Cafe Hayek - Latest Comments in A Note on Income Data

Re: A Note on Income Data

John Dewey — Fri, 09 Nov 2007 12:38:58 -0000

Mr. Reynolds,

After reading your comment, I quickly followed the link and carefully read "The Truth About the Top 1%".

Thank you for writing this piece. I've long understood that income distribution arguments ignored non-taxable transfers. But I had forgotten that tax-deferred savings would also be excluded.

Before reading your editorial, I hadn't realized the significant shift of business income from corporate to personal tax returns. That was illuminating.

I'm going to summarize your editorial into a very brief layman's version. The next time my local Dallas or Fort Worth paper mentions "increasing income inequality", I'll be ready with a Letter to the Editor.

Thank you.

Re: A Note on Income Data

Alan Reynolds — Fri, 09 Nov 2007 10:16:54 -0000

My WSJ article spoke of the "indivdiual income tax" (and shifting in and out of the corporate tax), but was very explicit in saying the data referred to tax returns, not households, and that top quintile taxpayers average two salaries per joint return.

If the letter made a "good point" it was not a good point about anything I wrote.

Re: A Note on Income Data

John Dewey — Wed, 07 Nov 2007 04:51:22 -0000

vidyohs,

Thanks for that Ayn Rand quote. I had never before read that.

Re: A Note on Income Data

vidyohs — Wed, 07 Nov 2007 03:03:24 -0000

Strange doin's can happen inside these little machines, eh holymoly? :-)

Whether Sir Galt finds me or not will never affect what is in my stocking, my friend. I long ago understood that if my stocking was going to have something in it, it would be me that put it there.

On the same Rand-ian theme, I have adopted her response to a questioner who challenged her after a lecture, and I now preach that wisdom as my own.

Her questioner asked, "But, Miss Rand, what do we do about the poor?"

She replied, "Don't be one."

That's it in a nutshell, don't be one, and spread that wisdom to others, don't be one.

There is always a way for those who look.

Re: A Note on Income Data

please disregard previous post — Tue, 06 Nov 2007 17:16:08 -0000

Please disregard the previous post: Posted by: vidyohs | Nov 6, 2007 2:40:17 PM It was NOT posted by vidyohs. It was me - holymoly. I have no idea how that happened.

My apologies to vidyohs.

Re: A Note on Income Data

vidyohs — Tue, 06 Nov 2007 09:40:17 -0000

vidyohs --

That's good to know. Galt's place is hard to find. But when Johnny-boy shows up with a lump of coal for your stocking instead of a gold-brick, recognize it's just a reflection of the waste of productive time that blogging truly is! ;)

Re: A Note on Income Data

holymoly — Tue, 06 Nov 2007 09:31:09 -0000

John Dewey

One more followup. Tax revenues increased because baseline economic activity increased. If you believe that the decrease in taxes *caused* the economic activity, then you're in the realm of faith alone. Facts will not support you. Consider the study by Gene Amromin and colleagues at the Fed that compared the European stock and real estate markets to the U.S. over the same time period and found similar patterns of growth, despite the fact that there was NO similar tax cut in Europe at the time. If anything, it was monetary policy that contributed to the high (perhaps temporary) growth rates. The Fed was dumping money into the economy; corporate profits (and profits from flips in the housing market) were raging -- of course receipts were going to increase.

So, I recognize that since the capital gains tax cuts of 2003, capital gains tax receipts have increased(http://www.cbo.gov/ftpdocs/..., but by 2005, receipts were only about $50 billion, compared to $119 billion in 2000.

But note that receipts also increased for the last 8 or so years of the 1990s, when capital gains tax rates were much higher (statutorily, 28% max up to 1997, then 20% max from 1997 to 2003). See http://www.cbo.gov/ftpdoc.c...

(From Table 1. Capital Gains and Capital Gains Taxes, 1976 Through 2000 )

Year: % Change in FY Receipts

1993 20

1994 12

1995 10

1996 36

1997 33

1998 16

1999 19

2000 21

Re: A Note on Income Data

John Dewey — Tue, 06 Nov 2007 08:12:26 -0000

holymoly: "I didn't say "due to Clinton," I said "under Clinton." ...I will give him credit for not screwing it up!"

Well, then, we're in agreement about that. Clinton did not screw up the business environment. Sorry if I misunderstood your statement.

Re: A Note on Income Data

vidyohs — Tue, 06 Nov 2007 07:57:44 -0000

"but I can't help but think you're wasting your time and intellectual capital looking for John Galt."

'nother mistake, I ain't lookin' for John Galt, John Galt is lookin' for me.

Re: A Note on Income Data

holymoly — Tue, 06 Nov 2007 07:18:02 -0000

John Dewey --

I didn't say "due to Clinton," I said "under Clinton." You may not want to give him the credit for the high growth -- but I will give him credit for not screwing it up!

vidyohs --

Frankly, I don't think that Table 1 makes your case -- in fact, it supports my contention about the declining public debt at the end of the Clinton presidency:

(From the table):

Year: "Debt Held by the Public"

1997 3,772.3

1998 3,721.1

1999 3,632.4

2000 3,409.8

2001 3,319.6

BTW -- my "weak explanation" of public debt seems to have been totally misunderstood by you. It was a description of the legally-established accounting methods, together with a reference to a nice, balanced review of the empirical research by Alicia Munnell.

What do I believe in? I believe in the golden rule. I believe in love. I believe in Brett Favre (at least until Sunday). But, in a political-economy realm, I guess I would say that I believe in competition in well-functioning markets, with a role for government where market failure is present and correctable. I won't begrudge you your beliefs, but I can't help but think you're wasting your time and intellectual capital looking for John Galt.

Re: A Note on Income Data

vidyohs — Tue, 06 Nov 2007 04:54:49 -0000

HolyMoly,

Been out practicing capitalism since my last and I see you've been a busy busy boy.

I saw your stats reference and I checked out the URL you sent. Wonder why you chose to show us states from table 13 and not table one? Could it be because table one shows the debt held by the public, in other words part of the national debt? Oh, please, I saw your whimpy attempt to explain that "debt held by the public" away, but your explanation doesn't hold water. Much of that debt is held by the "public" of foreign nations.

See this URL http://zfacts.com/p/461.html

for a better understanding......I am sorry for more information....I realize the understanding won't come to a socialist.

The bottom line is simply that when one has debt one can not have a surplus.

One may chose to direct funds to things other than repaying the debt, but the redirection of funds is not a surplus, it is a cheating of the creditor.

However; that does not address my previous comments about laughing over the "clinton" surpluses. What I referred to (and anyone who was not catatonic knows this to be true) was the sycophantic socialist main stream media's constant reporting under clinton's management the economy was produce a 5 trillion surplus by the year 2005, and every year we were treated to news of the elevating "projected" surpluses. Then when Bush defeated Gore those "projected surpluses" became real money in the media's reporting and Bush was accused of spending the "clinton surpluses). This is all a joke to anyone with a brain because as I said, if you have debt you can not have surplus.

There that explains my laughter at your statement of "getting back to the years of the clinton surpluses", which I might add that while not huge the numbers do show that for four years running while clinton was in office the government spent less than it took in.

Who is responsible for that is debatible. Was it clinton's devout belief in fiscal restraint, or was it a republican controlled congress?

We have some evidence of clinton's attitude towards fiscal responsibility that he displayed prior to the republican takeover of congress in 1994 and it doesn't support any theory that clinton had a sincere belief in fiscal responsibility. No president can balance the national budget without cooperation of congress, and in this case I think history shows that the balancing of the budget may have been more at the results of congress than of clinton. Also, clinton had no 9/11 happen, and that was definitely a huge factor in what happened after.

I read Reason magazine every month and have been since the late 1980s, and I trust the accuracy of their articles, reviews, and editorials because I see my "street" reflecting very very closely what they write.

Reason has told me that government grew less under the clinton administration and of course that less money was spent than came in and that the excess was applied to the national debt. (note my reservations about who was responsible two paragraphs up.)

Now bush has definitely grown government and is spending more than comes in, 'tain't' no doubt about it. And, I am hard pressed to believe that 9/11 explains that growth.....so hard pressed that I d not believe it. I think baby bush, like daddy bush, is a closet socialist wearing republican skin, and baby bush had a republican congress which joined him in spending like drunken sailors. Sad to say, but there it is.

Conclusion, hate socialist, hate compassionate conservatives, stand uneasy with libertarians, and hold firm in my belief of controlling my own wealth and forming my own associations.

An unrealistic principle you might say and near impossible to do, but it is a principle and it is mine and if I am successful my practice will never harm you in any way or in any way reduce or impede you from pursuing your own life, liberty, and pusuit of happiness.

What do you have of which you can say the same......when you advocate a religion founded on, bedrock belief, theft?

Re: A Note on Income Data

John Dewey — Tue, 06 Nov 2007 03:45:31 -0000

Holymoly: "We needed a booming economy, and under Clinton, that's just what we had."

Sorry, but I don't agree with giving presidents credit for booming economies. U.S. presidents can do very little to grow private sector output or create permanent private-sector jobs.

I do give presidents partial "credit" for tax-caused recessions - which I believe George H.W. "Read My Lips" Bush helped with his early term tax increases.

Finally, I do not believe tax cuts caused the deficits of the past six years. Had government spending remained at 2001 levels - even with adjustment for inflation - we would have no deficit spending. After all, tax revenues have increased significantly since the May, 2003, tax cuts (Jobs and Growth Act of 2003) were implemented.

Re: A Note on Income Data

holymoly — Tue, 06 Nov 2007 02:54:32 -0000

John Dewey --

And thank you for engaging in a constructive debate.

If the government were only running a surplus on the *unified* budget during that time period, then I might agree with you. But the *on-budget* deficit numbers declined throughout that period, and there was an actual on-budget surplus by 2000. That's not just controlling spending "somewhat." That's frigging huge! You want to give some credit to Gingrich and the Republican Congress. Fine, but recognize that the first deficit-hawkish budget out of Clinton came in 1993, before the Republican Revolution. I will actually go further towards bipartisanship and give some modest credit to George HW Bush's 1990 budget for being hawkish(but it was passed with a Democratic Congress, IIRC).

Furthermore, if you look at that time period, the public debt did decline -- the government was retiring debt. There is no solid evidence that the trust fund "evaporated." The only even-somewhat credible argument I've found supporting your claim was by Sita Nataraj and John Shoven, but their econometric model was extremely sensitive to specification. Alicia Munnell has a very balanced discussion of what happened with the trust fund here: http://www.bc.edu/centers/c... -- she concludes that spending in the late 1990s did not offset much of the gains in the trust-fund. But rather, it's Bush's 2001 tax cuts for the wealthy that made them evaporate.

BTW, Clinton caught holy hell from the Republicans and tax hawks when he and Rubin proposed using the trust fund surpluses to pay down debt. Martin Feldstein went so far as to call Clinton's proposal to pay down debt "a sham," http://www.nber.org/feldste...

Finally, I will agree with you that demographics was important -- but we needed a booming economy to support that bolus of workers, and under Clinton, that's just what we had.

Re: A Note on Income Data

John Dewey — Tue, 06 Nov 2007 01:51:26 -0000

holymoly,

Thanks for trying to educate me, but I've been long of how the government mis-accounts for "trust" fund surpluses.

The whole point of my argument, which you seem to not understand, is this: the Gingrich-Clinton surpluses were not completely the result of controlled government spending. They were the result of demographics. As the smaller pre-Boomer generations of workers retired, they were replaced by much larger generations of workers. Furthermore, the Boomers were finally in their peak earning years in the 90's. Together, these demographic changes should have meant huge surpluses in social security and medicare trust funds.

A prudent government would have used the surpluses to either lower social security and medicare tax rates, or else retire government debt. Instead, Gingrich-Clinton spent up to the limit, and the social security and medicare trust fund surpluses evaporated.

Gingrich and Clinton did hold the line on spending somewhat. But their task was certainly easier due to the huge trust fund surpluses that didn't exist for prior administrations.

Looking at only public, marketable debt and declaring a surplus is simply wrong, Holymoly. The intergovernmental debt is just as much an obligation for future taxpayers as the public, marketable debt. It is money that is owed to tomorrow's retirees, and enough of them will vote to ensure that debt is repaid.

Re: A Note on Income Data

holymoly — Mon, 05 Nov 2007 15:28:01 -0000

I should have expected this old canard. Try looking at the actual detail from the Monthly Statement of the Public Debt reports. If you did, you'd see that the public, marketable debt *DECREASED* during the years I cited.

The total debt increased because total debt includes annual net surplusses in all of the various government trust funds. That's right -- when the trust funds are doing well (receipts minus outlays are positive) -- as they tend to do when the economy is booming, as it was during the Clinton presidency, the government is required by accounting rules to issue "debt" that the government *owes itself*. It is non-marketable debt, by definition.

The Government Account Series is the primary source of increase in total PDO. Increasing currency in circulation might also contribute, since that too is counted as Public Debt Outstanding -- but currency is expected to increase in a growing economy to prevent deflation.

So, what are these trust funds? Things like the civil service retirement and disability trust fund, DoD Military retirement trust fund, Social Security trust fund, highway trust fund, railroad trust fund, etc. In total, all of these trust funds took in more in revenue than they spent in outlays, and consequently the Government Account Series Debt went up. Social Security isn't the only fund that did well during the Clinton presidency.

See, for example, the January 31, 1999 report (ftp://ftp.publicdebt.treas....

Re: A Note on Income Data

John Dewey — Mon, 05 Nov 2007 10:55:23 -0000

holymoly,

I just don't have time to provide all the data you may think is required. But here are a couple of important items:

1. Total U.S. government debt increased during every year of the Clinton administration. One cannot claim that the government had surpluses in the same years it was forced to increase its debt. You can confirm the growing federal debt at this link:

Hostorical debt outstanding

2. Social security surpluses were very small until Clinton's second term (FY1998 - FY2001)

SSA Finances ($ billions)

FY....Revenue...Outlays...Surplus

1989...268.......242.......26

1990...286.......259.......27

1991...299.......282.......17

1992...303.......294........9

1993...317.......324.......-7

1994...341.......342.......-1

1995...356.......362.......-6

1996...381.......373........8

1997...405.......390.......15

1998...432.......402.......30

1999...463.......418.......45

2000...502.......440.......62

2001...528.......456.......72

2002...538.......491.......47

Source: SSA's Accountability Report

Re: A Note on Income Data

holymoly — Mon, 05 Nov 2007 09:04:29 -0000

Yes, I understand. I understand that you are completely incapable of supporting your argument with data.

Re: A Note on Income Data

John Dewey — Mon, 05 Nov 2007 09:03:25 -0000

holymoly,

In the first place, it was Newt Gingrich and not Bill Clinton who led the way in more closely aligning government spending with government receipts. I will give Clinton credit for adjusting to the will of voters after the 1994 elections.

I think we give the Gingrich-Clinton partnership a little too much credit, though. They benefitted from huge social security surpluses not available during earlier years. It was only after Boomers reached peak earning years that social security surpluses arose.

The 21st century Congress - under Republican and then Democratic control - is guilty of uncontrolled spending. It is Congress - not the White House - that controls federal government spending.

Re: A Note on Income Data

Tom — Mon, 05 Nov 2007 05:01:51 -0000

holymoly,

I'll make it simpler. When people make claims about surpluses, they're pulling numbers out of their asses. Understand?

Re: A Note on Income Data

holymoly — Mon, 05 Nov 2007 04:56:38 -0000

Tom -

Jeebus! It's the government's budget, of course I'm going to use the government's accounting! They, like, have the accounts and all.

Only Clinton can run a surplus and still increase the debt.

Thanks for enlightening me with your mountains of empirical evidence.

Re: A Note on Income Data

Tom — Mon, 05 Nov 2007 04:03:42 -0000

"but here's the actual budget data from the Congressional Budget Office - Table 13 from the 2008-2017 outlook, available at"

Yeah, the only way that is a surplus is when you use government accounting. Only Clinton can run a surplus and still increase the debt.

Re: A Note on Income Data

vidyohs — Sun, 04 Nov 2007 16:25:41 -0000

Sori for the double post, internet went down and i hit post twice thinking the first didn't go.

Re: A Note on Income Data

vidyohs — Sun, 04 Nov 2007 16:23:37 -0000

holymoly,

Holymoly!! were you eyeballing your own prostrate when you typed this:

"You're right, Wes. To live back in the time when Clinton was running budget surpluses would be a fantasy. A

Posted by: holymoly | Nov 4, 2007 11:45:32 AM"

LOL, my God how delusional can one person be?

Go back, holymoly, and look at the data, those "surpluses" you cite as being run by Clinton did not exist.....they were projected surpluses.....I repeat "PROJECTED SURPLUSES"! They were as delusional as your typical socialist.

You understand the word "if"? The word if describes Clinton's surpluses, if nothing changes, everything continues exactly as "projected" then we will have a surplus. But of course nothing ever does continue exactly as....! Among other things 9/11 happened.

Thanks holymoly, I haven't laughed that hard for a long time. I needed that.

Re: A Note on Income Data

holymoly — Sun, 04 Nov 2007 15:20:30 -0000

Vidyohs -

Not that you'll let facts get in the way of your argument, but here's the actual budget data from the Congressional Budget Office - Table 13 from the 2008-2017 outlook, available at http://www.cbo.gov/budget/d.... Note the *continuously* declining budget deficit beginning in 1993. Note also the budget *surpluses* reported in 1998-2001 (which, even after adjustment still show surplus in 2000 and 2001).

Col 1 is the reported budget deficit (-) or surplus (+), columns 2 and 3 are cyclical and other adjustments, column 4 is the standardized budget deficit (-), surplus:

1980 -2.7 -0.8 1.5 -0.3

1981 -2.5 -0.8 1.2 -0.5

1982 -3.7 -1.8 0.7 -1.3

1983 -5.7 -2.4 0.2 -3.0

1984 -4.7 -0.8 0.3 -3.6

1985 -5.1 -0.4 0.4 -4.3

1986 -5.0 -0.3 0.0 -4.8

1987 -3.2 -0.3 -0.4 -3.3

1988 -3.1 0.2 0.7 -2.6

1989 -2.9 0.4 1.0 -2.2

1990 -3.9 0.2 1.9 -2.1

1991 -4.4 -0.8 1.2 -2.5

1992 -4.5 -1.0 0.6 -2.9

1993 -3.8 -0.8 0.2 -2.9

1994 -2.9 -0.4 0.4 -2.1

1995 -2.2 -0.2 0.0 -2.0

1996 -1.4 -0.2 -0.1 -1.2

1997 -0.3 0.2 -0.5 -1.0

1998 0.8 0.5 -0.8 -0.4

1999 1.4 0.8 -0.7 0.0

2000 2.5 1.0 -0.4 1.1

2001 1.3 0.2 -0.1 1.0

2002 -1.5 -0.6 -0.3 -1.2

2003 -3.4 -0.9 0.1 -2.5

2004 -3.5 -0.5 0.6 -2.4

2005 -2.6 -0.2 0.4 -1.9

2006 -1.9 -0.1 0.0 -1.9

Re: A Note on Income Data

vidyohs — Sun, 04 Nov 2007 14:57:25 -0000

holymoly,

Holymoly!! were you eyeballing your own prostrate when you typed this:

"You're right, Wes. To live back in the time when Clinton was running budget surpluses would be a fantasy. A

Posted by: holymoly | Nov 4, 2007 11:45:32 AM"

LOL, my God how delusional can one person be?

Thanks holymoly, I haven't laughed that hard for a long time. I needed that.