“If you give a mouse a cookie, he’s going to ask for a glass of milk. When you give him the milk, he’ll probably ask you for a straw. When he’s finished, he’ll ask for a nampkin…” This children’s book which I read to my son about hundred times years back now reminds me of the new Tim Geithner fiscal plan which we got a whiff of a few weeks ago. Republicans finally decide to give in on about $800b in tax increases and the Obama administration says they want $1.6T of taxes with spending cuts to be determined later. Any economic credibility that Geithner professed to have is out the window. The US economy is growing no more than 2% and his plan is to take 1% of GDP right out of the private sector per year. While this could be just awful DC negotiating, the optics now look like a giant money grab where the income of the top 2% is just a cookie jar for others to stick their hands in to eat as many as they want.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

26 Responses to ““If you give a mouse a cookie…””

  1. jashead says:

    Mr. Ritholtz,

    I just don’t understand why you have this idealogical clown on your site. Please explain.


  2. dsawy says:

    When did Geithner have any credibility?

    This is the tax cheat who was found out when he was nominated for SecTreas, remember? This is the guy who used to be head of the NY Fed when the “too big to fail” banks were blowing up on his watch – and it came as a surprise to him.

    In any financial or fiscal problem we have today, men like Geithner are part of the problem, not part of any solution.

  3. techy says:

    Why I am not surprised that Peter has no problem with the republicans obstructing everything with the sole purpose of making the economy bad so that they can blame the administration but now he is not happy that finally the democrats have learned to play the ball.

    What part of 95% americans have suffered while .5% have made it like bandits dont you get it?

    Only solution is reflation leading to wage inflation, borrow 2 trillion and spend, lower the dollar so that we can deal with currency manipulators.

    Spending cut during recession is not the solution. taxing the people who own 99% of wealth is a real solution.

  4. Greg0658 says:

    I’ll have fun with this thought here .. yesterday saw a $1 coins are being pushed again (by who’s – dunno)

    but the Q is – I understand the coins and bills Order of Law between the 2 jobs Timmy has held
    ie USTreasury and FedResBankCorp

    if there was a Jubilee required to exit pc from this mess

    what would happen by Constitutional Law if bills became null and void .. and I guess what would the 2 golds do?
    ie corn & the shinny metal

    what about QE #s in the other pc and iDevices – null to zero?

  5. dougc says:

    Last year the Bohner couldn’t sell the 800 billion compromise to the republican congress, since they were confident Obama couldn’t win reelection. Now reality is setting in.

  6. Greg0658 says:

    ps – PayPal has a button on the swipepad at DolGen now .. bring it up because its 1 prominent barter pay system in place – runs in currency – but – just pointing

    its fun being a nobody – imagine if Ben or Tim said that flyshit

    I like the comment – if its too terrible to imagine, it won’t happen

  7. denim says:

    Why Republicans eat horse meat.
    Once a point in time a Republican agri-businessman had a plow horse. Now in the interest of free market efficiency, he decided each day to reduce the amount of oats that he would feed his horse. And he would feed the horse at the end of each day. At fist he noted no difference in the plowing performance of the horse, but after a long period of daily reductions in oats the horse fell over dead. Not to be wasteful, butchered and ate the horse. Well, he thought to himself, I wonder if this would work with the hired help.

  8. Greg0658 says:

    folks who follow my stick on the duoNovas – know what I think of the Law that Congress allowed – that gave the FedRes the short stick on command and control
    ie Corporate Stock Certificates
    - enforced by the Department of Justice and SCOTUS

  9. Vitus Capital says:

    What techy says…

    Also – Mr. Boockvar, you actually have it backwards. The cookie jar is the income of the 99% (98%??). The moochers are the 1(2?) % – Rentiers whose -whole business- is taking, not making. Steve Jobs was a maker. Romney, Koch “industries”, most financial types (me?) take. Romney: As BR has pointed out, “Private Equity” (formerly known as the Hostile Takeover biz), would not exist w/o a carried interest tax break. There’s no business there without the government handing the Mitts of the world money which rightfully belongs to the 99(98) %.

    Get a f***ng life, man.

  10. DeDude says:

    Buuu-huuu. I guess elections have consequences. The big compromise (of kicking the can down the road to past the election) was accepted by both parties. The negotiations at that time had Obama in a weak position because he needed a decent deal more than the GOP (who wanted the country to fail so that Obama could become a one-termer). So their talks at that time was about a very GOP like deal. In the end both parties decided to “kick the can”, rather than making a deal – in hope that they would win the election and have a stronger hand to form the final long-term deal to something much more to their liking. Well if Mitt had won and the Senate changed to GOP there is no way he would have accepted $800b in revenue, he would have cut it in half and settled at $500b in phantom revenues that left the rich pigs with lots of alternative tax avoidance schemes even as some of them were plugged. Well now the GOP found that sometimes you gamble and lose. Having been in a situation where the other side could win by refusing to negotiate, Obama was smart enough to set up the default scenario such that the GOP would become the big loser if a deal could not be reached. Although most liberals where whining about how weak a deal it was, I was surprised that the GOP would take a gamble and accept a situation where they would either end up being big winners or big losers.

  11. HowardA says:

    I am crying crocodile tears for the Republicans. You might point out that all your dollar amounts are for 10 year periods. If the tax rules were the same today as they were before the Reagan administration (adjusted for inflation), taxes paid by higher income individuals (over $250k) would be in the range of $175 to $250 billion per year more than today ($1.7 to $2.5 trillion over 10 years). Back then the highest income group paid 48% of Adjusted Gross Income in taxes. Now they pay about 23%. In 2010 Romney paid $3 million on $21 million AGI. In the pre Reagan era someone with his equivalent income would have paid $10 million. Supporting data: http://alturl.com/i8n2c

  12. Simon says:

    The whole trickle down theory is a myth. Taxing 1% does not take 1% out of the economy it puts up to 4% back in depending on how it is spent. If the 1% tax is taken from the top 2-3% money is put into circulation that may have otherwise not been spent any time soon. The rich are big savers and certainly corporate balance sheets apparently indicate that those entities have been saving not spending.

    When gold was the major currency Countries used to try to arrange their affairs so that more gold would enter the state than leave it. The accumulation of gold was considered a good thing. While it is true that if you have a lot of gold there is the potential to spend it. However unless you do you derive no benefit from it. The king may be very very rich but unless he spends the money his subjects will not notice any change.

    As soon as he does spend it however the change is immediately noticeable. He only has to spend 25% of his money to effectively stimulate the kingdoms economy by the full amount of his hoard. That is because what he spends gets re-spent and spent again up to four times before the value of it is finally consumed.

    The point is that a good economy is not one in which everyone has a whole lot of savings. And saving and not spending is not necessarily a good thing. A good economy is one in which trade deficit is held within an acceptable range, growing on average in proportion to economic growth and in which the velocity of money is high. There should be a wide range of high quality goods and services available and obviously a large section of the population should be able to afford to pay for them.

    It’s pretty obvious really. The role of government is to tax and spend and that role obviously gets more important when the private sector does not want to. Additionally unless the government does tax and spend all the money ends up in the pockets of the very few at the top. Clearly the trend has been biased in that direction for a long time.

  13. Simon says:

    I forgot to mention that if the king taxes his subjects 25% of their gross income he gets back much more than he spent.

  14. HowardA says:

    With reference to my earlier comment above, I calculated the cumulative lost tax revenue from high income individuals from 1980 to today assuming the current annual loss is $175 billion. I assumed that this amount would have grown at an average 3.3% inflation rate since 1980 and that the lost revenue would have earned a 5% annual rate of return. The cumulative loss would have a current value of over $7 trillion. Therefore, the dramatic tax cuts for the top 2% instituted during the Reagan administration account for about 43% of the current $16 trillion of federal debt.

  15. HowardA says:

    (Continuing comment above) A more agressive estimate of the current tax impact of Reagan era taxcuts would indicate that the cumulative impact since 1980 was closer to $11 Trillion, or about 2/3 of the federal debt. Another way to look at this is that the lower tax rates instituted in the early 1980s have resulted in increased wealth of the top 2% in the range of $7 to $11 Trillion!

  16. Vitus Capital says:

    HowardA: Kewell

  17. HowardA says:

    What is kewell?

  18. HowardA says:

    (Continuing…) Spread $7 trillion over the top 2%, about 2 million, households, equals an average $3.5 million per household. That’s a little more than the average welfare recipient, or person on unemployment, gets.

  19. Union Agitator says:

    Since the income, possessions, even the lives of the bottom 98% have been taken at whim by the top 2% from time immemorial, this seems to me more than just.

  20. Theravadin says:

    Peter: I’m extremely puzzled by your notion of economics. You seem to operate under the delusion that Gov’t money disappears. Reality is, it’s recycled in wages and benefits which show up on Main street way faster than any millionaire’s stash. The exception to this rule? Money paid out as interest on the debt… which the Republican party has been gleefully running up under the “starve the beast” theory. Probably at this point taking money from the 1% and spreading it around in wages and benefits is one of the best stimulus programs there is. The thought that 1% more of the GDP in taxes means 1% less GDP is simply not true. Clearly at some tax rate the disincentives to enterprise begin to outweigh the economic positives of gov’t spending… but the USA is so far below that level that there’s no point even discussing the issue.

  21. HowardA says:

    (continued) The average income of the top 2% is in the range of $600,000. So if that group saved and invested the benefit of the Reagan era tax cuts, they alone would have grown to @$3.5 million or almost 6 times annual earnings, while accounting for $7 to $11 trillion of the federal debt. MY SUGGESTION: Rather than considered a done deal, this should be treated as a deferred tax benefit. The top 2% have total net worth of about $22 trillion. For the next 10 years the government should impose a wealth tax of 4% and the Reagan era tax cuts should be reversed to generate an additional $200 billion from the top 2% each year. This would eliminate a large part (but not all) of the federal debt and annual deficit. OBAMA HAS TO THINK BOLD. This would be fair. The top 2% have been given a HUGE tax benefit over the past 30 years.

  22. Vitus Capital says:

    Kewell is “cool” in Californian

  23. steelhead says:

    Peter B:
    I have read your columns for about 2 years and I have never seen a more selfish, condescending, narcissistic and psychopathic piece of propaganda for the .001%.

  24. Vitus Capital says:

    Peter B! Ya!

  25. MidlifeNocrisis says:

    I have to agree with Jashead. Peter’s narrative is so devoid of reality and is so politically biased that it serves no purpose whatsoever. It reads like an opinion piece from FOX News.

  26. capitalistic says:

    Raising taxes + cutting spending = zero effect

    Raising taxes on the wealthy, will not hurt the economy. In my opinion, the marginal tax increase is essentially sucking up the excess liquidity sloshing around. Cutting spending will contribute more to economic contraction.