again, using your figures, education would be another $15 billion a year (I actually think this figure is close to reality from what I understand of his basic education plans…and please DO explain more, very interested). That’s an additional $95 billion a year (using your figures). Assuming your $200 billion for the Bush tax cuts (which is hard for me to believe) is realistic, and even assuming we actually get all or even most of that money in hard revenue (which I flatly don’t believe at all and will take major convincing to stop doubting), this is only going to cover about half of the few projected programs you’ve mentioned…and using figures that seem awfully lowball for what is being talked about.
And of course all of this is happening when our economy is already doing fairly poorly, so it’s not going to generate a lot of additional revenue until it picks up. Which is probably a few years out. And none of this covers unexpected things like the housing melt down, potential disasters, possible other unexpected things (a melt down in Iran, say, or a shooting war somewhere else unexpected).
Well, I disagree that we’d come out of it with a healthier work force, but that’s another debate. I’m trying to get a handle here on the realistic costs for paying for all this stuff (what I’m hearing is that even using your figures we are talking the Bush tax cuts AND a hefty increase in taxes to those evil top 5%-ers…which of course includes myself). Even using your figures for projected costs we’d have to squeeze over $3 million per household of those top 5% group to pay for it all…and that’s just those programs you listed. Also, this doesn’t count a tax CUT (or rebate or whatever) to the other 95% that this thread is about. Assuming my 140 million figure is close, that’s an additional $4000 per household (of those 5% folks) per dollar tax cut/rebate. I assume Obama isn’t planning on simply giving each of those other folks a dollar (I realize my math here is VERY rough…sorry, just trying to ball park all this in my own head).
Yes, as always your posts are excellent and informative. Appreciated…as I appreciated the posts of the others in this thread. Having trouble with the board or I’d check out their links and respond as well.
I’m pretty sure your math is off here. There have got to be more than 700,000 families in the United States; by my hasty estimates (300 million or so Americans; American family = Mom, Dad, 2.2 kids…) you seem to have dropped a couple of orders of magnitude somewhere.
My math probably IS off…and I think I’m mixing apples and oranges there too (i.e. at one point I was talking families, at another tax paying citizens). In theory I should be flying out of this dump tomorrow so I’ll see if I can look it up when I get home tomorrow. I was basing the top 5% figure on aprox. 35,000 families from memory…but no idea how many families compose the other 95% to do even a rough comparison.
You’re way, way off here. The top 5% of earners make an average income of roughly $450,000 before taxes, and there are 5,800,000 households in that income bracket. (I had to look it up, so let me retract my statement that I’m approaching that bracket, I’m wrong.) If you want to see where people start making more than $150k, look more toward the top 20%, which makes an average of $214,000 a year, and there are 23 million households in that bracket. See page 6 of this pdf.
It would only take one year to phase in higher rates, although it could be extended for convenience’s sake. Additional revenue would start immediately, since many in the upper income levels must pay estimated taxes throughout the year.
Also, the figures cited for how much additional revenue would be generated from the top 1% aren’t based on a new tax code, they are based on what people actually paid during the Clinton years. Is there some reason you think people would take a radically different approach to their income today than they did in 2000? That makes no sense to me. That would require that people were foregoing tax shelters from 1993 to 2000, which is a real stretch, and then suddenly decide that they should take advantage of the shelters that they didn’t think were necessary eight years ago. I just don’t believe that there would be the need to radically restructure the tax code (although there could be additional brackets added since we’re now down to what, four brackets?) if we just turn back the clock to what the tax rates and structures were several years ago.
I could say a lot on this, but the cost of withdrawal has been estimated by the Congressional Budget Office, but the savings do indeed total tens of billions of dollars annually. See page 3 for the estimated costs of a two and a half year total withdrawal – the FY2009 graphic on this pdf.Suffice it to say that first year savings are approximately $14 billion, second year $30 billion, third year $50 billion, etc. based on what was being spent on Iraq at that time (2006). Reset costs are figured in that analysis. And seriously, Afghanistan costs a fraction of what Iraq does.
It’s impossible that front end costs would be higher. The cost of health care depends primarily on the numbers receiving benefits, and since the plan will be phased in over several years, there’s no way that we’re going to be paying higher front end costs. But point well taken, the cost of the plan could be higher.
I’m not following your argument. There’s $200 billion additional revenue, and $95 billion additional spending. How does the additional revenue “cover only half” of the programs? It’s the other way around – half of the new revenue is spent on new programs, and the rest is presumably for middle class tax cuts.
Nor does it cover an asteroid hitting San Francisco. How do you propose we budget for those things? Of course things change. We don’t budget for hurricane relief or farm disaster relief. The country NEVER budgets for emergencies, because it is impossible to do so. It is unfair to count that against Obama’s plan, because not a single Administration in the history of this country – hell, not a single budget analyst in the history of this country – could ever budget for unexpected things. That’s what makes them unexpected. Hell, even PAYGO is designed to have waivers for emergency spending.
In the absence of our mutual ignorance of how much tax relief would be given to each income bracket, let me frame the cost of a tax cut a little better than you have tried.
The last tax rebate checks went to those earning less than $75,000, generally speaking. According to my CBO cite on income brackets, the fourth quintile of earners make an average of $85 grand, so my back of the envelope calculation is that at the most 75% of tax paying households got rebate checks (that’s about 85 million households). All those rebate checks of $600 for individuals, $1,200 for couples, cost the treasury about $140 billion, IIRC.
Now, I don’t think for a second that 95% of households are going to get a flat $600 to $1,200 in tax relief. Since we’re talking about adjusting tax rates, not sending out rebates, some families may indeed see a grand in tax relief, but lesser earners would probably see a fraction of that. (It’s just like how Dems complained that the Bush tax cuts resulted in tens of thousands of savings for the rich, while the poor got just $100 or whatever, and Republicans sensibly pointed out that it’s hard to cut taxes for those who pay very little in taxes.) Since more families will almost certainly not receive $600/$1,200 in tax relief, but more families will be covered (i.e., only 75% received rebate checks, but 95% would receive tax cuts), I think it is safe to say that the total amount of tax cuts, in absence of further information, would probably be substantially lower than the total cost of the tax rebates.
That’s just a total WAG, and if anyone has any firm numbers on how much taxes would be cut under Obama’s plan, I can do a little more math.
But the bottom line is, I think the numbers roughly balance out, and again, I’m not even entering into the fairness debate.
Don’t forget Obama’s plan also includes rolling back corporate tax breaks and raising their tax rates to 35% or so–McCain wants to keep the Bush corporate tax breaks and reduce the rate to 25%.
I found this New York Times analysis of the Obama economic plan to be extremely informative and pretty easy to follow–I’m fairly good at math, but when it starts getting into the big numbers my brain gets scared and quits a bit… One of the things I noted is that Obama’s big on encouraging smart behavior–the idea of making enrollment in 401K plans the default is brilliant. An employee can opt out if he wishes, but enrollment is de facto at the time of hire unless the employee specifically states otherwise, which means that most people wouldn’t even notice it happening and this would encourge saving and investing in the future. Way too many people are the opposite, they say “oh yeah, I’ll look into that 401K thing later when I have time” and by the time they think of it they don’t WANT to divert some of their paycheck into it.
Also, don’t forget that the McCain plan has some hidden pitfall style taxes–his plan shifts payment for employer furnished health care to the employee and doesn’t adequately allow tax relief for when the cost of health care rises, which it does faster than the cost of living.
There are a buttload of economists who’re onboard with Obama’s basic plan–it’s sound, it’s been thought out and it’s definitely slanted toward giving the advantage to the middle class and the poor, who’re the ones it really matters to. I also see that Obama’s surrounding himself with solid, smart people who’re working to figure out how to benefit the largest percentage of the American people the most–not how to make the richest people richer. Not being a rich bastard myself, I wholeheartedly approve of this approach.
