Where the "deficits do not matter" mentality came. RR

[Texas Contrarian]

Does anyone seriously believe that a 70% tax bracket for high income earners is remotely justified or appropriate? (At least, other than in places like the Berkeley faculty lounges.)

Of course, the 70% bracket was first reduced to 50% before it was reduced further, but even then it was entirely farcical. No wealthy or very high income individual paid an effective tax rate more than a fraction of the statutory rate, since it was so easy to shelter most of your income, or even almost all of it, with accelerated depreciation on leveraged assets packaged into limited partnership interests.

Of course, wealthy investors had known this for years. But high inflation in the 1970s and early 1980s pushed millions of professionals like surgeons, attorneys, dentists, CPAs, small business owners, successful salespeople, and others into unprecedentedly higher tax brackets.

Enter the tax shelter industry! With only a few tens of thousands of dollars, often stretched out in capital call schedules spread over a five-year period, you could shelter much of your income from taxation while getting a stake in real estate developments, oil & gas drilling ventures, cattle-raising operations, etc. (As you might expect, many of these were OK ventures, though some were very overpriced or downright fraudulent.)

The problem with this wasn't so much that the Treasury didn't collect all that much money with 50-70% tax brackets (although it didn't), but that hundreds of billions of dollars was shoveled into malinvestment.

One obvious result was that market values of apartment complexes, office buildings, and shopping centers skyrocketed, creating an overbuilding boom that would soon create painful consequences.

Conclusion:

The 70% and 50% top tax brackets that existed for many years prior to the 1986 reform were like furniture store pricing in those big box stores that proliferated in the 1980s. There were red stickers everywhere with prices marked down 60-75% on everything. Nobody ever paid anything remotely close to "sticker price!"

[Texas Contrarian]

Closely related to the aforementioned wild, speculative malinvestment spree is the crazy story of "Fast Eddie" McBirney. Those who were living in Dallas at the time remember it well, since it was in the headlines for months.

Introduce a fast-moving, massively bloated, tax shelter-driven commercial real estate market to a slick, silver-tongued scam artist, and here's what you get. From the New York Times in 1989, here's Fast Eddie's crazy story:


nytimes.com
Showdown At 'Gunbelt' Savings
Leslie Wayne
19-24 minutes

March 12, 1989

The Sunbelt Savings Association sits in a nondescript four-story office building overlooking an endless stream of cars that whiz by on the Lyndon B. Johnson Freeway. Dark tinted windows give it a secretive quality and it is hard to distinguish this building from at least a dozen others clustered like so many covered wagons and encircled by concrete freeways.

Yet this is the site of one of the nation's biggest financial disasters - the $6.1 billion Federal bailout of Sunbelt, nicknamed Gunbelt by Dallas wags in honor of the aggressive lending policies that led to its demise. Headed by financial whiz kid Edwin T. McBirney 3d, now 36 years old, Sunbelt's explosive growth came in pure Texas style - bigger, bolder and brasher than anything anywhere else. Whether it was its fleet of seven airplanes, its spectacular Christmas and Halloween parties or its ''cash for trash'' real estate loans, Sunbelt rose like a meteor and came down just as hard.

Mr. McBirney didn't create problems just for himself - or for the Government. He also created problems for his auditor, Grant Thornton, the nation's 10th-largest accounting firm. While Mr. McBirney went on a three-year lending spree, Grant Thornton reviewed his books. It said everything was all right for 1984 and 1985 and then, in 1986, issued a ''disclaimer'' for that year and went back and ''disclaimed'' 1985 as well. In effect, Grant Thornton was saying that Sunbelt was such a mess that the firm could not issue an opinion. Now, Grant Thornton is being hauled into court by the Government, which contends that the firm was asleep at the switch until it was too late.

Grant Thornton is not talking about its predicament. And neither is Mr. McBirney, who is also being sued by the Government, along with other former Sunbelt executives. But what transpired between the two speaks to the delicate balancing act of business pressures, human foibles and accounting standards. It's a tale that will be told again, with numerous local variations, as litigation against other accounting firms that audited failed savings institutions begins to hit the courts. For Grant Thornton, the lawsuit is particularly painful, coming on the heels of its costly settlement in the E.S.M. securities fraud case, in which a Grant Thornton partner had accepted bribes from a client in return for a favorable audit. With the dust just beginning to settle on that incident, Grant Thornton is now having to defend itself all over again.

For instance, after The Dallas Times Herald ran an editorial stating that Grant Thornton gave Sunbelt a ''clean bill of health,'' the normally reticent accounting firm snapped back with a letter that took pains to make its position clear.

Referring to the 1985 and 1986 disclaimers, the firm said ''such a disclaimer should clearly put the public and regulators on notice of the situation that existed at Sunbelt.'' The letter continued: ''Grant's report disclosed all of the types of problems which it was required to report upon under auditing and regulatory requirements. It was hardly a 'clean bill of health.' '' The Go-Go Years For Real Estate

The lawsuit, and the actions that led to it, did not arise in a vacuum. Rather, they were a product of Dallas in the early 1980's, a time when real estate was booming and Texas's usual can-do optimism was reaching new levels of contagion. Newly deregulated savings institutions outpaced their brethren elsewhere in the nation by piggybacking onto the real estate boom with highly speculative loans.

And just as the savings industry was beginning to spread its wings, so, too, was the accounting profession in Dallas. The local accounting fraternity was changing from a gentlemen's club to dog-eat-dog competition.

Some accounting firms - especially Grant Thornton, Arthur Young and Greenstein & Logan, a regional firm - began to court the growing savings and loan business aggressively.

Accounting firms, for instance, would show up at state savings and loan trade association meetings, sponsoring social events. The more high-flying the savings institution, the more desirable it was as a client.

Go-go savings units represented big potential fees for an accounting firm precisely because they were so active. An audit could easily lead to tax work, financial advisory assignments and merger-related billing. Besides, the savings and loan entrepreneurs were on the cutting edge of some of the most exciting, and seemingly successful, deals being done in the state.

''The S.&L. audit business in Dallas was very competitive,'' said a Dallas accountant who declined to be identified. ''Some firms decided that this was a good growth area and went after it with abandon. Different firms had different reputations and generally a go-go thrift would go to a go-go accountant. Accountants are not deal guys and then they get involved in these deals and get excited. It doesn't mean that the accountants have lost their independence. But they can lose their cynicism.'' Rolls-Royces And Rolexes

William C. Ferguson, a Dallas-based savings industry consultant added: ''Auditors were lulled into the same complacency as the S.&L.'s. They didn't think a real estate bust could happen. The auditors lived here. They saw the Rolls-Royces and the Rolexes. And they read the newspaper articles that portrayed some of these S.&L. cowboys as a new generation of financial wizards.''

Among the most prominent of those ''cowboys'' was Edwin McBirney, who went to Dallas from Philadelphia in 1970 to attend Southern Methodist University, where he graduated in 1974 with a degree in business administration and finance. Even then, he displayed his entrepreneurial touch by renting refrigerators to fellow students at $25 per semester; he was profiled in Time magazine for the effort.

He began his career as a real estate broker. In 1981, spurred by the prospects from savings industry deregulation, Mr. McBirney, then 29, joined with an investor group and began to purchase a string of money-losing Texas savings and loan institutions that later became the Sunbelt Savings Association. Mr. McBirney's deal-making skills earned him the nickname Fast Eddie and the term Gunbelt Savings arose from Sunbelt's reputation of easily outgunning the competition.

Today, Sunbelt has been converted to a mutual savings bank and is operated under the direct control of the Federal Savings and Loan Insurance Corporation. Mr. McBirney resigned in 1986 as chairman under Government pressure as Sunbelt careened toward insolvency. It will take at least an estimated $6.1 billion in Government funds over the next 10 years to restore Sunbelt's net worth and to provide it with operating assistance to remain a viable institution.

In Mr. McBirney's place came a new Government-approved management team that is evaluating Sunbelt's outstanding loans and remaining real estate assets. In the first quarter of this year, Sunbelt took a $1.2 billion charge to increase its reserves to cover the declining value of those assets. Brokered Deposits, Speculative Loans

Sunbelt today is a very different operation from the Sunbelt Mr. McBirney ran. What he did is easy to grasp in principle: He took depositors' money, which he often acquired in large pools from industry brokers, and lent it mainly to real estate developers. He made money on the spread between what he paid for his brokered deposits and what he received through his highly speculative loans.

This practice allowed him to grow his deposit base at a rate of 83 percent a year. And as long as real estate continued to boom - which, of course, it did not - his business would grow. In the eyes of the Government, however, Sunbelt looked a lot more like a real estate developer than a savings institution.

''Sunbelt was operated as a speculative real estate investment company rather than as a federally-insured financial institution,'' the Government alleges in its lawsuit. ''Virtually the entire economic risk of a substantial majority of Sunbelt's commercial loans was borne by Sunbelt because the borrowers put little or none of their own money into the transactions and had no realistic means of repaying Sunbelt.

''Sunbelt was only as sound as the speculative real estate investments of its borrowers and many of them were in financial trouble by 1985,'' the lawsuit added.

While what Sunbelt did in principle was simple, in practice the deals were exceedingly complex. And what Grant Thornton was asked to audit has been defined by the Government as encompassing the following: Imprudent lending practices, the waste of corporate assets, the artificial inflation of net worth and fraud. A Glimpse at What The Auditors Faced

In its lawsuit, the Government alleges that Grant Thornton failed to detect Sunbelt's numerous accounting irregularities and poor internal controls - charges that Grant Thornton denies in its response to the suit. But a look at the lawsuit gives a glimpse at the accounting issues that Grant Thornton, as well as accountants elsewhere, were up against.

A popular Sunbelt lending practice - and one used by savings institutions throughout the nation - was to finance so-called ADC loans, which were used for the acquisition, development and construction of real estate ventures.

Sunbelt, like many others, lent funds for up to 100 percent of the venture - enough money to cover the developer's entire acquisition and development costs, any upfront fees that the borrower owed Sunbelt and even enough funds to cover the first couple of years of interest payments to Sunbelt. These loans were often guaranteed only by the developer's personal word and the property itself - a high-risk approach since there was no down payment to cushion Sunbelt's exposure.

Savings institutions liked ADC lending because it was a quick way to fatten their net income since the fees and a portion of the developer's interest payments could be counted as income - even though the money actually came from the loan, which itself came from deposits.

In effect, ADC loans enabled savings institutions to quickly turn deposits into income. But when Texas real estate crashed and these loans failed, as more than $500 million of Sunbelt's did, the savings institutions became the new owners of properties with little market value. The Development That Never Was Built

For instance, according to the lawsuit, Sunbelt in November 1984 made a $49 million loan to two men - neither of whom had any significant experience in real estate development and one of whom received a monthly consultant's fee from Sunbelt - to turn a tract of empty land in Allen, Tex., north of Dallas, into a commercial-industrial park to be called Lake Ridge.

The $49 million was used to purchase 2,100 acres, but the loan was secured by only 1,763 acres. The remaining acres were released by Sunbelt without a lien and used by the two developers as collateral for an $8 million loan from a different savings institution.

The two developers were trying to amass some 6,000 acres for Lake Ridge and appeared to be bent more on buying land than on developing what they had. They borrowed an additional $7 million from Sunbelt ostensibly to develop a 300-acre section, but used it instead to buy even more land. Today, the Lake Ridge development is non-existent, only a few roads and sewers on otherwise barren land with little value.

The lawsuit also portrays the use of corporate funds for a variety of lavish executive perquisites. Sunbelt's seven-airplane fleet included two top-of-the-line corporate jets, a Gulfstream II and a Falcon 10. Mr. McBirney used Sunbelt funds to pay for some $54,000 in Christmas gifts from Neiman-Marcus and a $69,000 limousine bill - with no evidence that these expenditures were related to Sunbelt's business.

More than $1 million was spent for Christmas and Halloween parties in 1985 and 1986 - including a $32,000 payment to Mr. McBirney's wife for orchestrating the events. Texas Monthly magazine, in a 1987 article on Sunbelt's troubles, reported that the Halloween bash had a jungle motif, with a live elephant and entertainment by the Spinners singing group. A Christmas party featured a Russian winter theme, with a live bear, waiters dressed as Russian peasants and the Manhattan Transfer for entertainment.

Sunbelt, according to the lawsuit, attempted to artificially inflate its net worth - thereby deceiving state and Federal regulators - through a variety of practices such as generating imprudent loans to pump up earnings and issuing preferred stock in questionable transactions. But one of the most popular devices was ''cash for trash'' lending, which was a way to eliminate worthless real estate from Sunbelt's books and spare the savings institution from having to recognize a loss that could depress earnings and reduce net worth. Cleaning Things Up With 'Cash for Trash'

In a ''cash for trash'' loan, a savings unit lends money to a borrower who uses the loan to invest in defaulted real estate that the savings institution wants to get off its books. Sunbelt, the lawsuit alleges, lent $14 million to a developer who secured the loan with a second lien on the Lyric Office Center Building in Houston, which the developer owned.

The developer then used the money, according to the suit, to acquire two defaulted properties owned by Sunbelt. The lawsuit contends that the loan was made to get the two properties off Sunbelt's books, since a loan to the Lyric Center, in badly overbuilt Houston, was not a prudent investment in its own right.

Finally, the suit alleges outright fraud. It follows the money trail for a $1.1 million that Sunbelt took in as profit on a deal. The lawsuit claims that $805,000 of this profit went to a major Sunbelt borrower, who had already received more than $5 million in fees and commissions.

Mr. McBirney instructed the borrower to pay $350,000 of this amount to a business entity owned by Mr. McBirney and the remaining $455,000 to a partnership owned by Mr. McBirney and the borrower. The suit contends that Mr. McBirney directed the preparation of fraudulent statements to conceal the diversion of these funds from Sunbelt to his own pocket.

A lawyer may look at such transactions and smell a lawsuit. But an accountant looks at them differently. For instance, with ADC loans so widespread, their accounting treatment was a big issue facing the profession.

For accountants, the real question is whether the ADC loan is a loan or a direct real estate investment by the savings institution. To determine this, accountants must decide whether the borrower will be able to repay the loan or whether the savings unit will end up as the owner.

The difference is crucial: a savings institution recognizes the income from loan fees and interest payments immediately, but it cannot recognize income from a real estate investment until the real estate development is sold to someone else, usually many years later.

In terms of corporate perquisites, again lawyers and accountants ask different questions. From the accountant's perspective, it is not how much the savings concern's management spends on them, but whether the spending is disclosed and properly recorded.

It might make sense in a state as large as Texas, for example, for a savings unit to have an airplane - or, some might argue, even seven airplanes - so executives could travel to distant sites and return in the same day, especially to small towns with no scheduled air service. Or a Christmas party might be a good marketing tool.

With ''cash for trash'' transactions, the auditor again is looking at whether the loan makes economic sense for the new owner or if the borrower and lender are in collusion to keep a loss off a savings institution's books. Sometimes these loans can be a legitimate way to reduce a portfolio of properties. But other times, particularly if the lender and borrower are not in an arm's-length transaction, it can be a red flag signaling that the savings unit is trying to eliminate losses through questionable loans.

And fraud is extremely difficult for auditors to find, particularly if there has been collusion between someone inside and someone outside the concern being audited. Something as simple as an employee's hand in petty cash is fairly easy to ferret out; but a sophisticated scheme with many parties and false documentation is very hard to uncover.

There is no public copy of Grant Thornton's audits or of its written opinions. Because Sunbelt is a private company, as most savings institutions are, its financial records are non-public information. What the Disclaimer Listed as Problems

But the Grant Thornton disclaimer for 1986 and 1985 is said to run for about nine paragraphs and cover the following points:

* Auditors were unable to assume that Sunbelt could continue as a going concern because of the drop in the value of its assets.

* It was impossible to determine whether Sunbelt's loss reserves were adequate because of uncertainty over the value of Sunbelt's assets.

* Sunbelt's management was unable to provide the necessary proof that the financial statements were correct.

* Sunbelt was involved in litigation whose outcome was uncertain.

* It was impossible to determine whether Sunbelt was financially able to perform as a partner in a $700 million real estate joint venture.

Grant Thornton had initially given Sunbelt a ''clean'' opinion in 1985 as well, but reversed itself a year later when Sunbelt's assets had sunk so low in value that it was impossible to stand by its ''clean'' 1985 view.

It wasn't easy to take this stand. According to Grant Thornton, the firm was pressured by Sunbelt's new Government-approved managers not to issue the 1985 and 1986 disclaimers. In a memo to partners written two months ago, Burt K. Fischer, Grant's executive partner, said the disclaimers came ''despite pressure from the new management of Sunbelt not to disclaim an opinion.''

Thomas J. Wageman, a blunt former Chicago banker who is Mr. McBirney's Government-approved successor, would not comment on Mr. Fischer's memo, citing the pending litigation. The suit against Grant Thornton and the former Sunbelt executives was brought by the current Sunbelt management, as well as the Government. (The suit is currently in the pretrial stages and is not expected to be resolved for at least two years.) Grant Thornton issued its two disclaimers after Mr. McBirney and most of his management team had already resigned from Sunbelt - raising the question in some minds of the value of disclaimers that come long after the actual events have taken place.

In auditing Sunbelt, Grant Thornton faced many tricky problems, as did all accountants working in the savings industry. And because of this, the Texas Society of Certified Public Accountants tried to provide continuing education seminars to give some guidance. Throughout the mid-1980's, the C.P.A. society held annual two-day seminars in different parts of the state to review the latest issues in savings institution accounting. About 200 to 300 auditors would attend. 'We Tried to Help As Much as We Could'

''We were concerned about a lot of this,'' said Charles E. Sivess, a partner in Dallas at KPMG Peat Marwick and a former head of the state society's savings industry committee. ''And we tried to help our members as much as we could.''

But some may argue that as helpful as these seminars were, what some auditors really needed was something even more fundamental: common sense. It is what auditors call the ''sniff'' test, whether something seems right or not, numbers notwithstanding.

''Auditing isn't just cold facts,'' said Mr. Wageman from the big corner office once occupied by Mr. McBirney. ''There is such a thing as the sniff test. How does it smell? It may be something that the auditor can't put his finger on, but he ought to ask a lot of questions. And sometimes, he may have to say, 'I just don't like this,' and then have the courage to resign.''

[WTF]

Tiny

I've told you exactly what is going to happen. When it gets to to point of cutting benefits...they will raise the tax rate.

All dynasties collapse...are you arguing that they are all Ponzi schemes?



What you seem to be slowly understanding is that Ronnie just increased taxes on the lower and middle class. That is a fact you, TC and lustylad can not seem to grasp.

Now if you want to classify SS and Medicare as basically a slush fund used by hawks to hide the real cost of their wants....I'm ok with that. But please dear god....stop blaming SS for this country's deficits and debt. It is our ignorance on how our tax system is set up.

[Texas Contrarian]

Originally Posted by WTF

What you seem to be slowly understanding is that Ronnie just increased taxes on the lower and middle class. That is a fact you, TC and lustylad can not seem to grasp.

No, he did not! Good grief. Could you please make at least a rudimentary effort to learn something about this issue before posting again?

[Tiny]

Originally Posted by Texas Contrarian

Tax breaks for the wealthy? Seriously? When did Reagan introduce "tax breaks for the wealthy?" ( He didn't. He eliminated them!)

It seems that almost all anti-Reagan screeds, once you distill away all the extraneous crap, get back to the same narrative -- that is, that somehow Reagan increased "unfairness" in the economy by cutting taxes for the wealthy. (But he didn't!)

Maybe it's worth revisiting one of your old posts,

Originally Posted by Texas Contrarian

Earlier in this thread I mentioned that I occasionally had a little fun with friends by asking if they remember when Jimmy Carter undertook aggressive action against the Soviet Union during the Cold War. (Huh?? What??)

Likewise, I've enjoyed asking a couple of left-leaning members of my very large, extended family whether they are aware that Reagan actually raised taxes on the wealthy.

Yes, I know. "Everyone" seems to think that tax cuts on the wealthy were a prominent feature of Reagan's agenda, in pursuit of a "trickle-down economics" agenda.

But what if I were to tell you that, contrary to popular belief, that's not remotely what happened/

If you doubt that, please have a look at this:

https://money.cnn.com/2010/09/08/new...n_years_taxes/

This article was something of an eye-opener for some who looked only at the change in the statutory top-bracket marginal tax rate without understanding how the pre-1986 tax code actually worked.

.

Above in post #91 you provided an excellent summary of why cutting the tax rate from 70% not only increased the share of taxes paid by high income earners, but how the high rate caused capital to be allocated inefficiently.

Perhaps this paper from the Congressional Joint Economic Committee would persuade our friend WTF, in particular the graph on the second page.

https://www.jec.senate.gov/public/_c...april-1996.pdf

The graph, which shows the share of the income tax burden borne by the to 1%, top 5%, top 10%, and lowest 50% of the population, clearly shows the income tax burden shifted towards the wealthy during the Reagan administration.

A couple of quotes, since WTF probably will not look at the graph,

The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.

Several conclusions follow from these data. First of all, reduction in high marginal tax rates can induce taxpayers to lessen their reliance on tax shelters and tax avoidance, and expose more of their income to taxation.The result in this case was a 51 percent increase in real [inflation-adjusted] tax payments by the top one percent. Meanwhile, the tax rate reduction reduced the tax payments of middle class and poor taxpayers. The net effect was a marked shift in the tax burden toward the top 1 percent amounting to about 10 percentage points. Lower top marginal tax rates had encouraged these taxpayers to generate more taxable income.

[WTF]

Originally Posted by Texas Contrarian

No, he did not! Good grief. Could you please make at least a rudimentary effort to learn something about this issue before posting again?

What do you think a rate increase to SS was?

You need to pay more attention to wtf I say and less to what you think I said.

Are you trying to argue that debt and deficits did not increase beyond the normm under Reagan?

Let's stick to the subject at hand. I'll start a wealth inequality theory for yall to toot Ronnie's horn. But the numbers have been in on Reagan and hid astute economic policies and they're not good if you care about debt and deficits. And I trust his former budget director over any posters in this forum

[WTF]

Originally Posted by Tiny

Maybe it's worth revisiting one of your old posts,




Above in post #91 you provided an excellent summary of why cutting the tax rate from 70% not only increased the share of taxes paid by high income earners, but how the high rate caused capital to be allocated inefficiently.

Perhaps this paper from the Congressional Joint Economic Committee would persuade our friend WTF, in particular the graph on the second page.

https://www.jec.senate.gov/public/_c...april-1996.pdf

The graph, which shows the share of the income tax burden borne by the to 1%, top 5%, top 10%, and lowest 50% of the population, clearly shows the income tax burden shifted towards the wealthy during the Reagan administration.

A couple of quotes, since WTF probably will not look at the graph,

The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.

Several conclusions follow from these data. First of all, reduction in high marginal tax rates can induce taxpayers to lessen their reliance on tax shelters and tax avoidance, and expose more of their income to taxation.The result in this case was a 51 percent increase in real [inflation-adjusted] tax payments by the top one percent. Meanwhile, the tax rate reduction reduced the tax payments of middle class and poor taxpayers. The net effect was a marked shift in the tax burden toward the top 1 percent amounting to about 10 percentage points. Lower top marginal tax rates had encouraged these taxpayers to generate more taxable income.

Wtf does any of that have to do with Reagan being the impetus to these huge increases in debt and deficits?

Are you trying to argue that debt didn't spike under Reagan?

[Tiny]

Originally Posted by WTF

What do you think a rate increase to SS was?

You need to pay more attention to wtf I say and less to what you think I said.

You realize the social security tax on employees only increased from 5.4% to 6.2%? Social security + Medicare increased from 6.7% to 7.65%. Employers paid in the same %'s.

https://www.ssa.gov/oact/progdata/oasdiRates.html

[Tiny]

Originally Posted by WTF

Wtf does any of that have to do with Reagan being the impetus to these huge increases in debt and deficits?

Are you trying to argue that debt didn't spike under Reagan?

We're making progress. You don't disagree then, that the share of taxes paid by higher income earners increased during the Reagan Administration.

[WTF]

Originally Posted by Tiny

We're making progress. You don't disagree then, that the share of taxes paid by higher income earners increased during the Reagan Administration.

The subject matter is debt and deficits.

You three keep getting off topic , seemingly because none can admit who started this slide.



Back in 1981 David Stockman was the wonderkid of the Reagan administration–the director of the Office of Management and Budget who’d craft in actual budgets the trickle-down miracle Reagan had promised on the campaign trail: lower budgets, lower spending, higher tax revenue. But trickle-down economics was a wish, not a reality. It’s never worked. Lower taxes don’t generate more revenue. They generate deficits.

Reagan knew it. So did Stockman. So did their guru, Friederich von Hayek. The deficits were intentional all along. They were edsigned to “starve the beast,” meaning intentionally cut revenue as a way of pressuring Congress to cut the New Deal programs Reagan wanted to demolish. “The plan,” Stockman told Sen. Daniel Patrick Moynihan at the time, ” was to have a strategic deficit that would give you an argument for cutting back the programs that weren’t desired. It got out of hand.”

[WTF]

Originally Posted by Tiny

You realize the social security tax on employees only increased from 5.4% to 6.2%? Social security + Medicare increased from 6.7% to 7.65%. Employers paid in the same %'s.

https://www.ssa.gov/oact/progdata/oasdiRates.html

Not that it is on topic but how much more money do you think that is from 1983 to present?

[Tiny]

Originally Posted by WTF

The subject matter is debt and deficits.

You three keep getting off topic , seemingly because none can admit who started this slide.

I maintain it is on topic, because, in this thread, you keep bringing it up. And you contend that the Reagan tax cuts benefitted the high income earners while disadvantaging those who weren't as well off.

Here are some examples from this thread,

Originally Posted by WTF

We will do exactly what Reagan did....we will wait until SS and Medicare are going to have to reduce their output and then we will increase the tax rate on the poor and middle class and to be fair the high income earners too. This windfall regressive tax will then hide the discretionary side of the ledger where the rich are not paying for the wars and foriegn policies that benefit them much more so than the middle class and poor.

Originally Posted by WTF

Is it any wonder that the huge increase in non-dicretionary side [paid for in part by diversion of social security funds according to WTF] would hide the budget shortfalls on the other side of the ledger? What you get is not surprising....a growing income inequality. I argue that is not a good thing. We could further look at how CEO compensation expanded after he beat back the striking traffic controllers.

Originally Posted by WTF

So now we've established that Ronnie cut taxes on the highest earners and raised the regressive SS tax....by a lot.

Originally Posted by WTF

What you seem to be slowly understanding is that Ronnie just increased taxes on the lower and middle class. That is a fact you, TC and lustylad can not seem to grasp.

[Tiny]

Originally Posted by WTF

Not that it is on topic but how much more money do you think that is from 1983 to present?

Enough so that the social security trust fund reserves won't become exhausted until 2037:

https://www.ssa.gov/policy/docs/ssb/...me%20exhausted.

What makes you think that's not on topic? The social security trust funds were going to run out of money in 1983. Reagan et al extended that by many years. If the 1983 Social Security Amendments had not been passed, what would the effect have been on deficits? This is spot on topic.

[WTF]

Originally Posted by Tiny

I maintain it is on topic, because, in this thread, you keep bringing it up. And you contend that the Reagan tax cuts benefitted the high income earners while disadvantaging those who weren't as well off.

Here are some examples from this thread,

I keep replying to your and others nonsense!

You seem to think raising the SS tax wasn't a huge inflow of revenue from the poor and middle class...like Stockman contends.

[WTF]

Originally Posted by Tiny

Enough so that the social security trust fund reserves won't become exhausted until 2037:

https://www.ssa.gov/policy/docs/ssb/...me%20exhausted.

What makes you think that's not on topic? The social security trust funds were going to run out of money in 1983. Reagan et al extended that by many years. If the 1983 Social Security Amendments had not been passed, what would the effect have been on deficits? This is spot on topic.

SS surplus cause by Reagan’s tax on the poor and middle class is now on topic and open for discussion as to being one of the principal reasons Reagan lovers think his cutting taxes and the ensuing rise in public debt vs GDP is on topic. I seem to remember a thread where you said public debt should not be taken in to consideration when discussing this!

Let me explain to you what would have actually happened. Reagan did not give a fuck about SS....he cared about the SS surplus hiding the debt and deficits his military spending was causing or going to cause!

https://www.fedsmith.com/2013/10/11/...ecurity-heist/

Social Security was definitely not “teetering on the edge of bankruptcy” in 1981 as Reagan claimed in his letter to Congressional leaders. The 1983 National Commission on Social Security Reform, headed by Alan Greenspan, issued its “findings and recommendations” in January 1983. The Commission accurately foresaw major problems for Social Security when the baby boomers began to retire in about 2010, but that was nearly two decades down the road.

In addition to the long-term problem of the baby boomers, the Commission found a possible short-term problem for the years 1983-89. But the outlook improved and became favorable for the 1900s and early 2000s. The possible minor problem for the years 1983-1989 was based on very pessimistic economic assumptions. So, at the time Reagan informed Congressional leaders that Social Security was teetering on the edge of bankruptcy, the actual condition of Social Security funding was fairly sound for the next two decades.

Furthermore, Social Security was certainly not Reagan’s “highest priority.” Reagan had never been a friend of Social Security. He was a hardliner when it came to all government social programs. He called unemployment insurance “a prepaid vacation plan for freeloaders.” He said the progressive income tax was “ a brainchild of Karl Marx.” And, he called welfare recipients “a faceless mass waiting for handouts.”

Reagan referred to Social Security as a “welfare program” and, during the 1976 Republican Presidential Primary, Reagan proposed making Social Security voluntary, which would have essentially destroyed the program. There is no way that anyone who knew Reagan’s record would accept his claim that Social Security was his highest priority. He had always wanted the program eliminated, or at least privatized