Great debate attempt #5

  Childless households making $200,000 a year in expensive Northeastern cities are undertaxed, and the acquaintance mentioned here gets no sympathy from me.  He is getting all bent out of shape about a tax rise of a couple hundred dollars:  4 percent of his income above $200,000.  Maybe.  And I lived in New York, I have friends living in New York, and no, it isn't that much more incomprehensibly expensive than Boston. 

My wife and I are in that category.  We are undertaxed. 

Sometimes the attitudes of my fellow citizens can be very depressing.

Comments

[Bernard Guerrero]

There are two, or maybe three, possibilities that I see here:

a) He doesn't feel he's getting value for the money

b) He likes what he's getting, but he thinks there's some deep pocket making more than him that should be footing the bill. "Don't tax you, don't tax me, tax the feller 'hind yonder tree", etc

c) He's an idiot, because he had to have figured somebody pulling down over 200K was going to pay _something_ more under an Obama admin. Maybe not immediately, but sooner or later. He's solidly in the top 5%.

Anyway, it probably doesn't matter. It didn't sound like this amount was make-or-break for him in terms of supporting Barry, so it's hot air.

[Bernard Guerrero]

Ok, as long as we're on policy and the economy, take a gander at the following and offer your opinion, if you will:

http://www.bloomberg.com/apps/news?pid=20601109&sid=a00_1SlKgIwo

[Bernard Guerrero]

Last follow-up. As was pointed out on the comments thread, Manhattan itself is a choice. Why somebody making that amount would choose it is....well, it's just not the choice I would make. But if the guy needs or wants to economize, he can move. We had a very nice place in Hoboken just after we got married. :^) Maybe he can room with carlos or something....

[Noel Maurer]

I'm with you, Bernard. (a) I have trouble believing he'll miss $800 per year; and (b) he could save that by moving to Brooklyn, let alone Jersey City or the Bronx. Unless maybe he currently walks to work? In which case see point (a).

Anyway, it turns out that the proposal will (if passed, for which I hope but am doubtful) cut in at $280,000, not $200,000.

I don't know what to think of the link. I do think the probability is that the recovery will be jobless; the recent productivity figures only add more evidence to that. (In olden days, firms held on to workers through down times; today they seem to take down times as an opportunity to restructure. I can guess why, but I know not for sure.) That said, the question is, what to do?

(a) Nothing. Maybe there won't be a jobless recovery. But if there is, you've got lot's of unnecessary human suffering along that route. Or, more cynically, lots of lost elections. One, two, three one-term presidents! Congress flipping every election! Fun. Not.

(b) More unemployment benefits. That's fine, but you'd have to be an ideologue not to see the dangers. There is a hysteresis to long-term unemployment, and some subset of people would get caught in it. It also risks undoing the social accomplishments of welfare reform. That said, while costly, it is also relatively easy to undo politically.

(c) More stimulus. That will help GDP; jobs, well, it would have to be targeted. And a recovery is a recovery, so this would only work as long as both GDP and employment are depressed. You could risk overheating if you tried to pretend that the NAIRU hadn't risen. And you have the question of whether the long-term unemployed are suited to the kinds of jobs that the stimulus will generate.

(d) Tax and spend. This is different from stimulus; this is a deliberate attempt to reorient consumption and investment spending to more labor-intensive activities. No worries about crowding out if the recovery is strong while still jobless. No worries about the long-term debt. Plenty of public benefit, and rather little worry that the unemployed are unsuited for the jobs being created.

That would be my preference, should we find ourselves out a year from now with strong GDP growth and jobs flat or falling, because I would gladly pay more taxes for more cops and train operators and airport workers and streetcleaners and soldiers and the like. That said, it would be hard to undo, and in the long-term the country will need a lot of new tax revenue that it can get to fill the current spending gap. Adding a few percentage points of GDP to the baseline, even if paid for, could make it harder to raise the needed marginal taxes to put the federal government back into long-term balance.

Is that what you were looking for?

[Bernard Guerrero]

Yeah, basically. But let me argue that your stated preference above carries additional costs.

"That would be my preference, should we find ourselves out a year from now with strong GDP growth and jobs flat or falling, because I would gladly pay more taxes for more cops and train operators and airport workers and streetcleaners and soldiers and the like."

I have long been, as I think you're aware, in favor of foreigners taking promissory notes backed by green paper in exchange for sending us Real Stuff. Call me a pirate, but my philosophy basically boils down to Not Looking A Gift Horse In The Mouth, at least while said horse is availabe.

That said, I think it's been clear for some time that this state of affairs was not going to last indefinitely. It appears to me that the most likely way that the readjustment will occur is via inflation/depreciation. Emphasizing labor-intensive industries, though, would seem to work against said readjustment. Rather than allowing for a national transition of more of GDP into the capital-intensive tradeable sector, you'd be pushing people into non-tradeables that tend to be low productivity and low income, in addition to being...well, non-tradeable. This sounds like a bad idea.