I posted this on my Facebook status:
Krugman's cogent argument against the Ryan Proposal is in two parts. 1. Despite some theory to the contrary, other theory AND EMPIRICAL EVIDENCE shows that simply cutting taxes does NOT spark the economy and create more revenue. 2. The Ryan Proposal, because it throws the elderly and those who are not rich (not even just the poor) under the bus, is immoral.
One of my high school classmates, with whom I occasionally politely debate political and economic issues (he's an Independent who tends toward the Right but not on everything; I'm a Democrat) commented. He hoped that both sides of the aisle would see the Ryan proposal as a starting point for negotiations about needed cuts. My general impression is that the Ryan Proposal is too extreme for that. But my friend's comment got me thinking about areas where he and I might disagree and where we might agree.
Agreement. There are vulnerable people out there who have a right to government help. A particular area of agreement between us is that the developmentally disabled have special needs which we, as a society, are morally obligated to fulfill. Charitable efforts (and this friend works very hard for Special Olympics) are not enough; we need tax-funded, governmental efforts.
Probable agreement. I think that we need to look at cutting the kinds of subsidies and tax loopholes that provide what I think are unfair benefits for large, profitable corporations. Look, for example, at agricultural subsidies that are primarily helping Archer Daniels Midlands and not family farms. That GE owed no taxes is ridiculous. Oh, it's not ridiculous that that it paid no taxes -- why should they pay more than the tax code requires? -- but the loopholes and the opportunities for "offshoring" profits are ridiculous. So, I think we could do a lot by cutting corporate taxes IFF we also cut out corporate loopholes.
Probably disagreement. Where I think we differ is in our views of what the government *should* be spending money on (in addition to care for the disabled). (See this link for spending categories and expenditures in the budget.) I suspect that my friend would want to see more services privatized. I have not actually seen any evidence that privatizing saves money or makes services more efficient. (Neither have I seen any evidence that it doesn't, to be fair.) One of the privatization trends that I really oppose is in military services. We privatize a lot of tasks that are specifically related to the provision of national security, but it's the State (the US Government) that is supposed to provide security.
I also am a big fan of having the government have sufficient regulators on payroll to make sure that its rules are enforced. (Providing appropriate regulation is a form of "internal" security.) Further, the pay scale needs to be good enough to attract smart, highly trained people (and to keep them from being tempted by bribes.) You get what you pay for. Penny wise, pound foolish.
I would like to see a lot more regulators out there working on food products, determining that food processing plants meet FDA requirements, etc. And need I mention the need to have REALLY highly qualified regulators for the nuclear industry?
Mostly disagreement, I think. There are a lot of other areas on which I believe the government needs to spend. Social security, Medicare, and Medicaid, as well as Defense are very important, in my view. I also believe the government should be spending money on various social safety-nets, on basic research, on the arts, on infrastructure (roads, bridges, railroads [including bullet trains]), and foreign aid.
Probably agreement. Tax cuts on personal income tax will fuel the economy most if they are given to the people who are in the lowest tax brackets because they will go out and spend the money. At the higher end, yes, we should tax more. I'm willing to pay an appropriate amount more in taxes as long as everyone else in my bracket does, too. Cut out the loopholes in personal tax (simplify!) and there might be opportunities for tax cuts at the lower end.
Probable disagreement. I think we need to reconsider the tax break for mortgage income. Think how that works. People of modest incomes who rent get no benefit. For us more well-to-do people, the more house we buy, the bigger the benefit we get. The gap between rich and poor gets bigger, especially across generations. Poor people have little accumulated wealth to leave their children; rich people get tax breaks for mortgages that allow them to accumulate more wealth than they would have accumulated without the tax breaks. Their children inherit, and have a tax-break funded leg-up in the world. The gap between rich and poor increases.
Probable disagreement, but I'm hoping to win him over on this. Our lack of national health care funded by the government (through taxes) ends up being a "tax" on businesses, and the incidence of that tax falls disproportionately on SMEs (Small & Medium size Enterprises.) Why? Because SMEs have to compete for good employees in part with benefits, which include health insurance. The insurance company looks at the SME and thinks about the risk they take on by insuring the SME given its relatively small pool of employees. An individual SME's rates are high. And the SME is pretty much a "price taker." It doesn't have much clout for bargaining. But a large firm or other large employer (like my nonprofit Benevolent Employer) has lots of advantages in negotiating prices because its risk is spread over a larger pool and because it controls a larger market share. My Benevolent Employer is virtually a monopsonist in Maryland! So SMEs are at a significant disadvantage relative to large firms and relative to competing firms from abroad that don't have to worry about health care benefits.
Definite disagreement. I think the economy needs more stimulating through more government spending as we are climbing out of this recession. I expect that cuts -- including Obama's cuts -- will be damaging and will slow the recovery. What we need now is for the government to spend more on things like infrastructure (fixing roads and bridges, etc.), spurring the economy through increased employment while providing tangible benefits.
