Relax. The tax is unconstitutional and is basically just a source of brand awareness for the Warren campaign.
1
You don't have to be an economist to realize how dishonest the Wharton study is. It's based on the false assumption that wealth tax revenues would be used to pay down debt. That's not her plan at all. I hope the Times will run an editor's note that states that the entire premise of the study and the article is false.
13
Was this study peer reviewed? The article neglects to mention whether it was or not. I'll withhold judgement until this matter has been studied a bit more.
this is why I think thus article is wrong. first the billionaire class may not invest in America. it may invest in faster growing markets like China or india. it may also invest in stock buy backs which don't increase GDP. surely past tax cuts have went to both of these things. but the tax would be spent in america on things like housing for the poor and healthcare, which will affect GDP.
6
Does anyone buy this? The proposed wealth tax is levied on wealth IN WHATEVER FORM HELD above the generous exclusion amount. There is no way to save taxes by not "investing" an asset, except by getting rid of it either through charity or consumption.
If it takes the form of consumption, that means it is being spent to purchase goods or services. The producers or providers of those goods or services thus receive income from that consumption, which is taxed if in the U.S., and at a much higher rate than the 2 or 3 or 6 or even 8 percent proposed in any form of Warren or Sanders' proposals. There may also be applicable sales taxes, or use taxes.
If they try to give it away, there may be applicable gift or generation skipping transfer taxes.
Charity is good.
There is no disincentive to invest solely for fear of wealth taxes, because each dollar not invested above the exclusion amount is still being taxed six cents. You're still better off turning wealth into more wealth than not; the 6% bite taken out of your excess wealth is going to hurt a lot more and a lot quicker if you don't invest profitably.
Obviously they'll look for ways to minimize the effect: invest in harder to value "alternative investments," set up trusts, etc. Guess what: if they're that rich and not already doing so, they have dumb tax counsel. This'll still take a chunk out, and any "consumption" to avoid it is GOOD for growth, great for tax revenue, and wonderful for distributive justice.
2
You should really try harder to hide your bias. It's definitely interfering with the whole consent manufacturing thing.
4
I'm sure the billionaire funders of the Penn Wharton group were very happy to see this half-baked analysis trumpeted in the NY Times. Does the Times ever get tired of being used like this?
8
I'm repeating some points that others have made but I think they are important:
(1) The money that Warren's wealth tax would raise is NOT directed towards paying down the federal debt. She has been very clear about that. It is sloppy and ill-informed reporting to not contrast that clearly and upfront with the so-called analysis.
(2) There is absolutely NO evidence that reducing the wealth of the top rentiers will lower economic growth. Think about it: during the post 1980s huge build up in wealth at the top, our GDP growth rate has declined vs the decades after WWII. In fact, we are just about to complete the 13th consecutive year in which real GDP grew by less than 3%. This is unique in terms of our historical record and should give anyone pause who thinks that we need high wealth concentration to generate growth -appears to be the reverse.
6
"The Penn Wharton Budget Model estimated that wealthy Americans would consume more ..." seems to be a good thing.
also, PWBM funders ...
https://budgetmodel.wharton.upenn.edu/funders
2
Please NYT, leave this kind of Right Wing economic "Analysis" to the WSJ and Fox news; This is from the same people who insist Tax cuts will pay for themselves.
It's NOT a tax increase, it is a Revenue Restoration and clawback initiative on the plutocrats ill gotten gains.
10
I think a lot of people here misunderstand why the modelers assumed the revenue would be used to pay down the debt. The reason is simple: that is the absolute BEST case for growth. At the end of the day, investment in new capital is a major contributor to growth. Taxing wealth causes more consuming and less investing. However, paying down the debt frees up funds to be invested privately, boosting investment. Even under the BEST case for investment (where the negative effects of the wealth tax are partially offset by the positive effects of paying down the debt), Warren’s plan reduces growth by a nontrivial amount. Using the revenue for other purposes would be even worse.
2
@Anonymous -- You and the modelers ignore that Warren's plan is to pay for programs and not pay down the debt. Call me simple minded, but unless and until Warren changes her tune, any model of the consequences of her plan should conform to her actual plan, don't you think?
I also take issue with the idea that really wealthy people are going to forego investments that increase their net worth in order to avoid paying a wealth tax. I strongly suspect they are already engaged in as much consumption as they could possibly want, so I doubt they are going to buy another expensive trinket or car. And, if they are not spending it, what else are they going to do with it? It seems the modelers assume they are going to let it sit idle almost as a protest, rather then invest it as well as they can for the highest returns. For sure, they won't have the amount paid in wealth tax to invest, but Warren says that the government will be spending it on various programs, so it is going to be used to prime the economy, perhaps better than if the wealthy held on to it.
There may well be problems with Warren's plans -- such as vastly underestimating what Medicare for All would cost -- but I have no confidence in this model or its assumptions.
7
Does the NYTimes report on this in hopes of some deluded sense of "fairness"? The study assumes that money raised will go to pay down debt, when she EXPLICITLY says the money will go for other things. It is a useless study.
So why report on in NYTimes?
Please ABSOLUTELY publish legitimate critiques of her and other candidates' ideas, but don't publish nonsense in the hopes that Republicans will like you more.
7
Note to Warren and any candidate on the left or right especially democrats.
1-Don't identity obsess.
1-Don't identity obsess.
1-Don't identity obsess.
Don't soak the wealthy, make sure everybody including them are paying their fair share of taxes, some wealthy people are and some are not.
In 2016 we had an election with two identity obsessed people, the white bigot Trump and the female identity obsessed social engineer Hillary. The bigot won by a TKO in the electoral college.
Most Americans are sick and tired of identity politics.
2
The NYT should not publish these hypothetical articles. If you must, the headline should be accurate and not negative or fearful.
6
I can't believe anyone actually wrote this in the Report: "The Penn Wharton Budget Model estimated that wealthy Americans would consume more and save and invest less in order to avoid accumulating wealth that would be subject to the tax. The resulting drop in investment reduces economic growth."
Really? I can just hear Bill Gates or Warren Buffet turning down an absolutely stupendous investment opportunity that will add to their billions because a small percentage of the gains will be taxed. Get real.
On that basis we should do away with all taxes because they suppress economic activity: Income taxes cause people to work less, sales taxes cause people to spend less, real property taxes cause people to seek less housing, and on and on. But, the only ones we should worry about are the billionaires because they will put their money under the mattress and let it deflate in value rather than seek out the best investment opportunities despite this small wealth tax. Gimme a break. Whoever wrote this Report is an idiot.
8
A president smart enough to institute a wealth tax wouldn't be stupid enough to spend it on reducing the national debt.
5
Hmmmm......Hardly got started reading this, when the name Wharton popped up!
As I recall, while discovering Donald Trump's skimpy college background, The Wharton School was his major intellectual and educational achievement.
Readers, any connection?
2
More accurate headline "Desperate Billion Pin Hopes on Scare Tactics Based on Flimsy Predictions"
4
Thanks for the horribly misleading headline. You quote more economists in the article who don't think it will slow the economy than one, single study that does. Can't the Times avoid clickbait instead of the falling into the trap of other lesser outlets? I guess not. But I can edit it for you: "Economists debate the effect of Warren's tax plan on economic growth".
5
cancel student loans baby.
Totally illogical as we have yet to attempt anything that actually impacts the wealthiest among us. I’d be willing to bet that after the wealthiest of us came back out of the corner and stopped sucking their thumbs and stomping their feet, that the middle and lower classes could actually finally catch a break!
1
Good Lord. How does the Times not question the study creators assumptions, and its own, contained here? Completely thoughtless. Is this really what we can now expect from the Paper of Record? So disappointing.
5
An analysis, eh? Who paid for it? Cui Bono?
Why isn't this article in the opinion section? The author is clearly promoting a skewed opinion.
4
I expect Fox News to deliberately misrepresent the Democratic candidates' proposals, but not The New York Times. Shame on you.
6
A problem with hyper wealth is that it reduces access to property, the economy, and even the democracy for most of the population. One interest of a wealth tax is to reduce this confiscation of much by a few. Just taking wealth and reducing the national debt would reduce economic activity, and increase the worth of wealth, thus confiscate more from the commons, and make the wealthy relatively wealthier, achieving the exact opposite effect. So using a wealth tax to reduce debt… the latter being an obsession of the wealthiest and less economically active, would serve the wealthy, not most of the population.
Instead, one has to use a wealth tax to augment economic activity and avenues for most people to increase their worth. Some of the wealthy argues that seizing two cents of their wealth would reduce the recycling of their wealth, the recycling of these two cents, into economic activity.
A way to avoid this would be to enforce the recycling of 100% of the taxed wealth into economic projects. To avoid this, one should allow no injection of taxed wealth in the general budget. Thus one could present the wealth tax not as a redistribution tax, but a Wealth Economic Activation Tax. WEAT
A wealth tax will have a major beneficial effect on civilization:
Progressive diminution of plutocracy, to save civilization from the greed and control of a few power obsessed families
Wealth tax is a must. The wealth tax is why the Roman Republic lasted five centuries (and arguably longer).
1
A more accurate title for this article would be: "Warren Proves that GDP is a Horrible Indicator of the Health of an Economy."
So what if growth lags by 0.2%, when nearly all of that income would have gone to the 0.001% in any event?
2
The underlying assumption seems to be that only the investments of the very wealthy spur the economy, when in fact we saw how Wall Street's decision to invest in overpriced real estate nearly wrecked the economy.
Who is making the long term investments in our people, our infrastructure, in averting climate change? Why do these economists assert that private investment is better than public investment?
6
Wouldn't any new tax revenue that was used to reduce the national debt instead of spending on government programs cause less growth? Hard to believe only a tax on billionaires would have that effect.
The Wharton analysis is suspect without considering the dynamic effects of priming the economy with the additional trillions from the wealth tax, as most of that money will ultimately be taxable income of the workforce it engenders. As promising as a wealth tax sounds, there remains the question of its legality.
Such tax, defined as a property or direct tax in the Constitution, must be apportioned according to the population in each state, thus placing the burdens unfairly on low population and income states. In contrast, the income tax was approved by passage of the 16th amendment as an exception to apportionment. If a wealth tax were approved by Congress under Warren or Sanders, it would be challenged in the courts and probably not resolved in years.
Another problem of the wealth tax, particularly for the higher rates of 6-8%, is that for circumstances where the combined income and wealth taxes exceed income, it would force the billionaires to forgo assets to pay the tax bill. Unless they can deduct this "overpayment" in a future tax year, the tax in excess of income would constitute confiscation without compensation. At first glance this seems unlawful as well.
The best strategy (and lawful) for the Democrats is to rely on just increasing the tax rate in the highest income brackets to rates comparable during WWI and WWII without increasing those of the middle class and lower income groups.
It's totally unsurprising that increasing taxes to pay down deficits would result in decreased short-term growth. So would cutting spending.
Warren's wealth tax is not to be spent on deficit reduction, so the salient question is: what the net effect of Warren's proposed taxes and spending programs?
This study does not attempt to answer this question, so I don't understand how the headline "Warren Wealth Tax Could Slow Economy" is justified.
3
Ok everyone, pack it up, shows over. Getting vastly improved healthcare, education and human rights for the entire nation may slow down economic growth by .2%. Billionaires, corporations and investors cant take a hit like that, nice try though. Maybe a huge tax break for the 1% instead?
10
What a joke: ''The model did not assess growth effects from Ms. Warren’s spending plans. Instead, it assumed that the tax revenue would be used to reduce the national debt''.
Warren never said that the proceeds of her new taxes would be used to reduce the nation's debt. Warren has always said that the taxes would be used to finance health care, education, universal child care, Social Security. This spending would create jobs, and in turn increase spending from people with those jobs, higher retirement benefits etc...
The whole premise of the study is disingenuous. There is the usual assumption that when Republicans explode deficits and the national debt to enrich the 1%, that is not a problem. But if a Democrat gets elected, he or she has a moral obligation to clean up the mess left by the outgoing Republican administration.
Investment decisions are never made because of taxes. People and corporations only invest if they see a solid profit opportunity, for to pay taxes, people and companies first have to make a profit on their investment.
The Trump tax cuts have had virtually no impact on the level of investment. With Warren, the 99% will have more money to spend, this will drive economic growth, and the 1% will finally have some investment opportunities to meet this increased demand and purchasing power.
4
Why are we always using the metric of "money" growth? That's ridiculous. Let's do predictions instead on happiness, health outcomes, community involvement, quality of life, and human dignities outcomes. Those would be off the chart.
5
I would take a slower economy any day as opposed to a hyper-stimulated one that constantly sits on the edge of a Trumpian abyss of disruption, manipulation and uncertainty.
We need well-paying, STABLE jobs, consistent health care guarantee, and a stop to this criminally-polarized political animas. We need a government BY and FOR the PEOPLE, not one that abuses the law, rights and all ethical and moral values - an example like Obama that children can honor and emulate. We need a legacy of which we can be proud - not the destruction and xenophobia of a narcissistic sociopath.
Our economy is not everything - there is much more to life that Trump absolutely will never understand. His attempted authoritarian coup of our government must, and will end, and I hope we can repair his damage before we become a corrupt marginal player on this planet.
2
Ms. Warren has been known to dance about in Red Face, so you can't take anything she ways very seriously. The current plan is just a primary ploy. And them there will be a general election ploy.
And finally, if she did, by some miracle, become President, nothing would change, since she stocked up on bank money during her previous Senate campaigns.
We all know who the authentic Socialist candidate is, so if you're a fan of socialism, vote for him. At least, you will getting what you voted for, if he wins.
2
All we know for sure is that Warren's economic plan is based on French economists at Berkeley who deliberately use the wrong numbers for their analysis. Their analysis only makes sense if you ignore transfers and all kinds of other facts that expose their nonsense for what it is. Her economic plan is built on sand and lies, but hey, we already know her track record with the truth.
the stock market is not the economy..
2
Ridiculous. It is impossible to determine how investors will react to any particular situation or tax. This report is nothing more than educated ‘guesses’ at best. Billionaires had their chance to share the wealth. They have instead chosen to be selfish, greedy, and detached from reality. Fine, then it is time for the government to step in and take some of that wealth and redistribute it properly. It’s the American way.
First of all, who said that the money her wealth tax raises would go to reducing the debt? From what I've heard her say, this money would be used to fund MFA, the Green New Deal, free tuition and child care. Why would the NYT lead with this false narrative? I wonder? Does it have anything to do with being owned by a billionaire family? Or its barely concealed bias towards "centrist" - read Republican-lite - policies? NAH! That would be biased and unfair, the opposite of "fair and balanced" wouldn't it?
Second, investing these revenues in the ways she intends would in fact produce a positive ripple effect, which the Penn Wharton study doesn't account for. Not only by kick-starting new businesses and development, but by people have more disposable income to spend.
Third, the whole theory that stock investments drive economic growth is faulty. If it were true, Americans would have experienced tremendous growth in their income and wealth, but the fact is that most American's wealth has DECLINED over the past few decades. Sure, investments may have enabled a small number of people and Corporate America to rake in unprecedented wealth and profits, but it hasn't done much for most Americans. It's long past time that the NYT and MSM stop reporting these fairy tale measurements and report on what's REALLY happening for most people.
In short, this is just another "hit piece" to try and knock down the "socialist" agenda that most Americans want.
4
And what happens if we never pay this debt and continue to grow it?
It is gratifying to me to see so many comments here about the folly of pursuing constant growth...we need several more earths for unlimited growth. I used to feel like the only kook who is thinking about this...and then came Greta! Yes, a 16 year old is wiser than most adults it seems. Would the NYT please start a series on how the world will have to transition to a different paradigm to define our economic system? I find the constant drumbeat for growth simultaneously disgusting and terrifying.
3
Of course taking billions in new taxes from the uber-rich and using it to pay down federal debt would slightly slow the economy — the net effect would be to transfer a substantial amount of wealth wealth from rich Americans to foreign governments, especially China, who hold a substantial amount of U.S. debt. BUT THAT’S NOT WHAT WARREN PROPOSES.
She proposes to invest that money in Americans — in infrastructure improvements, better health care, expanded education, etc. That’s not taking money out of the economy. It’s taking money from rich people who’ve invested substantial portions of it in uselessly bidding up existing non-productive assets (stocks, real estate, art, etc.), and put large amounts in offshore accounts (some reported; some not).
Putting that money to work in things that will make the U.S. economy more productive, and more equal, will have significant positive impact on real growth, not the artificial asset bubbles we’ve been experiencing.
Lastly, shame on you NYTimes for publishing a misleading story with a misleading headline that further misleads the public!
4
Well, if you borrow like crazy, you can blow money and put all sorts of people to work. When you are called to pay back what you borrowed, the ephemeral jobs that you “created” do not exist anymore. The question then is, why did you go do that?
The answer is: you become popular! What fun times we have if we ignore the consequences. The Republican game has long been to play economic sugar daddy with monster deficits and tax cuts and to let the Democrats then try to balance the books that are flagrantly made worse every single time Republicans are in charge. Of course that is not a popular activity. Cleaning up after party is a much less fun than the party. It’s even less fun doing it when you know that next weekend the Republicans will be back carousing as usual and charging the whole bacchanal to your credit card.
Who cares! We'll never see the benefit of "growth."
The Opinions page would seem to be a better place for this article, which trumpets a narrowly focused "preliminary" study that, among other things, does not take into account the potential growth from the programs the wealth tax will fund.
Mr. Tankersley waits until the thirteenth paragraph to point out that the Penn Wharton model did not assess the potential growth benefits of Mrs. Warren's plan. This de-emphasis of a compelling counterpoint to the findings seems to betray an apparent favoritism of Mr. Tankersley toward the billionaire's arguments.
I don't necessarily object to leading with the Penn Wharton findings, but a fair and appropriate news story would have noted the narrow focus of the study immediately after.
Absent that, Mr. Tankersley's piece is better suited to the Opinions section.
3
Warren’s economists are from Berkeley? I’m sure there math is sound!
Warren Wealth Tax Could Slow Economy, But Only If We Completely Disregard Her Actual Plans For Spending Said Money
There, fixed the headline for you.
3
If the tax is used to pay the debt! It will clearly not be the case. These funds will be re-invested right back in the economy. So this is irrelevant information. Or should I say it is disinformation. Why NYT is letting itself being the vehicle of disinformation?
3
New York Times, this is a misleading and disingenuous article. To reach it's negative conclusion, the study had to pretend Warren plans to use all the money to pay down the debt. This is not the case, so the study's conclusions are basically made up. Why did the New York Times think this contorted study was worth reporting on? And the choice to use the headline "Warren Wealth Tax Could Slow Economy" without any acknowledgement that the study does not at all reflect Warren's actual plan for the money is alarmist and extremely misleading. At a time when most people skim headlines and rarely make it to the end of the article, this looks an awful lot like an intentional smear of Warren. Warren's plans deserve thoughtful analysis, not panicked headlines about studies using pretend scenarios to reach whatever conclusion they want. What a telling choice by the New York Times.
3
Why does the NYT give this Wharton model conclusions legitimacy with a headline stating what Wharton thinks they are proving? It is crystal clear to the author Jim Tankersley that Wharton's model is not a study of Warren's plan in assuming the taxes collected would go to reducing the debt, rather than what Warren actually plans to do with the money. How is this study relevant to anything since it is not a study of Warren's plan, but the headline pronounces it is all about her plan? Too why is this in the business section? This piece/Wharton model seem to be more of an opinion than any serious analysis. And even if it was an opinion, I would hope the NYT wouldn't allow an opinion piece that has such an obvious error. This is like the press constantly repeating the lies Trump spews, because, well, because the president said that. Does the press have to facilitate the dumbing down of America with constantly reporting on ridiculous conspiracy theories and outright lies of the president? Please, NYT, be more rigorous in what you accept as news, and please don't be a part of Trump's echo chamber.
4
If my family has real access to healthcare, free pre-k childcare, and access to tuition free state college and the hit to the economy is .2 percentage points - I'll take it thank you very much!
The .1% are freaking out over how well Elizabeth Warren is doing. Their reckoning is upon them and they are pulling out all the stops to squash her and the media is on their side. How many more "bought and paid for" articles are we going to see in the media like this?
3
Why would the NYT utilize a headline that clearly predicts "the sky will fall" when the PWBM analysis is incomplete and didn't consider the investment in social programs that would result from a tax increase on the wealthiest?
A parallel question is why would the PWBM even conduct and release their analysis which incorrectly assumed that the tax increase would not be put back into the economy? The answer just might be in 'hidden' in their donor list.
2
Holy (R)eagan, Tankersley! This is just the inverse of the (R)s repeatedly, thoroughly debunked trickle-up voodoo economics.
Even IF you're right, what's better for The Land of The Free (old, white, rich men)? An economically healthier citizenry? Or (R)icher (R)ichy (R)iches w/ more idle cash moldering in their Money Pits? Hmmmm (checking bank balance) - Nope, I'm not a Billionaire, so I vote for Warren's Wealth Tax. Go, Liz!
Just another load of lies from billionaires that are greedy beyond belief.When billionaires hire lobbyists to pay even less taxes that's enough proof for me that these people are greedy to the nth power.They are out to turn us into a Latin American country where a few people have all the money and the rest are all hard working but extremely poor peasants.
Isn't Wharton the font of knowledge that graduated D. Trump?
Wasn’t this the same business school that Trump graduated from?
Who knew sick and dead people were so good for the economy...
"A little over 60%, are filing bankruptcy at least in part because of medical bills. Most of them are insured. It’s clear that despite health insurance, there are many, many people incurring costs not being covered by their insurance,” said Himmelstein. “Medical debt is incredibly common, it’s the main cause of calls from collection agencies, and the vast majority of people with it have insurance,” said Himmelstein, lead author of the study Medical Bankruptcy: Still Common Despite the Affordable Care Act.
One out of every six Americans has an unpaid medical bill on their credit report, amounting to $81bn in debt nationwide, while about one in 12 Americans went without any medical insurance throughout 2018. Even as many Americans struggle to afford health insurance coverage in the first place, those that have it are not insulated from facing massive debt due to medical bills."
This in a country as prosperous as the US is shameful.
So who's benefitting from all this "growth"? Certainly not my working class brother employed in a series of part time jobs. Certainly not my daughter and all her college educated friends who are finding that the jobs being offered don't pay enough to allow them to pay their students loans and then save some. And because most of these jobs don't come with health insurance, they find themselves uninsured. Ask any of the so called "gig" workers how much "growth" they're experiencing and you'll get a good laugh from them.
Many of us are tired of being held hostage to the very wealthy. They've reaped more than a windfall over the last 40 years and done little to redistribute to the very people who have produced their riches. It's payback time.
3
So, in the worst prediction of economists, we are talking of slowing economic growth from an average of 1.5 percent to an average of just over 1.3 percent over a decade.
This being the price for a tax that will fund universal child care, increased education funding and student loan forgiveness.
This seems a small risk when comparing with the risk of NOT
taking care of the kids and NOT helping raise education and decrease debts of young people.
2
AND you forgot to mention that she will also pay down the nation's debt, instead of running up more every year. So it really does sound like a good plan overall.
It's interesting how we seem to be having considerably much, much more discussion on Warren's proposed taxes than I ever saw or heard on the current budget, which benefits the rich and puts the country further in debt.
Why is that?
2
In 2009, 45,000 a year died due to lack of health insurance.
It certainly has increased since then.
Why would we believe anything Wharton had to say about Warren's health plan when they turn out students like Trump who doesn't seem to know one iota about business or the economy?
2
Warren’s tax plan will undermine growth and lead to capital flight. The wealthy will move funds offshore before Warren can even articulate her plan to Congress. She needs to take Macro 101. It’s DOA.
1
Working people pay the taxes that keep this country afloat. Let that capital go, it does nothing for the country.
How much creative potential (which would likely stimulate the economy) is being squandered because so many citizens are using every ounce of their energies to pay for astronomical medical, educational and basic living fees.
Do a study on that please!
4
as if the prime mover in this country's economy was billionaire investment in plants abroad and stock buybacks
3
A welfare state is impossible without growth, especially in an aging society. If the warren welfare state is to continue for a 100 years instead of 10, you need growth.
2
This illustrates why we need many good universities instead of a few schools labeled "elite". If there were a dozen or more universities independently creating and running such models and explaining their assumptions, the collective findings might warrant some confidence.
Bogus Study. It is time for Americans to appreciate candidates like Elizabeth Warren. Honest, realistic and courageous.
4
Like it it or not, that Is 100% correct, and why I will not be voting for her.
1
@Hjb you may agree with it, but it's far from 100% correct.
4
The entire study is based on a false premise - that it would go to paying down the debt.
6
This is completely insane. In no way is it a fair assumption that Warren would use the revenue raised by her proposed tax to cut the national debt. Cutting the national debt is the obsession of a tiny group of centerists, economists, and libertarians. Mainstream Democrats AND Republicans have no interest in doing that, as they've demonstrated time and time again. While I understand that it's hard to economically model using the funds for spending - as spending requires laws which involve enough political variables to be completely opaque - assuming the money doesn't go into new spending at all is absurd.
When science can't be used to make accurate models it's good science to say that and bad science to forge ahead with unfair assumptions. When science makes bad models, based on bad since, it's bad science journalism to report on it.
3
Did this analysis include the economic cost of climate change if we do *not* follow Warren’s ambitious plans to rapidly reduce emissions and build resilience? If not, it’s a bogus study, and not worthy of an NYT story.
9
The goal should be to facilitate pursuit of life, liberty and pursuit of happiness "for all"! How does one do that? The elimination of desperation - poverty, inequality, racism, etc. With this society will be more energized, more productive, more creative and confident. Growth should not be the goal, improvement of the lives of "all" is the goal with growth as a result. Those who contribute most should be rewarded and celebrated but not at the expense of that which serves society as a whole. Quality healthcare and education are part of the infrastructure needed for a successful society and everyone should be required to support that infrastructure based on their ability and benefit received.
2
How would billionaires spending more hurt the economy?
And how really are they investing now rather than hoarding?
3
What I like about this analysis is that it makes it clear that a billionaire's first instinct is to find ways to weasel out of paying their taxes. That is, to enjoy the enormous advantages of living in a stable and prosperous country but make others less fortunate pay for that stability and prosperity.
If Senator Warren can make more of them cry like she did Leon Cooperman, she deserves your vote!
6
Yes balancing the budget will slow the economy in the short run. That is why the Republicans only want to balance the budget when the Democrats are in charge. How can we afford health care for all, the same way we can afford our current defense budget. Just run a deficit. What we need to discuss is sustainability. We cannot sustain growth by continuing to add to the deficit. It's a sugar high and the coming down is difficult. That is why Keynes believed the government should run a surplus in good times and a deficit in bad.
2
Is growth built on the back of grossly widening income inequality really what we want?
So growth slows a little but large swaths of the middle and lower classes start living better. That really so terrible??
3
What kind of analysis is this? "The assessment found that if the tax raised as much new federal revenue as Ms. Warren intends, and if the proceeds went toward reducing the federal debt..."
The proceeds will not be going to reduce federal debt. They will be going for a host of matters that Warren has outlined. Delete the article.
1
Penn Wharton Budget Model is the product of an INDEPENDENT BUDGET GROUP? Uh, yeah and stuff.
Right, it's going to take some leveling off. Sorry the rich can't ride this wave of theirs forever. The people will speak loudly when they vote against inequality.
1
A study is only as good as its assumptions. I would suggest to the researchers to assume that Warren's two-cents tax will go towards educational spending, not deficit reduction, and go back, recalculate their algorithms, and then publish their results.
We are in crisis on multiple fronts, and one of them is an entire generation saddled with student debt, and the inability to afford a college education. Too many young people are living with their parents, unable to get a start in life. This is a real drag on our economy and will only get worse as college costs spiral out-of-control.
Factor that into your study.
2
Dumbest study ever.
OF COURSE raising taxes by itself will reduce growth. The whole purpose of raising taxes is not to collect taxes but to do something useful with the money. Using the money to finance Warner's economic plans to help non-wealthy families will create benefits that vastly outweigh the slight drag that increased taxes on the ultra-wealthy would cause.
4
"...The model did not assess growth effects from Ms. Warren’s spending plans. Instead, it assumed that the tax revenue would be used to reduce the national debt."
Um, then is this piece of research really ready for publication? If I accidentally cut off my hand with a chainsaw but don't go to the ER because I only look at the cost of seeing a doctor and not the benefit, have I truly made a rational decision?
3
Ms.Warren , like so many on the left today, uses ideological and moralistic representations that appeal to the base resentment on her perceived target demographic. Blame and soak the rich and everything will be free, from student debt to health care to unicorns for you and me. The right, of course, has been doing the same since time immemorial. Instead of "immigrants" and evil Mexicans we know are sermonized about "the wealthy". The thing is that the so-called wealthy are not all evil wall street robber barons or Trump cronies. Most of them are hard working professionals who have excelled and get paid very well. They not stealing from anybody and the fact that they do well does not make them evil. To indulge in such resentment based fantasies renders the progressives peddling that cant no that far from Mitch Mconell's brigade. Of course nobody wants to hear this. Yeah, let's soak "the rich". Everything sounds so beautiful on paper when somebody else is going to pay the bill. If the democrats think that the only way to beat Trump is becoming him, they will fail. In fact, they're failing already. Every time a flake uses the word socialism a new Trump voter is born.
and
3
@Mr.Croc, your premise is off. Warren is talking about the ultra rich, not people working hard for a decent income. How do you become ultra rich? Inheritance, profiting from a monopoly, insider trading, fraud and exploitation. We can all agree that none of this is good for society.
Income inequality is certainly an issue but people would not be as resentful towards billionaires if they were not using their money to rig our political system or attack science and climate change in the name of greed (Koch).
3
You know what slowed the economy? Greedy billionaires taking all of the wealth at all costs. People like Lloyd Blankfein at Goldman Sachs steering clients into a strategy that GS themselves bet against causing the collapse of 2008 with zero repercussions!
This economy needs Warren or Sanders to fix it and it's ridiculously simple. Giver the majority of people the majority of the purchasing power and the economy will fix itself.
3
It's pretty clear to me that millions of people globally who lack proper nutrition, shelter and healthcare will have to wait while rich guys buy $500,000 wristwatches.
3
Of course paying down debt instead of spending it would crimp growth - is this supposed to be shocking?
It's called FISCAL RESPONSIBILITY, something us hard working American citizens practice every day and preach to our children, and if the dude in the White House can't practice it, he needs to go
1
Of course growth would slow if this tax was just used to pay down the debt—that’s all nonproductive dollars. The wealth tax Warren’s proposing would go toward investments in education/infrastructure/etc—things that would encourage growth. The premise of this “analysis” is grossly misleading, and another instance of the Times’s increasingly obvious editorial stance against the two progressive presidential candidates, attacking Warren on her numbers, and pretending Bernie Sanders doesn’t exist.
3
I am done with Warren. Going forward I am going to club her in the "crazy" category with Sanders.
We are not some Banana republic where we target the successful or wealthy and campaign on wealth confiscation or special taxes as Warren is calling them.
Looking at the candidates now, Buttigieg looks the most appealing to me, but if Biden were to look like he is winning when it comes time for me to vote, it will be him.
Let's see if I've got this straight: The Billionaires who are worth more than 50 million will give up making 98 cents on the dollar because they have to pay a 2 cent tax? In what school of economics does this seem logical?
3
The implication that Warren's, or any other plan around healthcare funding or spending may slow growth is like saying: "we're hooked on crack, but getting straight might actually get us healthier.....and we wouldn't want THAT to happen, now would we ?"
Two things....
1- This pursuit of perpetual growth seems ludicrous. There just aren't enough skilled or able people in the US to support it. With unemployment at all time lows, employers can't fill the jobs we do have today let alone continuing to create more...and creating jobs that often don't pay enough to support a living wage let alone healthcare is not exactly the 'win' they'd like us to believe it is.
2- The continued efforts to prompt and support growth become artificial and mask weakening underlying fundamentals (remember 2008) ?
I'm all for slower growth in exchange for starting to bridge the huge wage gap, better healthcare for everyone, better public education and fewer hungry children in this country.
3
I don't want to over think this.....so what? Better to have it slow down and give the middle and lower classes a bit of a break than to continue on the path we're on.
5
Pay the middle class back wages owed for 40 years of no raises. Billionaires got overpaid. That should pay for health care. We are a society not an economy.
2
I know a country which is also an economic super power where they can print money just like USA and pay for "state run" healthcare etc
There are few countries in scandanavia where they gift money to families to stay "afloat" and they are quite rich.. yes they do care about the poor and less fortunate unlike us where Google and Facebook created billionaires with multiple billions but fret at 15$ hourly national wage I am not talking of the so called billionaire in WH who gets penalized for not giving even the money got from others in his charitable foundation!
Of course I agree refugees specially the economic ones muddy the water a lot but can be adjusted quite like the Y2K issue times..
I am not sure why can't the Govt charge money without dishing out tax sops to the rich who became rich since they had Tax lawyers and some even saved enough to hide tax elements and go to Supreme court to get away with it !
Is there any plan to combine her measures with tax breaks for companies to repatriate cash back into the USA? How has that worked out? Was it effective, if so, isn’t that another way to help the local economy short and long term?
This is a hypothetical hit job on Warren. The Penn analysis assumes that the proceeds of the Warren tax would pay down the debt. But that is not what Warren proposes. Please report back when they analyze what her taxes plus spending proposals will to do the economy.
9
The biggest laugh from this "analysis" is the estimation that wealthy Americans would consume more. Hah!
If you had $100 million to several billion dollars, what are you holding back purchasing right now? Another gourmet meal each night for $1000 per diner? Another jet so that your current fleet can stand idle every other week so it can get checked for cracks and get new carpets? Maybe buy another house so you really cannot remember how many you have.
What do you think these people are holding back from spending now?
They will just have less money AFTER all these expenditures. And that huge fund of totally excess wealth will be invested by all of us in things beneficial to all of us, instead of by the wealthy building spaceships for tourists.
5
"The economy would slow." Is that always a bad thing?
Easy credit and virtually zero interest rates for [some] borrowers...but is an economy built on long-term consumer debt a good thing?
Of course economists rarely acknowledge there are multiple "economies" in the U.S.
I take what is said with the proverbial grain of salt.
I have come up with a plan. If I use Warren’s proposed taxes and direct the money to a burning pit, then economic growth will slow.
This plan is a straw man argument unrelated to real policy discussions. It’s purpose is to confuse the public.
4
Why are you not looking at what happened in France with the wealth tax? Can we not find other solutions?The foundations like Gates and Bloomberg spend far more than this wealth tax can create. Surely there's another way to work this out: https://www.npr.org/sections/money/2019/02/26/698057356/if-a-wealth-tax-is-such-a-good-idea-why-did-europe-kill-theirs
"Euro Flop
Normally progressives like to point to Europe for policy success. Not this time. The experiment with the wealth tax in Europe was a failure in many countries. France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it"
1
0.2 percentage points a year over a decade? Seems like a reasonable cost for the enormity of what she's proposing. I'll take it.
The mantra of a strong economy at any global cost is the seed of our destruction. As soon as we prioritize more significant, relevant issues as a society, we and the rest of the world can begin some kind of healing process, socioeconomically and environmentally.
3
If the economy grows through deficit spending, then isn’t it obvious that cutting the deficit would slow the economy. I don’t know how big of a deficit is too big but I know the fear of deficits is overblown, so I’m not sure that Warren needs to cut it. I’d rather she put any future taxes into the hands of the folks that have been going backwards these last 40 years. If that includes making a better, cheaper health care system, that would be great.
So, if I am understanding this correctly: Two/thousandths of a point over ten years? Considering that the upper echelons of incomes got a fourteen percent tax cut over the last two years, it seems they are well positioned to absorb any increases. Seems like a wash. The vast majority of citizens have still lost ground with wages essentially stagnant,paying more for sales,property,state taxes.And employers increasing employees share of rising healthcare premiums. Can somebody explain where all the money from this great economy is going?
6
The economy is going to slow down regardless if Warren is elected or if she raises taxes on anyone. The Dow Jones chart which is an indicator of the economy has always gone down after a long period of prosperity. The question is how much and how fast. The most important part of any economy is whether Joe Sixpack has a job and can put food on the table. It also helps if he can live a long healthy life. BTW, during the Middle Ages the Serfs did not worry if the Nobles increased or reduced the size of their estate. They wanted something to eat.
3
I'm just not convinced that the behavior of wealthy, capital backers would change all that much if there were new wealth taxes. The American market is still like 70% consumer based, and it will always be the most desirable--if not the only--game in town.
And what matter is an abstract principle like 'growth' to an any American that does not have a stock portfolio? We are in a period of unprecedented expansion and growth and real wages remain flat and stagnant.
The wealthy need to take notice that mobilizing the working classes around economic anxieties is just not going to be convincing. Why? Working-class demographics still feel the sting of the recession, housing inaccessibility, food insecurity, explosive debt (student, CC, medical or otherwise), and again, this all while economy pushes us 'forward'. I guess a rising tide does not lift all boats.
1
Elizabeth Warren has stated where the Wealth Tax money would be spent: universal childcare, student debt reduction, healthcare. Each of these purposes would boost the economy,
She hasn't mentioned reducing the national debt as a priority.
This supposed study is just one more anti-progressive "Squirrel!"
4
Give me a break. I’m pretty sure Warren can think of (and has described) better uses of the money than paying down the national debt.
9
Oh please....billionaires hoarding money....money that could (and would) circulate in the economy rather than be stashed to someone's personal account.
Let's face facts....these billions become redundant at a certain point. They are meaningless to those who possess them....they are essentially hoarders. Taxing them wouldn't change their lifestyle (or their ability to invest) one iota....
Our current system is unsustainable....if taxation doesn't happen, there will be other repercussions.....maybe not tomorrow, but it will happen and it won't be pretty. "Let them eat cake," comes to mind.....
3
People should take the study by the Wharton School seriously, especially in light of the fact that Donald J. Trump, the greatest businessman in the history of business and now the greatest presidents in the history of US presidents, graduated from the prestigious Wharton School and remains one of the institution's top graduates. Thank you.
5
Trump didn't participate in The Wharton School's famed MBA program. He has a BS from the University of Pennsylvania.
Forty years of no growth for populist America anyway. No growth for Wall Street but jobs for main sheet USA with wage growth through actual government infrastructure spending will raise wages and standards of living.
At least say no growth for Wall Street. Because there any gains for workers are always erased on recessions. And the recessions are always preceded by credit expansion and occur with credit contraction and no ability to lend further.
Wall Street doesn’t care about Main Street. The result was Trump. Now we have actual leadership attempting to find solutions instead of voodoo economics. At least democrats are offering real plans and solutions for Main Street.
3
Why are there no articles pointing out military spending slows the economy?
6
@Chris Because it doesn't.
OR, and maybe just hear me out here, we recognize that public debt is an entirely useless concept that is only ever used to stand in the way of actually investing in our communities (especially poorer communities and communities of color), and instead invest all of these new revenues back into our communities in the form of better schools that are fully staffed, the creation of parks and other public green spaces, anti-pollution focused efforts, a shorter workweek for all that pays, a public income for those who choose or are required to stay home to care for family members such as children, elderly, and disabled, rebuild and expand our aging infrastructure and public transportation systems, or any of the other vast number of useful things we can do with the money that has been destructively hoarded for decades.
1
Much of that investment from billionaires went into stock buybacks (vs. real industrial growth). And I'd be happy to take a growth hit of 0.2% per year if my kids could get Medicare for All. That's a no brainer. Both the wealth tax and the tax on stock transactions is long overdue.
4
"The wealth tax shrinks the economy because saving is more expensive" This statement confused me. If saving is more expensive, that should mean spending is incentivized, which leads to more growth right? Isn't that the justification behind lower interest rates (making is more expensive to save)?
1
So the hundred million stimulus from the tax cuts and government spending above its ability is what is floating our economy?
Or is he saying the wealthy with throw a trumpian temper tantrum and economically attack the voters? Wall Street punishing us for acting in our interest instead of theirs? They would never do that would they?
2
Why wouldn't the money go towards building infrastructure, eliminating student debt, and strengthen the middle class!
Reducing debt is always a Republican talking point. Strengthen the economy, collect more taxes and reduce the debt.
Why not go with a headline that projects economist who favor Warren's plan? This is how media manufactures the news!
1
Yawn, so what. Why should the growth of the economy and slaking the greed of the wealthy take precedent over benefiting ordinary people?
3
We have a desperately long way to go to economic enlightenment. Prof Warren wants to address inequality which is enlightened in recognizing it as an issue. If the critique of that is that it would inhibit growth, firstly I doubt that to be true because the poor spend much more of what is available to them than the super rich and also they spend much of what they have and also spend more locally - not in overseas hotels. But more fundamentally we need to stop the pursuit of growth and pursue stability instead. Chasing an average 2% growth for 1000 years would multiply the economy by about a factor of 398 million which is way too much"stuff". Greta Thunberg is right that ongoing growth is delusional. But the idea of ongoing growth underpins the logic that inequality need not be addressed. So we have light-years to go before we have more than mere slivers of enlightenment. Prof Warren is only nibbling at the edges of our foolishness and I'll bet she knows it.
112
@Charles M you can't have a welfare state without growth. You need someone to produce the wealth that is redistributed and as the population ages, that work has to be done by fewer and fewer people.
4
@Charles M The rich don’t spend their money like the poor but they invest. They don’t just stick it in a bank unless they are idiots or scared of a president like Warren. They invest in new businesses in order to make a higher return on their money. These businesses then grow and get more people jobs. The initiatives warrant is championing are well intentions but will not have the results she thinks
3
@Brian Brennan Invest? In companies that buy back shares? In jurisdictions that pay taxes?
1
Wharton, the B-school that earns billions from future Wall Streeters and is receives further billions in donations from Wall Street alumni found negative growth effects:
"if the proceeds went toward reducing the federal deb"
But that isn't Warren's proposed use for the funds! Warren proposes to use the money for health care, education and regulation. So Wharton's analysis - by its own admission - isn't an analysis of Warren's plan but of Wharton's, and presumably Wall Street's, straw man plan. Wharton also assumes that billionaires will increase consumption and thus reduce investment. But if you're a billionaire you're already purchasing anything that strikes even the slightest whim. And that "investment", how much spending by billionaires is on plant and equipment, which is investment, and which does grow the economy, and how much is on trading/ speculating in already existing financial assets, which does not meet economists' definition of investment and which does not grow the economy and in fact likely is a major drag on growth? Seems Wharton's "study" is intended to confuse the public and unfairly discredit the wealth tax proposal.
188
@KenC I second this comment. Why is it these types of "Analysis" are always eager to calculate the voodoo benefits of tax cuts to the rich but conveniently ignore the economic benefits of putting more resources in the pocket of regular people?
18
@KenC
Thank you for your realistic and common sense analysis.
Shame on Penn Wharton for this biased, unprofessional, and defective “analysis”.
2
@KenC
Which makes readers wonder why the NY Times would prominently cover it as if the presumptions by a group that the NY Times certifies as "independent" were even close to being true.
4
Warren's tax plan does not stipulate that the money would be spent to pay down the debt.
This is perhaps the least stimulative way in which the money could be used, which is no doubt why this use of the money was "assumed" in the study.
183
@Sannity
Right, if money is distributed, there is a cumulative effect. Money would be infused into the existing medical sector. Keynes said that if government hires one person to dig a hole and pays another to fill it, the net result exceeds the initial outlay.
Moreover if there is universal coverage, the collateral sources rule in damages could be eliminated and this would reduce the impact on pain and suffering and damages for future medical care.
6
@Sannity Exactly! I'm not sure why the analysis went forward on an assumption directly contrary to what she says she will do with the money. I also don't know why @NYTimes would publish an article that doesn't point out that wee problem.
9
@Sannity I just can't get over the fact that .2 percent is basically the bounce we see when quarterly GDP numbers are revised (up or down). I.e. they set up their assumptions in the most negative way the could find, and basically came up with statistical noise.
Glad the Times chose the most hysterical, Cooperman crying on CNBC headline for this nothingburger.
1
Interesting that they did not take into account the freeing up of citizens money that universal healthcare, daycare, and other programs will provide and the investment the government would contribute to projects. Sounds like a very incomplete study.
231
@MrQuick
Switzerland and Norway, however, have them still and both countries are doing fine.
32
@617to416
The Swiss have negative interest rates and are in danger of running out of other people's money.
Norway relies on an enormous petroleum sector that funds social services. It is not sustainable.
Neither one is doing well.
4
@MrQuick
No other developed country on earth has had as great a disparity between the rich and the less well off in the last 100 years as the United States. Give it a try.
9
Another strong reason to stay Moderate and eschew the Progressives.
3
I notice that when this "independent" budget group does analyses of the "let the rich pay the lowest tax rate in history" policies of the Republicans, they suddenly don't car about the deficit.
It is notable that the only way this so-called "independent" budget group could trash Warren's proposal was to presume that 100% of every single dollar raised would go to pay for the billionaire tax cut deficit that this very same group insisted didn't matter when they were promoting the billionaire tax cut!
If you have to presume the exact things you said were not important when you insisted the right wing Republican policy was good, then you are clearly only "independent" the way the NY Times says that William Barr is honest and upright.
4
Go, Senator Warren, tax 'em at 100%! That will guarantee your election. Depardieu is already in Russia. It won't cost you any votes. How about required blood donations? No doubt you'll be Pres. Warren soon as Berkeley-Fantasyland economists say your plan will help the economy. Wait a few days and Krugman will join, too. Count on it.
2
Why would you do that analysis without considering the growth impact of her spending? Why would you do it based on the assumption of cutting the national debt, which is explicitly not what she proposed to do? I'm not positing any conspiracies, but how could you possibly expect to make useful predictions on that basis?
They're having a livestream discussion of this later today (https://budgetmodel.wharton.upenn.edu/events-1/2019/11/14/the-wealth-tax-debate) I would hope they're asked, and I hope the Times covers the response.
1
“ if the proceeds went toward reducing the federal debt...”
But that’s not the intent. sSo why is this even newsworthy?
Just seems like another ploy of the billionaires and their academic henchmen.
4
@Marc Kagan
It is (another ploy of billionaires and their lackeys). We all need to be on watch to see that Warren's programs aren't distorted.
This is a ridiculous, specious analysis because Elizabeth Warren has laid out exactly how she plans to invest the revenue raised by her tax plans; nothing about paying down the debt. If her M4A plan were to be put into effect, according to claims made by her campaign, people would not have to pay for insurance and would actually (in effect) get a pay raise. That money would go to average Americans - who could then spend that money. More spending by average Americans which would then spur economic activity, which in turn would result in more investment. And, after all, isn't demand what spurs economic growth?
3
The economy is 'roaring' along...right...and Americans are dying because they can't get basic health care. I'd say that single payer medicare for all is worth a slowed economy. cynical, to say the least.
5
Why must we choose willful ignorance be it the Trump 20% . . . or the Warren/Sanders 20% ?
Huge tax cuts are absurd -- and so are huge Federal social programs.
Balance must be the goal. To walk back the economic/social inequities that both the GOP & Dems own (remember Bill Clinton cuddling up to Wall St and "open" global trade i.e. NAFTA, etc.?),
the process must be measured, fair and steeped in common sense -- otherwise, the Warren/Sanders approach will quickly become reviled as top down mandates & sputter both employment and the 401Ks of many, many middle class Americans.
IF either Warren or Sanders were to be elected, they'd be "one & done" single term presidents. Perceived as a meld of Woodrow Wilson & Jimmy Carter. Frankly, neither deserve more than that. However, the tragedy is that the opportunity to achieve a relative "even keel" for our country will be lost for the foreseeable future since voters will then be susceptible to yet another venal fascist like Trump.
The Democrats must put forth a common sense, fair & moderate candidate. If they do, Trump is unequivocally done, out the door and to the ash heap.
Total worthless speculation, prematurely released, and probably for political impact.
If I was Dean of that Department a Wharton, that Team would be in my office this morning, and Heads would roll.
4
Assuming it'd be used to pay off the debt and calculating by that is akin to saying that giving children a job would be bad because they might decide to buy drugs with the money. This is lazy, ideology-driven scare-mongerering.
1
Good less junk and plastic in the landfills. Best news I’ve read all day.
This is irresponsible journalism. Why would you publish news that the tax would reduce GDP when the assumptions are not reflective of the plan Warren proposed? The tax would not go to paying down debt. It would go toward new spending, which would do the opposite of reduce economic growth.
7
@Alex They publish news like this because the titans of finance (and they do control the media, through their investments and corporate advertising) are afraid that they will lose their billionaire bragging rights if Warren is elected.
3
Over and over, economists, law professors, tax lawyers, independent groups, all except for Paul Krugman, can see that Warren's plan, if it ever passed, would be bad for the economy.
Democrats and Liberals keep accusing the POTUS of 'ignoring experts', but when 'experts' look at a Democratic Liberal leader's plans and tell you they are garbage, they ignore the experts.
Well, ignore them, and run her for POTUS. See what happens. Will be Hillary's Rout 2.0.
It's just amazing that the Democrats cannot field a single candidate that is better than Trump.
Of course there would be what I believe would be a temporary drop in investment. Somehow I get the feeling this analysis is one percent driven. These people will go to any lengths to preserve their right to be totally greedy pigs(my apologies to the pigs). I can see them spending big to make sure that they have more money than the rest of us combined. The saddest thing about this is that the current financial configuration in place is unsustainable as we will reach the point where the one percent will virtually have one hundred percent of everything.
35
@Bill At the current pace, the top 10% of households will have 100% of the wealth in the U.S. 33 years from now.
Source: https://www.dallasnews.com/business/personal-finance/2019/08/04/at-this-rate-the-rich-could-truly-have-it-all-just-33-years-from-now/
If the economy can only grow by giving more money to the billionaires, maybe "economic growth" is not such a great thing after all. Because, after all, a billionaire's billions need to be taken from somewhere. Calculate the health of the economy by removing the one thousand richest and the one thousand poorest from the equation. Or maybe 0.2% on both ends.
That'll give a more realistic picture of a countries economy.
Proponents of tax cuts always claim that money is going back into the economy, and anyone who pays attention knows that's not the case. A large chunk of those tax reductions goes right into making the wealthy wealthier. Warren's plan would do exactly what tax cut proponents claim to want - put money into the economy through increased spending. It seems to me that the wealthy want to sit on their cash like Smaug the dragon.
3
Some astonishing comments here. A few points:
- We're approaching a limit on how much debt we can issue. The Fed is currently papering over a $300 billion dollar hole in the repo market that has barely been noted here in the Times. But even if the "infinite demand for dollars" argument had validity, do you really think it's fair for the destitute of the world to finance the not-as-poor-as-we-imagine of the US?
- "Cancelling" Wharton is an ad hominem ideological attack. Either refute their analysis, agree, or don't comment. FWIW, one legitimate counterpoint is raised in the article: if the proceeds are used for infrastructure rather than debt reduction, the results MAY be different. But that's an assertion that's unsupported by analysis. OTH, there's little analysis of the structural COST of taxing wealth or financial transactions. I have difficulty picturing how this could even produce any net addition to revenue.
- There has been a dearth of professional economic analysis of the Sanders/Warren economy. And what little there is appears partisan. But shouting down the few who actually try to do the math isn't helping.
1
I’m sure Republicans have a better plan, like maybe another tax cut for billionaires.
Of course we won’t be able to afford healthcare for anyone but Congresspeople, but it will speed up the trickle down and fix everything !!
8
For whom would the economy slow? The investor class, I guess, because the economy of the working class and the poor is already stagnant. Few meaningful wage raises. No raises in benefits. Once again, the captains of finance are worried about their already-bloated investment profits and not about the rest of us.
4
A major failing of capitalism is its obsession with growth, which is always followed by a period of decline.
Instead, how about stability?
8
Anything that pays down the debt will slow down the growth - this is debt fueled growth now and there will have to be payback at some point...
3
Aside from the irresponsible headline and the issues noted within the article, let's please abandon the premise that infinite economic growth is feasible or even desirable. It's time to rethink our measures of success in light of current social and environmental challenges.
9
I can live with that, the slow down in growth is minuscule and doesn't take into account new government spending programs, which would make the study incomplete in my view.
5
Who cares? The economy is not helping most people anyway. GDP 2%,4% ? the majority goes to a very few.Its not the amount we make, we make a lot, its distribution and thats what this is all about, Distributing the wealth.
Remember when Trump promised 4% GDP? Now its about 2% if that much. So, the tax cuts and all the benefits given to the rich did zero for income distribution. "Economists"said it would raise GDP. 400 folks still have most of the money. We do know one fact from history, when the High tax is over 50% the GDP rises and the income inequality falls, and thats an economic fact.
5
The article seems to imply that the study uses the wealth tax to pay off the national debt, and ignores Warren's specific plans. What should factor in is that if you use the wealth tax to pay off student loan debt, it frees up all those loan payments that are hurting younger american, which they are likely to then spend. On homes, families, or whatever. It's akin to the 6-fold recoup of unemployment benefits getting injected back into the economy. And its a wealth transfer from the richest to the struggling middle class.
7
perhaps the real takeaway from this study is that even when the assumptions being made are as unflattering or unfair as possible (presuming the money would be used to pay off the debt) the impact on the economy is still only .2 percent per year. When factoring in the programs that that money is actually being proposed for, the impact of the tax on the economy would at worst be completely negligible while more Americans end up with access to education, healthcare and childcare.
7
The economy is going to slow no matter what. When it inevitably does and normal people realize that having health care and not going completely broke over medical bills and education is kind of nice the economy probably won’t grind to a halt though, like when people rein in spending when they have to choose between medication and a Disney+ subscription.
Call me crazy but the corporate titans can take one for the team.
3
Perhaps everyone should buy and READ ‘Good Economics for Hard Times’ by Nobel Prize winners Abhijit Banerjee and Esther Duflo. Those readers should include Penn Wharton Budget Model economists.
With all of the recent science do-overs due to conflicts of interest, inappropriate financial backing, or tainted findings, everything must be seen through a skeptical eye.
I am sure that even the prospect of Wharton’s 1.3 billion endowment being subjected to taxation skews their findings.
I have always trusted higher education than came Jeffrey Epstein and MIT.
Who ISN’T on the take has to be the question these days.
3
I love that suddenly a huge swath of NY Times readers say they have $50 million dollars and therefore they are angry Warren is taking away a minuscule amount of their money.
Let's all agree that if you have $50 million dollars and you are too greedy to do what Americans in the 1950s did and help support this country's infrastructure with a tiny percentage of that $50 million that you won't even miss, than you should vote for Republicans where all greedy billionaires find their people.
Everyone else should vote for Warren since you will be greatly helped by the thriving middle class economy.
14
What I'm seeing here is that the Wharton study made the most conservative macroeconomic assumptions and found that there would be a miniscule, negative effect on the economy. A negative effect much smaller than the error in the analysis? Certainly an error smaller (<0.1%) than the reported precision of GDP determinations.
This is why we teach students about "significant figures." As an experimentalist, I would suggest that a more reasonable report of this study is "within the limits of our (conservative) assumptions, we find a small, negative but statistically insignificant effect on GDP growth."
15
It is misleading and irresponsible to lead with this headline and bury the problem with this analysis 5 paragraphs down. The study looks at a system where all the wealth tax revenue goes into debt reduction. That means the government buying debt instruments, mostly held by the wealthy. That isn't what Ms Warren has suggested at all.
Revenue from the tax would be directed into universal health care and infrastructure. Both of those add to the economy.
19
@Some Dude - I completely agree. I don't see the point in reporting on the results of an analysis of a plan that Senator Warren has not proposed. If the Times thought reporting was necessary, the headline should have been something closer to "Budget Group Analyzes Part of Warren's Economic Proposal" / "A projection of the effect Senator Elizabeth Warren's proposed wealth tax, without accounting for the effect of how she proposes to spend the money, said that economic growth would slow."
2
This just in from a half-baked right-wing study:
Endless tax cuts for the rich is fine; anything else is recessionary.
Heads Republicans win; Tails Democrats lose.
Why didn't these economists spend their time analyzing how tax cuts for the rich on a credit card isn't all it's crack-potted up to be ?
13
@Socrates, don’t forget the old standby...’it’s a job killer.’
1
The wheels of the anti-progressive propaganda machine are just getting started.
For the few who have had so much to share out a bit of what they have taken is too onerous a fate for them to bear.
So, let's get that disinfo out there. And, defer all associated costs to 'capital improvements' and other loopholes in place for the few who have taken so much.
9
But it wouldn't go solely into repaying the national debt, it would go towards Warren's other proposed programs like college, healthcare and child care. The projection seems to be arguing against a proposal nobody is really making.
8
I'd expect income redistribution downward to increase economic activity, because poorer people save less than the wealthy do.
In the long run, better education and health care will mean better and healthier workers and more productivity. That means there are more good investment opportunities serving the needs of the good economy.
The notion that enterprises can only be run on retained earnings, as implied by analyses like these, seems seriously fishy to me. Businesses can sell stocks and bonds to get capital. In good times capital gets more expensive...what's new?
As Picketty has shown, capitalism sends wealth up the income chain. If grown goes only to the rich, who have enough, what do we gain by it?
4
I do not give much stock in analysts projections because well, ...they’re just ‘projections.’ Nothing more than guesses.
In my lifetime, I recall only three periods of prosperity. 1) during the 60’s before capitalism became corrupt. 2) during the 90’s when Clinton was on track to have a national debt surplus. 3) and right before the housing bubble, before 2008.
All other times we’ve had either recessions or slow periods of stagnant growth.
For one, I’ll take free healthcare over slow growth any day!
Second, with the money that people save on healthcare, not offset by higher taxes... but LOWER COSTS because the greedy healthcare industry has been eliminated, with that extra money in people’s pockets, that is stimulus for the economy.
Third, the consumer is the SOLE factor for economic growth. Again, for as long as I can remember, businesses are not spending or investing. They are simply buying back their own shares.
Lastly, people will feel more secure financially without the burden of astronomic healthcare costs, especially older people and those with chronic conditions. This alone is worth the price of admission.
Medicare for All now! Elizabeth Warren now!
6
The estimates this article sites are not likely to be any more reliable than the predictions of Nostradamus. But, after all, economists need to make long term predictions to remain employed. Its part of their job description. Now if we could only get more useful predictions, like when world war 3 will start or when the arctic ice caps will stop melting, imagine how many more political scientists or climatologists could be employed. C'mon Elizabeth, give us more plans to excite academia and get more pundits employed.
NB. I don't see any estimates from political scientists as to the likelihood of a second Trump term will lead us into full blown tyranny.
4
Economics is not a science. Economists are not scientists.
There are too many variables and unknowns to craft the double-blind experimental controlled and randomized tests that provide predictable and repeatable results that are the essence of science.
Economics is gender, color aka race, ethnicity, national origin, law, sectarian, education, politics and history plus arithmetic.
Economists are akin to charlatans, fortune tellers, oracles, politicians, preachers ,pundits and soothsayers.
There is no Nobel Prize in Economics. There is the Swedish National Bank Prize in Memory of Alfred Nobel.
3
Looks like the rich are worried that Warren's plan may actually force them to pay taxes for a change. Expect many more fear-mongering, fictitious "Doomsday" scenarios to propagate while we live through a real one at the moment where primarily the poor and middle classes pay taxes while the rich reap all the benefit.
7
and the likelihood of the conservative dominated Supreme Court allowing the constitutionality of such a tax?
@Brian
Real property is taxed ad valorem, why not other assets?
If the barriers of affording healthcare, child care, and education no longer stood in way, more entrepreneurs could start and grow businesses that could employ more people. Did any economist consider that?
13
@mh
Agreed. Massive benefit to make small businesses highly competitive when medical is a non-issue.
1
Norway has a high rate of small business startups- I believe it is for exactly the reasons they don’t risk going without healthcare and child care.
A wealth tax would provide a substantial benefit for the people. So would a much more progressive income tax.
11
Why should we value slightly more growth over getting something for our money?
This article makes me support Warren even more.
12
Think it the current state of the Democratic party was best stated by one of the brightest of the founding fathers. . “When the people find that they can vote themselves money that will herald the end of the republic.” - Ben Franklin.
This is where we are heading with Elizabeth Warren's class warfare retoric. Never heard any billionaire say they have an objection to paying higher taxes (even though we have no idea how that would cure income inequality.) I would rather see loopholes like carried interest and basis transactions closed first. Then we can see if that is sufficient.
Then i need to understand how giving the government more money to give out solves any of these cited problem. There simply are not enough rich people in the country that can be forced to pay.
@mark edwards: Voting themselves money? No, voting themselves medical care and education.
Yes, reward-yourself democracy can get out of hand, as in Venezuela. We're not Venezuela.
4
@mark edwards
I need to understand why people like you believe the tax policies of Dwight D. Eisenhower -- when America was one of the strongest countries economically -- were so evil. I think you must hate America to believe that having a return to the huge budget deficits and terrible economy of Bush and Cheney and Herbert Hoover is the ideal policy.
2
@mark edwards
Never heard billionaires complain about paying more taxes? You haven't been reading the news lately.
1
These the same analysts who said raising the minimum wage would slow growth? (It hasn’t.)
These the same analysts who said tax cuts would pay for themselves? (They didn’t.)
Those the same analysts who said tax cuts would raise wages? (They didn’t.)
Those the same analysts who said the trade war would benefit America? (Farmers have taken $26 Billion in welfare.)
Why are we still listening to those same “analysts“ who are nothing more than paid lobbyists for the 1%? None of their analysis has proven accurate. None of it.
33
@Austin Ouellette "would raise wages? (They didn’t.)"
Median wages rose by $5000 in the last 3 years, while in the 12 years before that they rose by only $1400.
That is a fact that will doom the Democrats in 2020.
1
@novoad
Cute, now do annual inflation and healthcare premium cost increases over the last 3 years.
3
@novoad sheer luck that unemployment finally low enough to boost wages.
3
Warren plans to spend the money not save it! This study is erroneous from the start because it's assumptions are flawed.
Warren is spending 100% of the money earned from her two cent tax on providing educational opportunities for the next generation.
You cannot have continued economic growth when an entire generation is saddled with debt, and cannot afford an education, let alone a house or car or children.
Why publish such a flawed study?
19
@Ed
For the same reason this newspaper published the false claims of right wing Republicans and gives them equal weight with the truth. Remember when William Barr said the Mueller Report totally exonerated Trump and this newspaper blasted headlines on the front page informing readers that there was no evidence at all against Trump because Barr said there wasn't?
This newspaper has lost its way. It now believes that if you publish the lies and give them equal weight with the facts, they are being "fair and balanced" and Fox News viewers will start buying their paper.
All this is doing is making even those who believe in truthful reporting start doubting this newspaper.
"The model did not assess growth effects from Ms. Warren’s spending plans. Instead, it assumed that the tax revenue would be used to reduce the national debt [...]"
In other words, the analysis is useless. She's said the revenue is NOT going towards reducing the national debt, but will be used to reduce Americans' debt burdens-- medical, child care and education.
What's the economic stimulus of Americans' having more money in their pockets to spend as a result? That's the analysis that needs to be done.
12
Sometimes you must suffer some short term pain for a longer term healthier outcome. We are on a path to fiscal destruction and it has to be reversed
4
To put the findings in context:
These "independent" budget groups (which are clearly funded by people with a lot of money) claimed that raising taxes on the rich when Bill Clinton did and and Barack Obama did would "destroy" our economy.
These "independent" budget groups claimed that the George W. Bush tax cut would not destroy our economy -- it did. They also claimed that the Trump tax cut would be fine and not cause the biggest deficit in history -- they were wrong.
Why do these "independent" budget groups only care about deficits when it means spending money on important things like infrastructure while they claim that budget deficits don't matter if it means that billionaire get their money plus feed at the government trough for their defense spending?
They have been wrong for 50 years and they will continue to be wrong. The fact that the NY Times gives these people credibility is as if this newspaper published the rantings of the Flat Earth Society each year and insisting that because the Flat Earth Society is "independent", it is absolutely true.
18
The conclusion is in the assumption set, as my econ professor would remark. If -- as the premise here has it -- new revenues are allocated to debt reduction, then the, ahem, insight provided by the Penn Wharton model amounts approximately to "doh!".
6
Increasing the national debt, almost by definition, is borrowing from the future to inject money into our current economy. The hope is that, when we increase the national debt, we’re also doing it as an investment in the future.
4
Not really. What is termed the national debt is simply the aggregate difference between US dollars spent into existence and the amount taxed out of existence. A larger economy requires more money, does it not?
The thought you leave out is that Warren will probably offset this loss of economic growth with increased immigration. Increasing immigration is the most effective way to increase growth both short and long term. Numerous studies show this to be true. So before concluding anything based on a study of a narrow scope please try to understand that a whole approach is needed and Warren as she often says, "Has a plan for that." Anti immigration is pure fear being stoked by the rich to keep whites voting for racial superiority instead of economic equality. Immigration could overcome the stagnation of growth predicted by this piece and its underlying study. Look deeper. Think deeper. This is a scare tactic.
6
@Joseph I disagree that immigration is good for growth. It largely depends on the type of immigrants. Are they financially self sufficient or does their every need on our social services? If they are dependent, then it just adds to our national debt and strains our social services.
1
@Lyn Robins A study by the National Academy of Sciences, Engineering, and Medicine put your contention in context. The first generation of immigrants do indeed consume some (but not a lot) of public spending. But the second generation is wildly productive.
My grandparents came from Eastern Europe with nothing; and they went to work without even high school diplomas. Their children went to college and many got advanced degrees...bearing the study out.
For a little short term gain, you give up years of wealth.
@Lyn Robins
https://projects.propublica.org/graphics/gdp
https://www.ft.com/content/f1ca7b14-b1d6-11e8-87e0-d84e0d934341
Those ought to change your mind, if they don't then you have a problem I cannot help you with. These points you bring up are rooted in anti immigration talking points I associate with Fox News.
Anand Giridharadas is the one to get valid input from on this. Please everyone, listen to his interview on Stay Tuned with Preet! The more people understand how oligarchy is undermining our democracy, the more effectively we can fight for it.
5
How much more growth could we have if the middle and lower class could spend more money on the economy instead of building up debt to the wealthy who invest their money in tax shelters and foreign banks?
500,000 medical bankruptcies show economic structural problems.
Scandinavian countries with higher taxes actually have more millionaires per capita than the US, but much inequality.
In theory you can prove lowering taxes increases growth, but in most cases evidence and retrospective studies have shown the opposite, but Republican politicians keep trying by doubling down..
The greatest American growth happen in the 1950s when the top tax rate was 90%, executives did not work less or retire early, and union members were middle class.
We could try Warren's plans, and then vote Republican when higher taxes fail. Compare high tax California to low tax Kansas and Texas, who are becoming more Democratic.
15
This article is totally disingenuous. The underlying economic dynamic is that our economy is on Keynesian hyperdrive. Republican tax cuts have not been about supply side impacts, but the stimulative effects of deficit spending, which is macroeconomics 101. Now $1 trillion deficits are driving moderate grown, and any tax increases and narrowing of the deficits will undermine economic growth. Perhaps this growth impact will be moderated by a wealth effect shift from those with a lower marginal propensity to spend (the wealthy) to those with a higher marginal propensity to spend (the less wealthy), but for the economics cited here to suggest that the problem is Warren's tax plan without pointing out that any deficit reduction strategy at this point would have comparable effects on growth is professional misconduct.
14
@David And a measure of the editorial rigor of the New York Times today. Excellent post, David, thank you.
Correct me if I am wrong, but isn't the current relative strength of the economy due to the stimulus from a gigantic deficit, which is unheard of in good times?
1
You are wrong. The deficit has been worsened by the tax cut, but the cut was not to create a stimulus (for instance through spending on large infrastructure projects) but to make rich people richer. There’s only so much rich people can spend when you give them more.
3
“The assessment found that if the tax raised as much new federal revenue as Ms. Warren intends, and if the proceeds went toward reducing the federal debt…”
So, they assessed something that literally nobody is proposing. What is the point of printing this article?
22
I'll trust this Penn-Wharton study before I trust the comments attacking it here. In this highly political season, it is clear that many comments here reflect partisan leaning toward a particular candidate yet that leaning remains disguised.
1
@blgreenie It's based on false assumptions.
Through hard work, we have accumulated roughly 6 million in combined investments and physical assets, most of that in safe, secure investments. So Warren wants 2% of that (+/- $120,000) to fund her program(s)? Nope. Sorry. How about this--budget the taxes you already get better.
2
@Rick
"Ms. Warren’s plan would impose an annual tax of 2 percent on assets held by Americans, including stocks and real estate, that total more than $50 million."
Feel better now?
9
Rick, she only wants 2 percent on the dollars one has over $50 million. Your $6 million is safe.
16
@Rick You also made your money using tax-funded infrastructures, tax-funded national security, and in all likelihood have made at least some of your money, somewhere, through government subsidy. None of that should be taken for granted. All of us helped pay for it.
No one disputes that you and many other wealthy people worked hard to get where you are, but you being where you are +/- $120,000 is actually the primary mechanism responsible for this being the least socially mobile period in American history.
And re: hard work. It is possible to work as hard or harder than a millionaire or billionaire, and never make much money. Hard work isn’t a guarantee of success, and when success finds any of us we should acknowledge both the work we’ve done, and the innumerable ways we’ve benefited from things beyond our personal control.
5
So, by your logic, we should borrow a trillion dollars every year for the next century?
Somebody’s got to slam on the brakes. The economy might well slow after it happens. But the alternative is catastrophe. It’s being artificially over-stimulated by too much cheap money already.
This cannot end well. The issue is, how badly?
4
“Senator Elizabeth Warren’s proposed wealth tax would slow the United States economy, reducing growth by nearly 0.2 percentage points a year over the course of a decade, an outside analysis of the plan estimates.”
I’m not an Elizabeth Warren fan and I wouldn’t vote for if you held a gun to my head, but if i were her I’d be bragging about this, not trying to defend it. This is a very small price to pay for a very large reduction in the annual deficit. Of course, that’s not how she would use it anyway, she’s going to spend the proceeds, but still.
1
After years of economic studies and careful mathematical modeling, I was able to project that when I put everything in the credit card I have more money to spend and my economy expands, whereas when I am paying down debt, I have less money to spend and my economy contracts.
(Sarcasm out).
11
This analysis might be true if the US was starved of investment, but because the dollar is the world currency, the US is the investment of choice for the world. Good investments will still be made with less money in the pockets of billionaires.
Secondly, the poor spend a greater percentage of their paycheck than the rich, so putting more money in the paychecks of the working poor/lower middle class through government programs would boost economic output from the demand side.
8
Is this done by the same people that said giving tax breaks for the rich will create more jobs?
24
@Linh There are indeed more jobs than ever, especially for the previously disadvantaged. It worked; thanks for emphasizing it.
Excellent point.
@Linh No, by the good guys.
This is a perfect encapsulation of everything wrong with not only our economy itself, but the way we analyze and talk about the economy as a society. Growth means nothing by itself. It's the rich getting richer as the poorest stay exactly where they are. Growth says nothing about income inequality, just as unemployment rate says nothing about wages, undereployment, etc.
If the economy "slows" because the richest are losing money and the poorest/middle-class are getting money, benefits, etc., what are we even talking about? Don't want to sound anti-intellectual and act like numbers don't matter, but the way we use these numbers is horribly flawed. The U.S. economy has gone through many "growth" periods since WW2 and yet millions still are in poverty, don't have healthcare, and are facing soaring costs as wages stay stagnant.
We really need to change the way in which we talk about the economy.
23
As Anand Giridharadas points out in a tweet, this analysis was done by the same school that taught business to Donald Trump.
22
Anand Giridharadas is my hero! Please everyone listen to his interview on Stay Tuned with Preet!
I question the underlying motivation for this analysis and its validity...the assumptions it makes are meant to shift the projections towards negative growth.
Typical Penn Wharton product, supportive of the oligarchy....didn't Trump claim to be a product of this "independent budget group" institution?
12
It's just so much more fear-mongering by the oligarchs to keep us 99% down in the ditch. Anyone remember "Small is Beautiful" ?
12
This is not a neutral study. We should consider the relationship between the Wharton School of Economics and the financial industry. The study appears to be biased in that it deliberately was designed not to take proper account of the effects on the economy of Ms. Warren's spending programs. Instead, it made the utterly unrealistic assumption that in a political environment in which a President Warren could get her tax proposals passed, all of the taxes would be used to reduce the budget deficit and none of them to fund the government programs which are the reason for the taxes.
14
The score is based on the erroneous neoclassical assumption that taxing wealth supposedly reduces investment and consequently growth.
If we tax the wealth and use the funds to pay for universal childcare and pay down college debt government will be spending that money and freeing up the capacity of low and middle income households to spend. There’s empirical evidence that those households have a higher marginal propensity to consume.
I expect more economic models will show higher economic growth following a tax on wealth.
15
A number of readers have correctly pointed out the dubious and self-serving assumptions behind this analysis.
Since when is growth the measure of all things? Isn't the distribution of wealth worthy of consideration? Is it better to have more billionaires and simultaneously more people living in the street because they can't afford to pay for a home? Do we want more private airplanes and higher infant mortality rates? Could these economists please go back to the drawing board and attempt to measure, say, anticipated life expectancy and infant mortality rates instead of economic growth, by which I assume they meant GDP?
And of course none of this addresses the elephant in the room: the likely effects of climate change swamp this.
29
Since the Republicans aways demand "dynamic modeling" of their tax cuts (which, of course never actually produce the results they want because tax cuts are so inefficient as a growth driver), let's evaluate the effect of growth of dumping 3 trillion into infrastructure? Since infrastructure improves productivity, you'd have to factor that in too since tax cuts do not improve productivity.
But here is a fly in the ointment: if you reduce the growth in health care, you will reduce overall GDP growth quite a bit. Let's say that overall GDP is 2%. Health care has been growing on a CAAG basis at 2-3x that for decades. Now approaching 20% of GDP, a cut to 0% would reduce GRP to, what, 1.2%?
It will also cut job growth substantially because, again, health care has been a consistent producer of jobs. You can be sure the right will argue: we can cut health care costs or we will reduce employment? Talk about bass ackwards?
"The Penn Wharton Budget Model estimated that wealthy Americans would consume more and save and invest less in order to avoid accumulating wealth that would be subject to the tax. The resulting drop in investment reduces economic growth."
That is complete economic nonsense. According to the basic rules of economic analysis it makes no sense that increased consumption and decreased saving would reduce economic growth among the ONLY CLASS OF AMERICANS THAT SAVES SO MUCH MONEY THEY DON'T KNOW WHAT TO DO WITH IT ALL. Do you honestly think over 70% of their capital is invested in economically productive activities? Bezos literally said he has so much money the only thing he can think of to do with it is colonize the moon! That money is sitting there doing literally nothing but riding the growth trend of the S&P in tax protected rackets. How do you possibly explain billions sitting in the bahamas or Cyprus as "investing in American growth." The idea that we are supply constrained economy still, after 40 YEARS of tax cuts and supply side expansion policies, is the most backwards looking nonsense. Is it still 1989 for classical economists? How is that profession still frozen in amber, unable to digest the economic lessons of this millenium???
57
Well said-
The insanely rich cannot “consume” more-
Unless they buy more yachts, lots CB of extra homes they will never use. And the employ us to clean their never used empty homes and yachts
3
@Danny P
Best comment on here.
1
A question. What effect will an ever expanding national debt have on the economic health of the US?
The current GDP is $21.5T. The current national debt is $23T. The current cost of debt service for the existing national debt is $575B.
Is this sustainable?
1
The assumptions underlying this study are completely bonkers — it’s obviously designed to prove the point that Warren’s plan will harm growth. In what world would the additional tax revenue exclusively go to reducing federal debt. That’s literally an insane assumption to make. What a waste of news space.
33
We need limited growth. Constant growth is unsustainable.
5
These budget projections are largely worthless. There are too many poorly-known variables and too many unpredictable things can happen. (The large increase in deficit resulting from the Trump tax cuts did not require a model to predict. Projections from voodoo economics are completely phony, as has been demonstrated once again). What we know from history is that extremely unequal distributions of wealth and income are not beneficial to economies. We also know that highly progressive tax rates, as in the US through WW II and many years thereafter, do not inhibit investment or economic growth. The great reductions in tax rates for the rich since 1964 have not produced the benefits that were predicted by economists, including many of those describing themselves as liberal. Wealth taxes are somewhat different, but objections to them arise from the same source as those to more progressive rates - protection of income and wealth.
10
"The Penn Wharton Budget Model estimated that wealthy Americans would consume more and save and invest less in order to avoid accumulating wealth that would be subject to the tax. The resulting drop in investment reduces economic growth."
I am not an economist but it seems to me that if you spend more and save and invest less-- one balances out the other.
1
Maybe slowing the economy is a good thing. The current growth is mainly fueling wealth redistribution towards the top 20%, mainly the top 5%. Meanwhile, all the bottom 40% have gotten in the past decade is less disposable income than they had in the past.
Our current "growth" is not equally beneficial. It's creating a consolidation of wealth that is both concentrated among the upper class AND tightly geographically concentrated. So if a middle class person wants to participate in the wealth growth, they need to relocate to one of the few metros that is growing, which they can't afford to do, because the growth is so hyper concentrated that housing is out of reach.
I am in about the top 70% of earners, have been consistently employed, but my income has not gone up as fast as my housing and healthcare costs in the past decade. The only people I know who have gotten ahead are those in the top 10% of earners.
18
Warren’s wealth tax would be invested in expanding health care, pre-school, and reducing student debt so they can spend their money on goods and services. The wealthy are currently investing in the stock market bubble that is growing at many times the rate of the real economy, enriching themselves. It’s convenient for Wharton to claim redistributing income upward like Trump’s tax cut stimulates growth while redistributing it downward through Warren’s wealth tax slows growth, but it’s trickle-down nonsense.
43
@Bruce Shigeura
So tired of living in a country that literally pampers its' uber-wealthy people while letting its infrastructure and people rot away.
7
Since the model incorrectly assumes tax revenue will be used to pay down national debt, the headline of this story should have been "Wharton builds sham economic model producing sham results to discredit Warren"
96
0.2% over 10 years? Wow! Clutching at straws much?
12
Such nonsense. Trump and Republicans in Congress claimed that their 2017 tax cut would stimulate the economy. It didn't. The reason is because there was (and still is) a flood of capital in America prior to the tax cuts. Any math that attempts to prove that senator Warren's tax on wealth will curtail investment is self-serving and dead wrong.
33
Much ado about nothing—except the headline. 0.2% is statistical noise. The analysis suggests that Warren's proposal will have minimal impact on economic growth. It's neutral on that “good” (or not so good).
8
Maybe the modelers should try analyzing the effects of the wealth tax on the economy if the revenues are used to pay for healthcare, education and the environment, as Warren intends. Instead they have created assumptions that are guaranteed to show a negative effect and the New York Times headline announces their conclusion as fact.
102
@Sonia
Their support for Bloomberg reveals how out of touch they are.
3
It’s amazing to see the 610 billionaires in the world have such good press representation looking out for their best interests.
Are you concerned about their minority rights?
207
Hahaha, it's sad but funny to see the underlings of Billionaires do a awful job at justifying their existence. I agree with you completely.
4
That is because rich people today hate America. During the greatest period of growth in American history, for 35-40 years post WW2, they didn't, despite as much as a 90% top marginal tax rate. Now, however, they do. They need to rediscover their patriotism.
10
None of this (possible) "Lost" growth is trickling down.
Too many of our "Investments" are already financial engineering schemes and unneeded luxury housing.
Better the government take some of that money and spend it on infrastructure (And health care is part of the national infrastructure) and social investments (aka "Public Schools").
12
I think we'd bee better off reverting to the 1950's tax and inheritance structures. It is imperative that we disrupt financial dynasties. Entrepreneurs and the hard working deserve the monies they make. But their children do not.
Couple higher taxes with a level educational field where poor children go to the same schools as the rich, and we will get a more equitable society.
5
@Dan Lake
Perhaps, but remember in the 50's that all federal income tax rates were about double what we pay today, including on the lowest income tiers. And a much greater percentage of households were net tax payers.
3
This article asks us to choose between maintaining sky high profits and establishing a baseline of care for our citizens. If we were a rational society, this wouldn’t even be a choice—we’d do right by our citizens. Imagine the new mother who can’t afford to send her kid to daycare, and whose life now is a cycle of fear, overwork and debt. Can we really say to her that the quality of her life must be sacrificed for the “health” of the economy? Something is wrong here and Warren wants to face it. We should, too, whatever the cost in excess capital.
15
@Jeremiah Crotser
Thank you for this.
The biggest issue is that the stress of poverty is trickling up. It is convenient to look at those struggling and say "if only they worked and did not have a cell phone" and the problem is now that working won't provide what you need.
I know a mom, who works, decent job, 2 kids, gets her child support reliably. Retired parents provide child care. She has to regularly choose which kid to buy medicine for. This is a choice you'd maybe expect someone in poverty to have to make. And you can say "hey, cancel your cellphone".
If we keep looking away and telling the bottom 50% that they deserve their stress because they can't manage the cost of living that their jobs don't pay enough to cover, we really will end up with a civil war. And perhaps we should.
Every day, we underpay the people who serve us meals, staff nursing homes, pick produce, cut meat, build homes and watch our kids. We keep adding to the pool of underpaid- the teachers in my community are paid a less than living wage if they happen to be single parents. We keep growing the precarious class, while we "celebrate" a roaring economy.
2
First the Wharton school give us Trump and now gives us econ studies with bogus inputs (applying tax receipts to pay down the debt? Have you not been listening to Warren?) in a seeming attempt to goal seek a particular result.
That is a sad school.
39
"... if the proceeds went toward reducing the federal debt..."
That's the bogus assumption that underlies this hit-job. Because Warren doesn't intend to devote that wealth tax to reducing the federal debt, but to investing in child care, free tuition for college students, and for universal healthcare.
Further, if she reduces the annual deficit by some measure, history has shown us that increases in taxes on the wealthy do not hurt the economy. Clinton raised the marginal tax and we experienced the strongest economy in a century. Obama increased taxes on the wealthy, and we experienced a healthy sustained recovery from the Republican economic collapse.
Bogus assumptions on top of bogus analysis.
Warren has it right.
207
@Sean
Within the last 30 years, and more specifically in the last ten years, in the name of economic recovery, Bernanke printed and handed trillions to the likes of Cooperman, and massively exacerbated the wealth inequality.
When Bernanke liquefies your assets 2 to 5x, that you are simply squatting on, and your wealth multiplies disproportionately to the rest of the population, that wealth is un-earned.
Asking 2% back YoY of this wealth is not unreasonable.
I just hope Warren opens this line of attack. Unearned wealth just because Federal Reserve printed trillions.
11
@Sean
Remember, the NY Times embraces the right wing Republican view that the budget deficit is very very important except when it is caused by rabidly cutting the tax rates of billionaires. Then the deficit is good! Because that money is going to billionaires!
8
@Sean Suddenly they care about the DEBT. Yes, with any threat to raising the wealthy's taxes, the wealthy's toadies play the debt card. We've seen it many times before. Remember Paul Ryan, that GOP 'idea man,' who hated debt, but made sure to pass lower taxes for the rich ( more debt for the US) before he quit Congress
1
A "wealth tax" that only fell on "land value" (not buildings/improvements) would have no negative effect on the economy, because land had an inelastic supply.
Does no one remedy Henry George?
Btw, land value is even more maldistributed than income!
Soak parasitic rent seeking behavior instead of taxing labor.
5
The bean counters miss the benefits of restoration of justice (environmental and economic), fairness, equality, and democracy in governance to we the people.
51
Everyone that is not a millionaire/billionaire is losing much more than 2% every year to the rate of inflation and in many areas, especially health care, are losing much more of their money and assets. The wealthy are already reaping a much bigger benefit from the Great Corporate and Wealthy Tax Gift Act while returning next to nothing?
45
When voracious economies are eating the planet, with a literally devastating decline in the quality and focus of environmental regulation, is the idea of slowing the economy down reckless socialism or a responsible call for better thinking?
53
@Roger Bingo! As Edward Abbey once intimated: "Growth for growth sake is the ideology of a cancer cell," and that's what we have. There are many calling for a fairer distribution of wealth around the world, however, these are not the voices of those who control nearly half the world's wealth. "A responsible call for better thinking" would entail people going inward to address not only the difference between real needs and wants but also their own egos, which are want maintain a materialistic, rearguard-reaction to the finality of a corporal existence on this planet. Earnest Becker wrote a book "The Denial of Death," and this is what 'growth for growth sake' thinking is all about: materialistic, Potemkin-economies erected to deny the very transience of life. The industrialized world seeks peoples' wants (desires) becoming so-called needs in a very unconscious, omnicidal push towards extinction. The positive side of all this is that this human, self-purging will ultimately grant the planet both a reprieve from "voracious economies" gnawing away at its core and a re-entry into recovery and rejuvenation. Indeed, climate change has been 'telling' us something for at least the past thirty years, yet when real needs are subsumed by wants (desires), there can be no focus on what is truly meant by "quality." There is, sadly, only quantity.
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Seems like the study found that taxing people to pay down the national debt hurts the economy.
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These economists are assuming this and assuming that.
The political candidates are assuming this and assuming that.
Well, sooner or later you run out of other peoples money.
I wonder how that assumption will play into this?
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@Randy L. - "…sooner or later you run out of other peoples money."
Even tho' Thatcher's trope is staler than week-old bread, there's some truth in it.
Here in the US of A, we've been transferring The People's money up to the Predatory (R)ich for 40 years, and The People are running out of it while the Greedhead's Money Pits are stuffed to the brim with idle cash.
@Miss Anne Thrope
The ultra wealthy are showing their ‘Scrooge McDuck’ true personalities. The majority of their wealth is made in public trading, most of it then deposited in some shady off shore tax shelter, like Cyprus, Bermuda or the Virgin Islands. Enough of the myth that they invest in the creation of jobs! They have multiple mansions in multiple countries, probably haven’t a clue nor particularly care that many Americans are struggling and barely making ends meet. Spending most of their time in Bermuda (Bloomberg) Tuscany or Monaco or some other exclusive enclave, of course they neither have a clue, nor particularly care. Time to call them to account and make them finally contribute something to society, and not just philanthropic elitist donations to the museum of their choice (which is tax deductible and useful for hobnobbing with their peers
Like the late Epstein on the social circuit). Enough of their dishonest virtue signaling. They need to be taxed properly, even if 2% increase causes them ‘unimaginable pain and hurt.’