If you have "no place to go," come here!

Taxes are the bait, spending is the hook

beowulf's picture

As I've mentioned before, the budget compromise that Gov. Mark Dayton made with GOP legislators in Minnesota is the template. It only looks like a defeat if you make the Obamabot assumption that raising revenue (or cutting the deficit) is the top priority. Since, unlike state govts, Uncle Sam never needs to tax to spend, the opportunity this strategy offers is far larger.
"The late Thursday afternoon announcement that Dayton and the Republican Legislative leadership had reached a tentative budget deal was a near capitulation by the governor. He failed to get his tax increases on the wealthy to fund his spending, instead agreeing to the final Republican offer to fund the budget with more accounting shifts and a borrowing off of the future tobacco settlement funds. Dayton gets to say he got more spending and maybe a bonding bill without social legislation that he opposes."

Democrats should push for specific tax hikes to fund new spending in specific programs and the "rotten compromise" they reach with GOP (whose donors hate taxes more than they hate spending) is no tax hikes and new spending. Actually, the real compromise (which a non-corrupt Democratic Admin could use to get Medicare for All "paid for" for free) involves arbitraging the defective CBO budget scoring model. By that I mean... .

1. As Jamie Galbraith points out, "the CBO simply assumes that short-term interest rates will rise to around 4.5 percent" by the middle of this decade. The trend over the last 30 years is actually more in line with Warren Mosler's assertion that the natural rate of interest is 0. However, 4.5% is what the CBO economic model assumes from 2016 on (and from 2013 to 2016, 1.5%).

2. At the discretion of the Secretary of the Treasury, the IRS can accept Treasury bills for payment of taxes.

3. CBO preliminary scoring for Anthony Weiner's Medicare for All bill reportedly came in as requiring an additional $1 trillion a year in new revenue.

4. James Bowery's "net asset tax" proposal would tax $60 billion in household wealth-- let's limit it to top 10% of households, we're down to $40 billion tax base. Bowery's tax rate would float to match current 3 month T-bill rate By CBO's crazy math, it would raise $1.8 trillion a year (40T x 4.5%),
more than enough to pay for Medicare for all. It would also fund universal Early Head Start day care and Edmund Phelps's wage subsidy to boost the minimum wage. Might as well abolish the ineffectual estate tax while we're at it (we collect more money from excise taxes).

5. The 3 month T-bill rate is, as of yesterday, 0.02%. On a $40T base, a net asset tax would levy $8 billion a year. The wealthy could step into the T-bill market (a tenth of total public debt) at any time to "buy down their tax rate" and then turn around and use the 3 month T-bills they bought to pay other taxes. This would make the likelihood of the 3 month T-bill rate ever going up at at approximately... 0.02%.

6. By the time the CBO updates its buggy economic model (with present deficit spending, one can only assume using CBO logic, paid for by the endless series of out years with revenue from a 4.5% net asset tax); Americans would have universal Medicare and daycare along with a higher effective minimum wage at no cost to themselves, their employers, state or local govts, auto or workers comp insurers and excepting health insurers, anyone else (the Pentagon budget would be cut by 10% simply by moving its healthcare costs to Medicare). Its the biggest free lunch in the world, and that's not even counting the 45,000 people who die prematurely die because of inadequate health coverage (EPA values "statistical life saved" at $9.1 million, x 45k, so a $409.5 billion a yr reduction in the deadweight cost of the real death tax).

No votes yet


letsgetitdone's picture
Submitted by letsgetitdone on

Shows all the opportunities President O has wasted because he doesn't know how to or will not, negotiate. Impeach the man!

beowulf's picture
Submitted by beowulf on

He didn't sell out or cave to the FIRE sector, he was put up for office by the FIRE sector.
So naturally ideas like the above to fund social insurance (and in the process, help business in the real economy by taking the cost of their employee's healthcare off their plate) would never be considered because every dollar spent is taken out of the pocket of bond vigilantes and insurance companies.

The rich, as Jesus might say, will always be with us. The way I see it, the only possible strategy to win any measure of economic reform is to give the rich who actually add value to the economy a reason to support it over the objections of Wall Street. A wealth tax that could be legally avoided by keeping risk free interest rates at 0 would pit the interests of plutocrats in the real economy versus plutocrats in the casino economy. For an example of something more politically realistic, I'd trade away the corporate income tax in exchange for a financial transactions tax. After that, the goal would be to raise dividend and capital gains taxes to ordinary income rates, but one battle at a time. :o)