30.7.11

THE CASE FOR COMPROMISE.  A PJ Tatler analysis of a New York Times online poll (the site may have been deactivated) suggests the electorate will accept some mix of spending cuts and revenue increases, but the major parties' bases will not.
The up-and-down axis is about spending: dots near the top of the chart represent people who want to cut spending, while those at the bottom don’t want to cut spending. The left-right axis represents tax revenue — those who clicked near the right edge of the screen want to raise revenue through higher taxes, and those on the left don’t (more on this later).

Thus the cluster of dots at the upper left corner represent hardcore libertarians and Tea Partiers — people who want a lot less spending and no new taxes. The cluster at the lower right are the socialists and welfare-staters — people who want more spending and more taxes to pay for it.

The tiny cluster at the lower left are the crazy people — people who want more spending, but don’t want to pay for it in any way. We can safely ignore them.

But as the chart instantly reveals, the vast majority of respondents are in the upper right — people who want less spending and more revenue. In other words, the mid-point between the two extremes: the Tea Party position of cutting runaway spending is now the mainstream position; but the liberal Democrat call for higher taxes is also now the mainstream position.

This is why no one can figure out who’s “winning” the debt battle. Both political factions have a monopoly on only one of the two favored positions, while their opponents lay claim to the other.
The harder project is working out the tax rate elasticity of labor supply, and a few other wonkish things  (go and read this or this, both as .pdf, if you dare).  The Democrats and their court intellectuals suggest that higher marginal tax rates mean more tax revenue for the government, while the Republicans and their court intellectuals suggest otherwise.

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