Buffett v. The Data, Part Deux

In the comments of my previous post, co-blogger Steve stated, “[o]nly at the very top do taxes become regressive”; and – by way of supporting this statement – pointed (indirectly) to an IRS report regarding the 400 highest-AGI tax returns for 2008.  The data from this report, as well as other IRS data for that year, illustrates two things:

1. Effective income tax rates do start to decline at the highest income levels.
2. OTOH, the effective income tax rates at those levels remain well above those for most lower-income categories.

These points are graphically illustrated in Figure 1, which gives the effective income tax rates for various Adjusted Gross Income categories in 2008.

Figure 1

Granted, Fig. 1 only considers income taxes.  However, as Figure 2 shows, the aforementioned points remain valid when we include other federal taxes (e.g., FICA, excise, corporate).

Figure 2

I find it hard to get excited about the very-very-rich paying a somewhat lower federal tax rate than the very-rich, when rates for both groups remain higher than those for most other income categories.

Sources and Notes

In Figure 1:

• The effective income tax rates for the categories between $1 & $50k, and between $500k & $10 mil, were calculated using the Adjusted Gross Income data in col. 2 of this IRS table, and the “Total income tax” numbers in col. 41 of this table.
• The effective income tax rates for the categories between 50k & 500k were calculated using the AGI & “Total income tax” numbers from columns 2 & 62, respectively, of Table B in IRS Publication 1304 (Rev. 07-2010).
• The effective income tax rate for the “Top 400” was calculated using 2008 AGI & aggregate income tax data from Table 1, pp. 1 & 10, of this IRS report.
• The aggregate AGI for the “$10 mil+ ex Top 400” category was calculated by subtracting the AGI for the top 400 from the AGI of the “$10,000,000 or more” category in this table; the same procedure was used to calculate the aggregate income tax for the “$10 mil+ ex Top 400” category.

Figure 2 was generated using the 2005 Total Effective Federal Tax Rate data in Table 1 of this CBO report.

Tax Distribution: Buffett v. The Data

This post is all Warren Buffett’s fault.  When I read his recent NYT op-ed (HT Karen Street), this paragraph jumped out at me:

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

The implication is that the federal tax system is regressive, such that Buffett & others at his income level have lower effective federal tax rates than the rest of us.  Or, at Buffett might put it, our tax system (unnecessarily) “coddle[s]” “super-rich” individuals such as himself.  However, it appears that Buffett’s anecdotal evidence is not representative of the federal tax system as a whole.  From a recent CBS news story:

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

The latest IRS data is a few years older and it’s limited to federal income taxes but it shows much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.

Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.

For those so inclined, the sources for the above can be found in this Tax Policy Center table, and on p. 23, Fig. 4 of the IRS’s Statistics of Income–2009 Individual Income Tax Returns.  (See also this report from Citizens for Tax Justice, which gives similar results.)

Given my previous forays into tax-distribution issues, these results do not surprise me.

Debt Limit & Default

Recently, H.M. Stuart posed the following query:

I have heard it claimed recently that, if the current debt ceiling is not raised, the U.S. would not be able to cover the interest currently due on our national debt and other immediate obligations and would immediately default. . . .

I have also heard it claimed recently that . . . current U.S. Treasury receivables are easily sufficient to pay such current obligations many times over.

What is the true situation, as best you can discover?

What follows is my attempt at an answer.

1.  The term “default,” as applied to the federal government, is ambiguous.  It could either refer to:

• Inability of the government to pay principal & interest on the outstanding stock of federal debt; or
• Inability of the government to pay obligations besides federal debt, such as salaries, entitlements, tax refunds, etc.

Since “default” is commonly defined to mean “failure to meet financial obligations,” either of the above could be characterized as “default.”  Given that federal outlays currently exceed receipts by a considerable margin, default on non-debt obligations appears highly probable absent a debt-limit increase or massive tax increases.  This may well be highly unfortunate, but I doubt it would induce the financial catastrophe that would likely result from a default on the national debt.  It is this sort of default that I – and methinks many others – have in mind when they worry about the federal government defaulting.  Default on the national debt, however, is probably avoidable even if the debt limit stays constant.  Preventing debt default would have two aspects:  rolling over the current stock of federal debt, and paying interest on the debt.

2.  Rollover:  When a given portion of the national debt comes due, Treasury rolls it over:  it sells new issues of bonds & bills, and uses the resultant proceeds to pay off maturing debt issues.  These rollover operations could still continue even if fedgov hit the debt limit.  Since the debt limit provision merely establishes an overall limit on outstanding debt, and does not specifically prohibit new issues of debt, ISTM Treasury would still be able to issue new debt to “roll over” existing debt issues as they expired.

3.  Interest Payments:  Treasury would still receive revenue from taxes, and could use a portion of this revenue to pay interest on the debt.  Monthly Treasury Statements for the previous 18 months show monthly revenue exceeding gross interest payments by a significant margin.  According to the March 2011 MTS

• Total Receipts were ~$1.02 trillion through March 2011, and were estimated at $2.17 trillion for the full fiscal year.
• Gross interest payments were ~$216 billion through March 2011, and were estimated at $430 billion for the full fiscal year.

It therefore appears that Treasury could continue paying interest on the national debt even if the debt limit weren’t raised.

4.  Of course, the foregoing analysis assumes that Treasury prioritizes debt rollover & payment of interest above other obligations.  Arguably, Sec. 4 of the Fourteenth Amendment mandates such prioritization, by mandating that “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.”  ISTM Treasury also has the power to prioritize in this manner.  Although I’m unaware of any court cases addressing this question, a 1985 GAO report did conclude that Treasury is “free to liquidate obligations in any order it finds will best serve the interests of the United States.”  A 1981 OMB memorandum implicitly concurs, by outlining which governmental functions that would continue during a lapse in appropriations.  Finally, even though a recent statement by Deputy Secretary of the Treasury Neal Wolin deemed prioritization “unworkable,” it stopped short of asserting that Treasury is prohibited from prioritizing in this manner.

5.  Given such prioritization, ISTM the US would avoid the ill effects suggested by the first three bullets of a recent Treasury Notes blog post, i.e., “default on legal obligations of the United States,” a default-induced economy-wide increase in “all borrowing costs,” and “prolonged and far-reaching negative consequences on the safe-haven status of Treasuries . . . .”  OTOH, as noted in a recent CRS report:

Even if the government continued paying interest, it is not clear whether creditors would retain or lose faith in the government’s willingness to pay its obligations. If creditors lost this confidence, the federal government’s interest costs would likely increase substantially.

The probability of such a crisis in confidence depends on the psychology of those holding Treasury securities.  I have insufficient data to guestimate this probability.

Presidential Bank Holidays in a Time of War

I.  Introduction

Recently, a rather odd concern came to my attention:  apparently, some people are worried that Obama might someday declare a bank holiday.  Admittedly, there’s a smidge of truth to this concern, but it’s almost two years too late:  In the depths of the credit crisis, some pundits did suggest temporarily closing the nation’s banks, evaluating them for solvency, and reopening only those proven to be solvent.[1] However, this never ended up happening; nor do I think it likely to happen anytime soon.  Still, since I like to think about weird things, I got to pondering whether the President still has the power to declare a bank holiday nowadays.  FDR did so in 1933, but using a statute that has since been amended.  Does such authority still exist?  The tentative answer of this non-lawyer is “Yes.”  Sort of.

II.  The Trading With the Enemy Act

FDR proclaimed his bank holiday under the authority of § 5(b) of the Trading with the Enemy Act.[2] As amended, this provision currently reads, in relevant part:

(1) During the time of war, the President may, through any agency that he may designate, and under such rules and regulations as he may prescribe, by means of instructions, licenses, or otherwise-

(A) investigate, regulate, or prohibit, any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution, and the importing, exporting, hoarding, melting, or earmarking of gold or silver coin or bullion, currency or securities . . .

. . .

by any person, or with respect to any property, subject to the jurisdiction of the United States . . . .[3]

In general, this text seems significantly broader than the 1933 version.  Currently, the Act not only encompasses “transfers of credit between or payments by” a banking institution, but also “transfers of credit or payments between, by, through, or to” such an institution.[4] Paragraph (3) allows the President to define not only “banking institution” (as was the case in 1933), but also “any and all terms” of the statute.[5] If the 1933 version of § 5(b) was broad enough to authorize FDR’s bank holiday,[6] it would appear that the Act’s current, broader incarnation allows Obama to do the same.

Or does it?  Notwithstanding the above, the current § 5(b) is narrower than its 1933 counterpart in one respect.  The 1933 version not only applied “[d]uring time of war,” but also “during any other period of national emergency declared by the President . . . .”[7] However, since this “national emergency” language was removed in 1977, the Act has been limited to wartime.[8] We must therefore consider whether the United States is currently in a state of war.

III.  War Without End

Regardless of the continuing debate over whether a “war paradigm” or a “law enforcement paradigm” is preferable for prosecuting the fight against Al Qaeda, it appears that, since 9/11, the answer to the above question has been, “Yes” – at least in the eyes of the courts.  For example:

• In Hamdi v. Rumsfeld, the Supreme Court effectively treated the post-9/11 Authorization for the Use of Military Force (hereinafter “9/11 AUMF”)[9] as a declaration of war against Al Qaeda & the Taliban (among others), and therefore construed the words “necessary and appropriate force” in light of the laws of war regarding detention of combatants.[10] The Court also noted, with reference to the post-9/11 period, that “We have long since made clear that a state of war is not a blank check for the President when it comes to the rights of the Nation’s citizens.”[11]
• In Boumediene v. Bush, the Court reiterated this understanding, when it observed that the detainees whose cases it was considering had been “detained by executive order for the duration of a conflict that, if measured from September 11, 2001, to the present, is already among the longest wars in American history.”[12]
• In In re. Iraq & Afghanistan Detainees Litigation, various former Afghan & Iraqi detainees sued American military personnel for alleged abuse while held by US military forces in Iraq & Afghanistan.  In dismissing these suits, a federal district court referred to the defendants as “military officials commanding Armed Forces serving our country during a war….”[13]
• In Qualls v. Rumsfeld, a federal district court rejected a soldier’s challenge to the Army’s “stop-loss” program.  Referring to the 9/11 AUMF & the Iraq War resolution,[14] the court concluded that “The United States Congress, by its authorization statutes, has initiated war in the same way it has initiated war since World War II.”[15]
• In Kaufman v. Holder, a federal district court held that the term “state of war,” as used in a citizenship-renunciation statute, encompassed the dates of July 2004 & September 2008,[16] owing to the existence of wars in Iraq & Afghanistan,[17] and the passage of the 9/11 AUMF & Iraq War resolution.[18]
• In United States v. Prosperi, a federal district court held that, for the purposes of the Wartime Suspension Limitations Act, the United States was “at war,” owing to the 9/11 AUMF, the Iraq War resolution, and the existence of the Iraq & Afghanistan wars.[19]
• Also of interest is Judge Randolph’s concurrence in Al Odah v. United States, which concluded that an exception of the Administrative Procedure Act for “military authority exercised in the field in time of war or in occupied territory”[20] was applicable because, inter alia, “[t]he military actions ordered by the President, with the approval of Congress . . . are part of the war against the al Qaeda terrorist network; and those actions constitute ‘war,’ not necessarily as the Constitution uses the word, but as the APA uses it.”[21]

Qualls, Kaufman, & Prosperi are particularly noteworthy, since each was unconcerned with war powers questions (e.g., preventive detention, targeted killing).  Rather, each involved legal provisions which – like the Trading with the Enemy Act – just so happen to become operative during a “time of war” or “state of war.”  On the basis of these precedents, and the others mentioned above, it would appear that the United States is currently in a state of war.  It follows that the provisions of the Trading with the Enemy Act are currently operative; and that, therefore, the President has the authority to proclaim a bank holiday under existing law.

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[1] See, e.g., William Greider, Time for a Bank Holiday, Nation, Dec. 8, 2008, at 3, available at http://www.thenation.com/article/time-bank-holiday; New Deal democrat, FDR’s solution to the Banking Crisis – a model for Obama, The Economic Populist (Nov. 22, 2008, 1:21 PM), http://www.economicpopulist.org/content/fdrs-solution-banking-crisis-model-obama.

[2] Proclamation No. 2039, 48 Stat. 1689 (Mar. 6, 1933).

[3] 50 U.S.C. app. § 5(b) (2006).

[4] 50 U.S.C. app. § 5(b)(1)(A) (2006).

[5] Compare 50 U.S.C. app. § 5(b)(3) (2006), with 50 U.S.C. app. § 5(b) (1940).

[6] Both the executive & the judiciary took this view.  Although FDR followed the Emergency Banking Act of 1933 with a second bank holiday proclamation, this merely “extended” the holiday declared by the first, while also declaring that “all the terms and provisions of said Proclamation of March 6, 1933, and the regulations and orders issued thereunder are hereby continued in full force and effect”.  Compare Proclamation No. 2040, 48 Stat. 1691 (Mar. 9, 1933), with .  A subsequent decision by the Mississippi Supreme Court, while noting the questionable legality of FDR’s first proclamation, also took the validity of the second for granted.  See Anthony v. Bank of Wiggins, 184 So. 626, 628 (Miss. 1938) (“[A]lthough the banking institutions of the United States, out of a commendable spirit of co-operation in a time of economic crisis, generally obeyed the Presidential Proclamation of March 6, 1933, there was no authority in law for the issuance of such a proclamation until March 9, 1933.”).

[7] 50 U.S.C. app. § 5(b) (1940).

[8] Act of Dec. 28, 1977, Pub. L. No. 95-223, § 101, 91 Stat. 1625, 1625 (1977).

[9] Authorization for Use of Military Force, Pub. L. No. 107-40, § 2(a), 115 Stat. 224 (2001).

[10] 542 U.S. 507, 518 (2004).  (“We conclude that detention of individuals falling into the limited category we are considering, for the duration of the particular conflict in which they were captured, is so fundamental and accepted an incident to war as to be an exercise of the necessary and appropriate force Congress has authorized the President to use.”).  Implicit in this conclusion is the notion that the struggle with Al Qaeda & its allies is a “war”, and that as such, it is appropriate to look to the laws of war when determining the scope of the power granted by the AUMF.

[11] Id. at 536.

[12] 553 U.S. 723, 771 (2008).

[13] 479 F. Supp. 2d 85, 114 (D.C. 2007).

[14] Authorization for Use of Military Force Against Iraq Resolution of 2002, Pub. L. No. 107-243, 116 Stat. 1498.

[15] 357 F. Supp. 2d 274, 284 (D.C. 2005).

[16] 686 F. Supp. 2d 40, 43-45 (D.C. 2010).

[17] Id. at 44 n.2.

[18] Id. at 45 n.3.

[19] 573 F. Supp. 2d 436, 450-454 (Mass. 2008).  Admittedly, the judge in this decision also opined that the Afghan war ended on Dec. 22, 2001, when “the United States formally recognized and extended full diplomatic relations to the new government of Hamid Karzai”; and that the Iraq War ended with President Bush’s May 1, 2003 speech announcing the end of “major combat operations in Iraq”  Id. at 455.  This portion of the opinion, however, is obviously open to serious dispute on factual grounds, given the continued existence of counterinsurgency operations in both Iraq & Afghanistan well beyond the dates mentioned in the opinion.  Indeed, the opinion implicitly admits this, when it notes that “a strong case can be made, given the continuing expenditures and loss of life in Iraq and Afghanistan, that the United States remains at war.”  Id. at 454.  Moreover, the opinion’s designation of “Termination of Hostilities” for either of these wars is arguably non-binding dicta, since the same result could have been reached if the judge had simply (and probably correctly) deemed the wars in question “ongoing”.  See also Doe v. United States, No. [deleted], 2010 U.S. Claims LEXIS 886, at *1 (Ct. Cl. Nov. 22, 2010) (“A novel takings issue is presented—whether an Iraqi citizen can maintain a Fifth Amendment takings claim for the occupation of his home by the United States military during the Battle of Fallujah, a question that requires a determination as to whether the military necessity doctrine precludes invocation of the Fifth Amendment for a military occupation during wartime….”) (emphasis added).

[20] 5 U.S.C. § 551(1)(G) (2006).

[21] Al Odah v. United States, 321 F.3d 1134, 1149-1150 (D.C. Cir. 2003) (Randolph, J. concurring), rev’d on other grounds sub nom., Rasul v. Bush, 542 U.S. 466 (2004).

Randomness

Random thoughts on recent events hereabouts (& elsewhere):

1.  Sharia:  I’m fine with courts enforcing Sharia-based arbitration agreements, or consulting the laws & courts of Muslim states under normal choice-of-law principles.  Granting Muslims special exemptions from criminal laws on account of their religious beliefs does make me cranky; but I feel the same way about exemptions for Christians.  I’m just glad that New Jersey court decision was amenable to reversal on appeal; unlike, say, United States v. Lynch, 952 F. Supp. 167 (D.S.D.N.Y. 1997), where a judge acquitted two devout Catholic abortion-clinic protesters on the basis of their religious beliefs, and the Second Circuit found its hands tied by that pesky Double-Jeopardy prohibition.  That said, methinks occasional screwups along these lines are inevitable in a country such as ours, which has a long history of exempting people from generally-applicable laws on the basis of sincere religious convictions.  Personally, I don’t think such exemptions are mandated by the Free-Exercise Clause; and weirdly enough, the Supreme Court seems to agree with me.  But then, I’m not a constitutional lawyer, so it’s possible I’m totally off-base here.

2.  Pearl Harbor:  Historically, I’ve made a point of commemorating Dec. 7 in some way.  This year, not so much – I blame sleep deprivation.  FDR’s Dec. 8 war address is one of my all-time favorites (along with Lincoln’s Second Inaugural).  I do sometimes wonder how the Pacific War might’ve turned out if Japan hadn’t doomed itself attacking Pearl Harbor.  E.g., if they’d just ignored the Philippines, and gone for the rest of the Co-Prosperity Sphere, could FDR have talked the America-Firsters into defending Europe’s Asian colonies?

3.  I’m not overly concerned by the dismissal of ACLU/CCR’s Al-Aulaqi lawsuit, since I view these sorts of targeted killings as constitutional.

4.  Rush Limbaugh:  I was once an avid fan, in high school.  Not so much nowadays.  I occasionally wonder if I should tune in just to monitor what he’s feeding his audience.  But I don’t think I have that much time to spare.

5.  Wikileaks & Warfighting:  In a country such as the United States, public support is a sine qua non for any successful war effort.  The collapse of public support can make it much more difficult for the US to continue fighting, and may ultimately contribute to either an outright defeat, or the acceptance of otherwise-unacceptable terms of peace – in the same way as a long string of battlefield defeats might. (See, e.g., Vietnam)  Insofar as disclosures like those made by Wikileaks erode public support for the wars in Iraq & Afghanistan, they may thus be likened to war of a sort.

(Of course, if ending a given war is in our best interest, then actions which hasten the arrival of such a termination become far more praiseworthy, and far less lamentable, than might otherwise be the case.)

I do wonder why Wikileaks has provoked such an uproar this time around, given that their latest disclosure (of Foggy Bottom cables) seems to have been the most innocuous of their recent leaks.

6.  I recently came across an intellectually-honest liquidationist, who frankly admitted that his preference for avoiding the Fed/Treasury/TARP bailouts of late ’08, and putting the various recipient institutions through bankruptcy (ala Lehman), would’ve led to a “depression”.  (His term, not mine.  Not sure how this would’ve compared to the original.)  He didn’t seem to mind limited bailouts for investors in money-market funds, however – which struck me as interesting, given the role MMFs played in funding the institutions he wanted to put in bankruptcy.  It’s not clear to me whether this strategy would’ve led to a better outcome than what actually happened.

7.  I also recently came across this website, and found it quite entertaining.  Though I’m not sure I know enough about either the law or comic books to truly appreciate it.

Historical Tax & Income Data: Some Charts

With several of my co-bloggers raising the issue of how income & federal tax liabilities are distributed among different income levels, I figured I’d reacquaint myself with Microsoft Excel, and gin up some semi-relevant charts.  Fortunately, the Congressional Budget Office already did the heavy-lifting back in December ’08; responding to a query from Sen. Baucus, they drafted a letter[1] providing historical data for various income categories, with particular attention to higher-income ones.  Chart 1 plots the total federal tax liability for each of several income categories, as a % of household income.  Charts 2 & 3 plot the proportion of federal taxes paid by said categories; while Charts 4 & 5 plot the proportion of income earned by each category.

[The last link above is to an Excel spreadsheet containing the raw data I used for these charts.  Just in case anyone wants to check my sums (probably a good idea), or gin up some other charts using different income categories (YMMV).]

Chart 1:  Effective Federal Tax Rates[2]

Chart 2:  Share of Federal Tax Liabilities[3]

Chart 3:  Share of Federal Tax Liabilities (Again)

Chart 4:  Share of Income[4]

Chart 5:  Share of Income (Again)

Update:

It occurred to me that, when drafting the above, I neglected the top 10%.  Chart 6 plots relevant historical stats for that particular category.

Chart 6:  The Top 10%[5]

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[1] The CBO publication in question is Historical Effective Tax Rates, 1979 to 2005: Supplement with Additional Data on Sources of Income and High-Income Households (December 2008), available at http://www.cbo.gov/ftpdocs/98xx/doc9884/12-23-EffectiveTaxRates_Letter.pdf (hereinafter Historical Tax Rates).

[2] Data for this chart comes from Table 1 of Historical Tax Rates, under the heading “Total Effective Federal Tax Rate”.  For “Percentiles 81-99”, I calculated – as weighted averages – pre-tax and after-tax incomes for each year, using data from Table 3 regarding numbers of households and average household income for each of “Percentiles 81-90”, “Percentiles 91-95”, & “Percentiles 96-99”.  I did the same for “Top 1%”, using data for “Percentiles 99.0 – 99.5”, “Percentiles 99.5 – 99.9”, “Percentiles 99.9 – 99.99”, & “Top 0.01 Percentile”.

[3] Data for Charts 2 & 3 comes from Table 2 of Historical Tax Rates, under the heading, “Share of Total Federal Tax Liabilities”.  Each datapoint for “Percentiles 81-99” sums “Percentiles 81-90”, “Percentiles 91-95”, & “Percentiles 96-99” for that year.  Each datapoint for “Top 1%” sums data for “Percentiles 99.0 – 99.5”, “Percentiles 99.5 – 99.9”, “Percentiles 99.9 – 99.99”, & “Top 0.01 Percentile”.

[4] Data for Charts 2 & 3 comes from Table 3 of Historical Tax Rates, under the heading, ” Share of Income (Percent)”, and the subheading, “Pretax Income”.  Each datapoint for “Percentiles 81-99” sums “Percentiles 81-90”, “Percentiles 91-95”, & “Percentiles 96-99” for that year.  Each datapoint for “Top 1%” sums data for “Percentiles 99.0 – 99.5”, “Percentiles 99.5 – 99.9”, “Percentiles 99.9 – 99.99”, & “Top 0.01 Percentile”.

[5] As with “Top 1%” in Chart 1, I calculated the “Total Effective Federal Tax Rate” for each year by calculating – as weighted averages – pre-tax and after-tax incomes for each year, using data from Table 3 of Historical Tax Rates regarding numbers of households and average household income for each of Percentiles 91-95″, “Percentiles 96-99”, “Percentiles 99.0 – 99.5”, “Percentiles 99.5 – 99.9”, “Percentiles 99.9 – 99.99”, & “Top 0.01 Percentile”.  I summed the relevant percentages for these categories from Tables 2 & 3 to calculate “Share of Pretax Income” and “Share of Federal Tax Liabilities”, respectively.

Comparing the Costs of Iraq & ARRA

Recently, H.M. Stuart highlighted an op-ed by one Mark Tapscott, which draws a comparison between the costs associated with the Iraq War (on the one hand), and Obama’s stimulus program (on the other), and alleges that the latter cost more than the former.  The Tapscott piece in question cites a Randall Hoven piece on the American Thinker website, which in turn cites for authority a report from the Congressional Budget Office.  The report in question appears to be CBO’s August 2010 update to its Budget & Economic Outlook.  If my math is right – a proposition admittedly open to question – then it appears Hoven drew his numbers from pp. 13 & 15 of the aforementioned report.  I’ve reproduced the relevant tables below:

My thoughts:

1.  On a strict apples-to-apples comparison, the headline of the Tapscott piece – which implies (to me) that ARRA (the Obama stimulus) has already cost more than Iraq – is incorrect.  Per CBO, direct costs of the Iraq war did indeed total $709 bn from 2001-2010.  However, ARRA to date cost $180 bn in 2009, and $392 bn in 2010, for a total of $572 bn.

2.  Of course, ARRA is slated to continue expending cash for some time, to the tune of $242 bn from 2011-2019, for a total of $814 bn.  It is this number that Hoven & Tapscott are concerned with.  However, if one is counting future expenditures, ISTM one should also consider similar expenditures for Iraq.  Alas, the aforementioned table only goes to 2010; for 2011-2020, p. 25 of the CBO report only estimates the combined costs of Iraq & Afghanistan, w/o providing a breakdown of said projections for the two theaters.  Note that it would require annual Iraq expenditures of only $12 bn/yr to make Iraq’s overall budgetary cost (through 2019) higher than that of ARRA.

3.  The reason why CBO’s Iraq War expenditures are so much lower than Stiglitz et al is that the latter, in arriving at their $3 trillion figure, also appear to have tacked on indirect costs of the war – e.g., loss of productive capacity on the part of dead or injured military personnel, or macroeconomic problems resulting from effects (e.g., higher oil prices) potentially attributable to the war.  See here for a paper presenting an early version of their analysis, estimating a $2 trillion total cost.  (FWIW, Tyler Cowen deems the Stigliz & Blimes’ macroeconomic cost estimates “speculative”; I’m inclined to agree.)

4.  From where I stand, it’s a bit early to declare the stimulus a success or failure.  One problem with such pronouncements is our unfortunate lack of an alternate universe in which we can run controlled experiments.  We can guestimate the probable effects of stimulus using economic models.  I leave the question of said models’ reliability as an exercise for the reader.

5.  To some extent, this isn’t a question of numbers, so much as one’s opinions re. Iraq & the stimulus. If one thinks Iraq justified and the stimulus ineffective, then of course the former was worth the expenditure & the latter a big waste of $. And vice-versa.

More Random Links

Tyler Cowen and Brad DeLong explain why monetary policy via “helicopter drops” might be helpful.  Paul Krugman expresses skepticism, on economic and legal grounds.  Mark Thoma doesn’t seem to mind, but he’d prefer it be done via government spending rather than tax cuts.

Calculated Risk has a series of guest posts dealing with the issue of sovereign defaults.  So far, we’ve got parts 1, 2, 2B, 3, & 4.  Apparently the really interesting (to me) parts of the series – re. worst-case scenarios & knock-on effects – is yet to come.

Michael Pettis explains why China’s “nuclear option” of dumping Treasuries is overrated, and why we really ought to be worried about a diametrically-opposite scenario of massive Chinese capital exports.  And speaking of China, here’s an FT article about a huge Chinese ghost town, plus a post with pretty pictures of the same.

Megan McArdle provides some tips re. dealing with abusive debt-collectors.  See here and here.

In utterly-unrelated news, Marko Milanovic gives a nice overview of the issues at stake in the ICJ’s Kosovo independence case.

And apropos absolutely nothing, this guy thinks WWII would suck as a TV show.

About Those Ruthless Rich Walkaways….

So that NYT story regarding “rich walkaways” seems to be attracting some attention from the blogosphere, including Alexandria and The Other Blog.  I first heard about the story on Calculated Risk, who asked a key question that I’ve not seen addressed either in that story or in any of the (admittedly-limited) sample of econoblogospheric commentary I’ve read regarding it:

Were these borrowers really “rich”? Or did they just buy more home than they could really afford?

Along related lines…AFAICT that story didn’t provide us w/ any details of the loans in question besides the size of their initial balances.  No stats re. the income or non-housing assets of the borrowers in question (both in general, and among defaulters), nor a comparison between the rate of >$1 mil mortgage defaults and local housing prices.  No effort determine whether high income or assets has any remaining effect once key factors like negative equity or job loss are taken into account.  No effort expended to figure out how many of these defaults really were “strategic”, in the sense that the loan really was affordable to a borrower who nevertheless “walked away”.

Moreover, we’re left to assume that anyone w/ such a mortgage is “rich”, and maybe if “liar loans”, NINJAs, etc., had never existed, such an assumption would be warranted.  But in fact, such “innovations” did exist – which would seem to cast doubt upon whether the aforementioned assumption still holds.  Yet the only “evidence” provided to support this notion that “>$1 mil mortgage = rich” is anecdotal:  the rapper Chamillionaire and a so-called “technology entrepreneur” (whose income & assets are oddly left out of the story).

Maybe the rich really are more “ruthless” than everyone else; it’s not entirely implausible.  But before we declare the case closed, it’d be nice to see a little more evidence from the prosecution.  For starters, NYT et al might want figure out how many of those defaulters really were “rich”, and how many really were “ruthless”.

Random Links on Various Topics

Jack Balkin suggests, tongue-in-cheek, that McDonald v. Chicago‘s constitutional holding was unnecessary.  Sasha Volokh disagrees.  David Post, meanwhile, wonders what McDonald really held (if anything).

Tom Goldstein explains why everything you read about SCOTUS & ideology is wrong.

Jack Goldsmith laments the politicization of the judicial appointment process.

Peter Spiro discusses US v. Arizona.  Twice.

Eugene Volokh explains why CLS v. Martinez was rightly decided.

Balkin & Carpenter being unimpressed by the recent federal district court decisions striking down part of DOMA.

Randy Barnett expresses skepticism regarding the constitutionality of state nullification.

Calculated Risk highlights a newly-released NY Fed staff report re. shadow banking.

Someone emails Jerry Pournelle, pointing out that the “Fury of the Legions” passage is probably a fake.  Glad I included a disclaimer in my post on that piece….

Finally, apropos Steve’s post below, James Hamilton discusses (in two parts) the possible causal relationship between high oil prices & the Great Recession.  And Pournelle makes the case for mild protectionism.