From West Virginia Senator Joe Manchin’s official site:
Every Member of Congress has a solemn duty to vote for what they believe is best for the country and the American people, not their party. Respectfully, as I have said for months, I can’t support $3.5 trillion more in spending when we have already spent $5.4 trillion since last March. At some point, all of us, regardless of party must ask the simple question – how much is enough?
What I have made clear to the President and Democratic leaders is that spending trillions more on new and expanded government programs, when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity. Suggesting that spending trillions more will not have an impact on inflation ignores the everyday reality that America’s families continue pay an unavoidable inflation tax. Proposing a historic expansion of social programs while ignoring the fact we are not in a recession and that millions of jobs remain open will only feed a dysfunction that could weaken our economic recovery. This is the shared reality we all now face, and it is this reality that must shape the future decisions that we, as elected leaders, must make.
We can’t pay for Social Security, Medicare, and Medicaid, and they are “essential” (like marijuana and liquor stores in Massachusetts during coronashutdowns?) so we should probably actually cut spending wherever we can until we can pay for these essentials, right? Certainly, it would be “insane” to spend “trillions”.
Let’s compare the above, from September 29, to “Manchin says $1.5 trillion is his limit on Biden economic agenda amid battle with progressives” (CNN, September 30):
Moderate Democratic Sen. Joe Manchin of West Virginia made clear Thursday that $1.5 trillion was the price tag he was willing to settle on for his party’s plan to expand the social safety net, putting him $2 trillion away from the lowest number progressive Democrats have said they would accept.
I would love it if Senator Manchin came to help us with our household budget: “You haven’t saved enough for retirement, you’re feeding the kids ramen noodles, your supply of essential-for-anyone-from-Massachusetts marijuana and liquor is critically low, and your health insurance bills are past-due, so there is simply no way you can buy Paul Allen’s 414-foot superyacht. That would be fiscal insanity. I recommend that you buy a $15 million Riva 110 instead.”
(The CNN article also has a fun quote from Democratic Party thought leader Ilhan Omar: “We didn’t envision having Republicans in our party”)
Related:
- Understanding Congress’s solution to the federal deficit problem (2011): “The deal cuts $38 billion from last year’s budget. It’s being called the largest domestic spending cut in U.S. history” … The FY 2011 federal budget is approximately $3.82 trillion (3.82×10^12). Of that, approximately $2.17 trillion will be paid for by taxes collected and the remaining $1.65 trillion will be borrowed from our grandchildren. If we divide everything by 100 million, the numbers begin to make more sense. We have a family that is spending $38,200 per year. The family’s income is $21,700 per year. The family adds $16,500 in credit card debt every year in order to pay its bills. After a long and difficult debate among family members, keeping in mind that it was not going to be possible to borrow $16,500 every year forever, the parents and children agreed that a $380/year premium cable subscription could be terminated. So now the family will have to borrow only $16,120 per year.
Even if I could afford Riva 110 I would not buy as it looks like sea sickness on steroids machine with its narrow and tall and must be deep hull. With all Manchin shortcomings and his prep to get re-elected in Trump-majority state I would strongly consider voting for him if he were my senator. Blue Dog Dems destroyed themselves when they jumped on Slicky Willy’s anti – 2ns Amendment and thievery bandwagon. They would be still viable if they behaved like Manchin
I always have a feeling about Manchin (which is a little more than an gut feeling and less than a rigorous proof, but somewhere in between) that every single decision and position he takes is with a view toward two things:
1) His immediate political future.
2) The future of the person he is thinking might be his successor in West Virginia.
And as such, I don’t expect him to simply fold either way, either for the so-called “liberals” in his own party who have been told to go and visit him on his houseboat or the so-called “moderates” in his party the so-called “liberals” accuse of being Republicans. I think that for Manchin all politics is local and he’s got his finger on the pulse of the politics in West Virginia – not to mention what he hopes to extract from the final deal that gets made.
As Rod Blagojevich once noted about Senate positions (I’m paraphrasing): “Do you expect me to just give that up for nothing?”
However, I haven’t read deeply enough into the various proposals to see what is in any of them concretely for WV and Manchin in particular. I have a couple of people I can call to ask…I’ll do that tomorrow. If you believe the hype, Manchin is the Most Important Man in Washington right now except for possibly Kamala Harris, but I’ll find out how much of a grandiose fantasy that may be on his part…lots of things can happen in West Virginia politics, it’s a very interesting place.
To put it a little more bluntly, I don’t think Joe Manchin has experienced some kind of “Come to Jesus” moment where fiscal responsibility is concerned. It’s convenient that the numbers are so astronomical that even people who ended their schooling after the sixth grade can grasp that it’s a lot of money, though.
I do think that he’s very well aware of his once-in-a-lifetime position as the Most Powerful Senator in Washington from one of the Poorest States in the Country, however, and he is going to play every card he has in his deck, get some moonshine, a few more cards will emerge from his sleeve, etc. I’ll report back what I learn from a few people who might have some more insight.
Also (sorry) if you want to get *really* tinfoil-hat about this, let’s all remember that if the Republicans had not lost both of their Senate runoff races in Georgia in the past election cycle – an unexpected cataclysm of unthinkable proportions – Joe Manchin would not have been in the position in which he currently finds himself. The morning after that implosion ended, I walked around all day long in a state of dazed disbelief: “Joe Manchin is the most powerful Senator in America! We are in uncharted waters!”
Aren’t the analogies to a family budget too simplistic? The differences in kind between family and the Federal government budgeting is way more than just scale. The federal government prints the money it owes and can therefore never default on its debt unless it deliberately chooses to. In addition, as a country we derive many benefits from being the de facto reserve currency for the world, e.g. you buy and sell drums of oil in USD. Inflation *is* an issue but isn’t inflation a problem mostly for people holding wealth in fixed (and probably low) interest rate securities? E.G. The elderly. So much of government today serves to transfer wealth from the young to the old, maybe this is actually a good thing. Maybe all this government spending is a good thing. It will certainly demonstrate if Modern Monetary Theory is bullshit or not.
Daniel: If being the reserve country is this powerful, wouldn’t it make more sense to use our money-printing powers to relieve Americans of the need to work, rather than using it to build charging stations for Tesla owners and other “infrastructure”? https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm shows that roughly 62 percent of American adults are working (down from 67 percent in 2001). Let’s say that half of the jobs aren’t rewarding, other than financially. Why not use our money-printing power to drive down the labor force participation rate to 31 percent so that no American has a crummy job? Puerto Rico is at 41 percent and folks there are happy (see https://tradingeconomics.com/puerto-rico/labor-force-participation-rate ).
Here’s one of our innumerate thought-leaders from the NYT, David Brooks: https://www.nytimes.com/2021/09/30/opinion/federal-spending-democrats.html
This Is Why We Need to Spend $4 Trillion
Have we given up on the idea that policy can change history? Have we lost faith in our ability to reverse, or even be alarmed by, national decline? More and more I hear people accepting the idea that America is not as energetic and youthful as it used to be.
The Democratic spending bills are economic packages that serve moral and cultural purposes. They should be measured by their cultural impact, not merely by some wonky analysis. In real, tangible ways, they would redistribute dignity back downward. They would support hundreds of thousands of jobs for home health care workers, child care workers, construction workers, metal workers, supply chain workers. They would ease the indignity millions of parents face having to raise their children in poverty.
But we can make it clear that we value people’s choices. For years, there was almost an officially approved life: Get a B.A., move to those places where capital and jobs are congregating, even if it means leaving your community, roots and extended family.
Those were not desired or realistic options for millions of people. These packages, on the other hand, say: We support the choices you have made, in the places where you have chosen to live.
That fundamental respect is the key scarcity in America right now.
So we will respect those who don’t work and stay in dead high-tax communities, e.g., Upstate New York, by giving them money collected from people busting their butts in Texas. And you’re not supposed to subject this to “wonky analysis”, which is why I say $4 trillion is nowhere near enough. Let’s make it $40 trillion.
The logic is just as compelling as the Desk Pop scene in the move The Other Guys https://youtu.be/wWZTTtE5_zQ (“be a man, do it”)
Oh, there is no question in my mind that this is theft or at least “transferism” in one way or another. What I find interesting is dissecting who it is taking from. I’m still sticking with the theory that by driving up inflation it is mostly stealing from the elderly. The group I think is most disproportionately invested in low-interest rate, non-equity securities AND which is not currently working and will therefore not be compensated by seeing an adjustment to their wages.
Assuming that it is too late to start construction company specializing in government work, what’s an investment strategy that exploits these dynamics?
Daniel Knighten, stealing from the elderly in a form driving up real estate and old houses prices and making it is less affordable for younger people to buy? Elderly were already stolen from in the form of social security tax that was not invested into their retirement. I think this is stealing across the border of all age groups and social categories, except pone – households of able adults that do not make money on their own.
Daniel: What’s a good strategy? How about mining companies? That’s kind of like buying gold in that the output of a mine has a value that should stay roughly constant even if U.S. dollars are inflated. Unlike a chunk of gold, a mining company is productive (i.e., they actually mine!).
https://www.barrons.com/articles/buy-mining-stocks-growth-51631918714
says that mining companies are super cheap right now, with P/E ratio of 3-7 (compare to over 30 for the S&P 500!).
Janet Yellen wants to fund it through unrealized capital gains. So if the total market cap of all stocks is $50T, and the market goes up 10% ($5T) per year, and Uncle Sam slices off 20%, that’s a cool $1T per year! Hooray, free money forever! (or as long as banks make loans to buy $5T in rising stocks every year).
That would be unmitigated disaster. Millions of investors would be out of long term investing and Yellen would find out that market goes down too. And sometimes recovery takes thousand years if ever.
Forget the fast & flashy Riva super yacht, I’ll have a slow & steady all-weather expedition trawler with 6000mi range, like a Nordhavn 96 or a Bering 100
I would agree with Magellan regarding nordhavn. I would suggest a smaller version that is not designed to be run by a professional crew. All of the nordavns below 80 feet are designed to be run by just a couple.
Philg – I don’t recall you being upset when Trump signed into law massive, unfunded tax cuts for corporations and the wealthiest Americans. No issues so long as the money flows upwards, to those who have no need for it, am I right?
SenorP: I think you might be confusing tax RATES with tax COLLECTIONS. Congress/Trump did not seek to reduce federal revenue with the rate and regulation changes (mostly for corporate taxes) that went into effect in 2018. They wanted to increase revenue by discouraging companies from moving offshore or creating elaborate offshore structures and paying almost nothing (e.g., Apple). As you can see from https://www.thebalance.com/current-u-s-federal-government-tax-revenue-3305762 , federal tax revenues actually went up after the rates/regulations changed. See also https://en.wikipedia.org/wiki/Hauser%27s_law
The proposed spending, on the other hand, is just spending. If Congress and Presidents Biden/Harris spend another $5.5 trillion on “infrastructure” and handouts (not “welfare”!), that’s a guaranteed $5.5 trillion that can’t be spent on something else.
But my original post doesn’t take a position on this proposed spending spree. I was just enjoying the apparent logical contradiction in Senator Manchin’s statements.
These are the same tired old trickle down scams republicans have been selling since Reagans voodoo economics. It’s as much BS now as it was then, especially now that we have decades of data to prove it’s nonsense. Sure, revenue got a temporary boost due to repatriation. And corporations can count on republicans doing this every decade or so, which is the only reason it makes sense to offshore in the first place. Because, at some point in the future, they’ll get a sweetheart deal to bring it back. The kind of deals that small business or sole proprietors never benefit from. Apple and all the other juggernauts couldn’t spend all that money in Ireland even if they wanted to. Didn’t nearly all of that money wind up going towards stock buybacks anyway?
SenorP: I don’t think corporate tax rates have a horse in the trickle-down race. The corporate tax is just an all-around terrible idea, according to people with a wide range of views on the appropriate size and role of government. See https://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/ for example on why a corporate tax is not “progressive”.
I would love to see corporate tax replaced with https://en.wikipedia.org/wiki/Land_value_tax ! The U.S. is hugely overinvested in real estate, much of which is unproductive, and a huge tax on the land itself (not, e.g., a factory built on top of the land) would perhaps nudge a few Americans away from becoming realtors and into making integrated circuits (well, that last part might be a stretch)!
In general I’m against any tax rates that are above 20 percent, which I consider to be the point at which people put a huge amount of effort into tax avoidance. Tax avoidance is extremely harmful to an economy. You divert attention and time away from productive activities. You have people stay invested in a mediocre company because they don’t want to pay capital gains taxes (maybe mostly on price change due to inflation) rather than fund a startup. You yourself have noted that the dividend tax rate (about 37% for successful people in California? 20 percent federal, 3.8 percent Obamacare tax, 13 percent state tax) is high enough to motivate Apple and others to purchase shares instead of paying a dividend.
Philg – the land tax is interesting. But, wouldn’t that just force companies to build up even more massive and unsightly structures, and create more cramped single story enterprises when building up isn’t feasible? Also, I can’t imaging what a blow that would be to the economy and the resulting uprising. How do you elegantly make such a monumental change to the economy? I’d be more inclined to support more of a corporate progressive tax without any of the millions of pages of loopholes and sweetheart laws which only large business can take advantage of–precisely the folks who don’t need more market advantage.
@Philg: Also, at this hour, my backwoods windage is the Democrats will get the entire $3.5 trillion once Manchin is given assurances that he will get what he wants. I think he wants three things: 1) To make it look like he fought for WV coal miners and other fossil-fuel interests in WV and has some tangible success he can point to and 2) A carved out source of funds for WV that will last at least ten years – the entire duration of the spending being considered – so that his political legacy is assured and 3) guarantees from the “liberal” Democrats that whoever they decide to support in West Virginia in the future will be chosen by him or people associated with him.
After that, his objection to the entire $3.5 trillion will vanish and he will invite the left-wing kayakers onto his houseboat for a few rounds of West Virginia hospitality.
https://www.vice.com/en/article/7kvgxe/were-going-to-make-the-rich-pay-joe-manchin-tells-protesters-from-his-yacht
“We’re all on the same page, gang. We really are,” Manchin added. When another activist again said “tax the rich” Manchin agreed with a more annoyed tone from the back of the yacht: “We’re taxing the rich, I agree. We’re going to make the rich and famous pay!”
Wow! Now it’s not just the rich! It’s also the famous! This is obviously a nod to Robin Leach and his show, “Lifestyles of the Rich and Famous.”
Alex: If you’re correct, my idea of investing in Sweden will be given a boost. https://www.nber.org/digest/jan00/how-government-spending-slows-growth is from 2000. The more the government spends, the less companies invest and therefore the lower future growth rates will be. The U.S. won’t collapse under the weight of Uncle Joe’s spending spree, but it is likely to grow more slowly than people had been forecasting (a forecast that is baked into the current prices of U.S. stocks).