The Senate voted 60 to 40 today to end a Republican filibuster of extended unemployment benefits.

[HAL 9000 96]

Sigh... I've heard this way too many times before. Tax cuts (on profiteering) only increases profiteering.

[DukeOfYork 28]

Thought I would save you the time, the Republicans have been filibustering all over the place. The tag of the "Party of No" is seemingly justified. That 112 sticks out like a sore thumb and shows the Republicans are more interested in getting back into power (By blocking legislation which in turns puts the Democrats/Obama in a bad light because they can't get anything through) rather than helping the American people. It's a great plan be it for selfish reasons on their part.

Being that the Republicans have such a small minority in the Senate, it's the best they have to work with. Some democrats may have gone along with Bush on some main bills (Patriot Act, tax cuts, etc), but I remember there being a lot of kicking and screaming about it. Is it really any different now?

Also note that the graph highlights the longest filibusters were about civil rights, voting rights and school busing. I'm not sure about the last two, but isn't it ironic that the civil rights law was filibustered by Democrats?

Our politicians (even the conservative ones) are to the left of the Democrats and even they are not really "Socialist". Hearing people talk about the Obama administration and the Democrats as being "far left" or "socialist" makes me laugh - because its only true if your political spectrum is very narrow.

I lived in Spain for two years (2001-2003) and I agree, their "conservative" party is to the left of our Democrats. Conservatives here say that Obama is governing from the Left. I think he's more liberal and leftist than he is able to be simply because he has to compromise with those in his own party. If he had things his way, we'd already have the single-payer health care system and even more entitlements. His actions certainly shows that he is for greater government expansion and entitlements and he does not trust business at all. I happen to come from the opposite end of the spectrum. I see business as creating jobs and prosperity and when the government gets involved, it tends to do things poorly and inefficiently.

[HAL 9000 96]

That's hardly socialism.

[Mr. Big Dog 10,747]

The tax cuts pay for themselves in increased output in the economy.

If that was the case, we should eliminate taxes altogether to maximize revenues. And we should also not have accrued some 5 trillion worth of debt and put the budget defict on a trillion+ / year trajectory following the tax cuts that were enacted in 2001 and 2003. And extending the tax cuts that are set to expire would then also not add 700+ billion to the pile of debt but actually, if not bringing it down, at least leave it as is. Neither is the case. Hence, the tax cuts do not pay for themselves and have less of an impact on the economy than the UE benefits.

Edited July 22, 2010 by Mr. Big Dog

[JohnSmith2007 353]

If that was the case, we should eliminate taxes altogether to maximize revenues. And we should also not have accrued some 5 trillion worth of debt and put the budget defict on a trillion+ / year trajectory following the tax cuts that were enacted in 2001 and 2003. And extending the tax cuts that are set to expire would then also not add 700+ billion to the pile of debt but actually, if not bringing it down, at least leave it as is. Neither is the case. Hence, the tax cuts do not pay for themselves and have less of an impact on the economy than the UE benefits.

Lets just say I 100% disagree and leave it at that.

[Mr. Big Dog 10,747]

Lets just say I 100% disagree and leave it at that.

You're like Reagan. He also never really understood the Laffer Curve.

[JohnSmith2007 353]

You're like Reagan. He also never really understood the Laffer Curve.

I guess these guys never understood the Laffer Curve either.

Among Democrats, Calls To Extend Bush Tax Cuts

By Martin Vaughan, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Some Capitol Hill Democrats want President Barack Obama to extend tax cuts for wealthy Americans now scheduled to expire at the end of 2010, arguing that a tax increase could hinder economic recovery.

"I think there is a certain logic to leaving well-enough alone for now, given the fragility of the economic recovery," said Rep. Gerry Connolly (D., Va.). " It's a question of prudent judgment and timing."

White House officials are preparing to unveil their 10-year budget plan on Feb. 2, which will include a decision on what to do about the pending expiration of tax cuts enacted under President George W. Bush.

Asked in recent days about the tax cuts for the wealthy, administration officials have insisted that Obama won't propose extending the tax cuts for the wealthy.

"That's not something we have contemplated, and I don't think that's a necessary act," Treasury Secretary Tim Geithner said in an interview with CNBC last week.

Obama during the campaign and in last year's budget plan proposed extending Bush tax cuts affecting the poor and middle class. He proposed letting the top two tax rates, now 33% and 35%, return to 36% and 39.6% respectively, in 2011.

This year, the top rate will apply to income above $373,650 for individuals and married couples. Under Obama's plan, the 36%, second-highest rate would kick in at $200,000 for individuals and $250,000 for married couples.

Obama also proposed bumping the 15% rate on capital gains and dividends up to 20% for those with income in excess of $200,000, or $250,000 for married couples.

"The president's always said that tax cuts just for those people making more than a quarter million dollars a year--something like 2% of people--that those ought to expire when they were scheduled to expire, but...he has called for extending all the rest of the tax cuts," Austan Goolsbee, a member of the White House Council of Economic Advisers, said Monday on PBS.

However, some Democratic strategists looking toward midterm elections see peril in heading into November with looming tax increases on the horizon. Tax increases may be a potent issue for Republican opponents as Democrats defend majorities in the House and Senate.

Rep. Harry Mitchell (D., Ariz.), a second-term congressman who held on to his seat in 2008 with 53% of the vote, wrote Obama last week asking him to extend the lower capital gains and dividend rate, and estate tax rates.

"Given the unique economic difficulties we face as a nation, this is the wrong time to raise these taxes. We need to retain these tax cuts that encourage investment that stimulates growth and job creation," Mitchell wrote.

Connolly said the decision on whether or not to extend the tax cuts should be weighed against the impact of doing so on the deficit. But "re-instilling confidence in the economy" should be paramount, he said.

Their view, while gaining clout, remains in the minority among congressional Democrats. Rep. Jim McDermott (D., Wash.), a member of the tax-writing Ways and Means Committee, dismissed the argument that allowing taxes on investment to rise now would slow the recovery.

"There's no proof that the Bush tax cuts had anything but a negative effect," said McDermott.

Read more: http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201001191713dowjonesdjonline000448&title=among-democratscalls-to-extend-bush-tax-cuts#ixzz0uRtSYm00

[Mr. Big Dog 10,747]

I guess these guys never understood the Laffer Curve either.

Among Democrats, Calls To Extend Bush Tax Cuts

Yep, ignorance is widespread.

[JohnSmith2007 353]

Yep, ignorance is widespread.

I guess that statement depends on what economic POV you have. Both sides see the other as ignorant and wrong. I ask you this though, has what we have been doing for the last 18 months been working? Wouldn't you agree that raising taxes right now would be harmfull?

[Obama 2012 1,714]

Yep, ignorance is widespread.

Ignorance? So Democrats who realize that staying with their party and playing politics will cost Americans even more jobs, will cost Americans even more money, and even cause the government to lose more money, is ignorant?

[one...two...tree 2,762]

Deficits Do Matter, But Not the Way You Think

By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City.

Budget deficits and government spending are necessary to end today's crisis.

In recent months, a form of mass hysteria has swept the country as fear of "unsustainable" budget deficits replaced the earlier concern about the financial crisis, job loss, and collapsing home prices. What is most troubling is that this shift in focus comes even as the government's stimulus package winds down and as its temporary hires for the census are let go. Worse, the economy is still — likely — years away from a full recovery. To be sure, at least some of the hysteria has been manufactured by Pete Peterson's well-funded public relations campaign, fronted by President Obama's National Commission on Fiscal Responsibility and Reform — a group that supposedly draws members from across the political spectrum, yet are all committed to the belief that the current fiscal stance puts the nation on a path to ruinous indebtedness. But even deficit doves like Paul Krugman, who favor more stimulus now, are fretting about "structural deficits" in the future. They insist that even if we do not need to balance the budget today, we will have to get the "fiscal house" in order when the economy recovers.

There is an alternative view propounded by economists following what has been called "Modern Money Theory", which emphasizes the difference between a currency-issuing sovereign government and currency users (households, firms, and nonsovereign governments) (See here and here). They insist that the notion of "fiscal sustainability" or "solvency" is not applicable to a sovereign government — which cannot be forced into involuntary default on debts denominated in its own currency. Such a government spends by crediting bank accounts or issuing paper currency. It can never run out of the "keystrokes" it uses to credit bank accounts, and so long as it can find paper and ink, it can issue paper currency. These, we believe, are simple statements that should be completely noncontroversial. And this is not a policy proposal — it is an accurate description of the spending process used by all currency-issuing sovereign governments.

And, yet, there are a number of misconceptions circulating that need to be addressed. Many (often of the Austrian persuasion) interpret this simple statement as a Leninist plot to destroy the nation's currency by flying black helicopters dumping an infinite supply of bags of money all over the planet. This is usually accompanied by a diatribe on the evils of fiat money, with a call to return to "sound money" based on shiny yellow metal. Others suggest that we are instead proposing to ramp up the size of government, until it completes Obama's plan to gobble up the whole economy. Almost all critiques eventually produce a lecture on the lessons to be learned from Weimar Germany and from Zimbabwe.

The strangest criticism of all is that we MMT-ers argue that "deficits do not matter". In a recent exchange in the New York Times, Paul Krugman put it this way: "But here's the thing: there's a school of thought which says that deficits are never a problem, as long as a country can issue its own currency." In that piece he took Jamie Galbraith to task for arguing that "Insolvency, bankruptcy, or even higher real interest rates are not among the actual risks" facing a sovereign government. I won't go into the details, but Krugman produced a simple model in which ever-larger budget deficits generate ever-rising prices. You can see the rest of that back-and-forth here. But the strange thing is that Krugman never actually addressed Galbraith's points that insolvency, bankruptcy, or higher interest rates are non-issues for a sovereign government. Nor did Krugman even try to justify his claim that MMT-ers "say that deficits are never a problem".

In fact, MMT-ers NEVER have said any such thing. Our claim is that a sovereign government cannot be forced into involuntary default. We have never claimed that sovereign currencies are free from inflation. We have never claimed that currencies on a floating exchange rate regime are free from exchange rate fluctuations. Indeed, we have always said that if government tries to increase its spending beyond full employment, this can be inflationary; we have also discussed ways in which government can cause inflation even before full employment. We have always advocated floating exchange rates — in which exchange rates will, well, "float". While we have rejected any simple relation between budget deficits and exchange rate depreciation, we have admitted that currency depreciation is a possible outcome of using government policy to stimulate the economy.

A favorite scenario used by the critics is the ever-rising budget deficit that causes the government debt-to-GDP ratio to rise continuously. As interest payments on the debt increase, government faces a vicious cycle of rising deficits, more debt, more interest paid, higher interest rates, and even higher deficits.

Our response is two pronged.

First, OK, let us accept your premise. Will the government be able to make all payments (including interest paid on debt) as they come due? The answer is, of course, "yes — by crediting bank accounts". Insolvency is not possible when one spends by a simple keystroke. The critic then quickly changes the subject: Weimar! Zimbabwe! You are a destroyer of the currency! Yes, but it was your scenario, not mine. And even in your worst case scenario, the government cannot be forced to default. Instead, Krugman argues "the government would decide that default was a better option than hyperinflation". In other words, Krugman veers off into politics — government "decides" to default — because the economics does not give him the result he wants.

Second. Your scenario is highly implausible. As budget deficits rise, this increases income (government spending exceeds tax revenue, thus adds net income to the nongovernment sector) and wealth (nongovernment savings accumulated in the form of government debt) of the nongovernment sector. Eventually, this causes private spending and production to grow. As the economy heats up, tax revenue begins to grow faster than government spending or GDP. (In the US over the past two cycles, in the expansion phase federal tax revenue grew two to three times faster than GDP and government spending.) This reduces the government deficit (remember the Clinton boom and budget surpluses?). Even if the government spending is on interest (in Krugman's model, the deficit is due to interest payments) that generates nongovernment income and spending. In other words, the cyclical upswing will automatically reduce the budget deficit. The scenario ignores the "automatic stabilizers" that cause the budget deficit to swing counter-cyclically.

What if the economy runs up against a full employment constraint, but government stubbornly keeps spending more, driving up prices toward hyperinflation? Even though incomes and thus tax revenues rise, government spending always keeps one step ahead so that the deficit rises. This is Krugman's "infinite inflation" scenario.

OK, we never claimed that a sovereign government will necessarily adopt good economic policy. The last time the US approached such a situation was in the over-full employment economy of WWII. Rather than bidding for resources against the private sector, the government adopted price controls, rationing, and patriotic savings. In that way, it kept inflation low, ran the budget deficit up to 25% of GDP, and stuffed banks and households full of safe sovereign debt. By the way, Jamie Galbraith's father, John Kenneth Galbraith, was the nation's chief inflation fighter. After the war, private spending power was unleashed, GDP grew relatively quickly, and government debt ratios came down (not because the debt was retired but because the denominator — GDP — grew more quickly than the numerator — debt; see here). In other words, Galbraith, senior, used rational policy to avoid the Zimbabwean fate. I do not understand why Krugman prefers to believe that our policymakers would choose hyperinflation over more rational policy. If there is anything that policymakers of developed nations in the postwar period appear to hate, it is rapid inflation. In other words, the policy choice will not be between hyperinflation and default, but rather rational use of inflation-fighting policy should the need arise in order to prevent hyperinflation.

If we can get beyond the fears of national insolvency then there are many issues that can be fruitfully discussed. While inflation will not be a problem for many years, price pressures could return some day. Impacts of exchange rate instability are important, at least for some nations. Unemployment is a chronic problem, even at business cycle peaks. Aging does raise serious questions about allocation of resources, especially medical care. Poverty and homelessness exist in the midst of relative abundance. Simply recognizing that our sovereign government cannot go bankrupt does not solve those problems, but it does make them easier to resolve. We may well need more government spending, and, yes, even budget deficits to tackle some of those problems.

So, yes, deficits do matter, but not for solvency.

[Mr. Big Dog 10,747]

Ignorance? So Democrats who realize that staying with their party and playing politics will cost Americans even more jobs, will cost Americans even more money, and even cause the government to lose more money, is ignorant?

Your assumption doesn't hold water. The Bush tax cuts haven't really created any jobs to begin with. Nor have they resulted in higher wages - in fact, the Bush economic policies have provided the ground for the first ever decrease in the median wage during an economic expansion period. What they did accomplish was an accelaration in the inequality of income distribution. Between 2001 and 2007, the income pulled in by the top 1% nearly doubled while receipts of federal income taxes in that population increased less than 35%. These tax cuts did not pay for themselves. Extending them would tear a new 700+ billion dollar hole into the already deficit plagued budget. There's just no sound economic and fiscal argument to be made for retaining a tax cut package that has benfitted the economy little, has done scrap for job creation, wages and the federal budget.

[HAL 9000 96]

It really does depend on how you view things. This is like blaming the guy that throws you a life raft when your boat was sinking.

[ScottThuy 140]

FREE MONEY!!!!

YEEEEEEAH! FREE MONEY!!!!

Thank you Mr. Obama!

I'll never understand why they pay people to sit home rather than pay them to perform some public service while they look for work....

[HAL 9000 96]

I'll never understand why they pay people to sit home rather than pay them to perform some public service while they look for work....

I like this idea. Then again, you know many on the conservative fringe will accuse such a government of being too large...

Wouldn't it have been interested, in light of what you just stated, if Obama had actually put forward that kind of a program in the face of the recession we just went through?

Heck, the pay could even have been better than unemployment 'benefits.' And, of course, voluntary for beneficiaries.