Pretty soon we're talking real money

By Sean Carroll | September 20, 2005 12:53 pm

The number being tossed about for post-Katrina reconstruction is $200 billion. That’s a lot of money, even for a cosmologist. If you spent a dollar per month throughout the entire existence of our observable universe, you’d only get up to about $164 billion.

How can we possibly pay for it? Mark Schmitt points to two ideas: a bad one and a good one. The bad one is a project being organized by Glenn Reynolds and N.Z. Bear to point the finger of shame at wasteful pork in the discretionary budget, in hopes that Congress will be moved to slice away this excess fat and free up funds for more important things. The germ of the idea is okay — wasteful pork is bad, why not trim it away — but the idea that they’ll reach $200 billion is fantasy-land. (At the moment they’ve reached about $14 billion, using an expansive definition of “pork” that includes, for example, all federal domestic-violence programs.) That’s because the part of the federal budget that they would even consider trimming is only about $500 billion. Schmitt quotes Stan Collender in the National Journal, who explains that “Social Security, interest on the debt, most other federal mandatory spending, the Pentagon, the costs of activities in Iraq and Afghanistan, homeland security and foreign aid” are off the table. The remaining $500 billion, by the way, includes all spending on science, education, and wasteful stuff like that. Rail against pork all you like, but it doesn’t make up 40% of the discretionary budget.

The good idea comes from the Center on Budget and Policy Priorities. They point out the obvious thing: the reason the government is having trouble paying its bills is because its revenues, as a fraction of GDP, are lower than they have been in decades. But even better, they home in on two tax cuts scheduled to kick in during 2006, which represent a particularly egregious example of benefiting the rich. One deals with personal exemptions, and the other sets the values of allowed itemized deductions, both applying to couples making over $218,950 or individuals making over $145,950.

who benefits from these tax cuts?

Some interesting features of these tax cuts:

  • President Bush didn’t even ask for them; they were inserted by Congress during the budget reconciliation process.
  • 54% of the money from these cuts will go to households earning over one million dollars per year, the wealthiest 0.2% of households.
  • 97% of the money from these cuts will go to households earning over $200,000 per year, the wealthiest 3.7% of households.
  • The total cost of the cuts, including interest on accrued debt, is $197 billion over ten years.

Hmmm.

CATEGORIZED UNDER: Politics
  • http://iso42.blogspot.com iso42

    Sean,

    you forgot the third option, which is to borrow the money.
    This will be the way to go, since it is (in the short-term) easier to borrow from China using the credit market than to raise taxes or cut spending.

  • Adam

    The weirdness of the current Republican party is that ‘conservatism’ apparently only includes social conservatism. Apart from that, it appears, spending like a drunken sailor is fine and dandy.

    The question of whether or not New Orleans should be substantially rebuilt is an interesting one. The importance as a port necessitates some rebuilding, I guess, but how much? Port plus accomodation for the people that work in the port and the people that service the port and the people that service the people that service the port. Is that basically the whole city? How many people will go back anyhow? Surely at least some of them will start their lives elsewhere (Baton Rouge is booming, apparently, for example).

    An article in the WSJ pointed out that for 200 billion dollars you could give each displaced family $400 000 each. The irony is that the federal largesse announced by Bush doesn’t yet appeared to have positively impacted his popularity ratings, which are still falling (although slower, if only because the people who still support him would have to catch him in bed with a couple of underaged sheep to change their mind now).

  • LM

    Adam, just what is the age of consent for a sheep?

  • Adam

    You mistake me for a welshman, sirrah!

  • Amy

    The only reason they’d find the notion of sheep offensive is because he hails from cattle country.

  • LM

    Hey, why don’t we just save the $200 billion by cutting grad student stipends!

  • http://arunsmusings.blogspot.com Arun

    The argument against taxes goes something like this:

    You have to remember that taxing the wealthy is immoral because they achieved their wealth by their own efforts, and with no contribution from society, certainly not via government largesse – the wealthy would be wealthy in the People’s Republic of China or in the Soviet Union or in Sudan, and it has nothing to do with the American economy or anything America ever did for them, and so it is immoral to tax them for the common good……(and anyway, it is the wealthy that finance my re-election campaign, not the middle class and definitely not the poor).

  • Dissident

    Dear Arun, there’s a difference between (1) doing something for somebody and (2) being a little less obstructive to somebody than others might have been.

  • http://arunsmusings.blogspot.com Arun

    Dear Dissident,

    A lot of people have worked hard and some have died to defend this privilege of living in a society where there is a little less obstruction. We see everywhere that without tremendous concerted effort, we get dominated by warlords, not by libertarians. That, in my book, counts as “doing something for somebody”.

  • Dissident

    Ah, so your argument is that the burden of upholding law and order, i.e. external and internal defence, should be shared equally? No libertarian has a problem with that. But what does it have to do with “steal from the wealthy” populism?

  • The Anti-Bush

    The wealthy have benefited more from the cozy American system than have the poor.

  • JC

    At times one wonders how much a particular agenda is determined by who has the most guns and money to either “bribe” and/or “force” their agenda (both figuratively and literally). Is funding more easily slashed for government funded programs which have the least political support or lobbying (ie. funding for physics in comparison to military defense funding)? How much of what gets funding and what gets cut is determined by who plays Machiavellian political games the hardest?

  • JC

    I’ve always wondered how many people in “politics” follow what was written in “The Prince” by Niccolo Machiavelli (whether consciously or unconciously), or for that matter, what was written in “Dialogues In Hell Between Machiavelli and Montesquieu” by Maurice Joly.

    Modern politics seems to almost mirror what’s in those two books, especially when it comes to allocation of taxpayer money whether it’s for the military or science research.

  • http://blogs.discovermagazine.com/cosmicvariance/mark/ Mark

    Oh, I’m sure Bush is well-schooled in the classics. Aint that Machiavelli one o’ them Scottish folks?

  • http://arunsmusings.blogspot.com Arun

    Dissident, for instance, I’m told that US corporations file four times as many lawsuits than American individuals (orders of magnitude – 10 million corporations, 300 million people). It seems to me the taxes on corporations should be correspondingly higher.

  • JC

    Mark,

    Niccolo Machiavelli was from Florance, before Italy was a nation-state.

    I don’t know if Bush is well-school in the “classics”, but no doubt that the people around him most likely are, such as Cheney, Rove, Rumsfeld, Rice, etc …. On the surface Cheney and Rove seem to be very Machiavellian figures, when it comes to how they do their work and conduct business.

  • Adam

    JC, I think that you’ll find that Mark knows where Machiavelli was from and was joking based on the ‘Mac-‘ at the beginning of the name.

  • Dissident

    Dear Arun, apart from the obvious fact that corporate lawsuits are neither free nor paid for with tax money (corporate lawyers are employees or contractors of the companies involved, and the losing party can be sentenced to cover the entire cost of the proceedings) before trying that argument you would also be well advised to check the fraction of tax money going to justice relative to all tax-financed spending. You will find that it is minuscule.

    I will grant you this though: your reasoning indicates that you think services should be paid for by those who use them. I agree fully. So, just to mention a fee consequences, somebody who sends his or her kids to a private school, paying tuition out of his or her own pocket, should obviously not have to also finance other schools, whether run by other companies or by the government; and somebody who has deferred spending in his youth to accumulate enough capital to see him or her through old age should obviously not have to pay for those who did not. All by your own logic.

  • http://blogs.discovermagazine.com/cosmicvariance/mark/ Mark

    Thanks Adam. I’m also familiar with that book by Angelina’s Dad. Or did I just see the movie…?

  • JC

    Oh, I get it now. I didn’t make the connection with ‘Mac-‘.

  • http://arunsmusings.blogspot.com Arun

    Dear Dissident,

    It’s not my logic, I’m merely exploring what I think your logic might be. While someone **can** be asked to pay the entire court costs, does this happen always? That the courts eat up only a relatively small fraction of taxes is irrelevant when we’re discussing matters of principle, because the additional taxes proposed on the rich are both a small fraction of overall taxes and a small fraction of the incomes of the rich, and so a libertarian should have no objection. Secondly, we can gradually work our way up to the big money.

    My logic is that I’m better off in a society where people are educated than where they are not; and I’m willing to pay for it via my taxes. I notice that I receive the benefit of living in a society of literates and educated people whether I asked for it or not, and likewise my contribution via taxes is likewise involuntary. It is possible, in principle, e.g., to quantify the benefit of having a literate population, by comparing for instance Sri Lanka versus Pakistan (similar income levels, very different literacy rates) or even states within India (say Kerala versus Bihar). In each comparison, great effort was put into primary literacy in the former and very little in the latter – primarily by government. But just from qualitative experience, I can say that high literacy is a good; everyone who lives there receives that good, and therefore must share in paying for it.

    Libertarianism cannot create a sustainable human society beyond that of the hunter-gatherer type, which is probably the last time people were entirely dependent on themselves and their immediate family. The invention of agriculture; the first river valley civilizations and the need for large-scale collective effort to tame the rivers couldn’t happen with people solely responsible for themselves. Perhaps not coincidentally, religions with altruism as a value were born around the same time.

    -Arun

  • Dissident

    Arun wrote:
    “While someone **can** be asked to pay the entire court costs, does this happen always?”

    1) It’s standard practice.
    2) The question is really not relevant in a discussion of principles.

    Arun wrote:
    “That the courts eat up only a relatively small fraction of taxes is irrelevant when we’re discussing matters of principle”

    Not if the principle in question is that those who use more societal services should pay more taxes. If the fraction of tax money going to courts is quite small, it follows by that principle that the impact of court usage on taxation level should be quite small too.

    Arun wrote:
    “because the additional taxes proposed on the rich are both a small fraction of overall taxes and a small fraction of the incomes of the rich, and so a libertarian should have no objection.”

    If you really believe this, you have no idea what “libertarian” means. A libertarian won’t accept a wrong just because it’s “small” (according to some arbitrary standard, of which there is always one handy to justify anything). Wrong is wrong.

    “Secondly, we can gradually work our way up to the big money.”

    Thus speaks a thief.

    “My logic is that I’m better off in a society where people are educated than where they are not; and I’m willing to pay for it via my taxes.”

    No dear, your logic is that you are willing to force others, by the threat of violence, to pay for it via their taxes.

    Nobody prevents you from sending all your money, every last penny of it, to the state treasury if so inclined. By all means, do so and I’ll applaud your great gesture and sense of civic duty. But that’s not what you have in mind, now is it?

    Arun wrote:
    “I can say that high literacy is a good; everyone who lives there receives that good, and therefore must share in paying for it”

    So you define a good according to *your* standards, impose them on everybody (including people who couldn’t care less for literacy) and demand that *they* pay for what *you* think is a good thing.

    Thus thinks a predator.

    Arun wrote:
    “Libertarianism cannot create a sustainable human society beyond that of the hunter-gatherer type”

    …again proving that he has no idea what “libertarianism” means.

  • Adam

    Dissident:

    You can say that a Libertarian won’t accept a wrong no matter how small, but one would have to be a whacked-out and crazed utopian idealist (which some Libertarians clearly are, to the exasperation of my buddy who’s an LP member) not to recognise that sometimes all choices lead to wrongs and thus some measure of worth has to be derived with relation to which the cost will be minimised by the choices eventually made. So, I think that Libertarians will accept wrong, because life, indeed, does contain hard choices. They may not accept it in the sense that the won’t shout the downside from the rooftops, but they’ll have to face making such decisions, if they should ever gain a significant measure of representation in government (as opposed to their prevalent role, on the national stage at least, as a pressure group).

    As an example: if, for example, you are to cut taxes, the likelihood is that some will benefit more, according to a chosen cost functions, than others. You have some freedom to pick your cost function and your tax cuts (you could, indeed, pick your cost function post hoc so as to make it appear even across the board, but that would, I think that we can all agree, be something of a shifty trick). All Arun has, in effect, is a different cost function to you and, thus, would pick different tax cuts.

  • Dissident

    Arun would not pick any tax cuts.

  • Adam

    If that is true, that is because his constraints are presumably driven by concerns such as balanced budgets (feelings such as used to be held by American conservatives) or a perceived need to spend money, whatever. If, according to your internal model, the current situation already sits at an extremal point, or is in fact outside of what ought to be the allowed region, there may not be any wiggle room.

    I am very financially conservative, and I’m not calling for tax cuts, not until after spending is cut and the budget deficit under control. Tax cuts when the government is spending like a drunken sailor aren’t really tax cuts, they’re tax hikes put off (maybe for someone else to pay altogether). How can more tax cuts be on the table with gigantic deficits, an expensive war and the administration has just committed to something like 200 billion dollars of disaster relief? It just doesn’t seem financially responsible to me. So, current taxrates may indeed be ‘a wrong’ from both our perspectives, but they’re a lesser wrong, so far as I’m concerned, than mortgaging our futures and those of younger generations, for some jam today. Deferred tax is even worse than high tax, because people are bizarrely able to persuade themselves that the time to pay it all will never happen (a trait also demonstrated in personal financial dealings).

  • http://arunsmusings.blogspot.com Arun

    Dissident,

    The interesting thing is that as a child who couldn’t afford anything at all, except courtesy of my parents and of the society around me, I received an education (and I didn’t have a choice in the matter either :) ), and the benefits of that education, if any, would be mostly received well beyond the lifetimes of those who funded it. So while I do not have any children of my own, I do not mind paying for children’s education in my taxes and by other means. I hope the benefits extend beyond my lifetime, though it can’t possibly benefit me in any way. I do look for wise use of the money. I’m not imposing my values on anyone, the objective good of education is measurable, I’m sorry you didn’t understand that. Do examine the societies I mentioned, if you had to choose (and you had a choice) you’d find yourself choosing the one where the government paid more than lip service to education.

    And I wasn’t educated to be called a thief or predator by you. I suppose it hurts when your pet philosophy or scientific theory for that matter, is a failure. The fact is that libertarianism doesn’t work, it does not square with human nature. As I said before, it can’t take man beyond hunter-gatherer. Societies are engineered, not theorized into existence, and engineering has to take into account the highly non-ideal nature of its material. The American Constitution, btw, is a great feat of engineering, and it is not libertarian. Humans are not naturally libertarian; it requires a great feat of government to get the illusion of a working libertarianism. We see not libertarians emerging from Somalia, or Afghanistan or Yugoslavia or Iraq, we see war-lords. We see drug-lords and pirates and armed gangs of all kinds. For libertarians to even get their voices heard, the first thing needed is strong government. Otherwise, they just get shot by the gangs.

    Anyway, enough of this. I won’t visit your asylum any more.

    -Arun

    [Aside: the conservative/libertarian argument after Katrina was – see, government can’t work, it is the problem. But I think, I hope, after Rita, we’ll see just how well the government can work. There is nothing inherent in the nature of government that it will work poorly any more than there is something in the nature of the free market that it will work well; the failures in either case are a failure of accountability.]

  • http://arunsmusings.blogspot.com Arun

    If human life is a value, then vitamin C is a value, a necessity, there is no question of “imposing” this on anyone, it is part of the nature of things, at least, until we learn how to fix the broken human gene.

    Education is like Vitamin C, one leads a scurvy existence without it.

  • Dissident

    If something is a value which does not need to be imposed, then why does it need to be imposed? That’s what a tax is: imposed spending.

    You just don’t get it, do you? If you perceive a value in something, by all means pursue it. Pay all you want for it. It’s your right. But the moment you try to force others to pay for what *you* consider worthwile, you are nothing but a predator and an oppressor, and deserve to be called by your right name, and to be fought back by all necessary means.

    Because you see, fighting oppressors, defending the right to live as we choose, not as others choose for us, is at the very core of human nature, no matter what you say. It is your stance that is literally inhuman.

  • Adam

    Your argument is, then, based on the argument that the self is pretty much all. So far as I can see, most people don’t believe that and favour democratic governments with a measure of spending power (and that money to be spent is raised from individuals, in the end), so this point of view loses bigtime in the court of public opinion. Which is, I guess, why the LP would be better off focussing on being a pressure group (like the ACLU, or CATO, or what have you) and abandon their ridiculous political ambitions. Sure, they can try to play that as trying to shift the debate amongst the big players, but they’re getting less votes than before (at least at the national level) even as the debate moves away from them. There’s one Libertarian in Congress and he was basically elected as a Republican. Alan Greenspan, yes, is a former disciple of Ayn Rand but overall, the revolution just never happened. I think that the best approach now is to call for restraint and, most of all, a balanced budget. Indeed, a balanced budget first because that’s the most important thing (balanced over an economic cycle, at least) and then we can argue about how much restraint is required.

  • Dissident

    “Your argument is, then, based on the argument that the self is pretty much all.”

    Sorry, it’s not clear to me what you mean by that. My argument is simply that each individual has the right to live his or her life as he or she sees fit, doing whatever he or she wants, as long as he or she does not violate the same right of others. This does obviously include spending the result of one’s productive endeavours as one sees fit. It does not in any way preclude collaboration and all kinds of societal involvement. In fact, if 10 (or 10 million, or five billion) people decide that they want to organize themselves in a Stalinist dictatorship, I raise no objection as long as it is their *choice*. I may well shake my head in sorrow (or laugh my ass off in glee, depending on the mood of the moment) but as long as it’s what they want, fine with me.

    The moment they try to force somebody else into it against his or her will, that’s when you’ll hear me unsafe my revolver.

    Please note the fundamental asymmetry between me and Arun. He wants to impose his will on others. I simply want everybody to be allowed to choose for themselves. The divide between us is therefore a moral one which, contrary to what you say in comment #23 (all in an attempt to keep the peace, I’m sure) can never be reduced to just “a different cost function to you”.

  • Adam

    You’d best be firing your revolver around you, then. It’s not a Stalinist dictatorship, but the US (and every other Western country) has thriven on the imposition of the will of some fraction of the population on the rest of it (this is pretty clear, of course, in the collection of taxes, but it’s there right through the structure of the law). Your apparent ideal doesn’t exist; sure, you can try to bring it about (I don’t think that it’ll work) but there’s not much point claiming that you’re going to start shooting if The Man, backed by The People, starts to infringe on your right to do what you want, because that is the situation you already live in, assuming you live in a Western nation (or most other nations, for that matter).

    And the question of economic policy has to be driven by some sort of cost analysis. You can emote it up to whatever you want, freedom, tyranny, whatever, but in the end, underlying it, has to be logic. The creation of the cost function itself, almost certainly, is driven by moral imperatives.

  • Dissident

    Your pessimism is depressing. Read and cheer up:

    http://www.freestateproject.org/community/nh_info.php

    :-)

  • http://arunsmusings.blogspot.com Arun

    While people who want (as) libertarian (as is possible) government move to New Hampshire, those who want a Christian government are moving to South Carolina. Perhaps that was the original purpose of the states in the Union, but I suppose the insistence on slavery put an end to that.

    Meanwhile, it turns out our current President has presided over the greatest increase of discretionary non-military spending in recent years.
    http://www.dailykos.com/storyonly/2005/9/23/175346/446
    talks about it, while the sorry state of the republic is discussed here
    http://prudentbear.com/internationalperspective.asp

    Kind of goes to show that the label attached to a politician or any other person for that matter, means nothing, it is what one does that counts. Who you are is determined by what you do, not by what you believe in.

  • http://arunsmusings.blogspot.com Arun

    There is a nice graphic in the NYT (unfortunately hidden behind subscription) about how corporations embellish their earnings. The corporations can’t say – the government made us do this.

    We learn for instance, that Cisco’s 70 cents earning per share should really be 53 cents, because of dilution by stock options. We learn that Exxon Mobil has $26 billion in pension obligations but only $18 billion in pension fund assets. All in all, it adds up to big money. The problem that obfuscation pays off. It pays off big for the executives because their bonuses are tied to earnings. (Don’t try blaming executive compensation on the government.) If the problem is with ignorant or stupid investors and not with the free market as such, the same can be said about any other human system, including government.

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Cosmic Variance

Random samplings from a universe of ideas.

About Sean Carroll

Sean Carroll is a Senior Research Associate in the Department of Physics at the California Institute of Technology. His research interests include theoretical aspects of cosmology, field theory, and gravitation. His most recent book is The Particle at the End of the Universe, about the Large Hadron Collider and the search for the Higgs boson. Here are some of his favorite blog posts, home page, and email: carroll [at] cosmicvariance.com .

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