State of the Union, 2010


  1. Griff Wigley said:

    Want to watch the address with fellow Northfielders?

    I got an alert from that there will be a “State of the Union watch party” at Froggy Bottoms.

    Anywhere else?

    January 27, 2010
  2. Anthony Pierre said:

    I will see if I can host a chat on my server tonight.

    January 27, 2010
  3. Patrick Enders said:

    Will there be anything worth partying about if the House can’t bring itself to pass the Senate HCR bill?

    I’m more than a little angry at my elected Democrats right now.

    January 27, 2010
  4. Anthony Pierre said:

    I feel your pain patrick.

    January 27, 2010
  5. Kathie Galotti said:

    I’m very angry at the Democrats for squandering the 60-seat majority, too. We came so, so close to getting meaningful health care reform, and now it all blows up so that insurance companies can keep up their cherry-picking, average-Joe-gorking ways. Dammit.

    January 27, 2010
  6. Patrick Enders said:

    Kathie and Anthony (and anyone else who cares),

    It’s not quite dead yet! Please read this if you want to help save this reform:

    Unfortunately, our Republican Representative won’t be of any help, but I urge each of you to call and/or email our two MN Senators, and ask them to actively fight for a side bill that will allow the House to pass the Senate HCR bill as-is, and render the 60-vote filibuster rule irrelevant.

    I’m told that calling is better, and faxing a letter is best. I recommend doing all of the above.

    Al Franken, DC Office
    320 Hart Senate Office Building
    Washington, DC 20510
    (202) 224-5641

    Amy Klobuchar, DC Office
    302 Hart Senate Office Building
    Washington, DC 20510
    phone: 202-224-3244
    fax: 202-228-2186

    Time is of the essence.

    January 27, 2010
  7. Griff Wigley said:

    On MPR’s Midday today: David Brooks previews the State of the Union address

    January 27, 2010
  8. Ray Cox said:

    If the only way that Congress can pass a health care reform bill is to have one party in the Presidential office, at least a 60 seat majority in the Senate and a substantial majority in the House, then I tend to think there is a problem with the legislation…or possibly the way the legislation was handled. I don’t really know for sure about the actual legislation because I’ve never seen a very good analysis of what is actually in the bill. But I do know that the poll numbers in America today show an overwhelming majority do not want the legislation to pass. I’m not sure what they are basing their decision on, but that seems to be the way things are right now.
    .-= (Ray Cox is a blogger. See a recent post titled Water Damage) =-.

    January 27, 2010
  9. Patrick Enders said:

    Or, possibly it is a problem with the fact that the Republican Party decided to make health care reform Obama’s “Waterloo,” and refused to negotiate as a party on any HCR measure whatsoever, or even allow any of its less-conservative members to negotiate with the Democrats in good faith.

    Alternately, you could just look at the failure of anyone else to pass HCR in the last 40 years, and realize that it is a very difficult thing to pass.

    January 27, 2010
  10. Anthony Pierre said:

    — Obama to seek repeal of military “Don’t Ask, Don’t Tell” policy in State of the Union speech tonight, top official says.

    January 27, 2010
  11. Anthony Pierre said:


    January 27, 2010
  12. Ray Cox said:

    Patrick, working to pass something that very few people actually understand and a huge majority of the country doesn’t want doesn’t make a lot of sense to me. You are correct that health care reform has been difficult for the past years….that may be more because 85% of Americans are comfortable with their health care plans and don’t want government intruding into their lives in that area. People do want to see cost containment of health care costs. If that is something the public wants, Congress is going about delivering it in a very, very strange fashion.

    There are ways to get bipartisan suport on a bill and ways to prevent it. Congress has elected to create a single party bill. Now they can deal with it.
    .-= (Ray Cox is a blogger. See a recent post titled Water Damage) =-.

    January 27, 2010
  13. Anthony Pierre said:

    even if the bill said that senators got free cheetos for life, the republicans wouldn’t vote for it

    January 27, 2010
  14. john george said:

    That’s a pretty cheesy comment, IMO.

    January 27, 2010
  15. Griff Wigley said:

    Thanks for hosting the live chat, Tony… I’m heading down to Froggy’s so you’re in charge! I’ll see if I can bring it up on my G1.

    January 27, 2010
  16. Ray,
    I agree that the Republican Party and its allies have done a very good job confusing people about what is in the bill, and as a result, they do not understand it. The interesting thing is that a majority of Americans actually support a majority of the components contained in the bill, but many are unaware that they are included in the bill:

    However, when Americans are actually told what is in the bill (versus relying on the lies that have been spread routinely by bill opponents), a majority say they are in favor of the bill:

    What we see is that most individual components of the bill are popular — in some cases, quite popular. But awareness lags behind. Only 61 percent are aware that the bill bans denials of coverage for pre-existing conditions. Only 42 percent know that it bans lifetime coverage limits. Only 58 percent are aware that it set up insurance exchanges. Just 44 percent know that it closes the Medicare donut hole — and so on and so forth.

    “Awareness”, by the way, might be a forgiving term in this context. For the most part in Kaiser’s survey, when the respondent doesn’t affirm that the bill contains a particular provision, he actually believes that the bills don’t include that provision. 29 percent, for instance, say the bill does not contain a provision requiring insurers to cover those with pre-existing conditions; 20 percent think it does not expand subsidies.

    How would public opinion change if people were fully informed about the content of the bills? It’s hard to say for sure, but on average, the individual components of the bill are favored by a net of +22 points. An NBC poll in August also found that support went from a -6 net to a +10 when people were actually provided with a description of the bill.

    January 27, 2010
  17. Kathie Galotti said:

    Well said, Patrick.

    January 27, 2010
  18. Bruce Wiskus said:

    I will probably regret wading in on this discussion, but here goes.

    I have three huge issues with how health care reform was passed in the Senate.

    1. The special provisions for Nebraska in regards to Medicare to get Ben Nelson’s vote.

    2. The deal for Unions in regards to Cadillac health care plans.

    3. Lack of transparency. I remember the President, when he was campaigning, promising to hold the discussions and hearings on C-Span.

    Obviously if he would have done number 3 we would not have had 1 and 2 in the senate plan.

    My view on health care is that it needs to be fixed, reformed, blown up and reborn from the ashes. It is pretty obvious there are serious problems with the system. What I am not so sure about is that I want the government running it. The medical system in regards to the quality of health care available in the US is second to none, the problem is the costs of services and who pays for it.

    January 27, 2010
  19. Kathie Galotti said:


    I don’t disagree with any of your issues. But given the way the Republicans just want to bring Obama down and refuse to participate, there doesn’t seem to be a totally above-board way to do this. And for me, anyway, the large number of uninsured folks, the large number of folks who get screwed by profit-motivated insurance companies so they can pay big bonuses to their execs….this all just has to stop.

    The Senate bill is far short of ideal. (So’s the House bill, for that mater). But if it doesn’t pass now, we’ll have more decades of people dying needlessly, families being bankrupted by a single catastropic illness, and crummy insurance practices and obscene profits.

    January 27, 2010
  20. john george said:

    Since Griff started this thread as a response to the State of the Union address, I will toss in this link by David Brooks in a New York Times column.

    I really resonate with everythinbg Brooks says, here, but I especially liked these two paragraphs-

    It is really convenient to stand back and point fingers at one another, but that does not create any resolution to our problems. I did not vote for Obama, but I think he does have a good understanding of what is going on. My concern is that he will fall into this same populist trap. His one statement here-

    is a case in point. I believe what the country is crying out for, and did in the last election, is for someone to bring unity, not division. I think Obama has the ability to provide that if he is willing to take the risk to do so, and I don’t care what party he represents. Someone has got to step up to the plate.

    January 27, 2010
  21. john george said:

    Well, that will teach me to try to figure out that blockquote process. I conpletely lost my quotes. Here they are again-

    From David Brooks- “That’s because voters aren’t as stupid as the populists imagine. Voters are capable of holding two ideas in their heads at one time: First, that the rich and the powerful do rig the game in their own favor; and second, that simply bashing the rich and the powerful will still not solve the country’s problems.

    Political populists never get that second point. They can’t seem to grasp that a politics based on punishing the elites won’t produce a better-educated work force, more investment, more innovation or any of the other things required for progress and growth.”

    From Obama’s speech- “I don’t think American elections should be bankrolled by America’s most powerful interests, and worse, by foreign entities,”

    January 27, 2010
  22. Vicki Dennis said:

    Griff – there are times when quality should be considered over quantity. I was sorry you didn’t hang around last night!

    January 28, 2010
  23. Point of information: I believe Obama gave the 2009 State of the Union address, sometime in February. So this is his second.

    As for the health care bills, I believe that either the House or the Senate bill would be catastrophic both for health care and for the American economy. Doing nothing is preferable to either one, even if one could be passed without backroom deals to buy off potential opponents.

    There is a long list of Democrats who have publicly expressed doubts about the legislation — a lot more since Scott Brown knocked off a Democrat in the Massachusetts Senate race — but voted for it because his or her vote was needed for it to pass. On the other hand, I am not aware of any Republican who is genuinely in favor of either bill but voted against for partisan reasons. If you know some, please name them, otherwise don’t prate about Republicans’ motives.

    January 28, 2010
  24. You set up an uneven scale, Linda. Democrats expressing “doubts about the legislation” versus Republicans being “genuinely in favor”. Being Politicians are capable of both expressing doubts about items or portions of a bill and genuinely supporting a bill as a totality. And, didn’t Olympia Snowe express support for portions of the bill but vote against it? It was a party-line vote, subtle disagreements within each party put aside in name of toeing the line.

    I will gladly prate about Republicans’ motivations when you have delicious statements like this coming from Michael Steele, the RNC Chairman, in November, 2009:

    “So candidates who live in moderate to slightly liberal districts have got to walk a little bit carefully here, because you do not want to put yourself in a position where you’re crossing that line on conservative principles, fiscal principles, because we’ll come after you,” Steele continued.

    “You’re gonna find yourself in a very tough hole if you’re arguing for the president’s stimulus plan or Nancy Pelosi’s health plan. There’s no justification for growing the size of government the way this administration and this Congress wants to do it.”

    Also, Obama did address both houses of Congress last year only a few weeks into his term, but that officially is not considered a State of the Union Address. I’m not sure what the official distinction is, but the “new President speech that just happens to be very similar to a State of the Union Address” seems to be much more about only laying out an initial legislative agenda and policies. Officially, this was his first State of the Union Address.
    .-= (Brendon Etter is a blogger. See a recent post titled Brendon Makes Up Parenthetical Titles For Songs) =-.

    January 28, 2010
  25. One of the biggest worries about Health Care is that of what are our true priroities both state wide and federal policies toward how we care for our elderly far to long we have underfunded Long-Term over the last 12 or more years. As for me I can no longer take this approach in order to stop the high turnover rate and shortages of staff we nedd to take care of the people who take care of Grandma and Grandpa. For when it comes time for their needs for healthcare it is like they are a paycheck away from losing everything when a catastrophe happens medically to them and their families. We need to make the care of our elderly a top priority in this debate. Please contact State Senator Linda Berglin and State Rep. Tom Huntley and let them know. Please call me if you have any questions I should be in the phone or look me up at Three Links Care Center: Thank-You David Roberts

    January 28, 2010
  26. Ray Cox said:

    I believe the victory by Sen. Brown had more to do with our executive and legislative composition than it did the health care bill. Americans simply do not like to have Congress and the President in the same party. We generally make corrections, often as soon as possible. We did it with Clinton and we did it with GW Bush.

    Our democracy is designed to work with at least two parties. It is desgined to have a respectful majority work with a respectful minority. It is not a pretty or easy process, but when handled properly it does get the job done. Remember back to President Reagan’s quote when asked by a reporter how he managed to get significant portions of his agenda passed by a Demorcrat controlled Congress. He replied something like “my mother always taught me it was better to come away with two-thirds of a loaf of bread rather than no loaf of bread”. That is how you get things done. You work at it. You implement portions in manners that fit. You can come back and enhance at a later date if you feel it is necessary. You do not have to jump for ‘my way or the highway’ at the very first chance.

    Bruce brings up very objectionable actions that the administration was doing to get its way on health care. There are way better methods to accompish a goal. Yes they make take some weeks and months, but that is how our system is designed to work. When the voting public sees an administration trying to subvert our historical methods of discussion/cooperation/implementation they object at the ballot box.
    .-= (Ray Cox is a blogger. See a recent post titled NAF Grants Breakfast) =-.

    January 28, 2010
  27. There were health discussions and such on C Span…the Pres at a repulbican only meeting for him, talked about how it is just impossible to cover all the meetings and congressional hearings and the wildly complicated scheduling times and the logisitics of it all.

    January 30, 2010
  28. The Obama I saw on the State of the Union address was a much changed man. The lilt in his formerly hopeful voice, now sounded heavy. He seems to have aged more than the others in the first year. There’s much pressure on him and I think a lot of it is coming from himself. He can’t let anyone down, but he will, as all US Presidents do. I hope he will succeed in a few things. I don’t hope the Democrats and Republicans will ever get along very well. And I am glad for that cuz I am all for a two or more party system.

    The health care bill should be passed in small chunks, not one big hunk. Look closely at the state programs that work well for people and there are several about.
    Study, research and try things a little at a time. Like we do with everything else.

    January 30, 2010
  29. Norm Vig said:

    Hey, Ray, haven’t you seen the statistics on recent GOP use of the filubuster against every significant bill? They have used it more than 70% of the time, compared to opposition parties using it maybe 30% of the time even a decade ago. Don’t give me this stuff about abusing procedure. Remember when the Bush administration kept the voting open for hours and hours past the deadline to twist the last arms to get the presciption drug bill through?

    It’s very easy for the opposition to make the argument for divided government when they are totally out of power (as David Strom did in the Strib the other day). He wasn’t making that argument when the Bush administration was ramming its tax cuts through (using the reconciliation procedure when necessary). The fact is that the Republican Party has voted virtually unanimously against EVERY Obama initiative. That’s not the kind of biparisan civility that used to characterize Washington, and it’s dragging this country down into total gridlock. How can we solve any problem when the Senate vetoes everything??? And remember, those 41 GOP senators represent even less than 41% of the national popuilation (since many are from small states). Why should they control the agenda when they lost the election? Please explain that to me.

    January 30, 2010
  30. john george said:

    Norm- Funny thing about our “American democracy.” Much of the legislation since the civil rights movement has been a minority controling a majority of the people. When Clinton was elected, he only garnered 43% of the popular vote. That was a win by default. If Ross Perot had not financed his independent party, there would have been a significant conservative victory. So, your lament, “Why should they control the agenda when they lost the election?” sounds a little like sour grapes. I don’t mean to be offensive with that statement, but when it comes down to it, all of us are able to tolerate these types of injustices, if you will, when it is our party getting the advantage.

    January 30, 2010
  31. Norm Vig said:

    But Democrats have never filibustered every Republican move (at least as long as I can remember). It seems to me the Republicans are basically saying, “heads we win, tails you lose.” What kind of a democracy is that?

    If the Republicans regain a majority, the Dems will probably do the same thing to them. The Senate has gotten itself into what might be a fatal dysfunction by adhering to the 60-vote rule and requiring a 2/3 majority to change the rules. So 34 naysayers can control almost everything Congress can do? That doesn’t seem to me to be what the constitution says.

    January 31, 2010
  32. Ray Cox said:

    No Norm, I have not seen statistics on the use of the filibuser. I do know that it has become a more powerful tool in the past 15 years, but I believe that is more related to the legislation being advanced than any change in parties. If the only way you can advance your legislation is to have 60 votes in the Senate and a large majority in the house, and the Presidential office, then I continue to say that there is something wrong with the legislation. And the American public tends to agree with what I just said and generally makes a correction as soon as possible—regardless of what party it is.

    I also remind people that President Reagan governed with an opposition party Congress and was able to advance major agenda items. The same holds true for President Clinton. Legislation does advance when it is reasonable as it will attract bipartisan support, as it probably should.

    Those who worked to set up our wonderful democracy were insightful enought to think of many of the power divisions that we wrestle with. The Senate rightfully is the body that tends to be more cautious and also tends to slow down legislation and take harder looks at it. And the House has the sole power to bring forward taxing bills as they are ‘closer’ to the people and thus are supposed to know the needs of the populace more quickly. A lot of this makes sense. However, if your goal is to create single party legislation and push it through Congress regardless of what the voters are feeling, our democratic process often becomes an obstacle.

    Bright makes good comments when she notes that the health care bill may work better being divided into smaller bills. We have 50 states essentially all handling things differently with health care, but many of them are doing a pretty good job. Let’s truly figure out what works for people and try to keep focused on that.
    .-= (Ray Cox is a blogger. See a recent post titled Interior Trim) =-.

    January 31, 2010
  33. Mike Zenner said:


    Before the 17th Amendment the State Senators were voted in by their state legislatures(probably a huge mistake approving this amendment). Point being the US originally conceived as a Republic of States has since morphed into an all powerful central government.

    The Founding Fathers I believe put these checks and balances and resistance points(Senate) in the Constitution for the very reason of keeping governmental powers dispersed in State governments, and not have it converge into Washington as it has.

    Along with the 17th Amendment and the 16th Amendment(income tax) and the establishment of the Federal Reserve 100 years ago has enabled the Federal Government to become an all powerful Central Government. I am sure the Founding Fathers are turning in their graves. Could have just as well keep the central government in England, if that was the goal.

    Lord Acton:
    “Power corrupts, and absolute power corrupts absolutely”

    Iraq War Powers Act and Patriot Act now there’s some legislation du jour that Americans will be regretting forever. Should we add a fast moving bloated Health care law to the regret’s pile also?

    January 31, 2010
  34. Ray Cox said:

    Good article, but I don’t see a way to ‘fix’ the issue, even if I believed something needed fixting. When the Dems were in control a few years ago the R’s were saying the same thing….let’s change the rules. Then when the R’s gain control you hear the Dem’s saying let’s change the rules. I seem to remember there was quite a bit of talk around the apointment of Federal judges by President Bush and discussion of the ‘nuclear option’ of going ahead with a change.

    As the article points out, Rule 22 was put in place in 1917 to require 67 votes to end a filibuster. That was changed in 1875 so that only 60 votes could end af filibuster. I think it might be wise to go back to making the Senators actually talk continusously to maintain a filibuster instead of the pretend filibuster we have now. I was treated to the only real filibuster in decades while serving in the Mn Legislature. If I remember correctly it went on for 15 hours until everyone talked out and gave up and had the vote….I believe on a gay marriage issue. Making people talk does require energy, time and organization. Making people simply say they are going to talk doesn’t require anything.

    But the important part of all this is one that should indeed be preserved….the Senate is in charge of its own rules.
    .-= (Ray Cox is a blogger. See a recent post titled Interior Trim) =-.

    January 31, 2010
  35. Norm Vig said:

    Ray, thanks for the thoughtful response to the article. To my mind, the most important point of the article is that the filibuster has nothing to do with the constitution, other than that the Senate is allowed to set its own rules. The Federalist Papers and the text of the constitution itself indicate that the founding fathers expected legislation to be passed by majority votes in the Senate as well as in the House.

    You are right that both parties have complained about the filibuster when they are in the majority. But the fact remains (and this is not something that can be empirically disputed), the Republicans have used it far more than any previous opposition. As you say, if they had to actually stand up and explain the reasons for their opposition until they are exhausted, that would be one thing; but when it is just a procedural move to require a supermajority for all significant legislation, then it becomes obstructionism. There is a valuable role for a constructive opposition–in fact it is critical to have principled criticism of the government–but that is different from bringing an elected government to a halt.

    I am more pained by the fact that 41 senators from the small states could mathematically filubuster anything even though they represented only 10.2% of the population. The distortion is just too great. In fact, when the Republicans had a 55-45 majority a few years ago, the 45 Democrats represented 30 million more people than did the Republicans! That goes back to the original compromise between big states and small states, but that malapportionment was necessary to get agreement on the constitution at all. Still, the filibuster adds a whole new dimension to minority rule–not something the founding fathers contemplated.

    January 31, 2010
  36. Ray Cox said:

    Good thoughts Norm. It will be interesting to see how the Democrats behave with the filibuster when they lose power….which I think will be coming sooner than they may have thought a year ago.

    I am a believer in the Senate and 2 Senators per state. I think the founding folks were in fact on to something great when they set up the differences between the House and Senate. It doesn’t bother me a jot that a Wyoming or North Dakota Senator represents fewer people than a California Senator. It is a great equalizer and it is what keeps our states together. The large cities are populated by and large by very liberal voters and they elect liberal Senators…generally. I personally don’t think they do that great a job managing thier cities, but that is for them to deal with. Apparently the voters continue to believe they are managing well, even as stuff is crashing down around them. That is the great liberty we all enjoy in America.

    I do wish our own Minnesota founding folks would have been wise enough to have half our state senators stand for election every two years. They could have a 4 year term, but having half up for election every two years would tend to keep them a bit closer to the voters.

    Sometimes I also wonder what it would be like if we elected our President to a 6 year term without option to run again, creating a lame duck president from day one. Might make lawmaking a bit different.
    .-= (Ray Cox is a blogger. See a recent post titled If you register your site for free at ) =-.

    February 1, 2010
  37. Norm Vig said:

    Ray, I’m sorry, could you please explain to me why a person living in Wyoming (population 544,000 in 2008) should have the same voting power as a person living in California (about 37 million)? Why should that person have about 70 times more voting power? What is the principle? In 1787 it may have been necessary to get agreement on the constitution, but we have been a federation (not a confederation of independent states) for well ove 200 years, so how can you justify it? What about the principle of political equality? One person, one vote, which justified the civil rights revolution? Come on, the Senate makes no sense. It is, as has been said, the most undemocratic institution in the democratic world. Almost as bad as the House of Lords, which was stripped of its veto powers in 1911 (99 years ago). Please tell me, on what democratic principle can 20-30% of the population rule the majority???

    February 1, 2010
  38. Norm Vig said:

    Well, I actually did the arithmetic, and if you count half of each state’s population for each Senator from the state, the 41 Republicans (including the Nude Truck Driver from Mass!) represent 37% of the national population. Not as bad as I thought. But something has to be done to stop the use of the filibuster on every piece of legislation. If it really forced the two sides to compromise somewhere in the middle, that would be one thing, but it hasn’t so far–it has just produced complete gridlock.

    I don’t know what the answer is. Obama proposed a nonpartisan commission to make suggestions for reducing the deficit and controlling entitlements, as was done during the Reagan administration, but the Republicans voted that down. It seems obvious that some mix of tax increases and spending cuts (meaning probably freezes on entitlements) will be necessary, but without controlling health costs nothing will work.

    February 2, 2010
  39. Patrick Enders said:

    I’m really glad that I’m not the only one who crunched those numbers today.
    By my math:
    The 41 Senators in the Republican majority represent 36.5% of the population.
    The 59 Senators in the Democratic minority represent 61% of the population.
    Nobody represents the other 3.5% who live in DC, Puerto Rico, etc.

    February 2, 2010
  40. Ray Cox said:

    Norm, we could also look at land mass. I’m sure you have seen those maps that show land area controlled by political party representatives. I seem to remember that Republicans control about 90% of America’s land mass, and Dems the other 10%. That might make you feel better.

    In all seriousness, I think we do in fact need the Senate with two Senators from each state to keep our states together. As you noted, it probably was done to secure the votes for our constitution, but I believe the founders were onto something in doing it. As much as you may not care for differing numbers of voters backing each Senator, I don’t care to have the power of Congress centralized into a few states, or a few more larger cities. That is what would happen without the Senate.

    I am a states rights guy….you may not be. I find centralized power coming from Washington objectionable regardless of what party is in control. The Senate is the great equalizer for states rights. I conceed that there are some issues that it is best to have the federal government oversee, such as inter state commerce, contracts, civil rights, etc. But I also think we are the great country we are because we have the ability to implement different solutions to problems and issues.
    .-= (Ray Cox is a blogger. See a recent post titled Cabinets at The Crossing) =-.

    February 2, 2010
  41. David Ludescher said:

    Norm: The Senate was never intended to represent the people; its purpose was to represent the states. The House was intended to represent the people. I think it is an excellent compromise.

    If Congress just represented the people, big states, like California and New York could ban together to push through preferential legislation. Essentially, that is what is happening in presidential elections. Small electoral states are virtually ignored.

    February 2, 2010
  42. Paul Zorn said:

    David L:

    You say:

    If Congress just represented the people, big states, like California and New York could ban together to push through preferential legislation. Essentially, that is what is happening in presidential elections. Small electoral states are virtually ignored.

    Irrespective of whether the Senate works well or poorly, your analogy with presidential elections is unconvincing. In reality, it’s often *large* electoral states that are “virtually ignored”. Republican candidates tend to spend little time in, say, New York or California, while Democrats tend to leave Texas alone, because these states are seldom really in play.

    The broader point — that the electoral college leads to bizarre politicking — is well taken. While we’re mucking around with the government, let’s get rid of the electoral college. First.

    February 3, 2010
  43. Paul Zorn said:


    Sure, there’s a case to be made for states’ rights (SR) — notwithstanding the fact that the SR principle has been used selectively, and often nefariously, over the years, most notably as regards slavery. It’s been used for good, too, as when our more enlightened southern neighbor, Iowa, legalized same-sex marriage.

    Given that we are, for better or worse, a confederation of somewhat autonomous states rather than just a higgledy piggledy collection of provinces, it makes historical and (IMO) logical sense that the design of Congress (and even, perhaps, the structure of national elections) should somehow reflect this fact.

    But it’s far from clear that the US Senate, as designed in the Constitution 230 years ago and as it’s evolved (some would say devolved) up to now, is the best—or even a wise—way to go about things.

    It’s one thing to say that states deserve some special representation. It’s quite another to insist on two more or less equally powerful bodies, one “of the people” and one “of the states”. Such a design is especially problematic when the Senate arrogates to itself what amounts to a 60% threshold on vetoing any legislation — including stuff that has nothing at all to do with states or their separate rights.

    One solution would be to keep the present Senate and its design, but limit its power to postage stamp design, Arbor Day observance, and offically sanctioning each year’s Groundhog Day outcome.

    Alternatively, states’ existence could be realized by, say, 10 extra seats in the House for each state. (Our House is too small, by the way.)

    I don’t expect these bright ideas to be adopted any time soon — they’d probably not pass the Senate, for one thing. But they suggest (to me, anyway) that our current Senate is not the only approach to securing a decent respect for states’ rights.

    February 3, 2010
  44. David Ludescher said:

    Paul: The broader point is that the federal government was intended to a government of, by, and for the states. Hence, the term “the United States”. Our forefathers wanted each state to be fairly represented in the national government.

    In that sense, the Senate is very democratic; each state gets two votes. Yet, each state has the House where the population is the criteria for representation. The President is a compromise of these two positions. It’s hard to imagine a more fair system for the states.

    February 3, 2010
  45. Norm Vig said:

    David: it is true that the original design of the constitution suggested that the Senate would be a chamber representing the states; but nowhere does it say that that is its only function. In any case, with passage of the 17th Amendment which provided for direct election of Senators (see post 23.2 above) and with the rise of truly national political parties, it can hardly be claimed that state interests (WHICH state interests?) are the only thing represented in the Senate. If that were the case, it is highly unlikely that all of the states represented by Republicans have the SAME state interests, yet the Republicans are voting 100% for their position on important legislation.

    Actually, if you run the numbers by states, there are 27 states that have at least one Republican senator and 36 states that have at least one Democratic senator. Or if you take only those states in which both senators are currently from the same party, the Democrats have an edge 23 to 14. So the Democrats’ “state” interests should prevail if it were only about states. But it obviously is not. It is still minority obstructionism of the worst kind.

    February 3, 2010
  46. David Ludescher said:

    Norm: I don’t like the obstructist attitudes either. But, I blame the two party system. Politicians on both sides (for the most part) are unwilling to cross party lines for fear of losing party support. In essence, the reps end up representing the party, and not the state nor the people.

    The Republicans don’t have any way to advance their political agenda with a minority in the Congress and a Democratic president. Obstructionism is their best political option right now. The Democrats have to figure out how to break the logjam. Blaming the Republicans isn’t working.

    February 3, 2010
  47. Norm Vig said:

    But David, the Democrats in the Senate compromised again and again on the health care bill, and still didn’t get any Republican votes. And the senators who tried to get special deals for their states (think Ben Nelson and Mary Landrieu) have been roundly condemned by others on both sides of the aisle. This is not about state interests, it is about the national interest. And I don’t see how the “heads I win, tails you lose” attitude of the Republicans can help to get us out of the huge mess that they got us into in the first place. Remember, Obama inherited a $1.3 trillion deficit.

    February 3, 2010
  48. Paul Zorn said:


    Individually, some of those forefathers wanted their states to be over-represented, as would most of us today. Still, as a group these fore-dudes did indeed want the states to be “fairly represented” in the national government.

    But saying so begs the main question: what does “fairly represented” actually mean?

    Two votes per state, regardless of population, has the undeniable virtue of mathematical simplicity, but that’s not the same thing as being “democratic”, or “fair.” Our forefathers certainly didn’t see the fairness of such a formula as among the “self-evident truths” they professed. They fought like cats.

    Yet, each state has the House where the population is the criteria[sic] for representation. The President is a compromise of these two positions. It’s hard to imagine a more fair system for the states.

    IMO, it’s easy to imagine fairer systems. I suggested two (well, really one) in 32.1. And I bet others can do better.

    February 3, 2010
  49. Ray Cox said:

    I agree with David. The parties are causing all the problems, not the composition of the Senate. When you have an elected official that tends to ‘stray’ on some areas and vote his/her heart, or in some cases, how the district tends to feel, if it doesn’t line up with hardline party lines the elected official is often unelected. I have personal experience in this. I had several votes where I didn’t line up with more conservative voters….they withheld support and I lost my 2006 election by 50 votes. My replacement as far as I can tell has never worked with the opposition party on any serious legislation. I worked on countless significant legislative plans with the opposition party (e-waste, mercury switch removal, water clean-up, phosophorus reductions, etc. etc.). The lesson is that you work and appeal to your base, ignore the opposition party and keep your mouth shut to stay in office.

    Essentially we—-voters—-through the expanded use of political parties, are creating a more divided America. We will have to deal with the consequences of that until we—the voters—decide to stop creating volitile partisan representation. It is up to us.
    .-= (Ray Cox is a blogger. See a recent post titled Cabinets at The Crossing) =-.

    February 3, 2010
  50. john george said:

    Norm- Wasn’t it a Democratic Representative from Nebraska that held out until he got his own pork chop? I think your assessment of the Republicans holding out for favors is like the pot calling the kettle black. If the Dem’s have to buy their own people to get them to vote, then that tells me something about the veracity of the legislation.

    February 3, 2010
  51. john george said:

    Ray- I think you are spot on. Did you read my link in post 17? If not, take a look at it.

    February 3, 2010
  52. Norm Vig said:

    Ray, I agree with much of what you said. There used to be intelligent, pragmatic, moderate politicians in the Republican party like yourself (I think I even voted for you once because of your environmental record!!:) But the ideological bases and talking heads just deepen the division in the country by requiring litmus tests and ridiculing the other side. The Republicans have become much more of an ideological party since Newt Gingrich took over following the ’94 elections. Most of the moderates have been forced out of the party. That is less true of the Democrats, as was evident in the health care debate.

    The composition of the Senate wouldn’t be such a problem if it weren’t for the filubuster rule. But with the added requirement of a supermajority for every significant piece of legislation, the grossly unequal representation of voters is a disaster in the making. Let’s face it, this country is in real economic trouble. Without some bipartisanship in the Senate, I think we’re in for terrible times.

    February 3, 2010
  53. David Ludescher said:

    Paul: Our forefathers saw two different ways to be fair. One way is that each state got an equal numbers of votes. The second way is that each state got votes based upon the their population. The compromise was ingenious. For legislation to pass, it had to pass both tests of fair representation.

    Let’s not forget that the State of Minnesota is a sovereign. Minnesota could pass health care reform on its own. We don’t need the feds to do great and wondrous things for our people.

    Ray’s post in #36 pinpoints some of the problems of gridlock. Good legislators like Ray who are in the minority can’t get anything done. Or, if it does get done, the majority will often claim it as their own.

    February 3, 2010
  54. Norm Vig said:

    JOHN, yes, that was Ben Nelson of Nebraska who held out for special treatment. I mentioned that in # 35. He is a Democrat, but a conservative Democrat. The Democrats don’t always vote as a bloc, like the Republicans, because they are more diverse and sometimes put their state interests above the national interest. My main point here is that the Republicans lost the election (president and both houses of Congress), and should not be trying to block everything the winners are trying to do (isn’t that what elections are about?) The Republicans represent less than 40% of the voters and a similar percentage of the states. Why should they refuse to accept the results? They are just being belligerent and are not contributing to any solutions. People like Ray Cox are persona non grata in the Republican Party.

    February 3, 2010
  55. Paul Zorn said:


    I, too, appreciate the willingness you showed while in office to do the right thing, ideological purity be d—-d, on environmental issues like phosphorus cleanup. As I recall, that gutsy stand evoked some choice brays from stage right about your supposed tree-huggingness, hatred of capitalism, and other faults.

    So much said, I don’t fully buy the idea that “the parties are causing all the problems,” as you put it. For one thing, I actually like a vigorously functioning two-party system, for reasons I’ve expounded on at mind-numbing length (and, alas, little discernible persuasive effect) elsewhere in the LoGroNo playpen. (And, John G: The David Brooks screed you linked to in #17 is against populism, not against parties.)

    For another (and more important) thing, I just can’t see the national D and R parties as comparable entities at this point in history. The D’s, being in office, have at least to make some effort, fumbling as it sometimes is, to enact legislation, run the country, and generally mind the store. The R’s, demoralized and out of office, now offer mainly (Groucho) Marxist opposition (whatever it is, I’m against it), tired rhetoric on class warfare and evils of taxation, and, on the fringes, some darker flirtations (death panels, birther-ism). Simple obstructionism may be, as David L suggests, the best they can do for now, but it’s hardly an inspiration for the future — and it leaves Democrats little to cooperate with.

    February 3, 2010
  56. john george said:

    Norm- Sorry, I missed your reference to Nelson in #35. I generally agree with your position that we need to work together across the aisle. I would interject this comment, though. Since there was a minority of people in the 2008 election that voted conservative, are we just out of luck to have anyone represent us? Do we not have a right to representation in the government? Just because the liberals won in the last election, does that mean we have to go hide in the corner and keep our collective mouth shut? That certainly didn’t happen when the tables were reversed under Bush. Just because we still stand up to opposition on our principles does not in itself make us obstructionists.

    February 3, 2010
  57. Mike Zenner said:


    And there in lies the problem, to do the right thing requires telling the truth and making the right decisions to fix the problem.

    Almost all the politicians both Fed and local realize doing the right thing will require them to fall on their own political sword, because the real issues facing America today are not even discussed because someone(everyone) is going to come up short on their God given entitlements(low or no taxes, SS, Medicaid, Medicare,Military hardware,near free education,subsidized home loans, subsidized agriculture, etc). It’s much easier to hide behind the party bosses and parrot the party line then to actually fix problems that don’t require borrowing from the yet to be born generation. This is how Democracies end when everyone has figured out how to vote in politicians to bring home the pork, but make someone else pay for it. It’s OK for my guy to bring the pork home, but not the other guy’s guy!

    I feel the real problems(issues) are not where the parties are in disagreement but where they agree(entitlement programs,wars, military spending, subsidies of all kinds). Until politicians have the courage to put the Country before self and touch the “Third Rail” in unison, we are all finished,and soon, as a unified Country.

    Is America is ready for the truth?

    February 4, 2010
  58. john george said:

    Norm- One other thought on minority rule. Bill Clinton was elected on 43% of the popular vote. Were you concerned about that minority controling the government at that time? Probably not. There is an interesting characteristic that all of we humans share. My wife sums it up best with her comment, “I’m really easy to get along with as long as I get my own way.” As long as the government is going the way WE EACH think it should, then we think they are doing a fine job. When the process goes against our opinion, then it is easy for us to cry foul. I think the fact that we have lasted over 200 years says something about our ability as Americans to put the general welfare of the country above our own convictions. We may grouse about it, but we would defend it to the death if threatened by an outside force.

    February 4, 2010
  59. Ray Cox said:

    Supermajority votes are needed in many legislatures across the country for various things. In Minnesota our capital improvement bill needs to have supermajority to pass into law. That is a good rule to keep things balanced between the majority and miniority. As I said in an earlier posting, our democracy works because the majority should have respect for the minority.

    It almost sounds like some people are thinking direct representation is what is needed….have people vote on everything and whoever has the most votes wins on each contest. We don’t do that. We have a representative form of government where we elect people to make decisions for us. And part of our government system includes a certain amount of leeway in how the legislative bodies work. They are able to set their own rules on many matters. They do what they think is best for the country. If I was in charge I might propose changes. One thing I’d like to see in Minnesota is a requirement that the legislature pass into law the revenue bill before any other finance bills can be passed. That way the legislature would know exactly how much money they have to spend on the omnibus finance bills.

    Norm…thank you for your vote in an election. As I noted earlier, we are getting the government we deserve because we are electing the people. If we elect a bunch of people that cannot or will not work with the opposite party, then that we must deal with the results.

    And yes Norm, this country is in HUGE economic trouble—far, far greater than I believe anyone in Congress understands. In the next 5-10 years we will be tested like almost no other time. If we have reached the tipping point where the vast majority of people are only looking at what they can take or get from the public treasury, we are probably on the downhill side of a very unpleasant outcome.

    February 4, 2010
  60. Paul Zorn said:


    You say:

    Since there was a minority of people in the 2008 election that voted conservative, are we just out of luck to have anyone represent us? Do we not have a right to representation in the government?

    Has anyone suggested that minorities have no right to representation? Haven’t we been discussing whether the Senate’s peculiar rules have the effect of over-representing minority voices? Did I miss something?

    Just because the liberals won in the last election, does that mean we have to go hide in the corner and keep our collective mouth shut? … Just because we still stand up to opposition on our principles does not in itself make us obstructionists.

    Good points. Minorities have every right to state their opinions forcefully, stand up for (or abandon) their principles, and use the rules to delay or obstruct or gum up the works. As a convinced party animal, I’m in no position to object to party solidarity, or even party hijinks.

    The live question for me is not whether Republicans have the right to choose simple obstruction—they do—but whether simple obstructionism is the right choice. IMO it’s the wrong choice for the country, which really needs to get going on some serious problems.

    It’s also the wrong choice, IMO, for the GOP itself, which risks marginalizing itself as the party of no (or few, but bad) ideas.

    February 4, 2010
  61. john george said:

    Paul Z.- On the subject of health care reform, as I think this is what we are trying to discuss right now, I think there is a general consensus across the country that this is needed. What the solution is and how we go about appropriating it is where there is some disagreement. I, and I think a lot of other people, are concerned that the bills going through Congress right now really don’t accomplish the objectives needed and increase costs rather than decrease them. Perhaps the position that something is better than nothing is pragmatic, but there is a concern that we will set something in motion that will cost much more than estimated and will have to be fixed again in a few years. I think this concern is well founded.

    What I get from the news media, for what they are worth, is that the greatest concern in people’s minds right now is whether they will have a job next week. We can have the shiniest new healthcare system in the world, but if no one is able to work to pay for it, it won’t be worth a plug nickel. I read an opinion recently that the reason the US is slower to recover from the economic downturn than some of the third world countries in the world is because we are not manufacturing enough goods to support it. So much of our production has been sent off shore that we have become a nation of more consumers than producers. Until we get this trend turned around, I believe we are going to continue our down hill track. Seems like we are fiddling while the Titanic is sinking.

    February 4, 2010
  62. Norm Vig said:

    Ray, well I might have voted for you because you supported the Twins stadium:)
    Anyway, nobody is advocating direct representation–not with the Tea Baggers out there! One reason is that people have little accurate knowledge about government and policy. An article in the NYT last weekend reported a Pew Research Poll that showed that only 26% of the American public knows that it takes 60 votes to stop a filibuster. So the Republicans evidently think that it won’t hurt them politically to block everything. But good politics can be terrible policy.

    As to John’s mention of the fact that Clinton was elected with 43% of the popular vote: (1) so was Pawlenty and (2) the fact that he lost the popular vote didn’t stop George W. from pushing his agenda full throttle–and the Democrats (unfortunately) didn’t block it. Frankly, I wish we had a system of proportional representation rather than winner-take-all. But the relevant point here is that the Democrats won big in 2006 and 2008 but are prevented from governing by the minority representing 37% of the population. You accused me of sour grapes earlier, but I think the GOP is the sorest loser I have ever seen.

    February 4, 2010
  63. Ray Cox said:

    Norm, I think you made your own point very well in pointing out that President GW Bush advanced his agenda—-and he did it with the support of at least enough Democrats to get it passed. President Bush had to deal with a Democrat Congresss for a portion of his service. While you note that you feel it is unfortunate that enough Dems went along with President Bush on his policies, what went on was bipartisan. A lot of people are calling for more bipartisan efforts today. But we are not getting that effort.

    While you note that the GOP seems to be sore losers, I do believe that if sensible legislation is advanced, that they have a hand in crafting, there will be support for the legislation. I can’t say that will happen with every bill as some bills include absolute basic differences between free market systems and more Socialist systems. But by and large much of what Congress needs to do can and should be done in a bipartisan manner.

    February 4, 2010
  64. john george said:

    Norm- I think, unfortunately for everyone, populism is alive and well. Until we can somehow set our differences aside and focus on the betterment of the nation as a whole rather than forcing an ideology, we will continue in contention. I really think there is a majority of citizens who are looking for a person who can do this. I think it is evident that adherance to an ideology is not going to accomplish that end. Many, even I, hoped that Obama was the person to do this. Perhaps there is a rising tide of dissatisfaction that no person or ideology can withstand or overcome. Hopefully, the outcome will not be anarchy.

    February 4, 2010
  65. Norm Vig said:

    The problem is that on the health care bill the Republicans (except for Olympia Snowe for awhile) have refused to cooperate at all. Instead, the theme has been “go back and start over.” Well, how can you get a compromise if they reject the whole approach? You have to give Obama some credit for willingness to compromise–e.g., on the public option, which seemed to be the only “socialist” part of the bill (of course that means Medicare is socialist too, and if the Republicans want to campaign on abolishing Medicare, go ahead!) Aside from the public option, all insurance would remain private.

    Another problem is that the health care bill can’t easily be broken down into pieces. You can’t abolish refusal for pre-existing conditions unless you enlarge the applicant pool by forcing just about everyone to get insurance (otherwise premiums would skyrocket); and you can’t force people to buy insurance unless you provide a lot of help (Medicaid) to people who simply can’t afford it.

    February 4, 2010
  66. Ray Cox said:

    There have been many Republican plans over the years that have pretty much all been blocked by Democrats. I seem to remember that Sen. Ted Kennedy said in an interview that the political process he most regretted while in office was leading the Democrats in opposition to a plan President Nixon put forward. He said in hindsight it was a decent plan and he should have taken it. But poltical power was just opposite what it is now, and the Dems didn’t want the R’s to have any victories.

    You are correct that there are parts of the health care bill that would be difficult to enact. However, that is not the case for all parts. For example, if the Obama administration really believes there is $500 billion of savings in medicare, perhaps they should bring that forward as a stand alone bill and just take the savings now to help offset our crushing national debt. And there are many pilot programs in the bill that could easily be set in place giving us all an opportunity to see how different plans work before we implement a huge, sweeping overhaul.

    One of the main fears that people have with the health care plan, at least one that I hear over and over in talking to people, is that they do not have confidence that the government can run a health care program well. They look at things like the Post Office, Amtrak and other similar services and see enormous public subsidies being given to support the systems. They also see things like medicare and social security quickly about to go broke and are concerned about joining that group. Right or wrong, the fears are there and the polls quantify that.

    February 4, 2010
  67. Norm Vig said:

    Yes, people have these fears, partly because the conservative ideologues constantly tell them that government can’t do anything right (going back to Reagan). Yet Medicare is run with a very low overhead (isn’t it something like 3-4%, compared to about 28% for private insurance?) And hospitals complain now that they lose money on Medicare patients because they aren’t adequately reimbursed (I think the Northfield Hospital lost a million dollars last year). So how are you going to CUT the Medicare budget? Would you means test it, and make the wealthy pay more? Or restrict the procedures covered (horrors, rationed care)? No, we have Socialism for the Elderly and the elderly love it (remember those town hall meetings last August when people were yelling for government to keep its xxxx hands off their Medicare?) And frankly, the GOP has been stirring up fears among the elderly that they would lose Medicare benefits under the Obama plan (not to mention those Bolshevik death panels!)

    It would be a hard sell to propose a clean bill to cut Medicare funding. The Democrats won’t introduce anything like that unless the Republicans take joint responsibility (something they have not been willing to do). But since Medicare is set to go broke in about 7 years, somebody is going to have to figure out how to get the parties to collaborate on this. Otherwise, as you say, we will all be broke.

    February 4, 2010
  68. Patrick Enders said:

    Report: Shelby Blocks All Obama Nominations In The Senate Over AL Earmarks

    Sen. Richard Shelby (R-AL) has put an extraordinary “blanket hold” on at least 70 nominations President Obama has sent to the Senate, according to multiple reports this evening. The hold means no nominations can move forward unless Senate Democrats can secure a 60-member cloture vote to break it, or until Shelby lifts the hold.

    February 5, 2010
  69. Patrick Enders said:

    According to the report, Shelby is holding Obama’s nominees hostage until a pair of lucrative programs that would send billions in taxpayer dollars to his home state get back on track. The two programs Shelby wants to move forward or else:

    – A $40 billion contract to build air-to-air refueling tankers. From CongressDaily: “Northrop/EADS team would build the planes in Mobile, Ala., but has threatened to pull out of the competition unless the Air Force makes changes to a draft request for proposals.” Federal Times offers more details on the tanker deal, and also confirms its connection to the hold.

    – An improvised explosive device testing lab for the FBI. From CongressDaily: “[Shelby] is frustrated that the Obama administration won’t build” the center, which Shelby earmarked $45 million for in 2008. The center is due to be based “at the Army’s Redstone Arsenal.”

    February 5, 2010
  70. Ray Cox said:

    I’ve followed a little bit of what Congressman Ryan has been doing. I give him credit for bringing ideas forward. Our national debt really cannot be dealt with without getting Medicare and social security back onto some firm footings. I thought the comment in the article about the plan was accurate..
    “Even Democrats have acknowledged that it is one of the few plans offered by a member of either party that would lower the long-term budget deficit.”
    Someone has to start dealing with our entitlement programs. They are not sustainable.

    February 5, 2010
  71. Ray Cox said:

    Patrick, it is always important to remember that blocking appointments is not a new thing in politics….see this from Wikepedia..

    “During President George W. Bush’s two term tenure in office, he nominated thirty-nine people for twenty-seven different federal appellate judgeships that were blocked by the Senate Democrats either directly in the Senate Judiciary Committee or on the full Senate floor using a filibuster.”

    Unfortunately, it has become more and more common in our politically divided world. We have seen an increased use in this in our own state legislature where the Senate Democrats have refused appointments of the Governor, something that was essentially unheard of until a few years ago.

    February 5, 2010
  72. Patrick Enders said:

    Ray: Republican Senator Shelby is blocking ALL nominations (currently, the 70 that are out of committee) – in the name of extorting pork for his home state. Do you think that’s justified?

    True, the Republicans aren’t inventing new rules. They are just abusing them at levels unheard of in history.

    As President Obama observed recently:

    (CNN) – President Barack Obama Wednesday accused Republicans of packing “20 years of obstruction into one.” Speaking to Senate Democrats, he declared, “You had to cast more votes to break filibusters last year than in the entire 1950s and ’60s combined.”

    Fact Check: Were there more cloture votes in the Senate last year than in all of the 1950s and 1960s combined?

    – A vote to end filibuster debate is called a cloture vote. From the 81st Congress (1949-1950) through the 91st Congress (1969-1970), there were a total of 30 votes on cloture. There were no more than seven cloture votes in any single session during those years.

    – Starting with the 92nd Congress (1971-72), cloture votes became more frequent. Part of that can be explained by the fact that the Senate changed the required majority in 1975, making it easier to induce cloture.

    – The 110th Congress (2007-2008) is the record-holder so far: There were 112 votes on cloture during that two-year period.

    – So far, the 11th Congress (2009-2010) has held 41 cloture votes, 39 of them last year, two more this year.

    Bottom Line: President Obama is correct. There were 39 cloture votes last year, nine more than the combined total for 1949-1970.

    Note as well that the current recored holder for cloture votes is the 2007-2008 Senate, which was when the minority Republicans started their crusade to shut down the Senate at all costs.

    February 5, 2010
  73. Ray Cox said:

    No Patrick, I don’t think what Senator Shelby is doing is appropriate at all. It seems to me this is a new twist on blocking things as it appears to be a blatant attempt to extort some pork as you say. With the Sen. Nelson and Landrieu actions we may be seeing more of this now…unfortunately.

    I’d like to see the Senate operate with rules that state that Senators must provide written objections to appointments, and if at all possible, include specific instances of concerns about the appointee. That way the appointee could address them to the appropriate committee. This concept of holding up entire batches of appointees is upsetting.

    February 5, 2010
  74. Patrick Enders said:

    Ray! I think we agree on some things there.

    February 5, 2010
  75. john george said:

    Ray & Patrick- Does Robert Bork ring a bell?

    February 5, 2010
  76. Paul Zorn said:

    John G:

    Yes, Bork rings a bell. The Bork nomination hearings constituted the best and most useful political “learning moment” I’ve ever seen. Viewers could hear serious and sometimes eloquent arguments arguments over important governmental principles and philosophies. (There was buffoonery and grandstanding, too.)

    In any event, the Bork hearings have little to do, as far as I can see, with the subject at hand. Democratic Senators did not block the process of Bork’s nomination to the Supremes. They held hearings and then decided, as the Constitution requires, whether or not to ratify.

    February 5, 2010
  77. Norm Vig said:

    John: you were complaining earlier that conservatives don’t get enough representation. How about 4 of 9 justices on the Supreme Court? And the Dems didn’t block Roberts and Alito, who have now opened the floodgates to corporate money in elections.

    February 5, 2010
  78. Patrick Enders said:

    Yes; Bork’s nomination was considered, and allowed an up-or-down vote in the Senate. It was not stopped by a filibuster or a hold.

    On October 23, 1987, the Senate rejected Bork’s confirmation, with 42 Senators voting in favor and 58 voting against.

    Interestingly, seven Republicans voted to reject his nomination, while two Democrats voted in favor of his confirmation.

    It is sad to think that – as controversial as the Bork nomination was at the time – from our current perspective, those may well have been the ‘good old days.’

    February 5, 2010
  79. john george said:

    Patrick- Yes, the good days. I hate to think of what might be coming that would make anyone call our present time the “good old days.”

    February 5, 2010
  80. john george said:

    Norm- I wasn’t complaining about conservatives not getting representation. Fortunately, we are. My response was to, what I interpreted, a resentment that we are getting represented. The thought seemed to express an attitude that since the livberals won, we shouldn’t question or retard the progress of any liberal legislation.

    February 5, 2010
  81. john george said:

    Paul Z.- I watched some of the live proceedings of the Bork inquisition. If I ever had any doubts about the value of confirmation hearings and how politics plays into them, those pretty well galvanized me. Here was someone who was probably one of the greatest men of jurisprudence of his time being baited and rediculed by a bunch of sneering liberals. What a travesty. I had to stop watching it because it made me physically sick. Those hearings did more to cause me to question the value of some of our government programs and proceedures than anything else I can think of. Norm says the Republicans are stirring up baseless opposition to the health care bills. Actually, all they have to do is set back and let the Democrats go. They shoot themselves in the foot quite handily, but that is just my opinion.

    February 5, 2010
  82. Norm Vig said:

    John, you really are misconstruing what I have been saying–which is not that Republicans or conservatives should not have any representation, but that the Senate Republicans are abusing Rule 22 by forcing a 60 vote supermajority on every piece of legislation and now on appointments. Neither party has done that in the past, as Patrick pointed out in 45.1. The Republicans have refused to cooperate on anything. Here is another example from today’s Times:

    It is really unconscionable for the GOP to attack Obama for the Wall Street bailouts when (1) they were passed during the Bush administration (with bipartisan support) and (2)the Republicans refuse to support financial reform. This whole mess started under the Bush administration, so why shouldn’t the Democratic majority have a chance to do something about it?

    February 5, 2010
  83. Paul Zorn said:

    John G:

    There were indeed some distasteful antics in the Bork hearings. For instance, Teddy Kennedy certainly took some poetic license in denouncing Bork’s supposedly retrograde views. And there was all that nonsense about Bork’s video rental history.

    But Bork was a genuinely controversial jurist, not because (as far as I know) anyone thought him intellectually incompetent but because of his legal philosophy, which received a lot of reasoned testimony on both sides. This isn’t the place to rehearse all the substance (the Wikipedia article Patrick linked to has pointers to such matters), but note that 6 or 7 *Republican* Senators were apparently concerned enough to vote Nay. There was clearly more here than a liberal slugfest.

    It’s idle speculation now, and nobody asked … but I’m not sure Bork would have been the judicial disaster some feared. And, giving due credit, Bork had the guts to take on the gun lobby, interpreting the 2nd amendment to apply to militias, not to purely private heat-packers.

    February 5, 2010
  84. john george said:

    Norm- I guess I haven’t clearly understood what you were saying. Thanks for the clarification. As far as the whole mess starting under the Bush administration, I’m not sure I agree with that assessment. The great manufacturing exodus to off-shore facilities has been a snare for the economy. That actually started under Clinton. I also think that if the American citizenship actually thought the Democratic patterns would correct the economy, then there wouldn’t be such a murmur across the nation right now. My concern at the time of the 2008 election was that there was unwarranted optimism in the new administration. I think that is becoming evident, and it is not the fault of the Republicans, even if they are being obstructionists.

    February 5, 2010
  85. john george said:

    Paul Z.- I think the attitude displayed at the Bork hearings was what was so offensive to me, and it is still prevalent. It is just being applied differently. I also think it exists on both sides of the aisle. Did you ever read David Brooks’ column on Populism? I thought he had some good points. It is linked in comment #17.

    February 5, 2010
  86. Norm Vig said:

    John, what is your point about the map you put up? That unemployment is heaviest (even before 2008) in the older industrial areas? Frankly I agree that the outsourcing of jobs started with the “globalization” craze in the Clinton administration. It was free market, free trade economics, which Clinton bought into too much. Now China practically owns us, and we have very little international leverage against it or anybody else. Unions have screamed about “hollowing out” the US economy for 20 years, but nobody (certainly not the Republicans) gave a damn because profits from cheap labor are high. Now we are starting to reap the costs.

    Patrick, that is the “bikini” chart. It certainly shows when the greatest job lossed occurred, and how the economy is recovering. But people only look at the unemployment rate–which thankfully fell to 9.7% in today’s report–but is still high because we need big job gains to pull it down more.

    February 5, 2010
  87. Patrick Enders said:

    I’ve looked at the map. I don’t think either of them lies. Taken together, I’d say: it looks like we’ve bottomed out, and if past trends continue, we are about due to start improving.

    As was reported at the time (and shown in my graph), the economy was in freefall by Jan 2009. Since then, it was all about slowing (and eventually stopping) that fall. Now we need to (and hopefully will) climb.

    February 5, 2010
  88. Patrick Enders said:

    I think John’s point (and I have to guess, because he didn’t say) is not in geography at all, but in the animation of the graph – which shows that unemployment continues to rise even after President Obama assumed office.

    In an analogy to the physics of motion, my linked graph shows velocity, while John’s shows location. You need both to get a full picture. (Of course, it’d be even more interesting if someone could dig up a graph of acceleration.)

    February 5, 2010
  89. Patrick Enders said:

    I do agree that we need to do more to help the economy recover. Of course, Republicans are already threatening to filibuster a jobs/recovery bill.

    February 5, 2010
  90. Norm Vig said:

    Patrick, thanks for the clarification. As they say, unemployment is a lagging indicator and has peaked under Obama due to the decline in 2007-2008, but it seems to be headed in the right direction. You also have to factor in population growth, which means jobs have to increase for the unemployment rate just to stay even.

    February 5, 2010
  91. Patrick Enders said:

    Yes. I have to add though that the ubiquitous phrase “lagging indicator” sells the unemployment rate a bit short. It seems more important in its own right than as an indicator of anything else.

    On a similar note, the Strib has a couple of related articles on its home page right now:

    Number of uninsured Minnesotans jumps by 100,000
    The recession caused thousands to lose their health insurance.

    Nearly one in ten Minnesotans was without health insurance last year, as job losses during the recession cause a huge jump in the number of uninsured people, the state Health Department reported Friday.

    Businesses: Health care costs stymie expansion
    That’s from a survey of employers for HealthPartners.

    What’s the biggest hurdle to growth for businesses today?
    Clue: It’s not the economy.
    For about 180 employers polled in a survey commissioned by HealthPartners, health care costs for employees emerged as the most-common obstacle to business expansion, more than the economy itself, access to funding or flaccid consumer demand.

    February 5, 2010
  92. john george said:

    Patrick- Thanks for clarifying the graphs. I was in between people when I posted that link. My main point was that there are a lot of statistics out there that need some interpretation, and that interpretation can look different. I think that your observation that unemployment is a stand alone statistic rather than an indicator is correct. In my business, I am seeing a greater number of people with confidence to purchase our products rather than postpone their decision. There are still some of those out there, but I am seeing a trend where people are moving beyond all the doom and gloom reports they hear about through the media. That is a better indicator of economic growth than unemployment, IMO.

    February 5, 2010
  93. john george said:

    Patrick- I found this graph of the rate of unemplyment on the Bureau of Labor and statistics site.

    If I understand the graph, the rate was decreasing from mid 2003 to mid 2007. A decreasing rate has to indicate deceleration. After January of 2008, it is quite evident what was going on. What effect anyones’ policies has upon this is open for discussion, IMO. Since we have been moving toward a global economy, with cheap labor off-shore production but greed driven on-shore consumption, then I think we are going to be more affected by world events than by anything congress throws at us. And, with most of our debt held by off-shore nations, I question how much control we really have over these trends.

    February 5, 2010
  94. Norm Vig said:

    Missing George Bush? You gotta be kidding. Maybe some Democrats put up the billboard?

    “Crunching Congressional Budget Office numbers, David Leonhardt of The Times calculated that of the projected $2 trillion swing into the red between the Clinton surplus and 2012, some 33 percent could be attributed to Bush legislation and another 20 percent to Bush-initiated spending (Iraq, TARP) continued by Obama. Only 7 percent of the deficit could be credited to the Obama stimulus bill and 3 percent to his other initiatives. (The business cycle accounts for the other 37 percent.)”

    Yet the Republicans have the chutzpah to charge Obama with “reckless spending” and “runaway government.” It took them 8 years to get us into this predicament, and now they attack Obama for not getting us out of it in one year. They have no integrity whatsoever.

    February 10, 2010
  95. john george said:

    Change, anyone?

    February 10, 2010
  96. Paul Zorn said:


    What’s your point?

    February 10, 2010
  97. john george said:

    Seems the whole election in 2008 was built around “change.” Does anyone believe that one man, be he Obama or McCane, could actually effect a quick change in the direction the country is going? I just don’t believe so. I think we would be in the same economic straits if the Republicans would have had a landslide victory. We have opened ourselves up to global economic swings and become dependent upon off-shore labor for production. Until we get that turned around, and increase domestic production of goods, we will not see change come, IMO. Afterall, GDP does stand for Gross Domestic Product.

    Jason Lewis has an interesting piece in the Pioneer Press today. I know he is a conservative talk show host, but I think he raises some interesting points. The link is here

    February 10, 2010
  98. Patrick Enders said:

    Before the strategy of absolute, ruthless obstruction by Republicans in the Senate was made apparent – yes, I thought significant change for the better was probable. It is still possible, if only Democrats in the House and Senate have a strong enough will to fight.

    And yes, I believe that if the Republicans under John McCain had implemented the economic policies that they are now advocating (i.e., opposing the initial stimulus package, and perhaps even drastically cutting spending), the economic collapse would’ve been much worse.

    And most economists agree:

    February 11, 2010
  99. Norm Vig said:

    I am beginning to think that it was a deliberate policy of the Bush administration to run up big deficits so that if the Democrats got back in, they couldn’t do anything. How else explain its failure to pay for two big tax cuts, two wars (all off budget), and the prescription drug bill? Even without the recession we would have been deep in the red. Maybe that’s what Dick Cheney meant when he said “deficits don’t matter.” In any case, the obstructionism of the Republicans in Congress since 2006 would fit right in with this strategy (what Gingrich used to refer to as “kill the beast.” A cruder interpretation would be that their plan (and the behavior of much of the financial sector) was simply “take the money and run.”

    It is interesting to see the media attention that Congressman Ryan’s deficit plan is getting these days. It shows that what the GOP is really after is to use the fiscal crisis to privatize both Social Security and Medicare. Of course Boehner and the leadership won’t endorse this openly, but that is the leading Republican proposal on the table these days.

    February 11, 2010
  100. Paul Zorn said:

    John G:

    I’m not surprised that the nation has not radically or instantly changed direction since the election. All large large entities (aircraft carriers, nations) have tremendous momentum, so rapid starts, stops, and changes of direction are physically and/or politically impossible, even if everyone is rowing in the same direction. With Republicans paddling furiously in the opposite direction change will be even slower.

    Yes, Republicans have every right to obstruct, obfuscate, kick, scream, and heel-drag — all the while keening over the death of “bipartisanship”. And they’re exercising those rights … vigorously. Senator McCain, for instance, was among 4 R’s who took the bold step of voting against the same Senate “pay-go” rules they had supported in 2006. No word on how these four are recovering from whiplash.

    Our economic problems (and those elsewhere) arise from many sources, and off-shoring jobs may play some limited role at the national level. (It’s obviously bad for those directly affected, as are many other business decisions unrelated to outsourcing.) But there’s a serious discussion to be had over the pros and cons of outsourcing in particular and economic globalization in general. Suffice it to say there are two sides to the ledger.

    February 11, 2010
  101. Ray Cox said:

    I’m not totally following what the Obama supporters are saying here. Obama is clearly implementing some plans and policies on his own. These include things such as ownership of General Motors, taking over various banks and insurance companies, closing down others, pushing environmental agendas, etc. If the economic world does not endorse these plans, the result might just be an enconomic situation that does not improve….and one that may continue to erode every quarter…until something is done that the economic markets endorse. Paul is right that big things are hard to turn. But they will never turn if policies are not well crafted, designed to enhance our capitalist markets, and are sustainable.
    .-= (Ray Cox is a blogger. See a recent post titled Trims at The Crossing) =-.

    February 11, 2010
  102. Norm Vig said:

    I’m not sure what you are saying about markets. The stock market has taken a real dive since the day Scott Brown won in Massachusetts. And I believe Mr. Bush started the bailout of Chrysler and GM, as well as saving the banks through TARP. And I don’t expect you to be critical of the president for pushing environmental agendas! We all know better than that.

    Doing nothing will not solve any problems. Fortunately the public still supports Obama:

    February 11, 2010
  103. Mike Zenner said:


    The Government doing nothing was probably the best option, but now that the Governments around the world stepped in and converted private debt to public debt all we have effectively done is converted the US gov into AIG, UK into Fannie Mae, Greece into Leahman Brothers, Portugal into Freddie Mac etc etc… Now this year we are having sovereign debt issues around the world!

    Government intervention only converted private debt issues into public ones, now we all can share in the losses to come! More Government spending only piles on to this debt load. Can’t spend your way to prosperity! Sadly the last 30 years while we been spending to prosperity we’ve shipped our productive assets to developing counties, which means we have no way to grow the economy even remotely close to the artificial levels of years past. Government is doing it’s best to reflate the housing bubble but the hole is just too big, and it’s not coming back for many years.

    From the link below:

    As the Austrian economist von Mises said: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”

    February 11, 2010
  104. john george said:

    Paul Z.- Yes, there are two sides to the ledger. I’m afraid we are in the red side right now. I do still appreciate Winston Churchill’s opine, “A person who thinks they can increase the economy by increasing taxes is like somone standing in a bucket and thinking they can lift themselves up by the bail.”

    February 11, 2010
  105. Norm Vig said:

    Krugman nailed it this morning. Utter hypocrisy.

    And Mike and George: can you imagine the destruction that would have occurred in our economy if the government hadn’t stepped in to save the banks and the auto industry? We could have been right back in the Great Depression, with 25% unemployment and an unimaginable fiscal crisis. Von Mises’ and Schumpeter’s “creative destruction” is not some kind of neat idea; it can be a recipe for disaster. It was the “creativity” of the financial and real estate sectors practising free-market economics that got us into this debacle.

    February 12, 2010
  106. Paul Zorn said:


    Yes, the national ledger is most assuredly in the red right now — thanks largely, but not exclusively, to Republicans’ fiscal fecklessness. Financial health is a long way off; achieving it is going to hurt.

    The ledger I was referring to in 52.5 is economic globalization, which has both cost and benefit sides.

    Winston Churchill was a better writer than an economist. In fact, he wasn’t an economist at all.

    February 12, 2010
  107. Ray Cox said:

    Norm, I’m not saying that markets are the only way to go. They do need some regulations in various areas. What I’m very concerned about is taking on massive amounts of debt with absolutely no idea of how it is going to be repaid. And I voiced of these concerns durning the last administration….it is just that now they have mushroomed into the stratosphere.

    I will not ever agree that the massive bailout of GM was needed. I tend to believe it was a total waste of money. Where were the bailouts when Pan American airlines went down? Where were they when Braniff airlines went down? We have had all sorts of businesses close over the decades. And now GM is in bankruptcy anyway…why did we give them billions of dollars just to let them get there a few months later?

    On the housing markets, the federal government was the one that created the ability to underwrite mortgages and bundle them together for resale through the offices of Fannie Mae and Freddie Mac. By the 1990’s they were bundling subprime mortgages and passing them off on anyone they could. All this was done because the government wanted to create higher levels of home ownership. Perhaps the government should have let things be controlled by the commercial markets. Wisely, the government rightly decided to let Fannie and Freddie go bust.

    I see the real problem as govenment tinkering with markets to get some supposedly altruistic goal implemented.
    .-= (Ray Cox is a blogger. See a recent post titled Trims at The Crossing) =-.

    February 12, 2010
  108. Norm Vig said:

    Without the bailouts, Ford would be the only U.S. auto company. Would that be a good thing? Actually, I think GM is going to do quite well, especially now that Toyota has taken a fall. I think this is rather different from the airline story in which there were always a lot of domestic carriers competing for business and airline traffic has continued to grow.
    I agree that Fannie Mae and Freddie Mac played a part in creating the housing bubble, as did the Federal Reserve (low interest rates). But who was running these agencies? Not Democrats, though insofar as Democrats in Congress pushed for making more money available, they are are partly responsible for the crash.
    The problem with unregulated free markets is that they produce repeated boom and bust cycles, and now that we don’t produce much, most of it is based on speculation. It was a huge mistake to deregulate the investment banks. I am all for honest business, but we have seen a lot of crooks like Madoff, Petters, and Hecker lately. We have to get back to a business culture that accepts its share of social responsibility.

    February 12, 2010
  109. Mike Zenner said:


    Indeed, the Chinese, Indians and South Americans will be quite pleased that we saved GM so that they can setup facilities and suppliers in their countries, while closing high cost factories in the US. And we know darn well that they aren’t going to repatriate their profits from overseas back to the US.

    The automakers will continue to shift their production facilities from high-cost regions such as North America and the European Union to lower-cost regions such as China, India and South America. For example, Greater China and South America is projected to represent more than 50% of growth in global light vehicle production in the auto industry from 2008 to 2015.

    There are two underlying factors behind this location shift in the auto industry. The first is the cost factor. The cost of labor in emerging auto markets continues to be a fraction of that in the developed world. The second is the demand factor. Many low cost regions, including the emerging auto markets, have high potential for growth. Thus, the shift in auto industry production facilities will lead to a localization of the manufacturing base that will bring down transportation costs. The emergence of trading blocs is also giving this process a push in the auto market. It is likely that over time there will be fewer car imports from outside a trade zone.

    February 13, 2010
  110. Norm Vig said:

    Good point, Mike. I still think allowing GM and Chrysler to go out of business would have taken a huge toll on our economy at this time, especially in terms of unemployment (including dealerships, suppliers, etc.) And it wasn’t clear from the quote you supplied whether the analyst was referring to U.S.-based companies or, e.g., Japanese and Korean. How much of GM’s production is in other countries?

    February 13, 2010
  111. Ray Cox said:

    Norm, Freddie and Fannie I believe were created back in the 1940’s after the original great depression. Republicans and Democrats have each been guilty of keeping what I consider a very strange system operating…until it collapsed. You can’t put the blame on the Republicans just like I won’t blame Obama for GM going into bankruptcy.

    However, I do completely disagree with you that if we had let GM go into bankruptcy when it should have, instead of giving them billions and billions of dollars to ‘try and stave off’ the looming bankruptcy. You are correct that Ford might have been the only US automaker for a period of time. But I am sure GM would have reorganized and used its existing captial infrastructure to start producing autos again. It might not have been the same GM, but if we let our markets operate, someone would have stepped in and started operating a car company again. We simply have too much demand to not operate the company. And if GM is going to get healthy they will have to address labor costs as their #1 issue as noted in Mike’s 60.1 posting.
    .-= (Ray Cox is a blogger. See a recent post titled East side stairs) =-.

    February 13, 2010
  112. Mike Zenner said:


    I don’t know how big GM is in the world, they own all kinds of other companies(Opel etc), and subsidiaries and fractions therein. The larger point is the largest employers are the component suppliers to the car companies. This is where “True Wealth” is created turning raw materials into usable items. The auto companies have been spinning off their component production for years trying to shift the high labor and regulation costs to someone else, and then going with the most affordable suppliers.

    Today’s auto assembly plants are doing nothing more than robots screwing together parts from someone/somewhere else. Some of these operations require less labor than me screwing together IKEA furniture in my living room.

    February 13, 2010
  113. Paul Zorn said:

    Yet again our own John George is featured in the Strib. His letter starts at the bottom of this page:

    That notorious “Miss me yet?” billboard, with former President George W. Bush on it, John explains, may be unsigned not out of any excess of pusillanimity but from a deficit of space.

    Well done, John!

    With all this exposure in a left-wing rag, your inner liberal may soon emerge.

    February 15, 2010
  114. Paul Zorn said:

    Love the video. It’s clever, fun, and informative.

    But it’s not really about the errors of Keynesianism any more than it’s about the errors of Hayek-ism and the “Austrian school of economics”.

    I’m no economist, and so have no expert first-hand opinion about strengths and weaknesses of the Austrian school. Under such circumstances it seems reasonable to ask what trained economists, as a group, seem to think.

    If Wikipedia tells us true, the Austrian school represents a “non-mainstream” approach and is widely thought to “lack scientific rigor”. Milton Friedman, of the Chicago school, is quoted to this effect: “The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false.” From my personal perspective the most damning critique is that the Austrian school generally rejects or downplays mathematical models and statistics — but maybe that’s just me.

    None of this proves to me that the Austrian school is wrong. Minority positions sometimes win acceptance over time. But I wouldn’t bet the farm, or the US economy, on Austrian analysis.

    February 15, 2010
  115. john george said:

    Paul Z.- Probably the only liberal thing inside me is my humor, but many of my friends even question that!

    February 15, 2010
  116. john george said:

    Paul Z.- I agree with your time reference. Sometimes it takes a while to figure out who will take the “rap” for economic woes.

    February 15, 2010
  117. Mike Zenner said:


    Glad you enjoyed it.

    As long as the State has got it’s hands on the economic wheel the “Austrian School” doesn’t have a snowballs change in hell of getting into the majority of economic thought.

    When you’ve got Tea party members holding up signs that say “Government — hands off my Medicare.” you know it’s game over.

    I read another article a while ago that stated that 58% of the US population is either directly or indirectly a recipient of a government(all levels) check (pensions,military,SS,Medicare,Gov employee,etc). Hard to believe, but if it isn’t now, I can see in 15 years with retiring boomers it will easily be if not 60%. There’s our Senate super-majority. I wonder what they will be voting in favor of? Maybe we can hold off Healthcare reform til then?

    As the Keynes impersonator in the video said ” we are all Keynesian’s now”

    February 15, 2010
  118. Paul Zorn said:


    Yes, we have a large and complicated government, which doesn’t generally behave as the Austrian schoolmasters would like. (It doesn’t always behave as Keynes would have liked, either.)

    But are you saying, as the the first part of your posting suggests, that big government also controls our economic thoughts? Shades of 1984 …

    February 16, 2010
  119. Mike Zenner said:


    The Ministry of information has no doubt tweaked some of reality for most of us.

    However, I was thinking that economist’s thinking will always involve government intervention in the economy, which only makes sense due to it’s overbearing size and regulations. 100 years ago it was far different, when there was a free market,and hard currency standards, the Austrian School would have applied, but now a days the government is the economy. Further, due to fiat money system the the government is able to distort the economy’s true dimensions, making government’s actions all the more relevant.

    February 16, 2010
  120. Patrick Enders said:

    A good column in the NYT today on the stimulus package, on its first birthday:

    Imagine if, one year ago, Congress had passed a stimulus bill that really worked.

    Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now.

    If that had happened, what would the economy look like today?

    February 17, 2010
  121. Paul Zorn said:

    Indeed, an interesting and useful article linked to in #66. Here’s another, by Martin Wolf:

    Here’s a pithy quote:

    [Niall Ferguson] … accuses opponents of believing in a “Keynesian free lunch”. Not so. The argument is, rather, that the benefits of the higher output today exceed the costs of debt service tomorrow.

    This is IMO a key point. Whether the Bush/Obama stimulus will cost us all something in the future is not in doubt. The live question is whether the economic activity that the stimulus … uh … stimulates has enough benefits to offset those future costs.

    And this:

    Prof Ferguson believes instead in a conservative free lunch. This is the view that fiscal tightening today would have little effect on activity.

    Well said, Mr. Wolf! There really is no such thing as a free lunch — for liberals or for conservatives.

    February 17, 2010
  122. Mike Zenner said:


    You glossed over the main issue:

    “Historic deleveraging episodes have been painful, on average lasting six to seven years and reducing the ratio of debt to GDP by 25 per cent”. The only ways to accelerate this would be via mass bankruptcy or inflation. If these are ruled out, what might support demand, while deleveraging continued? If fiscal policy is also ruled out, the only option would be foreign demand. But who is likely to offset contracting demand in the US and other hard-hit economies? Nobody, alas, is the answer.

    Point is DEBT is DEBT be it public or private, we can’t spend our way to prosperity. Deleveraging could go on for another decade, which without fiscal stimulus all toughs years would result in a flat to contracting GDP which leads to:

    Now we come to the big dilemma: what if private deleveraging and fiscal deficits continue in the US and elsewhere for years, as they did in Japan? Then triple A-rated countries, including even the US, might lose all fiscal headroom. This has not yet happened to Japan. It might well not happen to the US. But it could.

    which leads to:

    If the sovereign debts of high-income countries are not to be reduced to junk, these countries do indeed need credible plans for retrenchment. On this there is no disagreement. The best approach would be sharp reductions in long-term growth of entitlement spending. Furthermore, as economies recover, short-term fiscal action will be needed. Actions will have to include spending cuts and increases in tax, to restore revenue lost forever in the crisis.

    So how long do we wait to cut spending/entitlements and raise taxes? no free lunch indeed!

    February 17, 2010
  123. peter Millin said:

    Could anyon explain to me how Republicans could be obstructionists? Until a few weeks ago the Democrats had a super majority in the senate and still have a comfortable majority in the house.

    Democrats had enough votes to just about pass anything they wanted including health care. The fact here is, that P-BO couldn’t get his own party to vote for the bills he proposed…

    His speech yesterday was put to shame with the new numbers that came out today. Unfortunately this will get worse until we have poltiticians that stand on principle rather than on re-election.

    But instead of cut spending and stop borrowing what do these cowards do..borrow more and spend more, Because nobody has the guts to say no.
    Just now Pawlenty has suggested a 680 millin dollar bonding bill..only to be topped by the DFL with a one billion dollar bonding bill????

    Have we lost our collective minds?

    Most of the board members here are much better educated than I am, but even you have to admit that the current course of our country is not sustainable.
    You can’t go in to debt indefinetly and you can’t print money out of thin air forever.
    The stimulus has created a temporary positive blip in the economy, but we all know that the fundamentals are not sound.

    There is not enough tax revenue that we can raise to pay back our debt and fullfill all future obligations in social security and medicare.

    We need change and it can’t be the same old worn out phrases and politicians in BOTH parties.

    We are be scre*ed and we are gambling away our country and what do we do…we debatte endlessly on who’s fault it is.

    Guess what? It’s our collective fault, because we have let our government get out of hand. Unless we stand up and say “NO MORE” it will never change.
    We need common sense back in government and we won’t get it from the current crop.

    February 18, 2010
  124. Norm Vig said:

    The Democrats didn’t actually have a supermajority since they depended on Joe Lieberman, an Independent, who held up the health care bill along with a couple of conservative Dems up for re-election. The reason the Republicans are obstructionist is that they invoke the filibuster on every vote — something no opposition party has done in the past. And the current 41 GOP senators only represent about 37% of the American population, compared to 60% for the 59 Dems/Inds. So we do have a minority obstructing everything in the Senate to an unprecedented degree.
    Nevertheless, you do make a good point that we have to get the deficit under control–though until we are out of the recession, it would probably hurt more than help to cut spending now. And, as pointed out in an earlier post (52), almost all of the deficit is due to Bush-era policies and the recession. Obama proposed a bipartisan committee to make recommendations on long-term deficit reduction, including control of entitlements, but the Republicans voted that down too. And they did their best to scare Medicare recipients that Obama’s health care bill would cut their benefits. You can’t be for deficit reduction and refuse to do anything about it.

    February 18, 2010
  125. peter Millin said:

    Joe Liberman might be an independend but he usually votes with the D’s.
    To blame this on Bush policies is not all true. Since 2006 the Democrats have control of the house and last time I checked it is still the house that approves the budget??

    P-BO hasn’t done a thing to reduce spending he has done quiet the opposite. His lates comission charade would be almost laughable if it wasn’t so sad.
    He spends money like a drunken sailor and then appoints a comission to stop spending??? What am I missing here?

    He just proposed a budget that has some of the highest deficit ever, why can’t he “man up” and do what’s right? Why use the cloak of a comission to make the tough choices? Real leadership comes from doing what’s right and stand up and take responsibility.
    BTW not only Republicans voted down the commission quiet a few Democrats have done so as well.

    Can we not make this a partisan issue. It is very clear that most politicians are at fault when it comes to budget managment.

    We all know what needs to be done. Cut spending and raise taxes on EVERYBODY. Unfortunately most politicians are cowards and take the easy way out. Avoid cuts and raise taxes ( on a group with little voting power, namely the rich) is easier to do then to say no.

    I have three kids and I know how hard it is to say no…..but I do it and explain myself.

    February 18, 2010
  126. peter Millin said:

    When will P-BO stop blaming Bush?

    Where is the vision and leadership a POTUS should have on how we go forward?

    John I agree with your assesment McBama same sh*t different pile.Hopefully enough Americans are mad now and clean out DC and St. Paul.

    Why does it matter who’s fault it is? In the end you and me are left paying the bill.
    If P-BO was serious about deficits how come his budget has a 1.6 Trillion dollar deficit?

    February 18, 2010
  127. Patrick Enders said:

    Obama proposed a bipartisan committee to make recommendations on long-term deficit reduction, including control of entitlements, but the Republicans voted that down too.

    The votes against the bipartisan commission included seven Republican Senators (incl. John McCain) who had previously endorsed just such a commission.

    Quite simply, there is nothing that Republican Senators will vote for these days – even things that they say they support. Their entire goal is to make sure that nothing is accomplished.

    February 18, 2010
  128. Peter Millin said:

    But the opposition was bipartisan — 23 Republicans, including seven co-sponsors of the commission bill, 22 Democrats and one independent.
    Why can’t democrats never tell the whole truth?

    February 18, 2010
  129. Peter Millin said:

    In short the comission was defeated by a bipartisan group of Democrats and Republicans.
    Democrats don’t want the comission because it would mean they have to cut their goodies for their own constituency and Republicans don’t want it because they don’t want to provide cover for the coming necessity of budget cuts.
    Politics as usual..nothing new here..move on….in the meantime our debt clock is ticking and China and the rest of the world owns a bit more of us.

    February 18, 2010
  130. Peter Millin said:

    These charts clearly show that the national debt has increased since the 40’s and really started to take off in the 80’s and hasn’t gone down since….

    We can sit here and blame Bush, Reagan, Clinton or Obama and if it makes you feel better please continue to do so.
    However it won’t do anything to hold our elected officials accountable and it certainly won’t decrease the national debt.

    If “We the people” don’t unite around this issue and hold all of our elected officials accountable we are throwing away the future of our children.

    Stop the insanity demand common sense.

    February 18, 2010
  131. Norm Vig said:

    Well, Obama is appointing a budget commission of his own, headed by former Senator Alan Simpson (R)and former Clinton aide Erskine Bowles. These guys are likely to recommend some big changes in both taxes and entitlements. It has to be balanced, not just cuts in programs that mainly benefit lower-income people. Democrats will never vote for privatization of Social Security and Medicare.

    February 18, 2010
  132. Peter Millin said:

    Te question is not which programs to cut..the real question is how many can we afford?
    Unfortunately raising tax revenue has to be part of the equation, but fairness doesn’t mean taxing the rich only.
    Without a doubt there is a need for raising taxes, but what is more important are meassures that don’t allow us to fall back in to our current habbits again.
    let’s start with the requirement of forcing the Feds having to balance their budget. Pay- Go is a good first step. Requiring more than just a simple majority to raise taxes would be another good option.

    The simple and hard facts are OUR CURRENT COURSE IS NOT SUSTAINABLE. enough of blaming each other let’s fix our budget and spending.

    Which is fairly simple “Only spend what you have”…geez even my kids get that..

    February 18, 2010
  133. Ray Cox said:

    Peter, you make some very valid points. I especially appreciate your pointing out that the Dems have had control of the US House since 2006….and that all the spending that resulted came out of that House. Our debt has truly grown to the point that it should scare every single person in the US today. We are soon, if not already there, going to reach a tipping point that may bring an economic disaster like we have never seen.
    I’ve seen lots of rhetoric about our spending, but very little substantive effort to get it under control…either in Washington DC or in St. Paul. At some point things will actually break…and it will be ugly
    .-= (Ray Cox is a blogger. See a recent post titled Elevators and Library) =-.

    February 18, 2010
  134. Norm Vig said:

    Oy. The Bush administration passed two big tax cuts, launched two wars, and passed a big prescription drug bill and didn’t pay for any of it. They inherited a budget surplus from Clinton and increased the national debt by almost 90% during 2001-2007. And now they want to blame it all on the Democrats and use the fiscal crisis to drive them out of office. This is ridiculous and really, really hypocritical.

    February 18, 2010
  135. Peter Millin said:

    Please read my posts again. I am holding DC as a whole responsible for our debt.
    Please take a look at the chart I posted. It clearly says that our national debt has been on the increase for the past thirty years. Within that time frame we had republicans and Democrats in power, neither of them have shown any restraints.

    How can we have a “surplus” if our debt goes up? A surplus is something you have once all your bills are paid..including your debt.

    February 19, 2010
  136. Norm Vig said:

    Peter, yes, the debt has been going up for a long time, but not necessarily as a percent of the economy (a better measure). Your chart also shows that the national debt almost tripled in the Reagan years and almost doubled under Bush. This was in good part because of the big tax cuts that the Republicans rammed through. The chart also shows the decline in the debt (in real terms) in the last 2-3 Clinton years. The fact is that Clinton left office with balanced budgets and the Republicans just blew it.
    With that off my chest once again, I am all for a bipartisan fix for Medicare, Medicaid, and Social Security. Reagan did this back in 1987 after budgets were spiriling out of control. But the real question to my mind is whether the Republicans are willing to support any revenue increases. Or are they determined to go over the cliff with the Tea Party?

    February 19, 2010
  137. Paul Zorn said:

    Peter, Ray:

    The US debt clock graphic Peter points to is quite fascinating — even hypnotic to a numbers geek like me. Unquestionably, we have an enormous economy with enormous assets and enormous liabilities. And the problem of matching assets with liabilities is proportionately enormous.

    As Peter says (along with a lot of other stuff I don’t necessarily support, or understand), getting things into balance over the long run will require a combination of changes, including tax increases. Making any headway will require political courage of which there is little current evidence. President Obama’s pledge not to raise (income, I think) taxes on families under $250K was IMO reckless. But it seems like wisdom compared with the Republican narrative: free Medicare, free military adventures, free prescription drugs — and no tax increases, ever.

    True, we have serious financial problems, not enough is being done about them, and any serious treatment is going to hurt. Bad.

    But let’s keep things (literally) in proportion. According to Peter’s debt clock, for instance, our national debt is less than our household debt (mortgages, etc.). And here’s another source:

    See especially the graph which tracks US public debt (aka national debt) as a fraction of GDP. We’re in debt trouble, but not in debt crisis.

    February 19, 2010
  138. Peter Millin said:

    Norm and Paul,

    Again we are discussing marginal issues and I guess there is a reason why Accounting is a BA and not a BS.

    Both of you miss the fundamental question here. What do we expect our government to do for us? How big and influencial are we willing to let our government become?
    Too many “perceived free” government goodies creates a populus that will be raised in dependence of the government.
    Case in point Greece. Despite the country being on the verge of going bankrupt, people are protesting on the street because government has cut services???
    When are we going to realize that promised government programs will become unaffordable, because they promise things that we can’t afford?

    In Greece there is certainly no lack of available tax dollars, since they are taxed much higher then we are. So when is enough enough?

    Greece has created a sense of entitlement and nanny state that it can’t afford. Sadly the population doesn’t see the cuts as a necessity, but still insist on everything promised to them.

    The same will happen to us with social security and medicaid.

    I hope Republicans will see the need for revenue increases, but I also hope that the Democrats solutions are a more than just the mantra of “taxing the rich”.


    As far as Clinton is concerned .Just remember that we had a Republican congress and senate, which holds the power of the purse.

    February 19, 2010
  139. Phil Poyner said:

    Peter, is that an entirely fair accusation? “In essence” aren’t they really protesting against losing their jobs? If the choice is between your fellow citizen’s interests and your family losing it’s means of support I imagine many Americans would feel the same way as those protesters.

    February 19, 2010
  140. Paul Zorn said:


    If the sizes of the debt and deficit (they’re not the same, by the way) are “marginal” issues, then why did you bring them up?

    I don’t speak for Norm, but I don’t think either of us is “missing” or downplaying the important question of what we want government to do for us, and whether we’re willing to pay for what we want. If you’d like to discuss this seriously, I’m game.

    I have no deep knowledge of the Greek situation, but it appears that wishful economic thinking is a powerful force all over the place. By and large, however, I don’t see Greece as telling us all that much. We have more in common with, say, Germany, which, although by no means unchallenged, appears to have weathered the present economic stress quite well.

    February 19, 2010
  141. Peter Millin said:


    Are you saying that there is no limit on government cost and spending? That taxpayers should fund government indefinitely, without regards to the financial situation of those that have to pay taxes?
    When does the financial hardships of those who pay taxes outweigh the need for an ever expanding government?

    February 19, 2010
  142. Peter Millin said:


    I was referring to marginal on how we calculate the debt, either in dollars or as % of GDP, either way it is too high, has risen for 30 years and can’t be healthy for us a country.
    We are splitting hairs here.

    Are you willing to pay close to 50% in income tax plus a 25 % VAT on all purchased goods?
    If so, then Germany is the place for you. I am for one don’t envy the Germans.. that’s why i love the US and the freedom it offers.

    February 19, 2010
  143. Phil Poyner said:

    Peter, at no point did you ever see me say that. What you said was that government workers were protesting against their fellow citizens. What I said was they are protesting against losing their jobs. When it comes to putting food on the table, people generally don’t consider lofty ideals like the interests of citizens they may not even know. My point is that assigning malevolent intent to people that are looking out for their own families is a bit of a stretch.

    By the way, you are aware that most government workers in most western countries also pay taxes, right? As they are taxpayers I’m sure you’ll find they are as concerned about our financial situation as you are.

    February 19, 2010
  144. Peter Millin said:

    In essence government workers do protest against their fellow citizens…who is paying their wages?

    But we are drifting here…. my whole point is, that despite the possibility of their own country going bankrupt they refuse to agree to any cuts.
    Government is not some third partie entity, it’s by the people and for the people.
    It has become obvious that whatever system had been setup in Greece is unsustainable.
    You are correct that in the striking workers mind, they are fighting for food, housing and family. But they fail to see that in essence they are furthering their own countries demise.
    In nanny state societies soon government becomes “them” and not “us”. By giving people the illusion that government is that big caring entity, that takes care of all the problems, people become detached.
    People forget that they are the government and that whatever “they” spend comes out of their own pockets.

    I can’t tell you how many Canadians told me that they had “Free Health Care” completly ignoring the fact that it has been paid for by their own money.

    The protesting greek government workers have been conditioned to think that their government provides for them, completely forgetting that it is their own money who does so.
    Because their is no direct connection, in their own mind, between the money they receive and where the money comes from.

    February 19, 2010
  145. Phil Poyner said:

    Peter, you and I are just going to have to agree to disagree on this one. As someone who has been in the employ (in one form or another) of the government since the age of 19, I’m obviously going to have a different perspective on things than you are.

    February 19, 2010
  146. Ray Cox said:

    Norm….when I left state government Minnesota had a $1.2 billion surplus and $800 million in the cash flow account. Today we have no cash reserves at all and in fact are raiding our school district cash reserves. We are dealing with a $1.2 billion shortfall in the last portion of the biennium we are in. We are facing a $5.6 billion budget shorfall in the next biennium. Seeing all this it might be easy to blame the Democrats who took over the House and held the Senate in 2006. But I actually don’t think that is completely fair. I do fault the Dems entirely for spending the whole $1.2 billion surplus in their 2007 budget and am confident we would be a stronger state if they didn’t do that. But regardless of that, the economic situation has created a fire storm of a problem that they are having to deal with. The same can be said of our National issues.

    But when you are fighting a fire it is best not to grab the pail of gas and toss it on…water works better. Instead we are seeing politicians that do not have a grasp of the dire economic situation we are in. It is not business as usual. We cannot continue on the path we have been marching down as the path is leading us to a cliff. When are our leaders going to understand that? We cannot protect the status quo simply because ‘that is the way we have always done it’—it no longer works people.

    We are seeing thousands and thousands of small business owners not having to pay quarterly income tax payments….myself included….because we no longer have any income. There is the problem that St. Paul and Washington are having to deal with. When there is no income there are no taxes. And when there are no taxes you have to massively scale back government….not massively expand it as President Obama is doing. His program will not work; it is not sustainable given current demographics.
    .-= (Ray Cox is a blogger. See a recent post titled Elevators and Library) =-.

    February 19, 2010
  147. Norm Vig said:

    Ray, I am not an expert on the state budget crisis, but I am aware of the size of the projected deficits. It is my impression that both the governor and the legislature looted the reserves and used every accounting trick available to avoid the day of reckoning. But I don’t agree that “no new taxes” is the answer. If we have essential services, for health care and nursing homes, we have to come up with the money. To throw the poorest of the poor out of Minnesota Care is not a morally defensible answer. I feel for small businesses that are suffering, too. But there are a lot of people who could pay more in taxes to maintain some quality of life for the less advantaged. I don’t know if you are on Medicare yet, but without it most elderly people (including me) would be living in poverty. We could not get private insurance even if we tried. So there are some deeper questions here that can’t be answered only in fiscal terms.

    February 19, 2010
  148. Peter Millin said:

    Fair enough and thank you for your service.

    February 20, 2010
  149. Peter Millin said:

    Nobody wants to throw the poor on to the street, this is just another typical answer by the left anytime we talk of budget cuts.
    I would be the first in line to pay more if necessary to help the poor or elderly.
    What we need to look at is administrative costs, pension plans and other fringe benefits received by some in the government, that are far beyond anything you get in the private sector.
    We need to hold government workers accountable and judge them by the same standard all us private sector workers are. If you don’t perform at your stop, we find somebody else who will..plain and simple.

    We need to look for efficiencies within the system like redundant and overlapping services. Combine agencies, cut staff and ask remaining people to do more.
    BTW what I am describing happened to me last year!!

    Our company had troubles last year and none of us saw a raise or bonus, because the money just wasn’t there. Why can’t this be done in the private sector? Because taxpayers are seen as an endless revenue stream and nobody feels responsible, because we hold nobody responsible to be careful with our money.

    Once I am convinced that we have done anything described above, then we can talk about necessary tax increases. However those increase should not be used to fund more unsutainable programs, they should be used to pay down the debt.

    Isn’t that what all of us have to do at home??

    February 20, 2010
  150. Norm Vig said:

    Peter, well, Pawlenty is trying to axe GAMC and force a lot of people out of MinnesotaCare as well. That is screwing the poorest and the sickest. See:

    You make two assumptions that are typical Republican mantras but have no real foundation: (1) that taxes are currently at an absolute maxiumum we can bear. We did fine before the two big Bush tax cuts and similar cuts in MN. The desireable level of taxation is an open question, not one to be settled by an absolute ban on tax increases. (2) that public employees and programs are always less efficient than private ones. Private health insurance delivers about 70 cents on the dollar of actual health care; the other 25-30 percent goes to overhead and profits. Medicare and nonprofits deliver 90-95 percent on the dollar for actual health care costs. And we have seen our pension funds and home equities shrink by 25 percent or more because of the irresponsible behavior of private bankers and others. If you had worked in the public sector, you would know how competent and dedicated most government workers are.
    One more thing: I wonder how many of those angry senior Tea Baggers are refusing Medicare and sending their Social Security checks back?

    February 20, 2010
  151. William Siemers said:

    Regarding the state budget crisis. I’ll keep beating on these items…maybe someone is listening!

    Sales tax on food and clothing.
    Temporary 10% surcharge on all income taxes.
    Racino gambling.

    5% across the board reduction in state government wages and salaries, or a 5% across the board reduction in force.
    A 5% reduction in funding to every state government department.
    (It has been my experience with a business budget and with a personal budget that there is almost always a way to cut when such action is required. It is painful, but in a sense it is a positive result of a recession…organizations that survive become more efficient. We are seeing this now with many companies that had sizable lay-offs…they have no intention of bringing all the people back, because they found a way to do things with fewer people. Likewise remaining employees found ways to reduce non-payroll costs and these reductions will remain in place as business improves. I think it is time state government take a similar approach.)

    February 20, 2010
  152. Phil Poyner said:

    William, it’s good to see people discussing ways to solve our financial problems, but I have some concerns about your suggestions. Regarding a sales tax on food and clothing…taxing clothing may be something I could consider, but a tax on food is something I consider morally reprehensible (obviously that’s defined by my morality; someone else would probably see things differently). You also have to consider that sales tax increases disproportionately affect the poor; it may not be deciding factor, but I think it should be considered. A flat increase in income tax is also worth considering, but I’d prefer a method that ensured everyone was paying the same effective tax rate. As you can see in this report, some folks in Minnesota are paying a higher rate than others ( I’m guessing that if we all paid something closer to an ETR of 12% we would close the budget gap, and the tax burden on some would actually go down! Regarding gambling…I don’t know. Once again, we’re talking about an activity that would pull state revenue in disproportionately from the poor. Then again, it would be their choice. To me this is a last resort solution.

    Regarding plans for across the board cuts in government budgets or RIFs, you always have to be careful of the unintended consequences. When you turn to a bureaucracy and say “You now have 95% less than you had last year”, that bureaucracy will protect what IT thinks is important, rather than what YOU think is important. I saw this happen in the Air Force all the time. We could be losing manpower slots left and right, but we never lost a pilot slot regardless of how many fewer planes we had that year. It might have had something to do with the Air Force being run by pilots! RIFs can be costly in the short run; the benefits would have to be weighed against the costs. And doing an across-the-board wage cut is just wrong. You affect those that work particularly hard in the same way as you affect those that don’t. Besides, you have a contract with these people…you don’t get to tell your mechanic and say that you’ll be cutting his fee by 5% just because you’re running a little short. A wage freeze may be considered, but to me a wage cut just turns all taxpayers into folks whose promises can not be believed. I suggest we’d be better off deciding what services people don’t want government to provide, and make adjustments accordingly. It’ll be tough; everyone has a different opinion as to what is an “essencial service”, but I think it would be the more responsible thing to do.

    Of course, all of this is just my opinion, and quite possibly worth every penny you paid for it.

    February 20, 2010
  153. Norm Vig said:

    Phil, thanks for posting the tax incidence study. I see that the top 1% pays about 7.4% of income on all state taxes, and the top 5% about 8.5%, whereas the lower deciles all pay around 12%. Correcting this regressivity should be part of the solution–mainly by raising the top income tax brackets–but I don’t think it would be enough without some of the other types of things William is suggesting.

    February 20, 2010
  154. Phil Poyner said:

    Norm, were we to assume that the 2006 numbers are still valid today, adjusting tax rates to ensure an even 12% ETR across the board should raise an additional $1.3B in revenue…that’s a very rough guess, basically a back-of-the-envelope calculation (I can just imagine Paul thinking “Dude, your math skills are weak!). Which of the other measures William mentioned would you consider looking into?

    February 20, 2010
  155. Norm Vig said:

    Phil, Well, I don’t like any of the other things, but I also could live with a sales tax on clothing and possibly a racino. I’ve never been to the race track or even to a casino, and I realize that the folks who go there are not the wealthiest, but as you say, at least it is voluntary. You make some very good points about the problems with an across-the-board spending cut or RIF. We can’t cut the programs that serve the poorest and sickest. I don’t have the answer, but we have to think in terms of sacrifice for those who can afford it.

    February 20, 2010
  156. Phil Poyner said:

    Cool, this is like that movie “Dave”! So far we have $1.3B from adjusting the taxes to even out the ETR at 12%, $100M to $200M estimated from racino (from, about $400M from the sales tax on clothing (from…so we’re up to $1.8B. The deficit is $4.57B, so we still need to find $2.77B somewhere.

    Anyone else have any other ideas on where we can either make some cuts of raise some revenue? Please bring some reasoning and a rough estimate of how your suggestion will affect the deficit. Everyone can rebute each other and still be polite about it. Maybe if all of us, with our variety of political leanings, can come up with some compromises our legislators can too. Besides, it’s not like anyone will pay attention to what we come up with, so this can be a fun mental exercise.

    February 20, 2010
  157. Ray Cox said:

    William, good thoughts on tax issues, ones that a lot of folks are looking at. While I would not rule out a temporary surtax on income, and proposed one when I was in the legislature, we have to figure out how it will be used. If it will be used to preserve and protect the status quo, a surtax never will work. You cannot add a surtax while government continues on down the path that created the ‘train wreck’ in the first place.

    On broadening the sales tax, there seems to be quite a bit of interest in that lately. I’m not sure I could go as far as including food, but there are a lot of services and goods that could get brought into the sales tax fold.

    But the overarching issue remains that Minnesota’s spending plans currently outstrip our revenue collections about about $5.5B for the next biennium….end of story. In the Strib today there is an article by Dane Smith talking about the cost of government and that it has lowered slightly over the past few years, now at 16.1%. Dane makes the argument that if we had left taxes alone in the late 1990’s we would now have $4.6 billion more state revenue. There are two major fatal flaw in his thinking.

    If we left state tax revenue the way it was in the 1990’s, the legislature would have had even larger surplus revenue. I’m sure you all remember the ‘Jesse checks’ distributed during the Ventura administration. When state government collects revenue they spend it….period. Dane assumes that Minnesota would have managed to keep spending in line. I do not believe that would have happened. The legislature spends what it collects.

    The second fatal flaw in Dane’s analysis is that the price of goverment only measures total state and local revenues as a percent of personal income. In early 2000 the state shifted about $1B of taxes onto commerical property taxes in the form of a state general tax. Residential property does not pay any state tax. But theprice of government includes this revenue in its calculations. This is OK to get to the percentage, but it provides a rather skewed look when the denominator is personal income.

    As I noted earlier, Minnesota actually had a budget surplus as recently as the 2007 biennium…$1.2B. But instead of keeping spending restrained, it was all spent. If that $1.2B had not been injected and built into the spending formula we would be dealing with a much reduced budget deficit.

    And I agree with Peter when he says we need to look at services, pensions, etc. It seems to me we are quickly becoming a society that wants the public treasury to provide all things….who is going to provide the revenue?
    .-= (Ray Cox is a blogger. See a recent post titled Elevators and Library) =-.

    February 21, 2010
  158. Peter Millin said:

    I could care less for Pawlenty, most of the Repubs or the Dems. In my opinion they are all responsible for the current mess we are in.
    We can spend hours on trying to decide on assigning degrees of fault, unfortunately none of these discussions will lead to a solution.

    The fact are. We have an irresponsibly high debt load. MN by most accounts is one of the highest taxed states in the US.
    Have you ever heard those ads on the radio that are enticing businesses to move to SD?? I am thick of them.

    Like it or not we need to attract businesses in to MN. We need to do this by creating a favorable business climate. Usually that means favorable taxation an other incentives, because our weather is not going to do it.

    More taxes “on the rich” which includes small business owners will do the opposite.

    We need to take a realistic look on how we are going to fund entitlement programs and what their goals should be. It has become very obvious that we have issues of underfunding just about every year.
    Continuing to raise taxes alone is not the solution. If it were we wouldn’t have the same discussions every year.

    There is no easy way out of this. I like some of Williams proposal in general, but disagree with some of his numbers.
    I think we can easily cut every government entity by 15%. We can probably find some redundancies, our goal should be to weed out useless agencies or agencies that overlap. Gambling and casinos are a good idea.

    I am not sure about the tax on food and clothing. It will hit those who can’ afford it.

    I would go along with a TEMPORARY surcharge, however we have to force conditions on this.

    1) Strictly to be used to pay down debt.
    2) Budgets should be made on more realistic numbers. All to often we get ourselves in to trouble, because revenue projections are way to optimistic.
    3) Any increase in spending or new program has to be financed from within the existing budget…pay go is a very popular phrase here.

    Now if this makes me a “tea bagger” then I wear this slur with owner.

    February 21, 2010
  159. Peter Millin said:

    oops I meant to say honor.

    February 21, 2010
  160. Norm Vig said:

    Phil, are those revenue numbers for one year or for the next two-year biennium? Also, does the 12% include all local taxes? According to Dane Smith’s article in the paper, the “price of government” (including all taxes and fees, as a percent of total personal income) is around 16%. Is that a better goal?

    February 21, 2010
  161. William Siemers said:


    I realize people have contracts which makes a wage reduction unlikely. But I still believe that a reduction in force is a possible solution. Of course there will be unintended consequences…some good, some bad. The fact is that workers will always say they have… ‘too much to do as it is…how can we have a reduction?’ But odds are, there can be a reduction and that the organization will become more efficient as a consequence. If government does not consider RIFs in a time of economic crisis they never will, and that is just plain arrogance toward, and disdain for, the citizens of the state. I understand that there are current initiatives underway that getting the most out of government spending by redesigning some systems. I’m all for that, but I keep returning to reducing jobs as part of the solution relating to reduced revenues. It is an obvious solution.

    Sales taxes on food exist in the majority of states…I don’t think that those citizens would agree that the tax is ‘morally reprehensible”.

    The wealthy should not pay a lower percentage of income tax than do the rest of us and as I read the table they don’t. The poorest pay much higher percentage of income for sales tax and property tax and that is what gives them a higher effective tax rate than the rich. The poorest also have a higher effective rate than the not quite as poor. Is this a big surprise? Aren’t sales tax rates and property tax rates independent of income? I’ll add, at the risk of political incorrectness, that the poor get a much higher percentage of government benefits than do the rich. In any case, some of the ecomomic ‘unfairness’ will never be addressed by the current tax system. The only way to eliminate it is to eliminate every tax except the income tax, and that is unlikely to happen.

    Since I’m on an ‘incorrect’ role, I’ll say we can cut the programs that serve the ‘poorest and the sickest’. There is undoubtedly waste and inefficiency in those programs. There are in fact, some parts of those programs that are probably counter productive to the overall mission.

    I don’t object to more taxation to get us out of this crisis. But that has to be part of a plan that FORCES government to reduce spending. For every dollar raised there should be a dollar saved.

    February 21, 2010
  162. Phil Poyner said:

    Norm, this is why I like bouncing ideas off other people. The numbers I roughed out WERE for one year rather than two, so we’d be talking about $3.6B over 2 years rather than the $1.8B I stated before.

    The EFT in the incidence study includes all state and local taxes (for detail see table 2-3). It’s supposed to be a comprehensive layout of the state tax burden, as a percentage, on each taxpayer by income. I’m not sure where Mr Smith got his 16%-down-from-18% number…I don’t doubt it’s out there, but I’m not sure where. I’ll try to find that publication before commenting on whether 16% would be a better goal.

    February 21, 2010
  163. Paul Zorn said:


    Thanks for beating me to the keyboard to point to the Quimby/Smith article in the Strib. Here’s the link:

    IMO it’s a useful piece, and I appreciate the fact that it includes some numbers. One of my favorites is 16.1: the percentage of personal income in Minnesota now devoted to state, local, and school district purposes. This number was as high as 17.9 in 1995 and as low as 15 around 2003. The present number is slightly below the 20-year average. This means to me that the taxes-are-out-of-control narrative we keep hearing is, at best, exaggerated.

    Another interesting number is $230bn, Minnesota’s total personal per year. Comparing this to our present annual deficit, or about $2.75bn per year, suggests the scale of the problem: big, but not necessarily insuperable. Raising the tax take from about 16% to a little over 17% would suffice — mathematically. Whether that’s politically possible or economically wise are different questions, and debatable in their own right. But let’s keep things in perspective.

    Ray, you cite two of what you see as “fatal flaws” in Quimby/Smith’s reasoning. Neither of them strikes me as such. You say, for instance, that “[Quimby/Smith] assumes that Minnesota would have managed to keep spending in line” (under other circumstances). I see no evidence either that this is assumed, or that it’s fatal—or even relevant—to the point that the present deficit can be bridged without undue economic sacrifice.

    Your second objection concerns how the commercial property tax figures into these calculations. I don’t really get your point here, I confess, but I’m guessing that if the calculation were reworked as you suggest, the results would not be dramatically different from those given. I don’t see a “fatal flaw”, in other words.

    The bottom line for me: We have a serious budget problem. Solving it will hurt, but it won’t be fatal.

    February 21, 2010
  164. Phil Poyner said:

    William, I appreciate you taking the time to stay in this little discusion. Considering the level of discourse that occurs on other forums in this day and age, it wouldn’t surprise me to have someone that disagrees with me just call me a communist and tell me to get bent! Your clarification and the elaboration of some of your initial ideas have been food for thought. But, as I’m sure you expected, I have some thoughts of my own…

    Regarding the RIFs, you may have noticed that I didn’t discard the idea out of hand. My concern is that often RIFs cost money in the short term, so it’s possible it wouldn’t solve the deficit we have right now, and might even make it worse. A better idea might be to offer early retirements (these are people you would have paid a pension to anyway; when they retire early that pension becomes less per month) or we lose personnel through attrition plus a hiring freeze. I don’t believe government doesn’t consider RIFs due to arrogance. I think they don’t consider them because of it’s possible negative effects upon the current (as opposed to future) budget cycle! I am in full agreement with you regarding increased efficiencies. In fact, I wish government would encourage management practices that allowed front-line workers more control over their own processes…quite often those workers already know where the processes are inefficient, but don’t have the authority to change them. However, my experience has been that bureaucracies, unlike most of private industry, don’t always become more efficient just because you cut their budget. Some departments will just do less out of choice, but some that are good stewards of the taxpayer’s money and “fat-free” will do it because they have no choice. I’m in favor of a plan of directed cuts rather than anything done across the board.

    Regarding my “morally reprehensible” remark, I thought I went out of my way to stress that I was making a personal assessment, based on my personal values, that is not necessarily shared by everyone. Regardless, according to the Center on Budget and Policy Priorities 31 states and DC exempt most food purchased for home consumption, so for whatever reason most states think taxing food at the state level is a bad idea. However, that doesn’t mean all those states forbid local governments from taxing food. Now, if you’re talking about some type of food tax I’m not aware of, let me know.

    Regarding your third and fourth paragraphs, I don’t think you’re being politically incorrect. In part you’re bringing up the topic of what constitutes fair taxation, something that’s always been debated in this country, and in part you’re bringing up the topic of which government services you’re willing to pay for. With regards to the first topic, you and I obviously disagree on this issue. To me “fair” means we count all taxes, and everyone pays a similar proportion of their income as everyone else. I’d say you’re probably correct in your assessment that the poor get a much higher percentage of government benefits, but I’d also argue that those are the people those benefits were designed to help anyway. Regarding “the programs that serve the ‘poorest and the sickest’”, I agree wholeheartedly that waste and inefficiency should be eliminated. But do you really want to cut them? What if cutting them proves to be even more counter productive to the overall mission? Maybe that needs to be studied more.

    You know, in the good old days I probably would have been considered a “Rockefeller Republican”; I’m socially liberal but, in many ways, fiscally conservative. I think our income ought to equal our expenditures. I want a plan too, but I want a plan that decides what spending has to be done, what spending is just smart and should be fully budgeted without any whining, what spending is dumb and should be eliminated, what spending can be done better (more efficiently, more effectively….whatever “better” ends up meaning), and then an outline of how the appropriate revenue will be collected without any one segment of our population being hit “unfairly”. And I don’t want any budgetary tricks; kicking a cost down the road is an automatic foul!

    February 21, 2010
  165. Norm Vig said:

    Phil, very good, thoughtful response to William et al. I would just add one point. Although direct income transfers may go disproportionately to the poor (and I hope they do), government provides a host of services that allows business to operate successfully — including a body of civil and commercial law, a court system, and various subsidies and services to particular interests. Without a strong and effective government, contracts wouldn’t be honored, employees wouldn’t have the education to be productive, and property wouldn’t be protected. These things are not cheap either, even though we tend to take them for granted. The system is basically set up to promote private enterprise. We should appreciate that as a government function too — we wouldn’t want to live in a state of anarchy.
    Beyond that, we want to live in a civilized society. That doesn’t mean survival of the fittest a la Hobbes, but a just and stable order in which all segments of the population have a chance to prosper and succeed. Without education and health care, we can’t have that kind of common good.
    Our state of Minnesota has occupied a special place in this domain. We have traditionally ranked at or near the top in education, health, and other indicators of the good life. We don’t want to become Arkansas or Mississippi. So let’s keep those lofty goals in mind as we figure out how to get through the current crisis.

    February 21, 2010
  166. Paul Zorn said:


    Kudos for making concrete suggestions, politically correct or not. Any serious effort to address current funding problems, IMO, will involve sacrificing some hitherto sacred cows, so let’s all have at it.

    But I do have some comments.

    First, you seem to favor both lower spending and higher taxes:

    For every dollar raised there should be a dollar saved.

    How literally (i.e., quantitatively) do you mean this? Why not $2 saved for every $1 raised, or vice versa? Is there some economic reason to think that this 50-50 split is the right balance? Or do you just mean that both the spending and the revenue sides need to participate?

    Second, you assert that “the poor get a much higher percentage of government benefits than do the rich.” If you mean that the average poor person benefits more from state and local government than the average rich person, then I’d say the situation isn’t as clear as it might seem. Sure, poor people probably consume more social services and they certainly get more income support than the rich. But richer people arguably benefit disproportionately in other ways: roads, better schools, higher likelihood of enrollment at state-subsidized educational institutions, and much more.

    Third, I agree that the current tax system can’t address every form of economic unfairness, and that a system based entirely on income is politically infeasible — indeed, I’d vote against it. But the perfect need not defeat the good. Why not try to be fairer, even if perfection is impossible?

    Fourth, programs for the “poorest and sickest” undoubtedly involve some waste and inefficiency. But so do other programs. If programs for the poor and sick deserve special or disproportionate reductions, then there should be some evidence either that these programs are disproportionately wasteful, or that they can be cut without disproportionate harm to the poor and sick — and to the state’s own exchequer. At some point, underinvestment in the poor and sick costs more money than it saves, as the poor and sick become desperately poor and desperately sick.

    February 21, 2010
  167. William Siemers said:

    All youse guys:

    I’ didn’t mean 1 for 1 literally (even though I said it!). I meant that government should look as hard at decreasing spending as it does at increasing revenues.

    Poor citizens pay a higher percentage of their total income in state and local taxes. They also receive a higher percentage of their total income in government benefits. I was suggesting that basing a fairness argument on such a ‘percentage’ can be used both ways. In both cases it’s because of the obvious…they have less income.

    I too believe in a strong and effective government. I want health care reform (single payer would be fine with me) and a high quality affordable education system. I don’t think that programs that serve the poorest and sickest are ‘disproportionately wasteful’, I just think they, like almost every government program, can be made more efficient and effective. And that it is a mistake to exclude them from budgetary scrutiny simply because of their ‘mission’.

    February 22, 2010
  168. Ray Cox said:

    Paul, my point on spending regarding the Quimby/Smith article is that it appears to me that they are assuming that state spending would not have increased if revenue was put up to the level they suggest. I say that because they note we would have $4.5B of increased revenues, alluding to the fact that this would almost solve our $5.6B projected revenue shortfall. My point is it will not solve the shortfall if during that time you added $4.5B of biennial spending during the interim. If we left the cost of government at 17% as they advocate, I’m saying government would be spending all that amount….plus some unidentified amout above that. That is pretty much how things are going in state governments now. Constituencies consume all there is plus some. We would still have a shortfall, although it might be somewhat smaller. I am quite certain that state constituencies will continue to create a ‘budget crisis’ on a regular basis. This is why Ventura made is comment about education funding being a “black hole.”

    Regarding my comment on commerical state real estate taxes, I think it is important to remember that $1B of school costs were removed from local taxes during the Ventura administration. Much of that cost was absorbed by creating a state general tax on commerical property. So, residential real estate taxes went down when the school levy amount was removed, and it was shifted over to commerical property. But the Quimby/Smith cost of government chart goes back to times prior to 2000 when the shift had not taken place. When you use personal income as the denominator continuously to create the chart, it may give false readings since a major change was implemented in 2000.

    February 22, 2010
  169. Paul Zorn said:


    You may be right that, given more money, our legislators would spend even more. Or not. But the Quimby/Smith calculation of how we might close the present gap doesn’t seem to me to “assume” anything either way on this question.

    Your point about commercial real estate tax now makes better sense to me; thanks for expanding on it. My hunch is that it wouldn’t affect the numbers radically, since $1bn per year, although big money on an absolute scale, is small-ish compared to total state income, something less than 0.5 per cent. Still, it introduces a small apples to oranges (or maybe raspberries to blueberries) element to the year by year numbers.

    February 22, 2010
  170. Paul Zorn said:


    A couple of questions …

    First, what do you mean by “from the horse’s mouth” in respect to these numbers? Note, too, that definitions matter a lot here. The figures plotted and tabulated in your first link (purportedly) measure something called “Gross Public Debt”, which is by no means the only reasonable measure to consider. (See Wikipedia for what “gross” means in this context.

    Second, could you summarize what makes Sowell’s book a “must read”? I’ve read and even enjoyed some of Sowell’s stuff, but this one was kinda panned by at least one reviewer.

    Here’s an excerpt:

    There is not a single interesting idea in its more than three-hundred pages. Purporting to deal with the role that intellectuals play in society, it offers no discussion of literature, music, and the arts. While containing copious references to Milton Friedman and Friedrich Hayek, its index lacks references to Lionel Trilling, Hannah Arendt, Saul Bellow, Daniel Bell, Jürgen Habermas, Raymond Aron, Mary McCarthy, Michael Walzer, Amartya Sen, and countless others known to have put an interesting idea or two into circulation. It recycles ancient clichés about the academic world and never questions its author’s conviction that those who share his right-wing views are always right. …

    Maybe the reviewer is wrong … it’s been known to happen. Any thoughts?

    February 22, 2010
  171. Ray Cox said:

    I think the whole state budget issue is really very difficult to wrestle with if you ignore one thing….the constitution. We seemed to have strayed very far from what spending is required in our constitution. But almost all the things we have strayed with are wonderful warm, fuzzy things. Who isn’t in favor of early childhood education? Who isn’t in favor of creating programs to help families afford good day care while they work? Who isn’t in favor of creating shelter for the homeless? Who isn’t in favor of home ownership and therefore mortgage deductions to make it more accessible? And on and on.

    The rubber meets the road in our current demographics…something I’ve been harping on for years. The baby boomers forced the US, and much of the world, to build elementary schools, high schools, colleges, and then we returned those ‘gifts’ by consuming hugely and paying massive amounts of taxes on the equally massive amounts of income we earned. Now it is slowly griding to a halt. The question for all is ‘are we going to reorganize and reprioritize our needs/wants so that we can create a sustainable government?’ I absolutely do not believe that we can continue in St. Paul or in Washington to preserve the status quo strive to keep doing what we have been doing. It will not work.
    .-= (Ray Cox is a blogger. See a recent post titled Elevators and Library) =-.

    February 22, 2010
  172. Norm Vig said:

    Peter, I’m not sure about how reliable the Tax Foundation is, but according to its figures, MN ranked 12th in state and local tax burden in 2008. Is that a bad thing? Do you want us to rank 25th or 50th or what? A lot of the quality of life in this state is due to its public generosity. What other state do you admire more?

    February 22, 2010
  173. Norm Vig said:

    Ray, some of these “warm, fuzzy things” are matters of life and death. And things like early childhood education and daycare support are critical in an economy in which women are forced to work. These things are not luxuries in contemporary society. You are right that demographics have changed the nature of the challenges, but we can’t just throw up our hands and say we can’t afford education and health care. Maybe we just have to accept the fact that we need to contribute more to the common good. Capitalism has survived elsewhere with higher taxes.

    February 22, 2010
  174. Paul Zorn said:


    Sorry, I don’t get your point about the constitution. Are you suggesting that somebody is acting unconstitutionally? Or that government should do only things specifically mentioned in the constitution?

    In any event, demographic and other changes are indeed coming down the pike, and government and society will have to adjust. How, specifically, would you recommend that such adjustments be made? For example, do you recommend more or less investment in infrastructure? Or in education?

    February 22, 2010
  175. William Siemers said:

    Ray…a couple ideas regarding demographics:

    Initiate a federal tax credit to offset 50% of the cost of long term care insurance. Currently, including the cost of l.t.c. insurance in the federal medical deduction does little to encourage its purchase for most people.

    Increase the economic benefit of electing to wait to draw social security until the age of 70 or 75. Increase the benefit even more be becoming voluntarily ineligible until a later age.

    Increase the medicare eligible age for those under 50 years of age to 68 or 70.

    Work to find ways to reduce end of life care costs. Medicare must come to grips with the cost of the extraordinary measures that are taken in terminal situations.

    On the state level…find a way to tax the income of part-time
    ‘snowbird’ residents. I’ve said this before, but with the coming retirement of boomers the current situation will only become more of a problem. How many affluent retired boomers will elect to stay in FL or Texas for an extra month in order to avoid an 8% income tax?

    February 23, 2010
  176. Peter Millin said:

    Great editorial and it sums up our current problems in DC and St. Paul

    Gov’t Must Not Escape Blame In Whodunits

    Posted 02/22/2010 06:53 PM ET

    During bad times, the blame game is the biggest game in Washington. Wall Street “greed” or “predatory” lenders seem to be favorite targets to blame for our current economic woes.

    When government policy is mentioned at all in handing out blame, it is usually blamed for not imposing enough regulation on the private sector. But there is still the question of whether any of these explanations can stand up under scrutiny.

    Take Wall Street “greed.” Is there any evidence that people on Wall Street were any less interested in making money during all the decades and generations when investments in housing were among the safest investments around? If their greed did not bring on an economic disaster before, why would it bring it on now?

    As for lenders, how could they have expected to satisfy their greed by lending to people who were not likely to repay them?

    The one agency of government that is widely blamed is the Federal Reserve system — which still keeps the heat away from elected politicians. Nor is the Fed completely blameless. It kept interest rates extremely low for years. That undoubtedly contributed to an increased demand for housing, since lower interest rates mean lower monthly mortgage payments.

    But an increased demand for housing does not automatically mean higher housing prices. In places where supply is free to rise to meet demand, such as Manhattan in the 1950s or Las Vegas in the 1980s, increased demand simply led to more housing units being built, without an increase in real prices — that is, money prices adjusted for inflation.

    What led to a boom in housing prices was increased demand in places where supply was artificially restricted. Coastal California was the largest of these places where severe legal restrictions on building houses led to skyrocketing housing prices.

    Just between 2000 and 2005, for example, home prices more than doubled in Los Angeles and San Diego, in response to rising demand in places where supply was not allowed to rise to meet it.

    At the height of the housing boom in 2005, the 10 areas with the biggest home-price increases over the previous five years were all in California. That year, the average home price in California was more than half a million dollars, even though the average size of the homes sold was just 1,600 square feet.

    Although California — and especially coastal California — was the biggest place with skyrocketing housing prices, it was not the only place.

    Other enclaves, here and there, with severe housing restrictions also had rapidly rising housing prices to levels far above the national average.

    If the housing boom was so localized, how did this become a national problem? Because the money that financed housing in areas with housing price booms was supplied by financial institutions across the country and even across the ocean.

    Mortgages made in California were sold to nationwide financial institutions, including Fannie Mae and Freddie Mac, and to firms on Wall Street that bundled thousands of these mortgages into financial securities which were sold nationally and internationally.

    The problem was that, not only were these mortgages based on housing prices inflated by the Federal Reserve’s low-interest-rate policies, but many of the homebuyers had been granted mortgages due to federal government pressure on lenders to lend to people who would not ordinarily qualify, whether because of low income, bad credit history or other factors likely to make them bigger credit risks.

    This was not something that federal regulatory agencies permitted. It was something that federal regulatory agencies — under pressure from politicians — pressured and threatened lenders into doing in the name of “affordable housing.”

    The housing market collapse was set off when the Fed returned interest rates to more normal levels. But it was a financial house of cards that was due to collapse, sending shock waves through the economy. It was just a matter of when, not if.

    A fuller account of all this appeared last year in my book “The Housing Boom and Bust.” The revised and expanded edition, which has just been published, shows how more of the same kinds of policies today are making it harder for the economy to recover.

    It’s not that politicians never learn. They learn how much they can get away with, when they can blame others.

    February 23, 2010
  177. Peter Millin said:

    Let me understand this correctly. MN has a budget shortfall and our answer is bonding bill?

    “Honey our home is in foreclosure, let’s take the credit card and buy a plasma TV.”

    Please call Pawlenty to veto this nonsense.

    February 23, 2010
  178. Peter Millin said:

    Horses mouth refers to the fact that these numbers come from the government website.

    Sowell explains in his book how being an intellectual doesn’t mean that you are necessarily smart.
    Many so called intellectuals have come up with some really dumb idea’s. i.e. Karl Marx and his communist manifesto and others.

    Look at our current cabinet which is highly stacked with academics, but contains very few people with common sense.

    February 23, 2010
  179. Peter Millin said:

    I am all for a good quality of life, but is it really a good quality, if you put yourself in to debt?
    If you raise your taxes to the point where busineses and people leave the state, you erode your tax base and the “quality of life” becomes even more unaffordable.

    February 23, 2010
  180. john george said:

    Peter- The only problem with this logic is that it is logical. I agree with Sowell’s conclusions. Years ago I heard a little ditty that went like this- when you point your finger at someone, there are three pointing back at you. I think there is a need for some government regulation, especially since the nation has abandoned its teaching of moral values with the focus on values clarification. I think Sowell has pointed out that the type of regulation the government imposes is critical. Just as the various stimulus packages were artificial and not sustainable, this article points out how the social engineering the government tried to do backfired, also. If socialism really worked, the largest socialist country in history (Russia) would still be socialist. That fact that it is not is indicative of its effectiveness, IMO. Are we going to learn from history or repeat it? The only really successful socialist system right now seems to be Sweden. Perhaps they have figured out how to separate those things that government does well from those things that the private sector does well. We might do well to seek counsel from them.

    February 23, 2010
  181. john george said:

    William- You might have something there with the idea of extending the retirement age. The whole concept of retiring at age 65 dates back to Kaiser Wilhelm. The average lifespan at that time was quite a bit lower than 65, and he figured that if anyone could live to that age, they probably had earned the right to be supported. Of course, the risk of having to pay this out was much smaller than now because of the life expectancy. With the improvements in health care over the last century, life expectancy is much greater now, so the likelyhood of having to pay for l.t.c. is greater, also. The other benefit of improved health is that potential for productivity until age 75 is much greater, also. The down side is that people staying in productive jobs longer increases the level of unemployment for the younger generation coming on, unless the government does something artificial to fill in the gap. The question then is where is the money going to come from for these programs, both the job market and the l.t.c.? I still think we are trying to lift ourselves up by our bootstraps. Until we can get more production of real goods back inside our borders, I think we are decieving ourselves if we think we can make it work.

    February 23, 2010
  182. Patrick Enders said:


    Gov. Tim Pawlenty refused Monday to sign a letter from the nation’s governors calling on Congress to pass an extension of part of the federal stimulus, a bill that Pawlenty is counting on to balance Minnesota’s budget….

    But Pawlenty’s criticism of the stimulus doesn’t square up with his efforts to balance the state’s budget. The governor didn’t mention on the show that he’s relying on federal money that hasn’t even become law yet to erase a third of the state’s $1.2 billion budget deficit.

    February 23, 2010
  183. Paul Zorn said:


    Your example is presumably facetious. But the analogy between government and household finances (“I have to balance my budget, why shouldn’t the government have to do the same?”) is often raised from stage right, and sometimes from stage left.

    Whoever raises it, the household=government analogy is imperfect, to say the least. There may be something to it when, as in the situation you describe, a bankrupt entity, public or private, proposes to blow money on pointless luxuries. But that’s by no means the situation as regards the proposed bonding bill. A better household analogy would be deciding whether to replace your roof or improve your insulation now, when such things — which need to be done before long in any event — can be done relatively cheaply, or to wait until better economic times raise the cost of roofing and insulation.

    February 23, 2010
  184. john george said:

    Paul Z.- I have to agree with you on the family/government analogy. With a family, there is the possibility of getting additional employment and cutting back on “discretionary” spending to get through a tough economic time. With the government, since all their spending is considered “necessity”, then there is no “discretionary” spending on which to cut back. And, since there are no part time jobs for the government, the only way to get additional income is to raise taxes. 🙁

    February 23, 2010
  185. William Siemers said:

    John…I’m sure you realize that calling something a ‘necessity’ does not make it so. Just taking an at random look at a few of one state department’s (Agriculture) grants (money that does not have to be paid back):

    “Livestock Investment Grant – grants to persons or entities who raise livestock in Minnesota, for the purposes of improving or expanding livestock production in Minnesota.”

    “Dairy Business Planning Grant – encourages dairy business planning and modernization activities of Minnesota dairy farms.”

    “Dairy Profitability & Enhancement Teams – for producers who are looking to make some changes in their operations.”

    “Sustainable Agriculture Grant.”

    I suppose a case could be made that investment in these businesses (as opposed to say…coffee roasting) is something the state should be doing. But these are not investments which will be repaid with nominal interest, they are gifts. Gifts with strings, but gifts none the less.

    Take a look at any state department’s grants, and see if you think they are all a ‘necessity’.

    February 24, 2010
  186. Peter Millin said:


    I partially agree with your argument in regards to having to maintain our state.
    However the current bonding bill goes way beyond that it finances new venues and infrastructure.
    As much as I want new trails, a new hockey arena and snowmaking euipment, we simply don’t have the money..period.

    I would love to have a new roof, but maybe for now I have to just fix it until times get better.

    February 24, 2010
  187. Peter Millin said:
    “People on the street will send a strong message to the government but mainly to the European Union, the markets and our partners in Europe that people and their needs must be above the demands of markets,” Yiannis Panagopoulos, president of the private-sector union GSEE, told NET TV yesterday. “We didn’t create the crisis.”

    No comment necessary.

    February 24, 2010
  188. Norm Vig said:

    Peter, William, John, Ray and all you budget experts:
    Does anybody know what the multiplier effect of bonded construction spending is?
    –State borrows money at low interest rate.
    –State spends money on construction projects.
    –Workers are hired and stop collecting unemployment and start spending money and paying taxes. The people they buy from benefit similarly, all down the line. All this generates tax revenue.
    –Materials and equipment are bought, benefiting those businesses and the state through increased tax returns. All the subcontractors and suppliers benefit.
    –The public benefits from the project. Not everybody, but a lot of people, depending on what the project is. A lot of it is transportation and education.
    –So what is the overall net return? Isn’t it positive? Especially now with high unemployment?

    On the other hand, if you lay off a lot of state employees you create the opposite effect: they don’t pay taxes, they collect unemployment and maybe other benefits, they stop spending money, etc., etc.

    Similarly, if you just cut taxes you may or may not get more investment, employment, new revenue, etc. Or those who save money on taxes may just invest it in their second home in Arizona (and maybe stop paying MN taxes altogether).

    Please explain why bonded construction is not a good idea.

    February 24, 2010
  189. john george said:

    William- I agree 100%. What I was expressing was the irony that government spending is often presented as “necessary” spending, when, as your examples demonstrate, it is not always true.

    February 24, 2010
  190. William Siemers said:

    Norm…I have no problem with state bonding, provided interest rates are reasonable and the state has the money (or even expects to have the money) to pay the interest on the bonds.
    Since the governor and the legislature do not seem to have the political will to cut spending and raise taxes in order to balance the budget, my non-expert opinion would be to forgo bonding until they do.

    February 25, 2010
  191. Paul Zorn said:

    Somewhere above in the ether Peter recommended Thomas Sowell’s latest volume, Intellectuals and Society, wherein the author, a prominent intellectual, explains what’s wrong with intellectuals. (They don’t like the free market enough.)

    Here’s another review:

    The reviewer, Russell Jacoby, is another intellectual with a book, The Last Intellectual, that disses intellectuals (mainly for talking to themselves rather than to the general public).

    Jacoby—surprise!—doesn’t care much for Sowell. E.g.:

    Sowell has given us the Idiot’s Guide to Intellectuals, Big Print Edition. We should take him at his word. This is not a book for intellectuals. It is a gift item for conservatives who do not read.

    Isn’t this infighting fun?

    Jacoby is too modest to recommend his own book, of course, but he does plug Henry Posner’s Public Intellectuals: A Study of Decline.

    February 25, 2010
  192. Phil Poyner said:

    Do we even have a commonly understood definition of “intellectual”?

    February 25, 2010
  193. Norm Vig said:

    My point is that putting people back to work and stimulating the whole construction industry could actually help to reduce the deficit, even after paying the interest. Beyond that, infrastructure adds value to people’s lives in all kinds of other ways. If you wait until you have the interest fully covered, you would probably just slow down the recovery. That doesn’t speak to the desirable size of the bonding bill, but it should not be looked at only in terms of immediate interest costs.

    February 25, 2010
  194. Paul Zorn said:


    I’m no expert either, but strongly suspect that on the interest rate front there could hardly be a better time to borrow.

    Whether we’ll have the money to pay off the loans (paying off principal may be harder than dealing with interest, given currentrates) is a fair question. The bond markets appear to think so,as Minnesota has the highest possible bond ratings with two of three main rating agencies, and the second highest possible with the third. The prospect of Minnesota defaulting on bond payments seems to be regarded by investors as remote.

    Whether it’s wise for the state to assume additional bond debt at a time like this is a different question. Another commenter on this thread apparently thinks not; there was mention of “insanity”. Indeed, one can imagine wrong-headed purposes to which bonding might be put.

    But, IMO, there’s nothing insane about using bonding to invest in the state’s future health, welfare (in the broad sense), and prosperity, through such instruments as educational infrastructure, roads and bridges, environmental improvement, etc.

    Sure, there’s a limit to what we can afford, even at low interest rates, and some bridges really do lead nowhere. But under-investment, like not fixing the roof after a hailstorm, is sometimes the greatest extravagance.

    February 25, 2010
  195. Paul Zorn said:


    Just like we have no broadly accepted definitions for “liberal”, “conservative”, “socialism”, “God”, “god”, and countless other buzzwords. Too often, these loaded words become code for “good” or “bad”.

    February 25, 2010
  196. Phil Poyner said:

    Ah…well, I’m not a big fan of buzzwords myself. It doesn’t strike me that pondering the role of “intellectuals” in society is worth my while until I actually know what I am pondering!

    It would be funny if I were considered an intellectual though…I’d feel like Groucho Marx! “I don’t care to belong to a club that accepts people like me as members.”

    February 25, 2010
  197. Mike Zenner said:


    The $ spread between what the Governor and House is bonding bill appears to be $310 million, of which appears to be nothing more than stimulus pork for the representatives districts.

    Northfield’s piece of the action is line 222. Note how they shortchanged the Local bridge funding(line216) by $8mil to get it.

    Point is some items were not even requested for but were thrown money anyway (eg lines 252-260,etc). Is this all “infrastructure investment” or a Keynesian spending free for all?

    February 25, 2010
  198. john george said:

    Phil- I thought an intellectual was any person who has read/written one more book on any partucular subject than you have? He is a little like the old definition of an expert: any person with a briefcase who is 50 or more miles from home.

    February 25, 2010
  199. john george said:

    William- I agree with your position on bonding. The big question, which I’m not sure anyone has any certainty, is what is going to happen with the economy. For any bonding or tax proposal to really work, it seems there would need to be some growth in the economy. This seems to be the point of discussion- what really produces growth? Does investment in infrastructure or investment in private capital produce the best results? I don’t have a good grasp of historical cause and effect in this case, so I’m really open to enlightenment. Following the Great Depression, it appears there was no quick growth until we started producing war equipment. True, the quality of our roads and municipalities increased, but the economy seemed to remain relatively flat until we, and the government, started consuming goods. This energized private industry to meet those demands, and there was relatively quick growth through the war years. Now, I am certainly not advocating starting another war, but I think there is something to be learned about the mechanics of supply and demand through those years. If the government commits to spending billions of dollars on something there is little demand for, such as light rail, then I think we will be digging ourselves into a pit. I heard about the derailment on the line between St. Cloud and the Cities this morning. The whole systen was shut down until they got everything back on the tracks and the damage repaired. This scenario doesn’t bode well in building confidence in this type of transportation system, IMO. There may be a short time span of construction activity building the system, but what do you do after that?

    February 25, 2010
  200. William Siemers said:

    You are probably right that there is good reason to do bonding this year, and most years for that matter. But that doesn’t change my opinion that before any additional spending is contemplated there should be a realistic plan in place to balance the budget.

    February 27, 2010
  201. Paul Zorn said:


    I, too, would love to see more realistic thinking about budgets. IMO the main obstacles are the Governor and the Republicans, who (unlike some Republicans in this discussion) adamantly refuse to look at the revenue side.

    Understood, others may allocate the budget blame differently. But regardless of who’s at fault, freezing all bonding until reason prevails strikes me as both impractical and, worse, a way of holding ourselves hostage, as a hunger strike might do.

    State bonding is supposed to support investments in our human and physical infrastructure, and ultimately in more prosperity and a better quality of life. Deferring or low-balling needed investments is bad for all of us in the long run.

    February 27, 2010
  202. Peter Millin said:


    You forget where the money comes from. Both the bonding bill money and unemployment money comes from the same source. The net effect for citizens is the same.
    What happens when the stimulus money runs out?

    It is like going to a pool with a bucket and taking the water from the shallow end to the deep end…. no net gain just shifting resources.

    February 27, 2010
  203. Peter Millin said:


    The governor has proposed a bonding bill on his own. Same stupid idea different priorities.
    Why are we ignoring the fact that we are heavily in debt? A bonding bill is nothing more than debt in a different form.
    Never mind that the bill contains a lot of job unrelated expenditures.
    Temporary very expensive jobs, that won’t last once the money runs out. As proven on the federal level.

    From where I sit it just adds another bill we have to pay back sooner or later.

    Government needs revenue to support their basic function, which are clearly defined in the constitution. Anything beyond that are “nice to haves”.
    We all have to support our basic needs at home and have to cut extras if money is tight….why not St. Paul?

    If you maintain your “nice to haves” an go in debt because of them, can you go to your boss and ask for more money that is reasonable?

    February 27, 2010
  204. Norm Vig said:

    Yes, but isn’t it better to have people employed than unemployed? You can’t think of it only in terms of “who pays” in the short run. The economy is a dynamic system, and if some employment stimulus (and multiplier effects) get it going in the right direction, that is more important than the borrowing costs and could more than offset them. As they say, you have to spend money to make money.

    February 27, 2010
  205. Ray Cox said:

    Folks, there is actually a formula that the state has used for decades to establish the size of the bonding bill. $1B is far above that calculated rate….$800M is about right on. The Governor has a little wiggle room to come up if the Dems will come down a bunch.

    Norm, if economics were as easy as you decribe it, just printing money to have people doing some work, then there wouldn’t be much to running a state or nation. To answer your question, even though I am in a depressed industry (construction) I would much prefer a focus on balancing budgets and fiscal restraint rather than thinking up more and more government make work projects to keep some people working.

    And I agree with William that we should first be attending to our budget issues, not running to the candy jar to dip our hand in for pork projects. I will also agree that the bond climate is good for borrowing right now. But that does not change my thoughts that the bonding bill should focus on core state infrastructure. Dump all the local candy and focus on what is needed. I think a good argument can be made to expand the bonding bill slightly as long as it goes to permanent state wide projects….roads, bridges (including County bridges) University and MnSCU buildings, etc.
    .-= (Ray Cox is a blogger. See a recent post titled All Flex) =-.

    March 2, 2010
  206. Paul Zorn said:


    Can you give us some sense of the “formula” used for bonding? Is it some fraction of the general budget?

    Re this:

    And I agree with William that we should first be attending to our budget issues, not running to the candy jar to dip our hand in for pork projects.

    William can speak for himself, but I read him as arguing against all bonding. And I haven’t read anyone as arguing for pork-flavored candy.

    March 2, 2010
  207. john george said:

    Paul Z.- Sometimes, when you go looking for a bacon tree, you end up in a ham bush. You usually won’t find it in the candy jar, either.

    March 2, 2010
  208. Mike Zenner said:

    Minnesota should consider establishing a State Bank like in North Dakota.

    The article eludes to that this is the only reason for North Dakotas budget surpluses, but one other big issue for ND is energy export (oil), which unlike the whole of the US, and Minnesota as a microcosm desperately needs to address before the economy can get back on a sustainable path.

    State bank may be a way to go providing its charter of investment is limited to the States people,businesses and public funding. Just think of all the student loan interest money that is leaving the state!

    March 3, 2010
  209. john george said:

    Mike- I may be too simple in my reasoning, but for any bank to be successful, it seems there should be some money to put into it. Right now, the only thing a state bank could hold is a repository of IOU’s. My son lives in ND, and I get a pretty good inside view of the state’s workings from him. The reason ND has a surplus right now is the oil found in the western part. That, and their very conservative approach to spending this money. Minnesota has neither oil nor a conservative approach to spending. I don’t think a state bank would do anything to increase the state income. Perhaps there would be a small ammount of student loan interest that would stay in the state, but if this would be enough to offset the deficit in any meaningful way, then those students are paying waaay to much for their education.

    March 3, 2010
  210. Mike Zenner said:


    The state of ND is required to put all its tax revenues ito the bank as Reserves for the Bank of ND. Due to fractinal reserve banks are able to loan more money than is in reserve (this is legal counterfeiting). The Bank of ND acts as the Federal Reserve for the State providing money to private banks within the state. further it insures the banks in ND (there is no FDIC insurance in ND private banks).

    I am not saying this is a fixall for all the issues of state budgeting but it does keep the money closer to home.

    March 3, 2010
  211. john george said:

    Mike- This would keep some of the money closer to home. All I’m saying is that there needs to be some money to put into the bank in the first place. We don’t have that right now.

    March 3, 2010
  212. Mike Zenner said:


    The state must receive at least $4Bil a quarter in income tax withholding revenue and sales taxes receipts, so I don’t see how you can say they don’t have any money to deposit in their own bank. Besides the mere fact that they have taxing authority puts them in a whole different position than say a group of private investors that want to start a bank. Once the bank is established they can loan themselves all the money they need to cover the annual budget shortfalls due to fractional reserve.

    March 4, 2010
  213. john george said:

    Mike- Perhaps this is my too simplistic approach, again, but I see the difference being that ND does not have a deficit. If I’m understanding the figures correctly, the $4 billion the State collects in taxes is not enough to pay the bills. If you don’t have enough to pay the bills, then where do you get anything to put into the bank? The bank is just funtioning as a distribution service for the various debts. It is not making any money, unless you want to go back to the famous overnight derivative market with the tax money. I think it should be evident where that got the country.

    I still say that the state needs to find some type of program that will increase real reprivate sector spending and investment. When that increases, then the tax base increases. Infrastructure construction puts dollars into the construction industry, but when the road is built, it produces no new products or employment. In fact, the maintainence of it becomes another liability for the State, not a source of tax revenue (aside from vehicle licenses). Manufacturing that uses the road to transport its products is what provides increased tax revenues. It seems that this is what we need.

    March 4, 2010
  214. Paul Zorn said:

    Debt lovers and haters … check out today’s blog post by Paul (K, in this case):

    There’s probably something here for big- and small-spenders alike to disagree with. But this Nobel laureate economist seems less worked up than some of us (perhaps even me included) over debt. More than debt itself, I think, he worries about our ability to make hard economic choices, not just grandstand:

    What this means is that if you’re worried about the US fiscal position, you should not be focused on this year’s deficit, let alone the 0.07% of GDP in unemployment benefits Bunning tried to stop. You should, instead, worry about when investors will lose confidence in a country where one party insists both that raising taxes is anathema and that trying to rein in Medicare spending means creating death panels.

    March 5, 2010
  215. David Ludescher said:

    Paul: Help me understand Krugman’s argument. He seems to be saying that we should’t worry about whether America actually has money; we should worry about whether people think the country has money.

    It seems to me that the bubble, stock market bubble and the housing bubble were created by undue confidence of investors. The bubbles burst because those markets lacked the fundamentals to support the confidence. So, confidence seems to have caused the problem.

    There isn’t much doubt that America is entering a period of a government bubble. Our debt is barely manageable at these historically low interest rates. If worldwide interest rates go up, we will be the exact same position as all of the homeowners who had adjustable rate mortgages.

    March 6, 2010
  216. Paul Zorn said:


    I don’t claim any special economic expertise. But your paraphrase—

    [Krugman] seems to be saying that we shouldn’t worry about whether America actually has money; we should worry about whether people think the country has money.

    seems to me not fully fair to what (I think … I don’t speak for others) K. is saying.

    If I’m right, K. would mainly agree with your first clause. Indeed, we shouldn’t worry unduly about whether America has money — it does have money. Present very serious problems notwithstanding we’re the richest country the world has ever known, with a huge economy and immense assets. Other rich countries, and we ourselves, have managed large debt in the past, and we can still do so — especially when debt is incurred as investment in wealth-producing things, like education.

    Re your second clause: I think K would say (i) yes, we should worry what people think of our debt; but (ii) the problem is not whether the US “has money” to repay debt, but whether we’ll have the political wisdom or courage to do what needs to be done to service debt, rein in spending, etc.

    March 6, 2010
  217. David Ludescher said:

    Paul: The federal government is trillions of dollars in debt. Our goverments are worse than broke; they are sucking money out of private hands. Further, it has proven itself relatively incompetent to manage money. For example, it has no assets to back up the money it has taken for Social Security and Medicare. These programs are financial time-bombs.

    Frankly, there is nothing that leads me to believe that the federal government has the wisdom or courage to manage and service the debt, or to rein in spending. So, because our leaders don’t have the courage or wisdom to manage the problem, what would you or Krugman suggest next?

    March 6, 2010
  218. Paul Zorn said:


    I’ll intersperse some thoughts—without pretending to speak for that other Paul.

    You say:

    The federal government is trillions of dollars in debt.

    True. And it will hurt to reduce our debt. But keep in mind that our economy is on the order of $15 trillion per year. Our debt is large but not—yet—insupportable. It could, of course, get worse.

    Our governments are … sucking money out of private hands.

    A distasteful image … worse, I don’t get the point. Where would any government “suck” its money from if not from “private hands”?

    [The government] has no assets to back up the money it has taken for Social Security and Medicare. These programs are financial time-bombs.

    Both Social Security and Medicare have actuarial obligations, but they’re not peas in a pod, as what’s above suggests. This isn’t the place to discuss the differences in detail (there’s always Wikipedia, which has useful information on SS …), but SS-related problems seem to me much less worrisome than those related to Medicare. SS can be addressed for a long time with endurable pain (except in the political sense, where pain thresholds are low) by such things as raising eligibility ages.

    Medicare in particular and medical care in general are much bigger actuarial problems—and they’ll surely get worse if we refuse to talk seriously about nation-level approaches totaking control of our health system. The Democrats have made some halting starts at doing so. Republicans? Not so much.

    [N]othing … leads me to believe that the federal government has the wisdom or courage to manage and service the debt, or to rein in spending. … [W]hat would you or Krugman suggest next?

    Call me an optimist, but I don’t see things quite so bleakly. The “federal government” is not a fixed entity, like a person, with a fixed budget of courage and wisdom. True, we recently emerged from an 8-year run of ruinous recklessness, with high spending (much of it off-budget) and lowered federal taxes, especially for the rich. True, too, at the moment we’re running up debt even faster than before, but that’s largely attributable to the stimulus, some version of which seems to have been needed to prevent really catastrophic collapse. (That other Paul would have spent much more, by the way, and on some other things.)

    I see some chance that, after the current economic crisis passes, we might start morphing toward a more sustainable economic way of life. One good omen is that we now have a more pragmatic, reality-based administration than formerly. Or maybe we’ll have to wait longer.

    Either way, though, I see no long-run alternative to increasing the feds’ tax bite from the economy, which is now lower than average among rich countries, and could be more progressive than it is. We can’t, on the cheap, both invest in our own prosperity and make that “decent provision for the poor” that, as Dr.~Johnson is supposed to have said, is the true test of civilization.

    I’m ready to do my part. You?

    March 6, 2010
  219. Mike Zenner said:


    I was not implying that a state bank would fix the sickly US economy but that it would help the state with its annual income by generating income for loan interest. Say the Bank of Minnesota had $4Bil on reserve it could then lend at a conservative 8:1 or $32Bil to state businesses. At an interest rate of 5% the state could earn roughly 1.6bil in interest. that is enough to cover the current budget shortfall and then some.

    As far as the economy goes I completely agree with you. We need to restart private business particularly primary industries that draw in money from exports abroad. This is going to be particularly difficult to do since America has become too expensive to do business relative to other countries around the world. High labor costs, taxes and regulations continue to drive business and jobs from this country every year, and they aren’t going to come back for a long time if ever.

    As long as we continue negative trade deficits(mainly due to oil imports) and federal budget deficits as far as the eye can see the economy will continue to stagnate. I believe that the powers that be and the federal government realize that earning from production is coming to an end, and that is why there is such a focus on the consumption end and the extraction of profits from things like Carbon trading and health care reform. This way we keep ourselves busy shuffling paper while the economy contracts to a more sustainable level, closer to where the rest osf the world is.

    Below is a link to an article that bemoans what you have been talking about:

    March 7, 2010
  220. Mike Zenner said:


    This new and different “pragmatic reality-based administration” you speak of must be from an online alternative reality game.

    compare past administration to present:

    Past Present
    illegal wars of aggression continued wars of aggression
    annual budget deficits >$300bil annual budget deficits >$1000bil
    prescription drug plan health care reform
    Gov stimulus plan $150bil Gov stimulus plan $787bil
    Wall Street gone rampant Wall Street still rampant w/taxpayer money
    created housing bubble trying to reflate housing bubble

    The difference is glaring in scale only, and maybe the guy behind the desk is now wearing a blue tie instead of a red one.

    March 7, 2010
  221. David Ludescher said:

    Paul: Another way to look at the debt is to remember that the government has no assets to support a debt. If we decided that we wanted to pay off the debt, we have no means to do so, except by taking money out of the government hands.

    I’m not sure that this administration is much different than the last. (See Mike’s comments below.) Simply put, the federal government is out of control.

    I sat on a local government committee which was considering things as silly as a tunnel under Highway 19 and a pedestrian bridge over Highway 3. These were incredibly expensive projects of little practical value. Why were we even considering these projects? We were considering them because we were trying to get federal grants that the federal government was giving away.

    March 8, 2010
  222. Ray Cox said:

    Paul, the debt is a huge looming issue. I believe, as many economists do, that we have arrived at a place in time where we actually do have to worry that people may not buy our debt. With the things happening in Greece, Iceland and other countries you can see how a ‘little blip’ on the debt confidence screen can create huge problems. We have never been in this debt position (without being in a World War) so it really is new territory.

    I do agree with you Paul that SS is the more manageable of the two mega, gigantic debt issues of SS and Medicare. The reason I say that is SS is fairly easy to deal with in actuarial terms and legislative terms, if we do in fact elect legislators with some spines.
    .-= (Ray Cox is a blogger. See a recent post titled Three Links Apartments) =-.

    March 8, 2010
  223. Paul Zorn said:


    You say:

    Another way to look at the debt is to remember that the government has no assets to support a debt. If we decided that we wanted to pay off the debt, we have no means to do so, except by taking money out of the government hands.

    Sorry to keep repeating a refrain … but I just don’t get your point. Are you saying that no government, ever, should borrow any money, for any purpose, because governments don’t have assets? And how can any entity, governmental or not, repay any debt or buy and good or service without taking money “out of its hands”? Explain, please.

    As for the rest, you asked what how I (and Paul Krugman) would deal with serious financial problems we face. I suggested that, among other things, government will probably need to increase somewhat its take from the economy, and that the operation is going to hurt.

    Paul K has not yet weighed in on what he’d do. What would you do (other than oppose tunnels and pedestrian bridges)? For instance, any thoughts on health coverage for the 10% of our fellow citizens now without it?

    March 9, 2010
  224. David Ludescher said:

    Paul: I meant to say that the government has to repay the debt by taking it out of the citizens’ hands. Right now, the government is spending money without a clue how it is going to pay it back. And, that is only for the funded liabilities. The unfunded liabilities like SS and Medicare are much worse.

    As for the health care concerns now dominating Washington, most of the ideas floating around will only make matters worse. The real problem with health care – it costs too much. If it were cheaper, more people could afford to either pay for it or get insurance.

    One of my solutions would be to build a model similar to the legal system. In the legal system, if you can’t afford your own lawyer, you get a lawyer paid for by the state. And that lawyer only takes people who can’t afford a lawyer. The lawyer has incredible caseloads. But, they are knowledgeable, efficient, and can perform triage.

    March 9, 2010
  225. Norm Vig said:

    Yes, there are deficit problems, but we are not Iceland or Greece. When people around the world want to invest in something secure, they still buy U.S. debt–even at extremely low interest returns. I agree that we have to put SS and Medicare on a more secure basis, but it means more revenue, not less. I hate this drumbeat from the right about deficits and national debt, especially since the Bush tax cuts and other spending is largely responsible for it. Every other developed country has been able to come up with a national health insurance system covering all–and most produce better health results than outs does–yet we somehow can’t bring ourselves to do anything about it.
    The proposed health care bill has at least a chance of controlling health care costs. Without it, health care will increasingly be priced out of the market for our citizens. The Republican alternative does nothing to control costs and would leave more and more people out of the system. This is just morally unacceptable in a modern society. We can’t just leave people to suffer and die without help in the richest country in the world. I’m sorry, there is no Christian or other religious tradition that would support that. Read Matthew 25 (the whole chapter) and see what the Bible actually says about helping the poor.
    We can’t predict when a health crisis will strike. My wife got cancer shortly after turning 65. These are not “lifestyle choices” or something–unless you think we can choose our genetic parents and grandparents. If we want to think of ourselves as a civilized society, we have to provide enough for the common good so that life and death issues are not just rationed by income.

    March 9, 2010
  226. Paul Zorn said:


    You say:

    Right now, the government is spending money without a clue how it is going to pay it back.

    Seems to me that all governments everywhere borrow money with the same plan: to pay loans back through fees, taxes, and other incoming revenue. Some investments are wise and some aren’t, but there’s nothing necessarily “without a clue” about such thinking.

    Or maybe you just mean that we’re borrowing more than current government income can reasonably service. Fair enough, but keep in mind that one way to address such an imbalance is to boost incoming revenues — increase taxes and fees, in other words.

    If one believes that additional taxes and fees are self-evidently counterproductive, and that new government spending is always wasted, then there’s no discussion to be had. But such a view strikes me as simplistic. And it would obviate anything like the health care plan you propose for covering the poor.

    Still, I’m interested in your health care proposal:

    One of my solutions would be to build a model similar to the legal system. In the legal system, if you can’t afford your own lawyer, you get a lawyer paid for by the state. And that lawyer only takes people who can’t afford a lawyer. The lawyer has incredible caseloads. But, they are knowledgeable, efficient, and can perform triage.

    How far does the legal/medical analogy go? Would doctors-for-the-poor also have “incredible” caseloads? How would the poor with expensive medical problems be treated, or would they just be “triaged”? Would the rich with expensive medical problems have to bankrupt themselves and their families before getting pro bono medical care?

    Stuff like that.

    March 9, 2010
  227. john george said:

    Norm, Ray, Paul, David- I may be mistaken in my understanding of SS, but I thought the whole concept behind this was that the current workers’ SS witholding is supposed to pay for the current retirees. The US Census data I could find indicated an approximate 15% growth in the work force between 1990 and 2010 (est.). The growth in the retirement age bracket was more like 30%. It appears that the discrepency in these demographics is exacerbating the SS & Medicare problems. The current tax rates are not sufficient to cover the increased costs associated with this section of the population. Had population growth and industrial growth been able to keep pace with the changes, I don’t think we would be facing the problems we now are. Even those who were able to attain financial independence through investments have seen their largess shrink or, in some cases, disappear. It seems that if we are going to have to extract a larger percentage of funds from the private sector to cover these costs, then somehow stimulating production and consumption would be the best policy. It appears that there is an increase in consumer confidence occuring right now, so that in itself should help cover some of the need. Whether it will be enough soon enough is yet to be seen. I’m not sure that the trillions of dollars we have “invested” to “rescue” some institutions are going to give us the return we really need. It is this scimitar of national debt hanging over the future generations that threatens confidence.

    March 9, 2010
  228. Paul Zorn said:



    for more on Social Security and its financial prospects. In particular, SS income has indeed exceeded outlays for around the last 30 years. This yearly cash-flow surplus is (says Wikipedia) likely to end soon, if it hasn’t already, but the SS trust fund (accumulated surpluses) and other resources are expected to last until around 2050 — assuming nothing else is done, which seems unlikely.

    March 9, 2010
  229. john george said:

    Paul- Thanks for the link. If I understand some of the reports correctly, this “…yearly cash-flow surplus…” cookie jar is what has been raided by various other program needs.

    I remember a news commentary by Paul Harvey about 28 years ago. He described the American economy as 12 people standing in a circle. Each man has his hands in his neighbor’s pockets, and they all think they are getting rich. Perhaps distribution is the key in these social needs.

    March 9, 2010
  230. Mike Zenner said:


    Paul likes to throw the term “surplus” around but it’s merely an accounting gimmick that the SS trust fund and the Federal government are separate entities. The SS surplus is special non marketable government bonds that the federal government will soon have to start paying on. The only way for the federal government to do this is by raising taxes (SS or otherwise) or borrow(debt) more money though other government bond issues.

    From Paul’s Wiki link in the “trust fund” section:

    Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury (technically, the “Federal Old-Age and Survivors Insurance Trust Fund”, as established by 42 U.S.C. § 401(a)). Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they have in most years, the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust Fund indirectly finances the federal government’s general purpose deficit spending. In 2007, the cumulative excess of Social Security taxes and interest received over benefits paid out stood at $2.2 trillion.[78] The Trust Fund is regarded by some as an accounting trick which holds no economic significance. Others argue that it has specific legal significance because the Treasury securities it holds are backed by the “full faith and credit” of the U.S. government, which has an obligation to repay its debt. It is important to note, however, that while the Treasury guarantees the interest and principal payments it makes to the Social Security Trust Fund, the benefit payments made from the Social Security Trust Fund to American retirees have no guarantee at all.

    The Social Security Administration’s authority to make benefit payments as granted by Congress extends only to its current revenues and existing Trust Fund balance, i.e., redemption of its holdings of Treasury securities. Therefore, Social Security’s ability to make full payments once annual benefits exceed revenues depends in part on the federal government’s ability to make good on the bonds that it has issued to the Social Security trust funds. The federal government’s ability to repay Social Security, in turn, is contingent on fiscal policies taken today (which have tended to increase deficits and the percent of the budget spent on interest and principal payments) and in the future.

    Most likely scenario in a couple years will be higher SS taxes, extended retirement age and cuts in promised SS benefits.

    March 9, 2010
  231. john george said:

    Mike- Yes, I agree. I have a story about my father selling his $3000 dog years ago. At least he figured it was worth $3000, because he traded it to a fellow for two $1500 cats. Isn’t accounting wonderfull?

    March 10, 2010
  232. john george said:

    William- That is a very interesting link. The only way to read the article is to pay for a subscription. Oh, well, I guess even the news people have to pay their expenses. Perhaps this is an example of how the US can get out of its debt- charge people for the services they use. It could be called user or access fees, so we wouldn’t have to use the dreaded “T” word. Wouldn’t that be revolutionary? Here all along we thought government services were free. As far as pay cuts to employees of government funded services, my wife has experienced that this last year, and it doesn’t look like things are going to get any better for some time. Even in my industry, I took a 25% pay cut last year alone. To add insult to injury, the witholding tables were changed to put extra cash in our pockets through the year. The result is a big tax bill for me this April. I had it figured out before how to come out about even between witholding and tax liability. Right now, retirement looks more like a mirage than a reality.

    March 10, 2010
  233. Phil Poyner said:

    John, I used to think that government doing something like pay-as-you-go for data was a good idea too. But then I saw the following report: It shows some of the economic advantages of making public data freely available, versus the Europian model where people must pay for the data (see page 5). I don’t doubt that having people pay for certain services would be advantageous, but some services actually help our economy more if they are free. So some cuts could end up being penny wise, but pound foolish…I guess the trick is to figure out which is which.

    March 10, 2010
  234. David Ludescher said:

    Paul: Additional fees and taxes are not self-evidently counterproductive. What is counterproductive is when the government is spending money that could be better spent in a free economy. Many government services, such as water, sewer, fire, police etc. are much cheaper when there is a monopoly.

    However, using taxes to build bridges to nowhere or even pedestrian bridges over Highway 3 are silly. On the federal level, both the Democrats and the Republicans are out of control. You don’t give your kid a larger allowance if he can’t live within his budget. The feds have the same problem.

    For that reason, I can’t support rasing taxes until the government is able to show some restraint. Local and state governments are hurting too. Every unit of government is going to need some help. I can certainly tell you that I have no interest in supporting a tax increase if it is going to be spent on a $500.00/foot bike trail.

    March 10, 2010
  235. Ray Cox said:

    Mike, you are absolutely correct. SS has loaned billions of dollars to the federal government. SS is going to need those dollars back now to meet its obligations to the baby boomers. I have no idea how the US is going to finance a payback plan. We could do it through increased taxes of one sort or another….SS payroll taxes, general income taxes, capital gains taxes, a VAT and on and on. Or the govenment could figure out a way to try and borrow more funds from someone else. Or they could change the rules and alter the amount SS pays out. But either way they have to figure out something. Pretty soon we will be living on fumes.
    .-= (Ray Cox is a blogger. See a recent post titled Elevator finished) =-.

    March 10, 2010
  236. Paul Zorn said:

    Mike, Ray,

    Mike says:

    Paul likes to throw the term “surplus” around …

    Throw around? The word simply means the difference between income and outlay, and is used at least 7 times in the Wikipedia article.

    but it’s merely an accounting gimmick that the SS trust fund and the Federal government are separate entities.

    Has anyone asserted such a thing? Not me. What’s your point, Mike?

    Ray says:

    … Or they could change the rules and alter the amount SS pays out. …

    What “rules” do you have in mind, Ray? If Wikipedia (and Mike) tell us true, there are no payment rules.

    In any event, Ray, how do you suggest that “they” honor SS obligations?

    March 10, 2010
  237. Paul Zorn said:


    You say:

    What is counterproductive is when the government is spending money that could be better spent in a free economy.

    Agreed. Does anyone argue for spending more when we can spend less? The hard question is when money is indee “better spent” outside than inside the government.

    Many government services, such as water, sewer, fire, police etc. are much cheaper when there is a monopoly.

    Cheaper when there is a monopoly? Is there a missing “not”? Either way, I agree that fair questions arise here — except, perhaps, for the police. If we can outsource the police, why not the courts? Or the government itself, for that matter … boggles the mind.

    … using taxes to build bridges to nowhere or even pedestrian bridges over Highway 3 are silly.

    Agreed. Was this at issue?

    … I can’t support raising taxes until the government is able to show some restraint.

    Fair enough. How will we know when the government has met your restraint test?

    Meanwhile, any thoughts on the questions in 110.3.1 about your legal/medical analogy? In particular, is there a right to medical care analogous to our right to legal representation?

    March 10, 2010
  238. Mike Zenner said:


    Sorry, maybe I misunderstood your statement below:

    the SS trust fund (accumulated surpluses) and other resources are expected to last until around 2050

    To me your implying that there are funds stored away ((accumulated surpluses)your editorial?) that will carry the SS trust till 2050, which of coarse,as the Wiki link shows, is not the case.

    This may be true as far as “the trust fund” looks at it as an asset, with the underlying assumption that the taxing authority of the federal government assures repayment at whatever future tax levies. However, for the federal government, it’s tax payers, and fund recipients, it is an unfunded liability, requiring increased future tax revenues or spending cuts in other government programs.

    Therefore, as a taxpayer, and future fund recipient, I object to the term “surplus” when it referring to a future unfunded liability.

    March 10, 2010
  239. john george said:

    Ray- Here is an interesting link presenting one side of the argument for raising the income cap on SS payments, and you don’t have to subscribe to anything to read it.

    Now, a disclaimer. The Heritage Foundation is a conservative think tank, so they naturally are going to present an argument favoring private enterprise and small central government. From the reading I have done so far on this, it seems that both the Liberal and Conservative camps have their own think tanks with their own “experts.” Seems to me that it is very difficult to find a neutral analysis of the situation we are in, if there is indeed such a thing as a neutral analysis. It also seems that every aspect of our lives has been politicized, and the gulf grows ever wider with the current rise of populism.

    March 10, 2010
  240. Paul Zorn said:

    Mike and others,

    Here’s a CBO discussion of long-term Social Security prospects (warning: the “s-word” appears often):

    Still, Mike’s concerns about SS future liabilities being “unfunded” strike me as well-founded — up to a point. Indeed, there’s no such thing as a Social Security “lockbox”, full of cash and gems and pieces of eight, ready to dole out to seniors when the time comes. (Remember the endless incantations on this subject from both candidates in, say, the Bush v. Gore election?) The SS trust fund, if I get it, consists of special IOUs — secured by the full faith and credit of the US — to repay money that has been and continues to be, in effect, borrowed by the Feds for its current operations.

    Whether this is good or bad economic practice, let alone good politics, is probably debatable. I’d be interested in a brief, scholarly reference … if “brief” and “scholarly” can be had in the same package.

    March 11, 2010
  241. Phil Poyner said:

    This is disappointing…I’m one of those people that was looking forward to being paid in pieces of eight.

    On a more serious note, I’ve yet to see a good reference on Social Security. By good I mean apolitical. It seems like each side come to the issue with a bias and simply collects information that supports whatever bias they initially adhered to. It’s very frustrating if what you’re trying to come up with is a no BS assessment of the health of SS.

    March 11, 2010
  242. Paul Zorn said:


    Have a look at the Wikipedia site referenced above.

    I have no expert opinion on the quality of its sources, and would never argue that Wikipedia is an unimpeachable source in general. But it does present a collection of arguments pro and con on various things to do with Social Security. The CBO (URL above) is also usually seen as a relatively disinterested referee.

    March 11, 2010
  243. Ray Cox said:

    Paul, the ‘rule change’ that I referred to is a simple legislative change in SS regulations. There are many that can be considered:
    * Raise retirement age
    * Raise the cap that earnings are taxed on
    * Include capital gains in SS taxable income
    * Change the formula that calculates how much SS is granted
    * etc, etc.
    I think it was during the Reagan administration when they increased the retirement age from 65 to 67. That was done to try and repair SS. But more repairs are needed if the country is going to remain solvent.
    .-= (Ray Cox is a blogger. See a recent post titled Elevator finished) =-.

    March 11, 2010
  244. Patrick Enders said:

    Ray, I particularly like your suggestions to consider:

    * Raise the cap that earnings are taxed on
    * Include capital gains in SS taxable income

    The SS tax is highly regressive. It only applies to the first $106,000 or so of income, and everything above that is SS-tax-free. It would be great to see that tax spread across the board as an even tax on all income (including capital gains), as was done with the Medicare portion of the FICA tax (which could also be extended to capital gains).

    March 11, 2010
  245. john george said:

    Patrick- Take a look at my link in 115.1. One thing to consider in raising the cap, to say $150,000, is that those people will be elligible for claims proportional to the ammounts they have paid in. One thing about people who make over $150,000/year is that they have the wherewithal to save more money toward their own retirement than a person making $75,000. The standard of living to which each aspires does have some bearing on what they can save, of course. So, when it comes time to cash in on SS payments, those with higher incomes, and supposedly less need, get a larger share. This does nothing to offset the money owed the larger population that is entering retirement age. The concept sounds good, but I don’t think it produces the needed results.

    March 11, 2010
  246. Patrick Enders said:

    I don’t think that the cap on payouts should be raised.

    March 12, 2010
  247. john george said:

    Phil- I don’t see the figures here being a whole lot different than the Heritage Foundation article. The telltale attitude behind this is expressed in the last paragraph of the article, “…In any case they can afford it…” It is this attitude that many people find odious no matter how much they make.

    March 12, 2010
  248. john george said:

    Patrick- This would involve ammending the law, since the pay-out ammounts are tied directly to the pay-in ammounts. My feeling is that when it comes down to it, the idea of increasing the tax rate on the upper eschelon of wage earners is driven as much by jealousy as anything.

    March 12, 2010
  249. Ray Cox said:

    Patrick, I don’t think there would ever be enough ‘horsepower’ in Congress to completely eliminate the cap on SS tax payments while at the same time leaving the cap in place for benefits. SS has a standard formula that has always linked the two together as far as I know. John’s comments in 118.1.1 are the base of what I believe the government bases the tax cap on.

    I also think it is very important for people to remember the fable about the goose that laid the golden egg. If we think we can solve all our economic problems, in Minnesota and Washington, by tapping into the goose, or rather, trying to force the goose to increase egg production, it will not work. Too many of the geese will decide to save the golden eggs they have and retire.
    .-= (Ray Cox is a blogger. See a recent post titled All Flex) =-.

    March 13, 2010
  250. Phil Poyner said:

    John, each person would read that differently, depending on which side of the issue you come from. I only saw it as a response to the equally absurd assertion that an increase in the wage cap was “soaking the rich” when they, as a group, were the only ones seeing true wage growth in the past decade.

    Regarding a cap on payouts, I don’t see why there has to be one. After all, when you reach higher levels on contributions the proportional amount of payout drops anyway. I’ve never actually seen the equation that goes into the calculations, but I know the difference in the amount of the payout between someone making $85K and $100K a year for the last 20 years before retirement is only about $100 a month. That’s just about enough to cover Medicare Part B.

    March 13, 2010
  251. john george said:

    Ray- Unfortunately, either way, our goose may be cooked!

    March 13, 2010
  252. Paul Zorn said:


    Yes, this would require amending some law. That’s not necessarily a huge hurdle, a la amending the Constitution, in this case — there have been many amendments to the Social Security act over the years. Whether any particular amendment is wise is, of course, a different question.

    Then you say:

    My feeling is that … the idea of increasing the tax rate on the upper echelon of wage earners is driven as much by jealousy as anything.

    Is this “feeling” driven by any data, or just by the general sense that envy is a near-universal human failing? Speaking of which, might greed play any role in the “upper echelon”‘s reluctance to pony up for their less fortunate?

    With respect … it seems a bit presumptuous for you to ascribe morally blameworthy motives so freely. The notion of progressive taxation for public purposes is hardly a fringe-y idea

    March 14, 2010
  253. Norm Vig said:

    John and Ray, when you talk about class “envy” and lack of incentive to invest if taxes are raised, you have to remember that the Bush tax cuts of 2001 and 2003 benefited mostly the rich. It was a lost decade for most people–median family income went down 2000-2009, but those in the top 10% (especially the top 5% and 1%) had big income gains over the decade. They seemed to have incentive enough to invest before 2001, so why not restore the previous tax rates? Why are we so afraid of how the rich might react to a more progressive tax? Whose goose has been cooked, anyway?

    March 14, 2010
  254. john george said:

    Paul Z.- I wasn’t inferring that a change in the law would be difficult, or even unwise, for that matter. It is just something that would need to be done for a rise in the SS salary cap to be effective for the people who really need it. As far as my “feeling” about this, it is just that- a feeling, or opinion, perhaps. It comes from the various inferences used in the liberal based studies. To say the rich need to pay their “fair share” infers that they are not doing so at this time. How do you determine a “fair share?” If everyone is taxed at the same percentage rate, then EVERYONE pays their fair share. It is an equal proportion of their total income. That is not happening now, with the earnings cap, and I have no problem lifting that as long as the payout formula is adjusted. The problem I have with progressive tax rates is that higher wage earners pay a larger percentage of their income as taxes. What makes this “fair?” Just the fact that they can “afford to do so?” That attitude does not seem to be based on any particular objective set of figures, unless everyone lives at the same economic level, such as what was tried under Stalinist style Communist Socialism.

    March 14, 2010
  255. john george said:

    Norm- I found some interesting figures from 2006 in this Wiki-pedia link, for what it is worth:

    These are 2005 figures, according to the table. I think it is interesting that in that year, only about 7.5% of all households aspired to six figure incomes. Somehow, that doesn’t seem like a very large portion of the population to go after to fill in the need for the other 92.5% of the population. Would the $$ ammount of increased taxes on this segment produced be worth the extra effort? That question might be answered by this article link:

    Again, I posite that the answer would vary by which “experts” a person quotes.

    March 14, 2010
  256. Paul Zorn said:


    You say:

    The problem I have with progressive tax rates is that higher wage earners pay a larger percentage of their income as taxes. What makes this “fair?” Just the fact that they can “afford to do so?”

    We’ve had this discussion before … . Briefly, you seem to think it self-evident that “fairness” requires everyone to pay the same tax rate, but this is far from obvious. It’s equally arguable (though practically untenable) that fairness requires everyone to pay the same amount. Or perhaps the rich, who benefit the most from society’s investments, should fairly pay a higher fraction than the poor, who barely scrape by.

    And then this:

    [Preference for progressive taxation] does not seem to be based on any particular objective set of figures, unless everyone lives at the same economic level, such as what was tried under Stalinist style Communist Socialism.

    I should probably just ignore the gratuitous, vergin-on-offensive reference to three (a hat trick!) bogeymen of conservative demonology. But do you really see progressive taxation, Stalinism, communism, and socialism as peas in a pod?

    Uff da.

    March 14, 2010
  257. john george said:

    Paul Z.-No, I do not. Russian Socialism and Communist Chinese Socialism are the only two societies that come to mind where “equality” was associated with economic postion, and which was enforced by the government. Fortunately, the US does not embrace that philosophy, nor has it ever. This is just two different ideologies of how a nation might be financed. Neither are complete, IMO. What I read of Biblical admonitions to the use of money is to give it away. Having this coerced upon an individual by the government is a way to see that the concept is enforced, but it does not change a man’s heart, but that is another subject entirely. Take a look at the second link I addressed to Norm Vig. It is by a conservative analyst, but his numbers appear accurate. The analysis of those numbers is the point of discussion.

    March 14, 2010
  258. Paul Zorn said:


    Russian Socialism and Communist Chinese Socialism are the only two societies that come to mind where “equality” was associated with economic position, and which was enforced by the government.

    The Soviet and Communist Chinese models (btw, socialism and communism are not identical) may have paid lip service to economic equality when it was convenient to do so. In practice, neither government came anywhere near “enforcing” equality.

    Fortunately, the US does not embrace that philosophy, nor has it ever.

    Indeed. How, then, do you see Soviet and Chinese models as relevant to this discussion? Wouldn’t, say, the rich-but-somewhat- redistributive Scandinavian model be more apropos?

    This is just two different ideologies of how a nation might be financed. …

    Yes, but there’s a lot of room between us and Stalinist totalitarianism. Let’s stay focused on live questions.

    What I read of Biblical admonitions to the use of money is to give it away. Having this coerced upon an individual by the government is a way to see that the concept is enforced, but it does not change a man’s heart, but that is another subject entirely.

    Yes, it is another subject. And I’m far(!) from wanting the government to enforce Biblical admonitions across the board. I hope you’ll apply the same parsimony principle in other areas, like gay marriage.

    Take a look at the second link I addressed to Norm Vig. It is by a conservative analyst, but his numbers appear accurate. The analysis of those numbers is the point of discussion.

    I haven’t checked the veracity of the numbers, but have no reason to doubt them. As you say (more or less …) the devil is in the analysis. This analysis is not so much incorrect as incomplete: it ignores other important numbers, like the proportion of income received by the top brackets, and the fact that federal income tax is by no means the only tax out there.

    The big tax picture seems to be that state and local taxes in the US are mildly regressive, and federal taxes are mildly progressive. And yet, somehow, Stalin, Marx, Mao, and Kim Jong-il remain at bay.

    March 15, 2010
  259. Norm Vig said:

    I don’t know which numbers you were referring to, but here are a couple of excerpts from the online sources you cited:

    The aggregate income distribution is highly concentrated towards the top, with the top 6.37% earning roughly one third of all income, and those with upper-middle incomes control a large, though declining, share of the total earned income.[3][9] Income inequality in the United States, which had decreased slowly after World War II until 1970, began to increase in the 1970s until reaching a peak in 2006. It declined a little in 2007…

    While the median household income has increased 30% since 1990, it has increased only slightly when considering inflation. In 1990, the median household income was $30,056 or $44,603 in 2003 dollars. While personal income has remained relatively stagnant over the past few decades, household income has risen due to the rising percentage of households with two or more income earners. Between 1999 and 2004 household income stagnated showing a slight increase since 2004.

    I haven’t looked up hard information on the distributive effects of the Bush tax cuts, but I remember reading that something like half of the benefits (in terms of absolute tax savings) went to the upper 1-2% of taxpayers. Of course, they would tend to since those people have the highest incomes to start with. But if you combine the capital gains tax cuts with the income tax cuts, I’m pretty sure that those at the top got most of the reductions. That’s why liberals talk about a huge upwards redistribution of income. The Wiki article said income inequality peaked in 2006, but there may be more recent figures. Anyway, I don’t think it can be disputed that the wealthy got far more benefit from the 2001 and 2003 tax cuts (both passed through reconciliation) than did the middle-class taxpayer.

    In terms of the macroeconomy, these tax cuts contributed to both budget deficits and to the real estate bubble (lots of capital gains there). They did not produce either lasting growth or fiscal stability. So why are you guys so opposed to any tax increases?

    March 15, 2010
  260. Phil Poyner said:

    Norm, just to be a troublemaker I’d like to add a couple of reports.
    The first has to do with relative economic mobility:
    The second has a nice section on intergenerational economic mobility:
    I find it somewhat interesting to consider that if I want my kid to do better than I did, I might want to consider moving to “socialist” Denmark!

    March 15, 2010
  261. Phil Poyner said:

    Some of the holes in the information that Paul pointed out can be filled by using effective tax rates (EFT) rather than something like income tax rates. For federal EFTs, see:
    or a simpler version that covers 1979-2006 at:

    For state and local EFTs see:
    particularly table 1-8.

    By seeing what types of taxes are paid by each economic segment of our population, you get a better sense of what segment of the population is effected by tax law changes. It makes it easier to get more information out of articles such as this one:

    March 15, 2010
  262. Paul Zorn said:


    The goose metaphor is fun. True to type, a lot of our “geese” even fly south for the winter.

    Still, I think this (my emphasis) —

    If we think we can solve all our economic problems, in Minnesota and Washington, by tapping into the goose, or rather, trying to force the goose to increase egg production, it will not work.

    somewhat caricatures the problem (as most amusing metaphors do, I admit). For one thing, I don’t think most people advocate that we solve all problems by cooking our geese.

    For another, the image of helpless geese being starved by heartless farmers seems somewhat at odds with the amply demonstrated fact that the rich are getting richer, not poorer. If there is danger to our geese, it may come more from force-feeding, as the French do it, than from starvation.

    , anyone?

    March 15, 2010
  263. Paul Zorn said:

    Somehow the last line dropped out of the posting above. If it fails again I’ll take it as a rebuke for pretentiousness. Here goes …

    Foie gras, anyone?

    March 15, 2010
  264. Ray Cox said:

    Folks, it is important to make a distinction between income taxes and capital gains taxes. Many of the really, really wealthy have somewhat modest incomes (but way, way largerthan probably anyone reading this) but they have significant capital gains income. What fuels America is investment of dollars. No one can build a building, create a factory, or farm land without investing capital in the effort. The more capital we have to invest in our economy, generally the better off we all are. I don’t want to see the government (continue to) be the investor for capital. One needs to remember that if we pull out X thousands or millions of dollars from a wealthy person, it will never be invested in our economy.

    As far as who pays what, the charts and articles are indeed interesting…thank you. In Minnesota I believe about 40 to 45 percent of our population pays no income taxes and in fact through the Earned Income Tax Credit they pay no taxes but get a check from the government for the estimated value of taxes (sales, gas, fuel, etc) taxes they have paid.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 15, 2010
  265. john george said:

    Paul Z.- I really don’t care for gras, whether it comes foied or not.

    March 15, 2010
  266. Norm Vig said:

    Phil, thanks for the informative articles. They seem to show that upward mobility (including intergenerational mobility) has declined substantially in the U.S., except at the top. More striking, they show that upward mobility is considerably lower in this country than in several others. They also seem to underline the relative economic decline (and increasing insecurity) of the middle class in this country. None of this is due only to the Bush tax cuts since some of these trends go back 25-30 years; but the Bush cuts certainly benefited the wealthy much more than those on the bottom. It is true, as Ray says, that a lot of people in the lower half of the economy don’t pay any (or significant) income taxes. But why is that? Why do they earn so little income? I don’t think it is because they are lazy or necessarily incompetent, but because our economic system distributes income so unequally. In fact, I think we rank at the top in the GINI index (that’s the index of national distributional inequality). Check it out.

    March 15, 2010
  267. Paul Zorn said:


    The tables Phil cited suggest to me that, as you say, 40 to 45 percent of Minnesotans effectively pay no income tax. So Minnesota income tax is indeed progressive, at least at the low end. Well done, Minnesota.

    But it hardly follows that the larger state tax system, of which income tax is just one part, is equally progressive. Indeed, the same tables indicate that total Minnesota (state and local) tax incidence for the second income quintile in 2006 was about 11.5%; for the top quintile the corresponding figure is around under 11%, and for the tippy-top decile the figure is even lower, just over 10%. Not so well done, Minnesota.

    March 15, 2010
  268. john george said:

    Norm- This is just my observations, no $$ fact links, but how much do you want to pay for a Big Mac? For those folks to make a living wage, it will raise it quite a bit from where it is. Also, I work in the furniture industry. Unfortunately, many of our manufacturers have gone to off-shore production. Would you be willing to pay $1500.00 for a dresser made in North Carolina as opposed to $700.00 for one made exactly the same way in China? My contention, and it is mainly my opinion, although I have seen figures to support it, that until we get our manufacturing processes back on shore, we are going to have a hard time paying living wages to the employees. I have heard much spin about the greed in management and manufacturing that leaves just crumbs for the employees, but I think we are all guilty of bringing the economy down around us when we buy products made with cheap foreign labor rather than support our friends and neighbors in their businesses. This could also be said for internet shopping. I don’t do this, but I know my wife orders clothing items on line (no local suppliers in this case) which sends money outside the state, and probably outside the country. What do we actually save in the long run by bypassing our local businesses? I know my health insurance program pressures me to buy from their on-line source for my meds, but I absolutely refuse to do it. I still prefer doing business face to face with someone, especially when it comes to my health issues. Sorry about this long tirade, but this subject exercises me, as my fellow blogger Paul Z. would say.

    As far as people in lower income brackets not paying any taxes, are suggesting they should be paying? Or, are you still suggesting the upper income bracket does not contribute its “fair share,” and should be paying in more? I just have a hard time pointing an accusatiory finger at people who make a large income off a business they have risked their wealth, life and families to build.

    March 15, 2010
  269. Norm Vig said:

    I agree with you that the stagnation in American wages and income are due in part to the decline of manufacturing, thanks to offshore sourcing to low-wage countries. I am not pointing fingers at anyone in particular, but the fact is that the top brackets have made off like bandits while others are not sharing in productivity increases, etc., as one of Phil’s articles showed.

    I also admire your efforts to buy locally and help the local economy. However, it is true that as a nation, income (and even more, wealth) is distributed more unequally than any other developed (say, OECD) country and moreso than in many developing countries as well. This was true even before the globalization of the past 15-20 years. So the rules of our system, including the tax system, seem to favor unequal accululation more than those of any other developed country.

    The Gini coefficient is complicated–maybe Paul can figure the mathematics out– but it does seem to show that our system distributes wealth very unequally, and increasingly so. See the tables and graph in the following Wiki article:

    Yes, I would to pay more for a Quarter Pounder if the money went to the workers.

    March 15, 2010
  270. john george said:

    Norm- I agree with the observation that wealth is distributed unequally in this country. Equality of distribution (sameness?) supposes that each individual is contributing the same value in labor and expertise into the GDP. How we are going to change this is where the debate is. The Liberal/Socialist camp has taken the position that the Federal Government is best equiped to do this. The Conservative/capitalist camp has taken the position that private enterprise and competition is the best way to do this. I believe that neither camp actually has the whole answer. There must be a balance between enough government to regulate greed and distribute resources to those in need (I don’t think that has actually worked well in the past, but that seems to be a goal) and enough private enterprise to support this plan. That is where the differences in political approaches lie. It seems that in the middle of the last century, there was a sense of cooperation between the political camps to at least have some agreement on this balance. Over the last 40 or so years, it seems there has been a polarization of the sides to the point where hardly anything productive can be accomplished. I have my opinions on why that has happened, but not many here would probably agree with them. Either way, I think this stalemate in governance has contributed to the belief, held by an increasing segment of the population, that ALL government is inept and a waste of money. That opinion is short sighted at best and just plain wrong at worst. One thing that would help is a charismatic leader that could work to unite these opposing camps. I actually thought Obama might be able to do that. Now, I am of the opinion that no one short of the Messiah will be able to accomplish that. So, like the musicians on the Titanic, we continue to fiddle while the boat is going down. Agreement and compromise doesn’t necessarily mean that all the give comes from one side. Also, to desire the failure of whomever is in power in the government is to desire failure for the whole country.

    March 15, 2010
  271. john george said:

    Norm- One additonal thought on the Quarter Pounder, one good place to start would be to at least get the beef from Midwest farmers. Parity is one agriculture program that at least attempts to level the playing field between offshore producers and the American farmer. Protectionism? Perhaps it is time we begin to protect ourselves more than just millitarily.

    March 15, 2010
  272. Norm Vig said:

    That was a good statement (124.1) and I don’t disagree with the idea of balance. We are not socialists here, whatever the Tea Baggers may say. But what I was pointing out is that the U.S. is at one extreme (the unequal) among all wealthy developed countries. That is probably due to our tradition of individualism, but it may not be where most people would prefer to be. There is a lot of room between us and, say, Sweden. Canada is a good example.

    Unfortunately, as you say, our politics have become so polarized that we are paralyzed in dealing with most problems. I have to say (and you probably won’t agree with this) that I blame mostly the conservatives who have taken over the GOP. Have you noticed that since 2006 the Republicans almost always vote 100% for the party line? It reminds me of the old Supreme Soviet when I used to teach Russian politics….every member raised their hand at the same time, just as we see in N. Korea today.

    It was very different 20 (actually 19) years ago when I was working for Paul Wellstone in the Senate. Paul made friends with many of the Republicans, including some of the most conservative: people like Orrin Hatch, Ted Stevens, and yes, even Jesse Helms after his initial blowup at him. Paul used to tell me that he had more personal friends on the other side of the aisle than on the Dem side. David Brooks commented well on this in his column this morning:

    I admit we used the filibuster once. Our staff organized a filibuster against bringing George H.W. Bush’s energy bill to the floor because it contained a provision allowing oil drilling in the Arctic National Wildlife Refuge. We prevailed on Nov. 1, 1991, and the bill went back to committee. Three months later, in February 1992, the bill passed easily (the Energy Policy Act of 1992) without the ANWR provision and with somewhat stronger support for renewable energy. I am not sorry we did it; otherwise ANWR would be full of oil rigs today. But the point is, it was still quite easy to compromise because members knew each other and could work together. The ideological barrier and lock-step party voting today is completely different.

    March 16, 2010
  273. Ray Cox said:

    I think John makes a very, very important statement when he says

    “I just have a hard time pointing an accusatiory finger at people who make a large income off a business they have risked their wealth, life and families to build.”

    I would like to see how many of the readers of this website and others in Northfield would feel if everything they owned was suddently taken away due to a downturn in the economy. That is what has happened to hundreds of amall business ownerss…from building contractors to restaurant owners to florists… all across the country. They all signed personal guarantees when times were going good, pledging all their assets to the banks and finance companies. When things hit the skids the financiers came calling.

    My question for Norm is: What return is adequate to risk everything you own as you create jobs and try to make a living? How much more should the government take from you in the form of taxes? (Remember taxes are taken as the first dollar out of a business, not the last.)
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 16, 2010
  274. Norm Vig said:

    Ray, I don’t know what a fair return on risk is; I guess it depends on what kind of business you’re in, and how risky it is. I know that small business has taken a terrible beating during this recession, and I certainly sympathize. I don’t care how much money people make, but I do think those who make a lot should pay at least as much (and I would say, progressively somewhat more) than the average taxpayer.

    I heard last night that the health care bill about to pass Congress (maybe) contains a 35% tax cut for small business. The jobs bill that has passed (with bipartisan support!!!) also contains tax credits for employers who hire new workers. Maybe these will help. Hang in there, we all have the highest respect for you.

    March 17, 2010
  275. john george said:

    Norm- I response to your comment-
    “I don’t care how much money people make, but I do think those who make a lot should pay at least as much (and I would say, progressively somewhat more) than the average taxpayer.”
    according to the figures, they presently do. How much more are you suggesting they pay?

    March 17, 2010
  276. Paul Zorn said:

    John, Ray,

    I think you overstate the case, John, with talk of “pointing an accusatory finger” and putting one’s life at risk. Whose “accusatory” fingers do you see “pointing”, and whose lives are at risk? Taxes, large or small, are not “accusations” in my lexicon.

    All rhetoric aside, I think your observation, Ray, that small business owners are hurting, perhaps disproportionately, in the present economy is right on, and I doubt that many “readers of this website” would disagree.

    How we should react to this as a society is a good question, and tax treatment of people who are hurting — whether small business owners or not — should reflect their condition. And the matter is surely complicated for small business owners, whose personal and business lives are, apparently, often intertwined. (Presumably this sometimes works to owners’ advantage as well … but we’re talking now, not then.) Perhaps tax codes can/should be changed to disentangle these things.


    What return is adequate to risk everything you own as you create jobs and try to make a living?

    too is a good question. I’d be very interested to know how you, Ray, would answer it. Should government back-stop risky investments? If not, how would you recommend that government help with this problem?

    March 17, 2010
  277. Norm Vig said:

    The top rate has been much higher in the past than it is now. I am not suggesting it should go back to the highest levels, but I do think the Bush tax cuts were unwise and should be allowed to expire. Let’s also remember that a lot of corporations and wealthy people (and I am talking about the really rich) pay little or no income taxes because of loopholes in the tax codes that allow them to shield their assets. People in other countries seem to be able to bear higher tax burdens and still have incentives to invest (not to mention providing universal health care, etc.)

    March 17, 2010
  278. Ray Cox said:

    I’m not going to go into great detail about how business taxes and personal taxes work, but one of the major problems with the ‘tax the rich’ mentality is that most of the ‘rich’ are not really rich. The vast majority of jobs in America are created by small business owners. By far and away most of these owners are organized as LLC’s, Sub-chapter S corporations, or LLP’s. In each case every dime of earnings flows through to the personal income tax return. But in many, many instances the dollars are not really there, and/or the dollars are being put to use to grow the business and keep people working. So a business owner who shows $250,000 of income might actually take home $75,000 of income….but pays taxes on the full $250,000. Taking another $25,000 of taxes from this person will simply push them to close shop. I’d much rather see these people stay in business, keep their employees working and paying taxes, and not try to chase them away.

    The whole percentage tax rate is something that should be put aside. High earners in Minnesota pay considerably more in income taxes than low earners….period. I will never buy into the rhetoric that adds in estimated amounts paid for real estate taxes, sales taxes, gas taxes, insurance taces, etc. etc. and arrives at the percentage figures that show that the ‘rich’ are not paying enough. With the exception of income taxes, virtually all our other taxes are optional. If you don’t want to pay real estate taxes, then live in a modest home. If you don’t want to pay cigarette taxes then don’t buy them. If you don’t want to pay gas taxes then walk or ride a bike. But we need to quit trying to use percentage of income as a basis for looking at taxes.

    Paul, my answer to you on what we can do to help our business is two things: 1) don’t enact new tax burdens and 2) don’t enact all sorts of new regulations. Let our businesses grow and flourish if they can. I am not advocating for reducing any taxes. As I did when serving in the legislature I’m fine leaving our taxes as they are. I have less of a problem increasing direct benefit fees if that is needed, as fees are typically related to optional activities (smoking, hunting, fishing, etc). But our tax structure seems fair as it is. However, we then need to create spending budgets that are in line with our revnue…something the legislature has failed to do in recent years.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 17, 2010
  279. john george said:

    Paul Z.- The “accusation” is that the very rich do not pay enough of their wealth in taxes. Again, my question is- What is enough? Also, if you take a look at Bill Gates as just one example, he has bypassed the government to give directly to the areas of need. When you make that much money, I suppose you don’t have to rely upon the government to find a way to distribute it.

    March 17, 2010
  280. Randy Jennings said:


    Maybe you should go into more detail about your scenario. It is probably theoretically possible that a business owner might generate $250K in revenue with no offsetting expenses or deductions, but it is highly unlikely that he or she will pay taxes on every dollar of revenue. In your example, whatever caused the revenue to shrink from $250K to take-home pay of $75K were probably deductible costs of doing business. If that business owner was paying taxes on every dollar of revenue, he or she needs a new accountant, not tax relief.

    March 18, 2010
  281. William Siemers said:

    Ray…regarding your example…”But in many, many instances the dollars are not really there, and/or the dollars are being put to use to grow the business and keep people working. So a business owner who shows $250,000 of income might actually take home $75,000 of income….but pays taxes on the full $250,000. Taking another $25,000 of taxes from this person will simply push them to close shop.”

    As you know wages and salaries are above the line expenses. Maybe the owner invests in a piece of equipment or machinery, or a building, or buys a competitor out, in order to ‘keep people working’. But that is a choice and an asset that is then owned and can be depreciated. Alternatively, the same equipment, machinery etc. can generally (at least before the credit crisis) be leased, and the use then expensed as well. It’s up to the owner.

    Most of the comments here have been about rolling back the Bush era tax cuts. I agree with that. Many small businesses were thriving prior to those cuts…I don’t think that removing them will cause the sky to fall for small business.

    Otherwise, I agree about the pretty much meaningless ‘tax inequality’ per centages. The lowest ‘quintiles’ supposedly pays a greater per centage than does the highest quintile. The way this is calculated is very creative: sales taxes and corporate taxes make up the majority of the lower quintiles percentages. But in MN, food and clothing are not taxed, so what are the poor paying these sales and corporate taxes on? Furthermore, I don’t see how the compilers of this list can assume that all corporate taxes are passed on to begin with.

    I think we can go back to pre-Bush era federal income tax rates without disrupting the economy in any significant way. Maybe the increase could be phased in to appease the right about potential negative effects. But let’s mute the rhetoric about addressing ‘fairness’ for the poor in the tax code. We have many programs to address absolute poverty. Reducing, if not eliminating, absolute poverty should be a continuing goal of society. Relative poverty is another matter. The poor will always be with us. Income inequality is part of the economic system. One might say it’s the basis of the system. We need a tax increase on the richest folks to reduce the deficit, not to eliminate the ‘unfairness’ of being relatively poor.

    March 18, 2010
  282. I think we can reduce the need to tax so much. Govt systems are terribly inefficient bloated things that need to have efficiency experts go over with a fine tooth comb, or a big toothed comb would do also. I am not talking about the protective services, but the office stuff is real torture, slow, everlasting, mind numbing torture to both the govt employee and those they serve. I am all for creating jobs, but let’s create jobs that have a innate purpose towards improving life for all of us, rich or poor. How about it? Any courses being offered, any retired people looking to help us out with free classes? Any articles being written? Anyone? Anyone at all?

    March 18, 2010
  283. Paul Zorn said:


    I guess you and I use words like “accusation” differently. Yes, I do think that taxes should be more progressive than they are — which implies that the very rich could and should pay more than they do now — I don’t “accuse” anyone who ponies up what the law requires. My beef is, in some sense, with the law, which I think should give greater weight than it does to ability to pay.

    How much, you ask, is enough?

    I like “how much?” questions, but this one is more complicated than one number or percentage can fully answer. What kind of answer are you, John, looking for? A maximum number of dollars? A maximum percentage of income?

    Whatever the form of the question, it’s complicated because, for one thing, the answer depends on things we can never predict in advance. Who knew, for instance, that we’d incur immense expenses associated with Iraqi and Afghan wars? And future costs of medical care—with or without any possible changes now in the offing—are both huge and impossible to predict with confidence.

    The question depends, too, on what you or I mean by “enough”. We may disagree, for instance, on how medical costs should be paid in the society. (As you know, we now have socialized medicine for one large group, self-financed medicine for another, and little or no medical coverage for still others.) Given that we now spend around 15% of our economy for medical care, the government’s role in paying makes a big, big difference to “how much is enough”.

    So much said, I’d venture a few numbers. Government at all levels now spends something like 30% of our economy. If health care changes come about, as I hope, this figure will presumably rise, but with the offsetting effect of individuals spending less than they now do on health care. If, say, the 30% figure rises to 35%, then the additional money would have to come from somewhere, and a good portion of that would have to come from income taxes. I’d estimate that, to accomplish this, income tax revenue at all levels of government would need to rise by something like 15%. (If you now pay 20% of your income in income tax, for instance, a 15% increase would take that rate to 23%.)

    So … there are some numbers, for what they’re worth. How much do you think is “enough”?

    March 18, 2010
  284. john george said:

    Paul Z.- I am glad to see that you are in the same conundrum as I. Neither one of us has a good idea of what is enough for this “super rich” few percent of the population to pay, and how to even go about determining that ammount. If we approach the need from this standpoint, as just an example, and hold the 95% of the population that makes less than a quarter million/yr. at the present levels, but increase the tax rate on the other 5% to cover the billions of dollars we are short in the budget, that would be one method. But, what would this do to the economy? I suppose the likes of Bill Gates and Warren Buffet could handle this and still have something left to live on. I read an opinion in another thread on this blog that went something like this- Just because someone has a right (or ability) to do something, that does not make it right. I thought that was a rather profound statement, and one that could be used in about any situation where there are opposing views.

    Did you get a chance to read this article on this link I posted in 121.1, and I repost here?

    I think the writer makes some observations that have merit.

    March 18, 2010
  285. Paul Zorn said:


    In 126.1.3 you say:

    Paul Z.- I am glad to see that you are in the same conundrum as I. Neither one of us has a good idea of what is enough for this “super rich” few percent of the population to pay, and how to even go about determining that amount.

    I don’t fully buy this paraphrase of my supposed views. I guess I don’t feel quite as clueless as this might suggest.

    Yes, taxation poses difficult questions, including yours: how much should the top 5% pay? But the difficulty arises less from any mathematical complexity than from the ill-posed nature of the problem (I asked for some clarification above, and didn’t get it) and from irreducible uncertainties about the future.

    None of this implies, however, that we should just throw up our hands in defeat. Doing nothing, after all, amounts to doing something — what we’re doing now. I believe, as I’ve said, that adding some progressivity to our tax system is a good thing — even if nobody can say exactly how much progressivity would solve all of our problems forever.
    More …

    If we … hold the 95% of the population that makes less than a quarter million/yr. at the present levels, but increase the tax rate on the other 5% to cover the billions of dollars we are short in the budget, that would be one method.

    I hear the rustling of a straw man. I’ve never recommended, and don’t plan to soon, that these favored few solve all our problems, even if they could. But they (and I, who am not in this category) could do more than they/we do without undermining the foundations of capitalism.

    You ask:

    Did you get a chance to read this article on this link I posted in 121.1, and I repost here?

    Yes, and I commented on it above, to the effect that it addresses only income taxes. The big picture is … uh … bigger.

    March 19, 2010
  286. Ray Cox said:

    Randy, the point I was making is that if a business owner pays herself $75,000, but as part of that reports income of $250,000, it is highly unusual that the $175,000 is just sitting there ready to be drawn out of the company. You are correct in that there most likely are all sorts of assets that are purchsed with the money. And they are not necessarily deductible costs of doing business. There are a variety of tax options available to businesses that may be used….or they may not be used. For example, businesses may elect to take a full Section 179 deduction for a piece of equipment, up to the allowed limit. Or they may elect to depreciate it over a period of years. Etc. Or, as William points out, they may lease it and have a deductible expense. But the bottom line is if we can keep capital flowing in businesses it will generally create more jobs and opportunity for people.

    Randy, I believe I understand what you are meaning about how business taxes work, but why not let businesses keep and put more of their earnings at work…then tax it when they take it out of the company? You can do that if your are a C corporation, but then you tax it when you earn it, and it is taxed again when it is taken out of the corporation. That is why most businesses organize as subchapter S or LLC’s.

    William, I agree with you that allowing the the tax cuts to expire will not end America as we know it. But I also believe that allowing them to expire will create a huge stress in an othewise fragile economy. I’m sure we can absorb the tax increase back into the system…but what will be the cost? Caterpillar announced today that their best estimate on what the Obamacare health plan will add to their corporate expense is $100 million. How will they compete with Komatsu if that new burden is placed on every trackhoe, dozer and packer that they make? We have to figure these things out before we charge ahead with untested and unknown plans.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 19, 2010
  287. Jane Moline said:

    Ray: If a Sub S makes 250,000 and only takes out 75,000 in salary it is usually because they are avoiding SS tax (on about 30000), and the other 175000 is definitely available to them–if they spent it on capital improvements they deducted it and they do not have 250,000 of income.

    There is a move to force all S Corp income out as earned income since S corp owners often manipulate their salary to avoid SS tax.

    Most people will not close shop just because their expenses went up 25,000–if they are making 250,000 and now are making 225,000, they may not like it, but I don’t know any that are closing up shop.

    On the other hand, I have plenty of clients losing money just trying to hang on through this recession–they don’t have to pay much in taxes–like none–but that is not enough to keep them going–if the economy does not pick up, I think we are going to see a lot more people going under.

    The Bush tax cuts were for the wealthy and made the wealthy wealthier–they did not stimulate the economy at all. Bush tax polices are big losers. When we have had fairer tax policies–wehre the wealthy have paid a more proportionate share–we have had a more stable business economy. And the wealthy did not pack up and move to Italy.

    Right now we could stimulate the economy by moving to universal health–which would remove a big huge business expense off of businesses–and schools and local governments. That would help everybody.

    March 19, 2010
  288. Ray Cox said:

    So Jane, how much do you think it will ‘stimulate’ my business if Obamacare passes? We have HSA insurance which does not qualify as an allowable insurance plan, so I will be forced to pay an additional 8% payroll tax. Or I can abandon the private insurance President Obama has said over and over I will not have to do….and sign up for some government plan. Or, I can shut the doors and simply not deal with any of this any longer. From what I know that is the choice. How will your clients that are barely hanging on, including me, going to view this plan as a savior to business as you indicate? To me it just looks like we will have a gun at our heads…either pay up and slide further down the economic decline, or join some government plan…or quit business.

    Also, there are a lot of other reasons that owners don’t take all their earnings out of a subS….working capital needs, requirements for performance bonds, and on and on. The idea that all subS organizations simply arrange their salaries around SS is a falsehood that the liberal left has been spreading for years. Business owners generally do what is wise to do to stay in business.

    I don’t know how much more you want the ‘wealthy’ to pay in taxes. See the earlier postings on that issue. I think most people understand that the percentage comparisons that became so popular 5-6 years ago don’t hold water and were just another way to try and create a drive raise taxes. It has not worked very well because the basic premise is so flawed. William summarized it very well in #129.

    Finally, where would that huge business expense for health care in the schools and local government move to?
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 19, 2010
  289. Tracy Davis said:

    Jane, I must need a new accountant. I’m OBVIOUSLY using the Sub(S) all wrong.

    March 19, 2010
  290. john george said:

    Paul Z.- You did not give me any firm figures, either $$ ammounts or % of income, that you think would be fair. That is the only point at which we both are. I don’t have a definite figure, either. The example I gave, re. just increasing the rate for this income level, was just that- a point of discussion. To say we are giving up by doing nothing is to suggest that the whole government will discentigrate around us if we don’t raise the taxes on the rich. They are paying 28% now, so I don’t believe this is an accurate result of making no changes to the tax code. Would you prefer 35%? 40%? 50%?

    As far as what the article investigated, there was more than just income tax adjustments with the Bush proposal. It included different rates on capital gains, also. The figures are in there. The result of this was a net increase in tax revenue, not a decrease, so to say the Bush tax cuts ruined the country and the economy is not really accurate. The thing he failed to do was curb the growth of government spending. Reagan was able to accomplish this, so his cuts worked. Bush’s would have worked, also, had the size of government growth during his presidency not outstripped the increase in tax revenue.

    Also, regarding your request for clarification, I’m sorry, but I’m not understanding what you are asking me to clarify.

    March 19, 2010
  291. Randy Jennings said:

    All of your challenges to Jane re: the cost of health insurance are completely valid, so why is it so difficult to reach the logical conclusion that what the nation needs is a single-payer, universal national health plan? We will not control costs until two things happen: 1) EVERYONE gets into the risk pool, and 2) we come to grips with the fact that we cannot afford to provide all possible services to all people. Before anyone is tempted to go all Palin on me and start shrieking about “death panels,” let’s acknowledge that we already ration care in this country, we just don’t do it openly and rationally.

    I completely support your observations that the cost of health care is an undue burden on employers large and small. Although it made sense at the time, coupling health insurance to employment has proven to be a big mistake, saddling American businesses with a cost burden not shared by our global competitors. We can continue to stubbornly go it alone, in our individualistic, capitalistic way, or we can admit that other nations have been more rational in accepting the cost benefit trade-offs of dealing with health care as a national, not a commercial, problem.

    March 20, 2010
  292. Norm Vig said:

    John, I wonder where you get those numbers that show that the Bush tax cuts led to an increase in revenue, not a decrease. In her commentary on Congressman Ryan’s proposals in this morning’s Strib, Rep. Betty McCollum suggests the opposite, as have most accounts:

    “As for how Ryan would reduce the deficit, he thinks providing hefty tax giveaways to the wealthiest Americans is a good idea. According to the Tax Policy Center, the Ryan plan cuts taxes in half for the richest 1 percent of Americans — those earning more than $633,000 per year. For the really wealthy, the top one-tenth of 1 percent, Ryan offers an average tax cut of $1.7 million a year. That is in addition to the extraordinarily generous tax cuts high-income households would get from making the Bush tax cuts permanent. Let’s not forget that former President George W. Bush’s 2001 and 2003 tax cuts alone have added $1.7 trillion to the national debt between 2001 to 2008.”


    March 20, 2010
  293. Randy Jennings said:

    My observation is that tax cuts like those the Bush administration pushed through increase wealth (the rich DO get richer), but do not necessarily increase employment or the kind of business investment you describe. As evidence I’d cite the increasing concentration of wealth we’ve seen over the past decade, and the struggle we are having rejuvenating employment, even as the stock market surges back toward its pre-recession levels. Wealth is again being “created,” even as employment and per capita income stagnate. We aren’t going to address this disparity by lowering taxes.

    I’d probably be pretty supportive of your idea that an individual business owner, with his or her own money at risk, should be given better tools and opportunity to retain earnings and invest in his or her business, increase employment, and so on. BUT, and to me it is an enormous but, the cost of operating society still must be covered, and right now almost no one seems to think those costs are being shared equitably. Every special interest — left, right and center — claims it carries more than its far share.

    With respect to your hypothetical business owner: you make a good argument for thinking more carefully about how we tax small businesses. You don’t need the hyperbole of claiming every dollar of revenue is taxed when, under any corporate structure or business scenario, that is highly unlikely. If you’re talking about a small business owner who generates a $250,000 PROFIT, but only takes out $75K as an owner’s draw, then how the remainder is taxed becomes a more interesting and likely question. Again, I’d suggest that we have a Byzantine set of rules, deductions and credits, which Jane or any good CPA will probably be able to use to reduce that number. In the scope of the national economy, therein lies the problem. That’s how we get an Enron, with its “special purpose entities,” the special purposes of which were to evade taxes and primp the corporate balance sheet. That’s not your small business scenario, I know, but another point on the spectrum.

    Remember Steve Forbes and the flat tax? Maybe he was on to something.

    March 20, 2010
  294. Paul Zorn said:


    You say:

    You did not give me any firm figures, either $$ amounts or % of income, that you think would be fair.

    Actually, I *did* mention some specific figures, such as the idea that the total revenue from income tax might need to increase by something like 15% if government assumes a larger role than it plays now in health reform. This would imply that people now in the 28% marginal tax bracket might move up to 32% or 33%. Keep in mind, by the way, the difference between absolute and marginal tax rates.

    Whether a 33% marginal tax rate is “fair” or not (I think it is; I suspect you don’t) is another interesting discussion. I’m glad to have that discussion, but let’s acknowledge that “fairness” depends on philosophical/moral/you-name-it principles, and so can’t “fairly” be summarized in a single number or percentage.

    More …

    To say we are giving up by doing nothing is to suggest that the whole government will [disintegrate] around us if we don’t raise the taxes on the rich.

    Another straw chap … this was not my point, and I said nothing about government disintegration, whatever that may be. I’d rather defend my own views than somebody else’s caricature of them.

    Still more …

    … there was more than just income tax adjustments with the Bush proposal. It included different rates on capital gains, also. … The result of this was a net increase in tax revenue, not a decrease, so to say the Bush tax cuts ruined the country and the economy is not really accurate. The thing he failed to do was curb the growth of government spending. Reagan was able to accomplish this, so his cuts worked. …

    Tax cuts may sometimes stimulate the economy, but the idea that tax cuts increase tax revenue has been broadly debunked. Here, for example, are some quotes (find them and much more in Wikipedia; search on “supply side economics”) … note the pedigree of the the first quote-ee:

    Greg Mankiw, former chairman of President George W. Bush’s Council of Economic Advisors, offered similarly sharp criticism of [supply-side economics] in the early editions of his introductory economics textbook. In a 1992 article for the Harvard International Review, James Tobin wrote, “[The] idea that tax cuts would actually increase revenues turned out to deserve the ridicule…”[19] While few modern economists claim that tax cuts will completely pay for themselves, some empirical and theoretical research suggests that tax cuts do help to pay for themselves through increased economic growth, though the end result, even conservative economists contend, will be a significant reduction in revenues.

    You could clarify things for me, finally, but (i) explaining what you mean by “fairness” in this area; and (ii) offering some of your own suggestions, including numbers, for how government should be financed.

    March 20, 2010
  295. Paul Zorn said:

    Ray, Randy, et al.,

    There’s an interesting discussion here, but it seems to me to conflate several interesting but different issues that ought to be disentangled.

    Issue One: how personal and small business taxes are or should be linked or de-linked. Knowing even less about this question than I do about other things I feel free to bloviate on, I’m glad to watch from the sidelines.

    Issue Two: the proper role of businesses, large or small, in providing and/or paying for employees’ health care. I’d like to see that role diminish to zero. A single-payer system seems the cleanest and IMO wisest way to achieve this. But it’s not the only possible approach. A government might, for instance, simply require everyone to buy some package of health insurance on the open market; the poor would need subsidies. Such a plan might be wise or silly, but it gets businesses out of the picture.

    Issue Three: progressivity (and how much) vs flatness of income tax rates. I want progressivity. Ray, you seem to agree (correct me if I’m wrong, of course) at least qualitatively, as you support Minnesota’s present mildly progressive income tax structure. My (data-free) hunch is that most of us want some progressivity.

    But some want more than others. Randy, your quick nod to the flat tax is interesting — are you going all Forbes-ian on us?

    March 20, 2010
  296. Jane Moline said:

    Hmmm. Tracy, I think you have a good accountant. My remark to Ray is that if one is making 250,000, one is not about to close up shop because taxes increase by 25,000. I do not advocate increasing said taxes–just that Ray’s remark is unrealistic.

    Also, Tracy, if your S corp is making 250,000 and you are maxing out your salary at 108,000, you might want to discuss with your accountant why you are doing this in these hard times when you might be better off saving some of those funds for working capital in the future when your income goes down.

    But… I am guessing here that most S corps are not making 250,000 that they are setting aside for working capital. Due to current economic conditions, many of these companies are struggling to pay their work force, let alone leaving anything over for the business owner–so they are not paying much in taxes, either–and if they are like any of my clents that are struggling, they are deciding to cancel their health insurance benefits because they just cannot afford them right now.

    On the other hand, I believe in a progressive tax system–that taxes the wealthy at a higher rate then the less-wealthy–after all if you make 100 million and had to pay 50% in taxes, you still have 50 million left…(that is an extreme example, and we don’t have 50% rates even for those Wall Street traders who are taking it all home as capital gains and paying no more than FIFTEEN percent, not 50, on their millions.)

    The problem is that we need to have some taxes to pay for services, and the Republican mantra is NO TAXES are good taxes–which sounds really good to most people because they don’t want to pay taxes someday when they are rich….but reality is that a great number of people don’t pay much in taxes–but the Republican mantra scares them anyway–so we are freezing up our government because of hysterical bias against taxation.

    So tell me, Ray, did taxation hurt your business or the economic downturn? What has made us suffer–the taxation that we are all going to get because we voted for Obama or the failed economic policies of a greedy selfish Republican president and his cronies?

    March 20, 2010
  297. Randy Jennings said:

    No, I’m not going all forbes-ian on you. The piece of Forbes’ flat-tax idea I found interesting was the simplicity of a uniform treatment of income. You could do that with a flat tax (and it could still have an indexing component that expects more of people who have more), with a value-added tax, or with some other scheme. The system we have is expensive to operate, siphons off resources that could be put to more productive uses than compliance with tax regulations, invites fraud and abuse, and it doesn’t raise the funds we need to operate government.

    Personally, I’d want to build in a “progressive” foundation in the form of an income threshold below which we extract no income taxes and in fact provide benefits related to health, education, shelter, etc… Ray’s comments about small business owners has gotten me thinking that perhaps we need to distinguish between businesses where an individual owner is 100% at risk, from those where the risk is dispersed among shareholders. I want to think about this a little more, but I might be sympathetic to a tax policy that extracts a lesser tax burden from the individual, at-risk business owner, and a larger tax burden from the investor class. At a minimum I would eliminate the distinction between ordinary income and capital gains.

    As long as I am bringing back chestnuts from the past (like Forbes), how about Huey Long? Back in the early 1930s, the senator from Louisiana’s Share Our Wealth program certainly fit the “progressivity” bill… See

    March 21, 2010
  298. Paul Zorn said:


    Thanks for not being too Forbes-ian. As for Huey P. Long, I’ll reserve judgment, but suggest you begin your campaign with a hit song:

    The official slogan of the Share Our Wealth movement was “Every Man a King,” which also became the title of a song co-written by Long in 1935 to promote his proposal.

    Seriously, I like simplicity in taxation, especially if it can be had along with other important virtues, like progressivity, fairness (a sticky concept, admittedly), proper treatment of business income, encouragement for charity, etc. Whether great simplicity is really compatible with a large and complicated economy remains (to me, anyway) to be seen. I think the jury’s out.

    The flat-tax-with-income-threshold system you (and your buddy Steve, for that matter) describe is, IMO, best thought of as a two-rate (or one-step) program: Income is taxed at 0% up to some threshold $L, after which a new rate, r%, kicks in. The live questions concern values of L and r .

    March 21, 2010
  299. Ray Cox said:

    Jane, you being the CPA in the crowd, might have the best answer to what hurt me and many other small businesses in 2008-9. When a company loses substantial dollars in a given year, but has accumulated and banked assets over a 30 year period of time, whose money is lost?

    To answer yor question, the economy has made things very, very difficult in my business and a lot of other businesses. But struggling to pay real estate taxes (with the special state general tax), license fees, registration fees, etc during a time when there are no earnings is equally hurting for these buinesses.

    Jane, SOME Republicans may be crying the mantra of no taxes, SOME may be crying the mantra of no new taxes, and many may be crying the mantra of evalute what is truly needed and create fair funding to support it. Painting all Republican’s with the same brush is the same as saying all Democrats are latte drinking, Volvo driving, snobs who want to confiscate 90% of everything you own and create a government that regulates everything you do. I believe what most people want is a government that is not frozen, but one that communicates with itself and more importantly, with the people….then creates policies that make sense and work.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 21, 2010
  300. Patrick Enders said:

    Back to the original topic:

    Let’s critique the speech and his first year in office.

    It took a little more than a year, but President Obama just accomplished something pretty darned big tonight – bigger than any other progressive reform in my 40-year lifetime.

    Yes we can. And, in this case, did.

    March 21, 2010
  301. john george said:

    Ray- Hear! Hear! I think many people, no matter what their political stripes, are tired of the stagnation of movement we seem to be experiencing in government. I also think that positive movement is not going to happen until we stop pointing fingers at one another. I keep listening for a unifying voice out there in all the clamor.

    March 21, 2010
  302. john george said:

    Paul Z.- I’ll take a stab at clarification. 1) I personally do not like the term “fairness” when it comes to evaluating tax burdens. It seems to be a subjective term, and I think produces more separation in the general populace than unification. There must be some standard by which actions are judged as “fair” or “unfair.” We really do not have anything like that in this country.

    2) As far as financing the government, this must be done through taxes, since benevolence is not really an inborn trait in anyone. It is a quality that must be trained and nurtured. There are two sides to the argument going on right now. One is that the government is too large for the economy to sustain it. The other is that we have all these programs that cannot be ended, so we must increase the taxes to support this largwer government. It is a little like a sparrow hatching a cookoo chick in its nest. The cookoo chick grows larger faster than the sparrow chick, thereby exhausting the parents’ efforts to keep it fed and starving out the sparrow chicks. What I’m trying to differentiate here is the difference in the philosophies by which we are approaching the problem. We may not know the results of our economic tinkering until some time has elapsed. What is a fear for some people (and I admit, it is hard to validate it with hard figures) is that we will come to a point in time and say, “Oops!”, and at that time have no way to reverse the effects. One hard fact that has contribted to these fears is the increase in the national debt over the last year.

    March 21, 2010
  303. john george said:

    Patrick- Let’s hope it works.

    March 21, 2010
  304. Phil Poyner said:

    Aw man….do I really have to get a Volvo?? 😉

    March 21, 2010
  305. Phil Poyner said:

    Unfortunately it ain’t over until the fat Senate sings (again)…and so the legislative theater continues. I know the Senate feels they have the votes, but still…

    And John, I may be a liberal but I’m just hoping for the best as well. This whole process has been enough to leave anyone feeling uneasy.

    March 21, 2010
  306. Patrick Enders said:

    The Health Care Reform bill has been passed by both the Senate and the House – and, I think, signed into law by the President.

    The only thing left is a second bill that, if passed by the Senate, will make a few small financial fixes to the overall plan. Even if that were to somehow fail, the principle reforms will remain the law of the land.

    March 22, 2010
  307. Patrick Enders said:

    Well, there are two things that reduce those worries. First, Harry Reid sent the House a letter signed by more than 50 Senators pledging to pass reconciliation. Second, since this bill contains some very common sense improvements to the law that has just been passed, it will look quite silly if the Republicans spend all their time trying to prevent the repeal of the “sweetheart deals” and the like that they have been quite right to criticize.

    For a contrary opinion:

    The key decision that made reconciliation problems an irritant rather than a roadblock was to treat tonight’s expected passage of the Senate bill as the victory and to sign the bill immediately. Back when Republicans thought they could stop the Senate bill by stopping the reconciliation fixes, any problems in that package posed considerably more danger to the Democrats. Now, passing that package is a bonus.

    Plus, if anything popular gets struck from reconciliation and left out of the final fixes, Democrats can bring it back through the normal order and let Republicans spend their time filibustering something they’ve repeatedly said they think Democrats need to do for the good of the country. Insofar as Democrats want to hit Republicans for being obstructionist above and beyond actual policy disagreements, that will be the perfect example.

    In the end, I could live with those things, and even with a major setback in the next election for Democrats, because for once, they did something really great for the country.

    Elected majorities come and go. Obamacare, like Social Security and Medicare before it, will be with us for the rest of our lives. And that will be a very good thing.

    March 22, 2010
  308. Paul Zorn said:


    You say:

    1) I personally do not like the term “fairness” when it comes to evaluating tax burdens. It seems to be a subjective term …

    Yes, fairness is a subjective concept. I’m sorry you don’t like the term, but is there a better one? And shouldn’t we all, like it or not, worry about the fairness/equity/justice/impartiality/reasonableness/propriety/rightness/ of our tax system?

    There must be some standard by which actions are judged as “fair” or “unfair.” We really do not have anything like that in this country.

    If you’re just saying again that “fairness” is difficult to define and achieve, then I agree, and that will also be so, not just “in this country” but everywhere. So let’s do what we can based on our own good-faith ideas of fairness; there’s plenty of room for improvement.

    Re your paragraph 2., again, with respect, I think you caricature one side of the (legitimate) role-of-government debate with talk of cuckoos, sparrows, etc. A less tendentious way of framing the question, I think, is in terms of public investment in the public good. Some investments are wise and others foolish; the hard part is telling the difference.

    March 22, 2010
  309. Jane Moline said:

    It ain’t pretty but it passed. Now we can get down to the real work of making it work.

    And Ray–you know that with every dollar your business loses it is YOUR dollars–every dollar of “deductions” are YOUR dollars–people who think businesses are getting some big benefit by paying expenses are living in an alternative reality–and one of the reasons our tax policy is so important–all these dollars are real dollars to somebody–

    There was a very interesting proposal made to the Minnesota legislature some years ago that would have had ALL children to age 18 coverend under a universal health insurance policy (all Minnesota kids). Corporations were projected as saving money as they would not have to offer expensive family medical coverage–only coever their employee and maybe spouse–but it was paid for by a modest corporate tax. Corporation were reasonable skeptical–would the modest corporate tax be increased to pay for other services? So corporations opposed it –but what it showed is that corporations would save money if MORE people were covered by health insurance and corporations were relieved of that “deduction.”

    The fact is that if we covered everyone in the United States with health insurance total costs would come down–critcism of this new law is that it does not go far enough in requiring coverage for all–we are still not covering 20 million Americans and many more are on the brink of losing their coverage due to economic conditions–they lose their job or just can’t afford the premiume any longer–while the penalties for not having coverage are not steep enough to encourage compliance or pay for that coverage.

    Now that we have it we will have to see how we can make it better.

    March 22, 2010
  310. One thing that has been overlooked is the fact that lots of people don’t want professional medical assistance. Some just want to die when it’s their natural time.
    It’s not something to be feared. We all die. All of us.

    Furthermore, if a person is so ill that they are going to die within a year or so, let’s say for an example, they are not going to be paying any insurance premiums if
    they are poor, or if they are just too handicapped to work…and there are lots of people like that. I don’t know if there are already provisions,but hopefully they’ll be corrected soon if there are.

    March 22, 2010
  311. john george said:

    Paul Z.- I agree with your comment,
    “Some investments are wise and others foolish; the hard part is telling the difference.”
    I think we are probably both realists when it comes to evaluating things as uncertain as economic trends and people’s preferences. In fact, I think that if either of us had a sure fire way of doing that, we could probably live much higher than we do. You are the type of liberal with whom I can at least have a discussion. Thanks for taking the time. Now, on to the next job of making this health care bill actually work, as Jane has so aptly suggested.

    March 22, 2010
  312. Ray Cox said:

    Jane, I’m not sure how if I follow your logic in stating that if we cover more people our health care costs will go down. The people we are covering don’t pay for the health care coverage. We are doing that right now, although in a rather inefficient manner. But I don’t see how costs will go down.

    While many readers are lauding the great health care bill just passed, time will tell us all how it will serve America. Some think we just witnessed the end of America in that we will take on so much more debt over the next decades that it will bury us. Others think it is the best thing since sliced bread.

    It is important to remember there is no free lunch—-someone somewhere will be paying for anything new that is added to America’s expenditures. It is also important to remember that in 1965 the goveernment actuaries estimated that in 1990 medicare would spend $9 billion on its health care program….we ended up spending about %63 billion. That of course is why medicare is in so much financial trouble. Have the recent actuaries done any better on estimating costs? Will our government really pull out $500 billion from medicare in the next decade? Will our government really tax ‘cadillac’ health care plans to pay for plans for others? A jitter in any one of these items will make the health care plan just passed look like a disaster in short order.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 22, 2010
  313. Paul Zorn said:


    You raise some good points.

    Whether insuring people now uninsured will actually drive total costs down remains to be seen. But, as you say, our current “policy” of caring for these folks informally, off budget, is far from cheap. It seems quite possible that the savings involved with better organized health care will at least offset the additional insurance costs.

    The same logic, by the way, could be adduced to argue for more, not less, coverage of undocumented (aka, illegal) workers. This would be my druthers. But such reasoning seems politically toxic, and has gotten nowhere in the present legislation. To the contrary, it appears that these workers will be forbidden to participate even at their own expense, and so will presumably continue to receive only the highest-cost emergency room services. Feels to me like a bullet in the foot.

    Another good point:

    … there is no free lunch — someone somewhere will be paying for anything new that is added to America’s expenditures.

    Quite right. But let’s acknowledge that our present health system– excellent in some ways, poor in others, but far more expensive than any other in the world—is anything but a free lunch either. I don’t think it’s obvious either way whether the present legislation will help “bend the cost curve”; achieving that will probably require much more than legislation. But doing nothing is unquestionably expensive.

    … in 1965 the government actuaries estimated that in 1990 medicare
    would spend $9 billion on its health care program …

    Yes, it’s very difficult to predict the future, especially for something like medical care, which is driven mainly by non-actuarial developments, like better but more expensive technology. We’ll just have to do the best we can.

    In any event, for all the undeniable issues health care raises, with or without new legislation, I’m proud of the country for trying, however imperfectly, to face up to some of the hard financial and also moral questions that health care policy entails.

    March 23, 2010
  314. I don’t know what has changed really. I remember back in 1990, I fell and went in an ambulance to the hospital and I was charged $50 for an elastic bandage that I did not use and that I recently purchased from Walgreen’s for $3.49. I was told after much digging around for someone to talk with me that I was paying for those who couldn’t pay, without my permission.

    March 23, 2010
  315. Ray Cox said:

    Bright, you identify what one of the problems with the legislation just passed is….adding more people to the insurance pool that don’t pay anything. Maybe the government will figure out how to deal with that, and deal with exploding health care costs. If they don’t we may all look back to March 21, 2010 as the day America died.

    Paul, I agree that our health care system is expensive. That is why I so much wish Congress decided to deal with that issue instead of a simple expansion of benefits.

    It is very difficult to predict expenses into the future. The main reason that is so is because of actions Congress takes in the intervening years. If medicare would have been left completely alone I’m sure the spending gap would be far smaller. The drug expansion of a few years ago will most likely add more billions to the growing shortfall.

    At some point we either elect fically responsible leaders, or I guess we just melt down into some other form of government or society.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 23, 2010
  316. Paul Zorn said:


    You say:

    … adding more people to the insurance pool that don’t pay anything … Maybe the government will figure out how to deal with that …

    Well, the legislation does deal with that; it provides subsidies to the poor to buy private health insurance. How else would you propose that health care for the poor be provided, and paid for?

    … and deal with exploding health care costs.

    Health care costs are indeed much too high, and they got that way with a lot of non-governmental help. Government has some responsibility to “deal with” this problem, but (a) the present legislation, rhetoric notwithstanding, is far from a government takeover of health care, so the ball is not entirely in goverment’s court; and (b) but “not-government” certainly doesn’t have an enviable cost containment record up to now.

    If they don’t we may all look back to March 21, 2010 as the day America died.

    Let’s keep things in proportion. Here are some numbers and a question from economist Uwe Reinhardt’s blog:

    Start with the $950 billion price tag over the next decade for federal subsidies toward the purchase of private health insurance. Divide that amount by $34 trillion, the current projection for total national health spending over the next decade even in the absence of health reform.

    You will get 2.8 percent. Does that, then, constitute a government takeover of our health system?


    March 23, 2010
  317. Norm Vig said:

    Johh, Ray, Bright et al., there is a nice article by David Leonhardt in the Times today on the potential redistributive effects of the health care reform:

    See the graph on incomes and taxes, and note especially these two paragraphs:

    “Since 1980, median real household income has risen less than 15 percent. The only period of strong middle-class income growth during this time came in the mid- and late 1990s, which by coincidence was also the one time when taxes on the affluent were rising.

    For most of the last three decades, tax rates for the wealthy have been falling, while their pretax pay has been rising rapidly. Real incomes at the 99.99th percentile have jumped more than 300 percent since 1980. At the 99th percentile — about $300,000 today — real pay has roughly doubled.”

    And let’s not resort to apocalyptic language (“death of America”) in regard to this bill, which only encourages the crazies. If the Republicans want to challenge its constitutionality, fine, but all this stuff about armed rebellion, “reload” (Palin), and threats to members of Congress who voted for the bill are totally un-American. All we need is some more assassinations or bombings.

    March 24, 2010
  318. David Ludescher said:

    David Brooks has an interesting editorial in today’s Mpls. paper on the politics of the passage and its meaning.

    March 24, 2010
  319. Paul Zorn said:

    David L,

    I found Brooks’s editorial interesting, too.

    Here’s a link:

    I find Brooks an interesting and thoughtful commentator, and always worth reading. Here he congratulates Democrats, including Speaker Pelosi and President Obama in particular, for their persistence and toughness in making this legislation happen. He also observes, appropriately in my view, that coming years will require a much more adult approach to paying for the things we want, probably including a consumption tax and increased investment in education — and he’s pessimistic about either party mustering the seriousness to do what’s needed.

    Some of Brooks’s points I find less convincing. For instance, he seems to link our runaway health costs with our being a “geriatric” society. Sure, we all tend to use more health care as we age, but that hardly explains our high costs relative to, say, Japan, which has a much older age profile than ours, but far lower health costs. Something other than geriatrics has clearly been at work.

    Brooks also complains about the cost of a new health care entitlement, thus:

    This country is in the position of a free-spending family careening toward bankruptcy that at the last moment announced that it was giving a gigantic new gift to charity.

    Paying our bills is unquestionably a problem, and one of these days we’ll need to get serious. But while we’re speaking of feckless acts of charity, perhaps the Bush tax cuts, another gigantic gift, but in this case to the least needy, should also be mentioned.

    What’s your take, David? (Since moving to Minnesota many years ago I’ve learned that, up here, “interesting” can mean anything between bad and good.)

    March 24, 2010
  320. David Ludescher said:

    Paul: I think that Brooks has a nice manner of presenting the obvious.

    I too admire the tenacity and toughness of most of the Democrats to get this passed. I thought that it was dead a couple of times.

    From what I have heard this is hardly a bill for which the Democrats should be self-congratulatory. It reminds me a little of all the people who were walking around congratulating themselves for electing a president based upon the fact that he is one-half black.

    I too am quite pessimistic that either the Democrats or the Republican have the courage to solve the problems that they just made bigger with the passage of this bill. Now, today, ahora is the time to deal with the cost issues. No one that I know thinks that this bill will reduce the costs. The Congressional Budget Office was fed fake numbers, so they calculated and came up with fake numbers.

    America does have high health care costs, and geriatrics is a large part of the costs. The fact that many, if not all, developed nations have lower health care costs means that there is a way to have lower costs. But, it certainly doesn’t mean that Congress knows the answer, or if they did, that they have the ability to implement it. And, I saw no need to present a 2000 page bill that few have read and even fewer understand. If there ever was a time for incremental changes to see if we are headed in the right direction, this was the time.

    That said, I think Brooks’s main lament is that the party that once inspired him to believe in the American people and their government just wasn’t there in this debate, or in the vote.

    March 24, 2010
  321. Ray Cox said:

    Paul, in 146 you state
    “Well, the legislation does deal with that; it provides subsidies to the poor to buy private health insurance. How else would you propose that health care for the poor be provided, and paid for?”
    You missed my point. When you say the government provides subsidies to the poor to buy private health insurance I don’t call that dealing with the issue. Simply handing out dollars to people that won’t or can’t pay for their own health insurance does not seem like a problem solver to me. It sounds like another ponzi scheme that will blow apart at the edges very quickly.

    From what I can tell (no one knows for sure since as the Speaker was kind to point out ‘we won’t know what is in the bill until we pass it’) there is no real assurance that the numbers of people connecting up to the government paid insurance will not continue to grow and grow. And humans being as they are, why would anyone think it wouldn’t? I’m sure this health program will far, far outstrip funding in a very short period of time. As I stated before, I doubt very much that we will ever see $500 billion of reductions in medicare….won’t happen. And if the tax on cadillac health care plans, that is essential to funding this health program, is good enough to implement in 2016, why isn’t it OK to implement in 2011 and start collecting revenue to offset the costs of the plan?

    Norm, thanks for your comments in 147. I sure hope we can continue to create that kind of wealth, since we tax it heavily and will sorely need it in the coming years. If we stop creating that kind of personal wealth, as some people seem to want to do, we will have to reach further down the ‘tax ladder’ to collect what government deems necessary to extract from its citizens to operate the government.

    I’m not sure where America is headed. We might be going down the path of much of Europe where we accept 15-20% unemployment and the associated societal costs that go along with supporting that unemployment level. We also then can expect much of our capital to leave the country and migrate to more friendly places. England has had this problem as they taxed their high earners essentially out of existance. America was founded on the wonderful belief of hard work and opportunity. We may be shifting away from that in exchange for a more laid back get-along attitude where the state takes care of most of lifes concerns.
    .-= (Ray Cox is a blogger. See a recent post titled New Window) =-.

    March 24, 2010
  322. Paul Zorn said:


    You wrote:

    When you say the government provides subsidies to the poor to buy private health insurance I don’t call that dealing with the issue. Simply handing out dollars to people that won’t or can’t pay for their own health insurance does not seem like a problem solver to me. …

    Indeed, the new legislation does not “deal with the issue” in the sense of solving it painlessly or forever. But it addresses—partially, imperfectly, and not in the way I’d prefer—the problem of providing at least some health care to those who can’t pay themselves. (You mention those who just “won’t” pay; is there indeed such a free money provision? I’m dubious … .)

    Again, Ray, how do you think health care for the poor should be paid for?

    As for “going down the path of much of Europe where we accept 15-20% unemployment and the associated societal costs …”: I don’t think we will or should emulate Europe in all respects. But have you looked recently at unemployment figures there? According to Wikipedia the EU unemployment rate (9.3%) is actually a little lower than ours (9.7%). In many countries it’s substantially lower: Holland, Austria, Switzerland, Denmark, Sweden, Finland, Germany … even the UK.

    March 24, 2010
  323. Norm Vig said:

    Here’s an interesting perspective on the Republican reaction to health care reform:

    “Let’s beat the other side to a pulp!” Rep. Steve King, Republican of Iowa, shouted to the last stand of Tea Partiers on Sunday night. “Let’s chase them down! There’s going to be a reckoning.”

    Indeed there will. But as the party of the hissy fit, Republicans are playing with fire.”

    Read the whole article here:

    March 25, 2010
  324. David Ludescher said:


    In a way, I agree with you. I can’t believe that there wasn’t a single Republican who voted in favor of this bill. It signals to me that this whole process was much more about politics than health care. I hope that I am wrong.

    March 25, 2010
  325. john george said:

    David L. & Norm V.- Here is a link to an interesting article by Thomas Friedman in the NY Times:

    I think he touches on perhaps the root problem we face in this country right now in this comment:

    “Larry Diamond, a Stanford University democracy expert, put it best: ‘If you don’t get governance right, it is very hard to get anything else right that government needs to deal with. We have to rethink in some basic ways how our political institutions work, because they are increasingly incapable of delivering effective solutions any longer.’”

    I’m not convinced that the present move toward populism is healthy for the country. Friedman exponds upon this further here:

    “My definition of broken is simple. It is a system in which Republicans will be voted out for doing the right thing (raising taxes when needed) and Democrats will be voted out for doing the right thing (cutting services when needed). When your political system punishes lawmakers for the doing the right things, it is broken.”

    Pehaps we are a little like the fellow that went out to see if the bus was comming. He was struck and killed because he was looking north, but the bus came from the south. In other words, the problem is not so much with health care reform as government reform.

    March 25, 2010
  326. Jane Moline said:

    I believe the rabid partisanship can be chalked up to Republican political gamesmanship–they are the party that continually runs down their own jobs–encouraging the public to not trust the politicians to do the right thing. You do not see Democrats slamming government–but now that the Reppublicans are on the recieving end they complain about the same tactics that they used when they were in power.

    And David L–just because no Republican would vote for it does not make it a failure as a bill–that is their stated tactic and purpose–whether they agree with what the bill contains or not, they are intent on being obstructionist for obstructionism sake.

    This call to violence “Don’t relent–reload!” “Kill the bill (n@##*$)” and pejoritives aimed at congressional Democratics shows how petulant and childish–while being downright treasonous (like opting out of a federal law? What is this, 1861?) the Republicans and their buddies are.

    So, John George, there is no way to make government work if one party refuses to participate–the Republicans are refusing to work in good faith towards anything unless they can make all the rules–it doesn’t work that way.

    I say, go all the way Democrats–let the Republicans continue to show how they obstruct good government. Republicans are disenfranchising themselves. Good riddance. Lets get some Independants in there to balance out the Democrats.

    March 25, 2010
  327. john george said:

    Jane- Welcome to the populist movement! Oh, by the way, I can remember many comments posted even here on LGN that lambasted former President Bush and his policies. The Democrats have participated in this behavior just as much as the pseudo-Republican Tea Baggers. Having an opinion is everyone’s right. Expressing it in a defamitory or devisive way only contributes to overall disunity. One thing the Independent Party could learn from this is how to bridge divisions, not tear down the bridges. If they come into power on the same devisive tide, then they will fail, also. This is just my opinion, but I think there were too many people that actually believed the Democrats could do better than the Republicans during this last election. Their hopes are getting dashed with reality, also. One prime example is the about face by the current administration concerning our involvement in the Middle East.

    March 25, 2010
  328. Norm Vig said:

    I don’t have any problem with his program for the radical center, do you?

    “The radical center is “radical” in its desire for a radical departure from politics as usual. It advocates: raising taxes to close our budgetary shortfalls, but doing so with a spirit of equity and social justice; guaranteeing that every American is covered by health insurance, but with market reforms to really bring down costs; legally expanding immigration to attract more job-creators to America’s shores; increasing corporate tax credits for research and lowering corporate taxes if companies will move more manufacturing jobs back onshore; investing more in our public schools, while insisting on rising national education standards and greater accountability for teachers, principals and parents; massively investing in clean energy, including nuclear, while allowing more offshore drilling in the transition. You get the idea.”

    I think the Dems have proposed many of those things, but I doubt the Repubs would support any of them as stated. I’m not sure the government is broken, but the party system sure is.

    March 25, 2010
  329. john george said:

    Norm- Nope, I don’t have any problem, and yep, that is what both Friedman and Diamond are saying (“I’m not sure the government is broken, but the party system sure is”). These two comments sum it all up for me-
    “We have to rethink in some basic ways how our political institutions work..”
    “When your political system punishes lawmakers for the doing the right things, it is broken.”

    The Dems have proposed SOME of the ideas you reference, but they have sure gagged on off-shore drilling or ANWR drilling. I think it is interesting that ANWR was originally known as the North Slope Oil Reserve before Clinton changed the designation.

    Right now, I am of the opinion that neither party has any bragging rights on anything.

    March 25, 2010
  330. A lot of people I have spoken with are very much against the passing of a bill no one understands or has read…no matter what it directs.

    If American was cut off from the rest of the world, I think we could take card of ourselves fairly well. Other nations have done it throughout the ages. The only things people may not have is exotic foods and clothes that fit them if they change size. Maybe that is a major key to lowering health care costs…stay the same size, all you adults, or you won’t have anything to wear when the world cuts off your access to clothes…and you can’t have all that caviar and French champagne…yeah, all champagne is French, right?

    March 26, 2010
  331. Norm Vig said:

    John, it seems Obama is taking positions on offshore drilling and nuclear power similar to what Friedman is suggesting. Compromise doesn’t mean putting everything on the table (e.g., ANWR). But maybe he can find the sweet spot on energy legislation like he did on health care? I think this issue is about to heat up again (so to speak).

    April 1, 2010
  332. john george said:

    Norm- Lets hope that the next big energy legislation package is more understandable than the health care bill. One thing I do appreciate about Obama is his willingness to be pragmatic. Some of these issues, such as health care and energy production, should really be divorced from narrow political ideologies, IMO. The all or none approach has only accomplished gridlock where agreement on policies for the common good for everyone is needed.

    April 1, 2010

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