Obama vs. Ryan's plan to Reduce Federal Debt

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Obama has a proven record of doing the opposite of what he promises.

Ryan wins on that basis alone.

Sad but true. We're also the same country that claims teachers are overpaid, but families making $250K are just trying to get by.

I have never heard of any other country in the world with this artificial debt ceiling nonsense. The debt is only a number. If it goes up, it means very little, unless of course the GDP crashes and if these austerity freaks have their way, this becomes a strong possibility.

It has been proven that cutting taxes can increase Government Revenue. In fact the Bush tax cuts increased the amount of money Government was taking in, so actually yes cutting taxes can help reduce the deficit, if people don't go on a mad spending spree with the increase in revenue.

It is raising taxes in the middle of a recession that is fiscally insane, cause if you didn't realize (and the mainstream media isn't bothering to report this tidbit) the people that will be hit by the tax hikes are the small business owners whom file their taxes as individuals not as corporations.

The tax cuts of 2001 did not increase government revenue. Studies showed people saved the money instead of spending it. The tax cuts for businesses in 2003 did increase revenue for a short period of time between 2003 to 2007.

If you like you can review my previous post, I tried to explain the math involved; but I will reiterate. All of the tax brackets were cut in 2001. People that make $250,000 lose absolutely none of those tax cuts that apply to the brackets up to $250,000.

This means they only see a three percent increase of the amount of income made over $250,000. If the are a small Business owner and make $260,000 a year they pay three percent of $10,000, which is $300 per year. As a percentage of their total income it is a (.001) one tenth of one percent increase in taxes. They still keep the thousands of dollars of tax breaks just like other Americans for the full amount of money they make up to $250,000.

For someone that makes $373,000 per year, they pay $3690 more per year in taxes. As a percentage of their income it is 1 percent. But, again they still keep the several thousand dollars of cuts from the 2001 tax cuts that apply to the first $250,000.

No one takes the time to explain this on TV, but if they did, I doubt people would be so wound up about the effect this is going to have on small business. And again, Obama is offering incentives to small businesses in his plan, so many will end up better off with the incentives and paying several hundred dollars more a year in taxes if they fall into the 250K to 300K range.

Let me ask you Inuyasha, if you owned a small business and made $260,000 a year, your gross income per month is $21,666. Would you really pay attention to a $25 decrease in pay per month? Would you have to raise prices, fire someone, or close down your business?

Again remember, you still get to keep the tax breaks from 2001 that affect the first 96% of your income in this scenario. From a mathematical standpoint there is no significant increase in tax for a person in this scenario.

Thank you very much for clarifying an emphasizing the fact that the increase only applies to the portion of income above $250,000. This is vital in understanding what effect the discontinuation of the tax cuts will really have. It's utter nonsense to claim that any average worker or small business owner will suffer from this change. I do wish the media would make this part clear, but as usual, it's nothing but misinformation.

The majority of people in the country have no idea how tax brackets work or how the tax system works in general.

Instead of saying tax cuts expire for those making over 250K, why can't the media and politicians just give a simple example like: If you make 250K you pay no additional taxes, if you make 260K you pay an additional 3 percent on the amount over 250K which amounts to $25 per month more in taxes.

Most people, and I would include those that make over 250K, because many of them have someone else do their taxes for them, think they are going to pay three percent more on 250K, which is $7500, a hell of alot more than the truth for someone making 250K, which is zero additional taxes.

Joe the plumber was a nice guy, and it was nice that he stood up for all those small business people making 250K per year, but I doubt he understood the tax system.

I'm starting to wonder if politicians understand or care to understand the tax system.

The making work pay tax credit is one of those tax system complications that's generally characterized as a "loophole". Sure, get rid of the credit. But instead of having the government spend the money on useless makework projects, use it to increase the personal exemption and let working families spend it on something they need. The idea that hundreds of dollars a year won't be missed by a middle class family with a tight budget is just ignorance.


There's plenty of direct evidence. Unemployment was still rising going into the November elections; it plummeted when the tax cuts were extended. That's direct evidence. Is it a certainty? No, nothing is ever entirely certain in these things. But the evidence is about as convincing as these things ever get in economics that the reduction in unemployment is directly due to extension of the Bush tax cuts and the refusal to extend unemployment benefits beyond two years.


And as a small business owner, I'd rather get rid of loopholes like Obama's "incentives" that force us to spend the way he wants to rather than in the way that's best for the business, and keep the tax rates down.

Will the businesses be "stifled"? Not necessarily. Rather, what will happen is that the reduced profits will make it more difficult for the businesses to grow and create new jobs. Take away $3000 dollars from each of 10 small businesses, and that's one $30,000 job that isn't created.


I reject the idea that creating jobs so that impoverished people can work empowers them, it doesn't stifle them. And as one of the first years that will be subject to the Ryan version of medicare rather than the current version, I have to say I much prefer Ryan's version - the current medicare system is full of complexities and inefficiencies that encourage the use of expensive solutions when relatively inexpensive lifestyle or diet changes work better.


You keep ignoring the taxes they are already paying. When they're only keeping maybe half of the $10,000 in the first place, the $300 or $600 cut looks a lot bigger.

They don't take home anywhere near 97% in the first place, because a lot of that 97% is either taxes or child care expenses that they wouldn't have to pay if they didn't have a job. Often they get less than 10% of it. If you want to see a fully worked out example, here's one, taking the example of two doctors who are married:

http://psychohist.livejournal.com/49423.html



Still think cutting that 5% that she gets to keep to 2% is a good idea?

Okay let's assume they pay fifty percent in total taxes, but unless you include state income tax, it is likely to be in the 40 to 45 percent range of total income, this means their take home pay is $5000, per total bi-weekly paychecks. With the three percent increase on the $10,000 their paycheck get's reduced $12 per total bi-weekly paychecks, so now their paychecks total $4988. As a percentage of net pay the tax increase is two tenths of one percent. The Bottom line is they are making $12 less every two weeks.

Unemployment dropped because of the tax cuts? Excuse me, but first of all, the taxes were not cut, and secondly, this trend had been ongoing, and thirdly, there is lag between a policy announcement, its implementation, and how it shows up in the economic statistics.

The trend was not ongoing. Here's a graph:



Note the sharp discontinuity when the Republicans gained control of the House in November. The trend going into November was that unemployment was gradually increasing; it was only when it became clear that the lower Bush tax rates would be extended that unemployment dropped precipitously.

With respect to lags, small businesses move much more quickly than large businesses, as significant decisions can be made by one person or a small executive team without having to check with the independent board of directors that large businesses have. In this particular case, the average small business owner had been watching the issue like a hawk for the better part of a year, and had contingency plans ready for when the lower tax rates were finally extended.

With the corrected amount of $2100 in taxes she gets to keep $5439.30/140,000 which is 3.9% vs. 5% of her gross pay. As a percentage of gross pay the three percent increase on $70,000 amounted to $2100/$140,000, 1.5% of her gross income. If there is a financial issue here that needs to be resolved, it is the $63,000 in child care expenses; and one that could easily be resolved, depending on personal preference.

The only way easily to reduce the child care expenses is for the mother to quit work, which is what's likely to happen. Then the government is out the $69,460.70 in taxes. It doesn't take very many working mothers quitting their jobs to cause the net effect on tax revenue to go down rather than up on that "small" 3-6% tax increase.

Missed this because you stuck it in the middle of a quote:

That's why Ryan's plan doesn't use simple vouchers. Under Ryan's plan, all the health insurers providing medicare coverage would be required to accept anyone who selected their plan upon reaching the age of eligibility for medicare. There would also be "open seasons" when people could change their plan to whichever they wanted, also irrespective of preexisting conditions.

Ryan's team has been working on their plan for over a year and their plan is very well thought out; don't assume the knee jerk reactions of liberal opinion commentators are well informed, because they're not.

You're also mistaken about cancer, by the way. There's a simple preventative measure that reduces cancer incidence by 77% in older women:

http://www.ajcn.org/content/85/6/1586.full

Unfortunately, many women on medicare never hear of this from their doctors - my mother for example - because medicare's fee for service model encourages treatment after the problem arises, rather than prevention. The Ryan plan, in contrast, gives the insurers incentive to use inexpensive and effective preventative measures such as this one.

There are many factors related to the ebb and flow of unemployment. Noting the decrease in the number of unemployed during the November/January time frame, I don't think one can dismiss the factor of job increases during the Holiday buying season. That is another factor along with additional healthcare industry and social services jobs that are not explained by the continuance of tax cuts. It seems to be less noticeable now and following the ebbs and flows seen earlier in the graph.

I'm still not dismissing any impact from continuing tax decreases; but there is really no hard evidence that it had a significant impact.

And additionally, there is no evidence that the tax cuts added jobs or stimulated spending in 2001; studies show people saved the extra money.

Do you have any evidence from a scientific survey that average small business owners were actually waiting with contigency plans to hire people immediately and expand business when their fears were alleviated? Some might have been, but I haven't seen anything to suggest that it was a centerpoint of small business strategy.