More on the deficits that are coming

It will become politically acceptable at some point to tax/confiscate wealth.

It doesn't matter. Taxation is about redistribution of wealth/value. The cost must always be paid by those who labor to create that value. Always.

Don't be fooled by the accounting.

No matter who you tax, the burden of taxation will always be borne by those who labor to create value.

I disagree. It will become politically acceptable at some point to tax/confiscate wealth. I expect this not to happen until the supreme court becomes more than 50% progressive because the Fifth Amendment will obviously have to be reinterpreted, but "always" is a really long time.

No matter who you tax, the burden of taxation will always be borne by those who labor to create value.

Dr. Roberts,

A friend used that phrase, "We sure live in interesting times." recently. I had to remind him that it's a Chinese curse.

Oh come on. Obama lied about Iraq, about no net spending increases, about all kinds of stuff. He's a Chicago politician. Lying comes to him as naturally as breathing.

So why believe him on whose taxes are going to be raised? What makes you think on that one inconvenient point he's going to be a stickler for the truth? Give me a break.

Sure as anything, the question of whose taxes need to be raised is going to be...er...revisited "in light of new events" and he will sorrowfully discover that in view of the changed economic situation blah blah blah that the original plan, much as he wanted to implement it, must be changed a bit. Probably beacuse of those bastard Republicans in Congress, or possibly because of the Failed Policies Of The Past and their evil legacy. Who knows? Who cares? You think a law professor can't dream up some plausible-sounding load of bullshit to justify what he has to do, no matter what? A load that will work just fine with the general public, except for a few of you malcontent economics professors left sputtering in outrage in some ignored corner...

I'm guessing if you make more than $50,000 a year, you'll be ponying up. That's where the money is, and he knows it. Besides, as long as he keeps the bottom half of the population -- the non taxpaying half -- happy with the corn dole, he can get re-elected. It worked for the Caesars, it will work for Obama.

Mezzanine's right. In fact, that reminds me: there's a fly on my leg. I think I'll swat it good and hard with a big ax.

Mezzanine's right. In fact, that reminds me: there's a fly on my leg. I think I'll swat it good and hard with a big axe.

Mezzanine's right. In fact, that reminds me: there's a fly on my leg. I think I'll swat it good and hard with a big axe.

Personally I'm glad that the Wall Street scum are gonna get soaked. It's high time they started paying their fair share.

This would be amusing if it weren't so ignorant.

Personally I'm glad that the Wall Street scum are gonna get soaked. It's high time they started paying their fair share.

Taxing partnership "carried interest" at the regular income rate rather than the long term capital gains rate.

While most pundits talk about hedge funds in this context, by far the largest use of this partnership structure is real estate investment partnerships. This will screw the real estate industry hard, just when real estate is reeling from current economic events.

"I wonder if the Treasury will be able to borrow that amount of money for that long."

Sure, no problem! The Fed can simply keep creating new money. Helicopter Ben's monetary acrobatics will make Sullenberger's heroism look as skilled as riding a tricycle.

I've been telling a couple of friends in particular that there just isn't enough available money in the world that already exists for the Treasury to borrow, even if China weren't embarking upon its own "stimulus" plan. Therefore the Fed is the only source of the vast sums of new money the Treasury needs for this insane level of spending. As we well know, this leads to inflation. It's another manifestation of Obama's African style of socialism: the masses usher a "savior" into power, believing the promises of massive social spending; ideological enemies are scapegoated; and the central bank must run at full steam once the government cannot borrow enough. As long as he pays his supporters first, the leader can maintain power.

Here's a pop quiz for the class: with all its holdings of U.S. Treasury securities, the Fed receives interest payments. What does the Fed do with the money (it's been claimed it remits it back to the Treasury after deducting for its operational expenses)? Justify your answer.

More stuff from his budget proposal:

A reduction in the tax deduction for charitable donations (for "the rich" only, of course).

Taxing partnership "carried interest" at the regular income rate rather than the long term capital gains rate. The media and political focus for this is the now ever decreasing number of Hedge Fund managers, but it effects all partnerships and is merely a huge tax on entrepreneurship.

Oh, yeah. I'm really optimistic about all that economic growth now.

We're right on the cusp of Pres. Obama's magic number. I've already told my husband, who brings in the vast majority of our income, either to suggest a small paycut that brings his comp down to $249,000 a year, or that I'll quit my teeny job and bring us below the threshhold. It's not that I don't want to do my part; it's that class-warfare rhetoric offends me and that the President could use a dose of both humility and reality.

Maybe I'm missing something, but TARP and whatever part of the stimulus bill gets enacted this year are both one time expenditures, so they won't be on the 2010, 2011 etc budgets.

From what I understand almost all of the stimulus bill will be "spent" at least on the budget's ledgers, by the end of the 2011 fiscal year. 2008 fiscal deficit was ~$450B, so the deficit for 2012 or 2013 will be that plus whatever additional permanent programs are put in place, which means Obama has about $400B to play with to get the 2013 deficit up to half of this years.

Perotcharts has a good chart of CBO projected future deficits:

http://preview.tinyurl.com/bsoelq

Indeed, CBO has 2010 at a $1.1 trillion deficit with 2011 at a $600 billion deficit.

These projects depend on GDP only dropping 1.2% in 2009, with growth of 3.2%, 4.0% and 4.6% for 2010-2012.

We didn't even have much 4% GDP growth in the last 10 years when we didn't have a "beat the rich" talking President. I'd like to see 4% GDP growth with the higher marginal tax rates.

The best thing in Obama's budget by far is:

* eliminating the cotton storage payment subsidy ($570 million/10 years); and

* gradually eliminating farm subsidies for farmers who make more that $500,000 a year in sales revenue ($9.8 billion/10 years

Given that annual USDA subsidies range between $10 billion and $20 billion depending on prices, there is a lot more to cut, but that is a good start.

All will be better if we are given the opportunity to touch the Messiah's robe. ;-)

Russ, your analysis is static. A deficit is the excess of expense over revenue. It does not require an increase of tax rate to increase tax revenue.

Tax the rich all you want.......

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...the burden of taxation will always be borne by those who labor to create value.

Blackadder,

When has a government spending plan ever been a "one time" event? The TARP money was given to proven wealth destroyers. Then, the government insisted that the wealth destroyers cannot offer competitive compensation to attract bright people to work for them. Given this, based on what can we expect any repayment of TARP funds?

Opaque? Opaque? Wait a second, I thought Obama was about transpar...oh never mind. I realize my error now.

Russ,

A cap-and-trade system that auctions all the permits will raise between $200 and $400 billion annually. If all the revenue goes to deficit reduction, that gets him a long way toward his goal. Of course, the cap-and-trade amounts to a tax on those making less than $250k, but it is opaque enough that he can claim otherwise.

Also, don't forget that part of Obama's plan is to impose a Cap and Trade system that will raise a trillion plus in revenue. This will be functionally equivalent to a tax increase, but there will be plausible deniablity (just as there is plausible deniablity about raises taxes on average people through a higher cigarette tax).

He doesn't understand incentive effects.

This tender soul overcome with compassion is operating on the notion that "the rich" will keep working their tails off and generating the same amount of money.

So when there will be less "rich" to tax out of being rich, he'll go for the top one percent and milk them dry.

Then he'll make some special tax just for whatever will be left of Bill Gates and Warren Buffet (who -from listening to him - shouldn't mind) and at that point, I should think that most of his objectives will be reached, justice will pretty much be served, Cuba will join the union and things will for the most part be "fair".

But as Mankiw noted on his blog today, a significant part of the $1.75 trillion is the TARP money. Not only is that not a recurring expense, but to the extent the money is eventually paid back (a big if, I know), that will count as additional revenue that will offset some of the other deficit spending.

They currently pay an average of about $167,000 a year in income taxes. So to cut the deficit in half (half--still leaving a deficit of over $800 billion) he will have to raise their tax burden by another $167,000.

Russ,

I'm sure you agree that this is a generous assumption, considering that it's unlikely that the top 2% of earners are earning as much as they were before. Of course, that means that the tax increase will have to be greater than $167,000 per taxpayer - leading to the same conclusion.