I’ve put forward a detailed plan that allows us to make [investments in economic recovery] while reducing our deficit by $4 trillion over the next decade. Now, I’m open to compromise and new ideas. But I refuse to accept any approach that isn’t balanced. I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes. This was a central question in the election. And on Tuesday, we found out that the majority of Americans agree with my approach – that includes Democrats, Independents, and Republicans.
Generals in the Class War Decry Class Warfare
It’s not class warfare. It’s math.
-President Barack Obama
That quote was from the president’s speech announcing a plan to reduce the deficit. Included in the plan is a choice — either close tax loopholes that allow the rich and corporations to dodge their fair share of the tax burden or end the high end Bush tax cuts which, as the president rightly pointed out, were intended to be temporary anyway. In fact, when Bush asked congress to make them permanent after the fact, congress refused.
There’s no reason that Obama couldn’t have demanded both the closure of the loopholes and the end to the bottom heavy tax structure — none other than Barack Obama being Barack Obama and leading with a concession. But that’s another post. This post is about the claims by Republicans that asking the wealthy to pay their fair share is “class warfare.”
Los Angeles Times:
Top congressional Republicans on Sunday accused President Obama of trying to incite class warfare with his proposal for a new tax on millionaires and said they would not support the measure because it would hurt economic growth.
“Class warfare … may make for really good politics, but it makes for rotten economics,” House Budget Committee Chairman Paul D. Ryan (R-Wis.) said on “Fox News Sunday.” “We don’t need a system that seeks to prey on people’s fear, envy and anxiety. We need a system that creates jobs and innovation and removes these barriers for entrepreneurs to go out and rehire people.”
The strong opposition by Republicans means the millionaire tax proposal is unlikely to pass Congress. But it promises to become a highly charged centerpiece in the battle over deficit reduction and job creation that will be a focus of the 2012 elections.
It takes a lot of guts for Paul Ryan, whose own budget-balancing plan would rob everyone’s Medicare fund to finance further tax breaks for the rich, to try to play the “class warfare” card. You want class warfare? Ryan’s plan is class warfare.
And are those high-end tax giveaways as necessary as Republicans say? Of course not. Everything they say the tax cuts will do are already failing to materialize. When Bush asked for them, they were the GOP’s flavor of stimulus, meant to reinvigorate the economy and create jobs. The result? George W. Bush had the worst record of job creation of any president since the Great Depression. This is what the Republicans argue is going to work for sure — this time. Hey Rocky, watch me pull a rabbit outta my hat!
By removing “these barriers for entrepreneurs to go out and rehire people,” Ryan means gutting regulations. Most of the regulations Republicans want to target have been in place during good times and bad, so the idea that they’re holding America back is ridiculous on its face. If you do something crazy, like ask business owners if regulations and taxes are killing them, they say no. Like anyone who has to live outside the Republican Ivory Tower, where failed theories and wishful thinking count as Gospel, business owners know that the problem is weak demand, not hocus-pocus about “uncertainty” and burdensome government regulations. If no one’s buying, no one’s hiring. It really is just that simple.
Further, by attacking the deficit the way the GOP wants to, you reduce demand, not increase it. Republicans like to talk about how the rich pay most of the taxes — regardless of how much they pay as a percentage of their income — but they don’t acknowledge that the vast, vast majority of economic activity in the United States comes from everyone else. If you’re actually taking things away from the not-so-very wealthy to pay for tax cuts that benefit the oh-so-very wealthy, the economy will never improve. People spending money is the economy — the entire economy — and tax cuts that benefit only the wealthy at the expense of everyone else do nothing but increase deficits. This isn’t even a matter of debate anymore, it’s proven. All the Bush tax cuts did was blow a hole in our budget and fail to create jobs or stimulate the economy. In fact, by the end of the Bush administration, we were in the worst economic situation of any since the Great Depression. In Republican circles, I guess that’s what passes for resounding success.
So “class warfare?” Republicans have been waging for a decade and all their victories have been Pyrrhic. Only a tiny handful are better off because of them and everyone else is screwed. If the GOP thinks class warfare is such an awful, scandalous thing, there’s an easy remedy.
They can stop waging it.
-Wisco
It’s Come to This: Republicans Want to Raise Taxes on Consumers
The overthrow of Libyan dictator Moammar Qaddafi is the important story of the day, to be sure. Foreign policy wonk Steve Clemons calls it a “huge win” for both the Libyan people and President Obama, while showing some understandable trepidation over what happens next. Juan Cole breaks down what the event means through the process of elimination, shooting down myths we’re sure to see crop up again and again in the coming days and weeks. For once, the story of the day deserves to be the story of the day.
But the problem with the big stories is that they tend to crowd out other stories. With a 24/7 news media, this should not be the case, but it is. It’s rational in a sort of televised car chase way; even if nothing’s happening right now, it’s inevitable that something will — the chase will end one way or another — and if you cut away to cover something else, you may miss the big crack up (or, as is more often the case, the anticlimactic peaceful arrest). In this case, if network cameras take their viewfinders off Libya, they may miss the money shot of Qaddafi himself being arrested or gunned down or blown up or even fleeing.
But the real world doesn’t cooperate with the media world’s programming decisions. Things are scheduled to happen linearly; people in the world aren’t waiting for Qaddafi’s last hour as dictator to run out before moving on to other things. It all goes on simultaneously, with stories overlapping. If one story becomes the story, other stories get sidelined. Take, for example, the fact that Republicans want to raise taxes on nearly half of Americans:
Associated Press:
News flash: Congressional Republicans want to raise your taxes. Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?
Apparently not.
Many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different “temporary” tax cut should end as planned. By their own definition, that amounts to a tax increase.
The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a “payroll tax” on practically every dime they earn.
One Republican explained the opposition. “It’s always a net positive to let taxpayers keep more of what they earn,” said Rep. Jeb Hensarling, “but not all tax relief is created equal for the purposes of helping to get the economy moving again.”
Yeah. Some tax relief actually works, while that preferred by Republicans has about a decade-long track record of failure. After all, if lightly taxing the wealthy helps the economy, then explain why it never has. Words you will never, ever hear anyone say; “Wow, look how those Bush tax cuts created all those jobs!”
And the story here isn’t just the “man bites dog” type of story that Republican opposition to tax cuts would seem to be. It’s a demonstration of just how awful and stupid and counterproductive Republican economic ideas have become. In fact, GOP ideas are becoming so bad that it would be legitimate to question whether they were actively trying to slow down, halt, or even reverse economic recovery. Supply side tax cuts have never worked to boost the economy, while demand side tax cuts often do. But here’s the party, standing in the way of something that history shows may help — and in defense of something that history shows does not.
While the Libya story may overshadow this particular tax fight, the media doesn’t have that excuse for the lack of coverage of the broader story — that GOP policies have no basis in fact or history and run counter to long accepted economic principles of supply and demand. In this particular case, that means actually raising taxes on the poor to pay for tax cuts for the rich. That’s not just shameless, that’s not just wrong. That’s so cartoonishly evil that you expect it to finally be exposed by a van full of teenagers and their dog, Scooby-Doo.
But what it’s not is anything new. Economists and analysts on the left and the right are warning that GOP boneheadedness is heading us for a cliff. And why wouldn’t it? Republican policies aren’t based on any deep thought. They’re based on the reactionary principle that if liberals like it, it must be wrong. It’s a talk radio mindset that confuses spin with fact and denial of fact with truth. It’s a deeply-ingrained belief — also demonstrated by global warming denial and creationism — that, if you don’t like a fact, then it doesn’t have to be true. If you just believe hard enough and strong enough and clap loud enough, Tinkerbell will recover reality will bend to your will. All it takes is a little faith; so-called “facts” and “history” are for lesser humans and losers without vision.
If the media won’t cover that big story — and they won’t — then the least we can hope for is that they’ll give some decent coverage to the facet of the story being presented to them now. Republicans want to raise taxes; man bites dog.
Surely that’s worth taking the media eye off Tripoli for just a few minutes?
-Wisco
The Economy as an Issue is Now 90% Republican-Owned
Last night, Robert Reich made a decent point. Writing about the debt limit deal and yesterday’s market sell-off, Reich wonders if Republicans are ready to take ownership of the problem.
John Boehner said Tuesday the Republicans got “90 percent of what we wanted” from the budget deal. So presumably he and his colleagues are willing to take responsibility for some 450 points of today’s mammoth 513-point drop in the Dow Jones Industrial Average.
I’m being a bit facetious — but only a bit. It’s always dangerous to read too much into one day’s move in the stock market.
Of course, there are a lot of factors that figure into the ongoing dive — economic uncertainty in Europe, for example — that have nothing to do with the US. But jitters about jobs and the threat of a double-dip recession are driving a lot of it. If Republicans got 90% of what they wanted from the debt limit deal, then Republicans now own 90% of responsibility for the economy.
So, preserving the tax cuts and avoiding any stimulus spending — in fact, drastically reducing government spending — ought to fix this right up. After all, didn’t we just send a message to the world that we’re going to get serious about spending and deficits? Didn’t the market need “certainty” and didn’t they just get it?
“Wall Street investors aren’t ideologues,” Reich says. “They don’t obsess about budget deficits ten years from now, or the size of the government. One day doesn’t make a trend, but a giant sell-off like this is motivated by hard, cold realities.”
And those realities are that “the economy looks like it’s dead in the water” and “investors now know the federal government’s hands are tied.” Thanks to Republicans, the US government has no way to fix this. Investors have their certainty all right. Unfortunately, it’s the certainty that the US will stick it’s head in the sand and ignore economic problems, hoping they’ll all go away on their own.
I suppose we could try another round of tax cuts, because they’ve been working so great so far. The Bush tax cuts are driving up deficits and really not accomplishing much else, but the GOP is sure to argue that they didn’t go far enough.
Still, the market worries about jobs, not taxes. And do you know why? Because they aren’t complete idiots. Job growth — or lack thereof — is an indicator of consumer demand. Higher unemployment means lower demand, which means a weaker economy. Republicans like to argue that tax cuts for the wealthy spur job growth, but where’s the evidence of that? Certainly not in America today. Demand creates jobs, demand creates wealth, demand creates federal revenues that drive down deficits. Demand is all and Republicans ignore it with their supply-side economics. Whether they want to admit it or not, Republican economic policies reduce demand. Austerity leads to stasis if done extremely carefully and decline if done carelessly. Growth and cutting spending just plain don’t go hand in hand.
What I’m getting at here is that a lot of things need to be done and they aren’t going to get done. Because Republicans will stand in the way and because, by getting 90% of what they wanted in the debt limit deal, they’ve made sure that what needs to be done has become impossible.
So the next time Republicans complain about jobs or economic growth, remember that they’re trying to have it both ways — setting 90% of US economic policy and claiming responsibility for none of it. When a Republican asks why what the president is doing isn’t helping the economy, you’ll know the answer — because what the president is doing was the Republican’s idea.
-Wisco
There’s Only One Pledge that Should Matter to House GOP — And It’s Not Grover Norquist’s
The head of the anti-tax taliban, Americans for Tax Reform’s Grover Norquist, just blinked.
Washington Post:WITH A HANDFUL of exceptions, every Republican member of Congress has signed a pledge against increasing taxes. Would allowing the Bush tax cuts to expire as scheduled in 2012 violate this vow? We posed this question to Grover Norquist, its author and enforcer, and his answer was both surprising and encouraging: No.
In other words, according to Mr. Norquist’s interpretation of the Americans for Tax Reform pledge, lawmakers have the technical leeway to bring in as much as $4 trillion in new tax revenue — the cost of extending President George W. Bush’s tax cuts for another decade — without being accused of breaking their promise. “Not continuing a tax cut is not technically a tax increase,” Mr. Norquist told us. So it doesn’t violate the pledge? “We wouldn’t hold it that way,” he said.
Norquist later walked his statement back a hair. “Any changes in taxes should be kept separate from the budget deal,” he said on MSNBC this morning. It’s not extremely clear why it should be kept separate from debt limit negotiations, other than the fact that Norquist sensed he’d given away too much. Still, if doing away with Bush’s high-end tax cuts doesn’t violate the pledge, it doesn’t violate the pledge.
Of course, as a conservative activist, Grover probably doesn’t feel like he’s under any obligation to be shackled by consistency. After all, he said pretty much the exact opposite about a year ago, so there’s definitely a pivot here.
“Norquist doesn’t want Bush’s budget-busting tax cuts to expire, but that’s not the point,” explains Steve Benen. “Republican lawmakers are terrified of violating his pledge, and here’s Norquist, on the record, saying GOP members can keep their word and allow a return to Clinton-era rates.”
The fact that “Republican lawmakers are terrified of violating his pledge” should be disturbing to everyone. There’s only one pledge that actually matters — their oath of office — and if it ever comes to a point where a pledge not to raise taxes and a pledge to “bear true faith and allegiance” to the US and Constitution and “faithfully discharge” their required duties, then there shouldn’t be any question at all that the anti-tax pledge goes out the window. You don’t get to throw the nation — and the globe — into economic turmoil because you once made a promise to a fanatical nutjob.
You do what’s best for the nation, Grover’s little pledge be damned.
-Wisco
The vicious circle of tax cuts for the wealthy
Related:
- The growing income gap, stalled economic growth, and financial deregulation
- The American Dream: we’ve gone from ‘prosperity for all’ to ‘the rich takes all’
- Middle America since 1979: doing more work for less money, even as corporate profits rise
- Tax breaks to the wealthy will never create jobs
- 19 Facts About The Deindustrialization Of America
Bush Tax Cuts are a 10 Year Economic Disaster
Republicans aren’t serious about debt reduction. By now, this should be obvious. We’re told that Paul Ryan’s Medicare-slaying plan is serious, as well as courageous, but the truth is that it’s neither. It’s silly and it involves the nation hiding its head in the sand. We’ve fought two wars, largely off-budget, and engaged in the biggest failure of economic policy since Hoover’s performance before the Depression. Republicans shoveled money into a hole for eight years, yet we’re supposed to believe that Medicare is our big problem. In 2010, our military spending made up nearly half of all world military spending combined, yet we’re supposed to believe our problem is that we spend too much on grandma’s heart medication.
It wasn’t that long ago that I put up this graph, but let’s look at it again:
The Bush tax cuts came with a lot of promises. We would grow our way out of deficits. Kind of looks like we didn’t. Deficits are mindblowing and our economy is a fragile wreck in recovery. As I said the last time I posted that graphic, by every measure and on every promise, the Bush tax cuts failed to deliver.
Which is why it was no surprise the Center for American Progress’ Pat Garofalo post a report yesterday spells out the ten years of failure that have been the Bush tax cuts.
10 years ago [today], the first of the Bush tax cuts was enacted. That 2001 tax cut was followed up by a second tax cut in 2003, passed after Vice-President Dick Cheney reportedly asserted that “deficits don’t matter.” The tax cuts were sold as necessary economic stimulus that would boost job creation and a moribund economy. “Tax relief will create new jobs, tax relief will generate new wealth, and tax relief will open new opportunities,” Bush said on April 16, 2001 as he was pushing for the passage of the first tax cut. Two years later he said, “These tax reductions will bring real and immediate benefits to middle-income Americans… By speeding up the income tax cuts, we will speed up economic recovery and the pace of job creation.” Bush called the 2001 tax cut, “a victory for fairness and a vote for economic growth.” Then-Speaker of the House Dennis Hastert (R-IL) said that the cuts were necessary to “spur the economy on.” And up through 2008, Bush was still convinced that his tax cuts had been good for the economy. “I think when people take a look back at this moment in our economic history, they’ll recognize tax cuts work. They have made a difference,” Bush said. However, the record of the Bush tax cuts is undeniable: their enactment coincided with the weakest economic expansion of the post-war period, blowing up the national deficit and debt, while not bringing any of the promised gains.
Yet Republicans use arguments that assume that the tax cuts were a tremendous success. For example, we’re told that if we do away with tax cuts for the top wage earners and corporations, then job growth will suffer. But there is no time in history when job growth wasn’t better with higher taxation. And what is the logic here anyway? If we raise taxes then businesses won’t be able to afford to hire people, as if hiring is just going gangbusters now. They’ve got the tax cut, it’s doing nothing, and hiring was better when taxes were higher.
The fact is that the Bush tax cuts represent the Republicans’ “starve the beast” strategy. Basically, this involves spending like there’s no tomorrow for a period, then suddenly “discovering” that government can’t afford basic services. So you spend idiotic amounts of money on military hardware no one is ever going to use, you cut taxes to the point that revenues are nearly nonexistent, then you say that “socialist” programs like Medicare, Medicaid, and Social Security are the problem. Can’t afford these luxuries anymore, but we can afford those moronic tax cuts. If “I want to cut Medicare” is a politically suicidal campaign slogan, then create a situation where you can argue that we have to cut Medicare.
So, while the Bush tax cuts have been an economic train wreck, they’ve been tremendously successful from a strategic standpoint. It’s one thing to put someone out on a ledge and give them a shove, but it’s another to create a situation where you might convince them to jump.
-Wisco
The Bush Tax Cuts Failed. Period
It’s a chart that’s been making the rounds for a while now. The Center for Budget and Policy Priorities graphed out the main drivers of current and projected deficits and came up with the following:
TARP, bailouts, the stimulus? Ain’t crap. And the economic downturn didn’t really make much of a dent. The big driver of current and future deficits are the Bush era tax cuts. Although the hole blown in the deficit by the cuts dwarfs them, it pays to point out that we fought two wars — which Bush made sure were off-budget — while giving people who could afford to help pay for those wars a free ride.
This isn’t pie-in-the-sky liberal loopiness here. These are history, these are facts. We were told that tax cuts would help us “grow our way out of deficits.” They didn’t. Again, that is fact. We were told the tax cuts would give us a rollicking, healthy economy. Look around you. They failed. That is a fact. In short, every argument in favor of the cuts has failed to materialize. The Bush tax cuts are — as a simple matter of historical fact — a complete failure.
They are currently zombie policy; dead arguments, inexplicably still shambling around, serving no actual, real world purpose and feeding off the public dime.
Which brings us to a post by Steve Benen yesterday:
How do GOP leaders defend this? Senate Minority Leader Mitch McConnell (R-Ky.) tried out this line on CNN’s “State of the Union” yesterday.CROWLEY: And I think I can get a yes or no from you on this. No tax increases will you accept at all in either the short, the medium or the long term, and that includes close tax loopholes?
MCCONNELL: Well, there aren’t going to be any tax increases. You know, that was settled by last November’s election. The president knows that.
I’m trying to think of a dumber line on fiscal policy. Nothing comes to mind.
“Indeed, I wonder if he’s even thought this through,” Benen wrote. “In 2009, after two consecutive cycles that went heavily in Democrats’ favor, did that settle the debate and prove the country opposes spending cuts? For that matter, did it also settle the debate and demonstrable voters’ desire for tax increases?”
Only the elections that go your way matter, apparently. This is an incredibly weak argument, made all the weaker by polling. The public doesn’t back the Republicans on this and everyone knows it, Mitch included. A McClatchy-Marist poll in April found that “voters by a margin of 2-to-1 support raising taxes on incomes above $250,000, with 64 percent in favor and 33 percent opposed.”
Note to Mitch McConnell; if you’re going to play the will-of-the-people card, make sure you actually have it in your hand.
And here’s a question that’s both interesting and informative — who does McConnell think he’s fooling? There he is, on the teevee, lying to you about what you want. Why on Earth would he even think that would work? A straw man argument only works when that straw man represents someone else. When it’s you, the success rate is closer to zero.
In any case, the “tax cuts forever” argument is a losing one, electorally. As government slowly strangles under the debt limit, this will become more and more clear and more and more of an issue. All summer long, the GOP plans to fight for the interests of a very few — against popular opinion. In a high-profile, front page battle.
That ought to work out well for them.
-Wisco
Reality-Based Budgeting
The budget deficit is a multi-generational problem. At least, that’s the impression you get if you listen to some in Washington or pretty much any random talking head. If we don’t get crazy with the budget scissors, our children and our grandchildren will pay the price. If we do nothing, the nation will be… I don’t know, in flames or something.
But yesterday, Annie Lowrey at Slate crunched the numbers and found the real consequence of doing nothing — eliminating the budget deficit in eight short years.
So how does doing nothing actually return the budget to health? The answer is that doing nothing allows all kinds of fiscal changes that politicians generally abhor to take effect automatically. First, doing nothing means the Bush tax cuts would expire, as scheduled, at the end of next year. That would cause a moderately progressive tax hike, and one that hits most families, including the middle class. The top marginal rate would rise from 35 percent to 39.6 percent, and some tax benefits for investment income would disappear. Additionally, a patch to keep the alternative minimum tax from hitting 20 million or so families would end. Second, the Patient Protection and Affordable Care Act, Obama’s health care law, would proceed without getting repealed or defunded. The CBO believes that the plan would bend health care’s cost curve downward, wrestling the rate of health care inflation back toward the general rate of inflation. Third, doing nothing would mean that Medicare starts paying doctors low, low rates. Congress would not pass anymore of the regular “doc fixes” that keep reimbursements high. Nothing else happens. Almost magically, everything evens out.
I’m not saying this is the best plan ever. I’m not even saying it’s a good plan. Frankly, it’s a lousy plan that would depress consumer demand by increasing the tax burden of the middle class and the poor — by far the two largest economic groups and, therefore, the largest portion of consumers. It’s not really a serious proposal anyway. It’s more of a “hey, look at this weird fact I found” thing.
But it does show that this whole “multi-generational crisis” thing is BS. The nation’s finances are set up so that, if you just switch it over to autopilot, the whole thing fixes itself. Not in the most optimal fashion, maybe, but a fix is a fix. Medicare and Medicaid are fine, Social Security is fine, we don’t have to chase down pennies defunding Planned Parenthood or National Public Radio — in short, we can let those budget scissors rust and everything would be peaches, deficit-wise. Not over generations, but in two years short of a decade. And, if we don’t need the budget scissors, we certainly won’t need Rep. Paul Ryan’s budget chainsaw.
And the Obama plan? It’s not exactly Lowrey’s “quit pokin’ at it” plan. Obama makes some cuts and hikes some taxes. McClatchy has an at-a-glance:
I wouldn’t make cuts to Medicaid at all and I’d make up that difference with cuts to our tremendously bloated military budget. The “cuts” to Medicare aren’t really cuts at all but, according to another handy at-a-glance from the New York Times, “The proposal seeks to reduce the growth in Medicare spending, including lowering prescription drug spending ‘by leveraging Medicare’s purchasing power.’” In other words, by allowing the government to negotiate drug prices with pharmaceutical companies — a no-brainer that should’ve been done a long, long time ago.
The Obama plan is twelve years, rather than the do-nothing’s eight, but it shows again that the “multi-generational crisis” talk is a lot of panicky BS. Besides, adding four years to avoid a hit to the economy in the form of weaker consumer demand isn’t really much of a setback.
“I can live with this,” Paul Krugman says. “And whatever the pundits may say, it was much, much more serious than the Ryan ‘plan.’”
Of course, that really is faint praise. I’ve been calling Paul Ryan’s proposal “fantasy-economics porn,” because that’s exactly what it is. It assumes the world is the way objectivist libertarians like Ryan wish it was, instead of the way that history shows it actually is. It argues that if you cut taxes, employment will go through the roof — Ryan’s plan projects numbers beyond full employment — but ignores the fact the we did cut taxes and labor stats suck. I guess eight years of stagnant job growth under Bush wasn’t proof enough. Once again, we see the conservative philosophy in action; if what you’re doing is failing, it means you have to do more of it.
Let’s be honest here: Rep. Ryan’s plan, by virtue of being completely ridiculous, set the bar pretty low. So it really should be no surprise that President Obama cleared it. It’s not the best budget ever devised, but the Republican alternative may very well be the worst.
And it beats doing nothing. Although, that works too.
-Wisco
