NEW from me: Just in time for the 2025 tax debates, "Correcting the Top 10 Tax Myths" addresses the most common liberal and conservative tax fallacies.

I walk through them below...🧵

manhattan.institute/article/correc… Myth 1: “Tax Cuts Pay for Themselves”

Good tax cuts bring some growth revenues, but rarely enough to pay for the tax cut. At current tax rates, each $1 tax cut would need to create $5 in new GDP to pay for itself. And no, "but revenues went up" is not enough - paying for itself means revenues growing as fast as they would have without the tax cut.

Ok, let's finally address these tariffs myths.🧵

1) "Trump's earlier tariffs didn't bring mass inflation, so these won't either"

Those were targeted tariffs on a small number of goods & nations - and those prices soared. Link below cites several studies. en.wikipedia.org/wiki/Trump_tar… 2) "Well why haven't Biden's tariffs brought inflation?"

Have you seen prices? But Biden's tariffs - like Trump's earlier tariffs - were targeted to a few specific items (which saw big price hikes). Trump is now proposing a huge, universal tariff on ALL imports, including gas, food, and medicine, from ALL nations.

This tax day, let's address the populist myth that 𝐘𝐨𝐮 𝐀𝐫𝐞 𝐆𝐞𝐭𝐭𝐢𝐧𝐠 𝐒𝐜𝐫𝐞𝐰𝐞𝐝ᵀᴹ with the middle class paying all the taxes & the rich paying $0.

Yes, we can find individual examples, and maybe you wish the rich paid more. But they fund nearly all the govt.🧵 Previous chart showed the top-earning 20% paying nearly 70% of all federal taxes.

Below, their subset of federal income taxes is tilted to 90%.

Note the bottom-earning 40% of families now collectively pay negative income taxes.

NEW from me: My new Issue Brief takes on the lazy contention that simply eliminating the $168,600 wage cap on Social Security taxes can bring long-term solvency without the need for spending savings (and is progressive reform). Neither point is true. 🧵

manhattan.institute/article/proble…
First, Social Security taxes stop at $168,600 in wages (growing by inflation) bc that's where benefits stop accruing as well. We're told that SocSec benefits are "earned" with FICA taxes. Higher taxes mean more benefits too - unless we want to delink & make SocSec truly welfare.

Quick Analysis of President Biden's new budget🧵

The first takeway is that the claimed $3.2 trillion in deficit reduction is mostly fake.

Biden repeatedly endorses extending the 2017 tax cuts for earners under $400k, but his budget simply leaves out their $2.4 trillion cost. Additionally, the president uses the classic gimmick of assuming that future (always well into the future!) discretionary spending falls to 1930s levels as a %GDP. That's another $3 trillion in fake savings.

This and the endorsed tax cuts add $5+ trillion to 10-year deficits.

Today, CBO released its first full budget baseline in 9 months. Let's dive in... 🧵

CBO shows that today's $2 trillion deficits will soon become a regular occurence, even with (assumed) peace, prosperity, and low interest rates. However, CBO is required to assume:
1) All 2017 tax cuts (+ recent ACA expansion) expire on schedule.
2) Congress cuts discretionary spending to 5.1% of GDP - the lowest level since the 1930s.

No Chance.

Fix those, and baseline budget deficit jumps to $3.6 trillion in a decade.

NEW from me at CNN. The 10-year bond hit 4.7% today. Washington never locked in those 1-3% interest rates, and now the debt is rolling over into these rates at the same time deficits soar too.

If rates stay above 4% long-term, were in deep trouble. (1/)
cnn.com/2023/09/29/opi… Every 1% that interest rates exceed the CBO baseline costs $3 trillion over the decade and $30 trillion over 30 years (or adds 40% of GDP to the debt, or like adding another Defense Department).

That's just for 1% higher rates.

When I explain that inflation is cumulative and that a recent reduction in the inflation rate doesn't undo the steep 16% hike still embedded in prices under Biden, people understandably ask - since deflation is not a good option - what does beating inflation look like? (1/)🧵

https://twitter.com/paulkrugman/status/1700180218898534847

To me, inflation will finally be "beaten" when real (i.e, inflation-adjusted) hourly compensation has finally caught up to the pre-inflation peak. Until our pay catches up to the higher prices, we are still in an inflation hole. (2/)

In the past 2 days, I've been deluged with replies from progressives demanding that America catch up with Europe's taxing of the rich.

However, the top U.S. income, corporate, cap gains, & estate tax rates already *exceed* OECD averages and even much of Scandinavia. (1/4) America's lower tax revenues are driven not by going easy on the wealthy, but rather from taxing the middle class less than other nations.

The OECD's higher tax revenues are driven almost entirely by broad-based VATs and payroll taxes. They also slam middle class on income taxes

Explosive piece in the Washington Post (by @JStein_WaPo assisted by @BudgetHawks) showing that the budget deficit is set to 𝒅𝒐𝒖𝒃𝒍𝒆 to $2 trillion this year.

This is basically unprecedented in U.S. history during relative peace and prosperity.🧵

washingtonpost.com/business/2023/…
This year's 7.6% of GDP budget deficit has been exceeded only during the depths of World War II, the great recession, and pandemic.

Deficits didn't even hit these heights during the Great Depression, Korean War, Vietnam War, or Reagan defense build up. (2/)

🧵My theory of current politics: In the last decade politicians and opinion leaders concluded that the lowest-information voters are the key battleground. Perhaps they are more persuadable, or an unmobilized bloc of potential voters, or just a large consumer base to grift... Perhaps the typically-informed voters were deemed to be already voting and less persuadable - and thus taken for granted and priced into the electoral calculus.

Thus, political targeting and messaging became ... dumber. More populist, conspiratorial, infotainment, sillier. (2/)

🧵Why the debt limit deal is so hard to analyze.

The legislative text imposes caps on "regular" (non-emergency) discretionary BA as follows:
2024: 0.8% cut
2025-2029: Annual 1% hikes.

But many caveats and asterisks may render these figures mostly meaningless. Let's explore..🧵 First, the 2024 & 2025 spending caps are placed in statute within the 1985 BBEDCA law that is enforced by sequestration, like most caps.

The 2026-2029 caps are placed within the 1974 Budget Act that is largely unenforceable. So its law, but seemingly no penalty to violate.

NEW from me. In the @NYPost, I review President Biden's budget proposal: More taxes, more spendng, too much debt, and Social Security going insolvent. Some highlights below:🧵
nypost.com/2023/03/09/bid… The $5 trillion in new taxes could be defended if it also cut spending in a balanced deficit reduction plan. Instead, it adds $2 trillion in spending on top of the $5 trillion Biden has signed.
So even with highest sustained tax burden, we still borrow $17T in new deficits.

🧵Chartstorm. Today, CBO released its first budget baseline in 9 months. Washington's fiscal situation has significantly deteriorated, and should serve as a wake up call. Deficits will approach $3 trillion within a decade even assuming the 2017 tax cuts expire as scheduled. (1/9) Overall, the debt held by the public is projected by CBO to hit 118% of GDP within a decade - surpassing World War II's peak. Again, this assumes peace, prosperity, low interest rates, and the 2017 tax cuts expiring on schedule. It will likely go higher.

This is an unforced error by some Senate Republicans. Requiring the prioritization of certain payments after the debt limit:
1) Is likely technically infeasible.
2) Still defrauds countless businesses that sell goods & services to the govt.
3) Will not fool the bond market. (1/4)

https://twitter.com/SenRickScott/status/1618395431989547009

As for the politics, I'm told Democrats are already planning to respond that "Republicans will pay Chinese bondholders before [veterans pensions, school lunches, security at our nuclear facilities, NIH, border security, Medicaid etc]. That's a layup.

🧵NEW from me at @NRO. A *realistic* blueprint for how fiscal conservatives should approach the debt limit. Summary: take default off the table (since the hostage cannot be shot) and look to attach modest reforms that Democrats cannot easily oppose. (1/11)
nationalreview.com/2023/01/how-fi… Debt limit is a terrible tool bc default is not an option. But conservatives use it because 70% of spending is growing rapidly on autopilot outside the annual budget peocess - so its the only vote on *all spending.* If we kill debt limit, need some tool to address that 70% (2/)

Me: Social Security and Medicare shortfalls ($116 trillion over 30 years) will force us to revisit promised benefit levels.
Replies: I demand to get back what I paid into the system!
Me: Your terms are acceptable. For those asking - all the breakdowns at various income combinations are in the Urban Institute report here. The chart above is from table 15 (Married couple with two average earners) retiring in 2020. urban.org/research/publi…

🧵How likely is a bipartisan "grand deal" on deficits anytime soon? House & Senate lawmakers have lately been circulating my 2019 report examining the history of major deficit-reduction negotiations in Congress. Not surprisingly, outlook is bleak. (1/10)
manhattan-institute.org/three-ingredie… I examined the 14 major Congressional and White House deficit negotiations since 1980. I researched them, interviewed D & R participants, and even participated in a couple while working in the Senate.

6 of these negotiations successfully enacted a deal.
8 of them failed. (2/)

🧵NEW from me in @thedispatch. Wonderful to see Republicans refocus on runaway spending and deficits. However, 40 years of similar efforts failed bc lawmakers prioritized gimmicky and unrealistic promises, invited a backlash, and then enacted nothing. (1/)
thedispatch.com/article/how-re… Look no further than 2018 - when a GOP Congress & White House promised to cut $6.5 trillion over decade to balance the budget. The next day they voted down a $1 billion rescissions bill because of a $16 million cut. Then they passed a farm bill and busted the spending caps. (2/)

🧵I love the House GOP's budgeting-cutting enthusiasm, but the goal of cutting $130 billion from discretionary approps without touching defense or veterans health means freezing those two items and cutting everything else by 21% immediately. That's just not realistic. (1/6) Other discretionary spending has a lot of overspending, waste, & unnecessary items - but items like highways, K-12, Pell grants, NIH, CDC, FDA, FAA, fed prisons, border, housing aid, homeland sec, corps of engineers, & embassies aren't getting cut 21% in one year. Won't happen.

I've been shouting this forever - For all the screams of "obstructionism" and awful filibusters, Congress and White House pass a lot of important bipartisan legislation that no one hears about. Its just a few key partisan fights that go on forever that everyone hears about.

https://twitter.com/Noahpinion/status/1613274685441204225

People remember 2011-2016 as the golden age of GOP obstructionism and paralysis against Obama. But besides judges (which, yes, was ugly), a lot of big partisan bills were passed.