Obamanomics: my kind of tax & spend
If I were to quote just one passage from the NY Times Sunday Magazine piece, Obamanomics, it would be this:
There have now been two presidents in the last 30 years — Bush and Reagan — who cut taxes and promised that deficits would not follow. But the deficits did come, and they went away only after two other presidents — George H. W. Bush and Bill Clinton — raised taxes. It also seems fairly clear by now that tax cuts for the affluent do not necessarily trickle down to everyone else.
For Democrats who want to think the worst about their opponents, McCain’s reliance on these ideas may be affirming. But it’s really a shame. For the time being, only one party is applying the lessons of history to the country’s biggest economic problems. There is no great battle of new ideas, and that can’t make it more likely that those problems will be solved.
Kevin Drum said of this (just before moving on to Mother Jones):
The palpable exhaustion of conservative economic thought really is extraordinary. The evidence has been clear for years that that, at current U.S. tax levels, neither modest cuts nor modest increases has any real effect on economic growth, but the GOP’s core interest groups — rich people and corporations — want tax cuts, so that’s what they continue to offer. They’ve simply got nothing else in the tank.
And John McCain desperately wants to be president, so he’s surrendered to the flat earthers. He knows perfectly well that Grover Norquist and the Club for Growth and the cranks at the Wall Street Journal editorial page can torpedo his campaign if he doesn’t pay fealty to their mindless tax cut jihadism, so fealty he pays. He’s sort of a Manchurian candidate at this point, reciting the talking points in a monotone and hoping wearily that it’s enough for one more trip to the well. Kinda sad, really.
So let’s sample Obama’s tax plan:
All told, Obama would not only cut taxes for most people more than McCain would. He would cut them more than Bill Clinton did and more than Hillary Clinton proposed doing. These tax cuts are really the essence of his market-oriented redistributionist philosophy (though he made it clear that he doesn’t like the word “redistributionist”). They are an attempt to address the middle-class squeeze by giving people a chunk of money to spend as they see fit.
He would then pay for the cuts, at least in part, by raising taxes on the affluent to a point where they would eventually be slightly higher than they were under Clinton. For these upper-income families, the Tax Policy Center’s comparisons with McCain are even starker. McCain, by continuing the basic thrust of Bush’s tax policies and adding a few new wrinkles, would cut taxes for the top 0.1 percent of earners — those making an average of $9.1 million — by another $190,000 a year, on top of the Bush reductions. Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year.
That sounds like a lot. But:
To put it another way, the wealthy have done so well over the past few decades, with their incomes soaring and tax rates plummeting, that Obama’s plan would not come close to erasing their gains. The same would be true of households making a few hundred thousand dollars a year (who have gotten smaller raises than the very rich but would also face smaller tax increases). As ambitious as Obama’s proposals might be, they would still leave the gap between the rich and everyone else far wider than it was 15 or 30 years ago. It just wouldn’t be quite as wide as it is now.
What he’d do with the money:
Obama’s agenda starts not with raising taxes to reduce the deficit, as Clinton’s ended up doing, but with changing the tax code so that families making more than $250,000 a year pay more taxes and nearly everyone else pays less. That would begin to address inequality. Then there would be Reich-like investments in alternative energy, physical infrastructure and such, meant both to create middle-class jobs and to address long-term problems like global warming.
Bob Kuttner says those investments are too small:
…the big battle will be over scale. The scale the campaign has proposed to date is too puny to generate a real recovery, or to fundamentally alter the trajectory of economic insecurity and inequality. Larger scale public investment would bump into the objections of the Rubinistas.
He says the NY Times piece minimizes dissension:
The few-left-of-center economists Obama has reached out to – Jamie Galbraith, Jared Bernstein, William Spriggs, Daniel Tarullo, would counsel much more substantial public interventions to redress market “imperfections,” which are far more than minor blemishes. By contrast, the Goolsbee-Furman-Rubin camp would be for “incremental, market-based solutions” often too feeble to make a difference.[...]
The big debates within an Obama administration—if we get one—are still to come. It would be nice if the major policy disputes over economic issues had been resolved, just as it would be nice if Fox were fair and balanced. Hasn’t happened yet, probably never will, any more than “the end of history” happened.
So there will be debate within an Obama administration. Everything I read says Obama thrives on that. And doesn’t hesitate to make his own decision in the end. Read the whole article. It’s a darn good one. And be sure to click through to the Tax Policy Center’s detailed analysis [pdf] of the Obama and McCain tax plans. The series of tables are indeed fascinating.
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20 Responses to “Obamanomics: my kind of tax & spend”
I have to say, it kind of boggles my mind sometimes to see “middleclass” support for republican tax policies. By now you would think these folks would have figured out how little they are actually represented. I can only imagine they lean right for reasons having nothing to do with tax structure. Btw, there is nothing inappropriate in taxing the extremely wealthy at a higher rate. Afterall, their great success was made possible by living here in the first place, meaning all the infrastructure and educated workforce the country has made available to them in providing a basis to build wealth on. Patriotism can take many forms – flag-waving and hawkish rhetoric (from folks who rarely take the associated risks) should be the least of it. Paying fair taxes might also be considered patriotic.
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Bill Clinton's economic legacy benefitted from the dot.com bubble and from a Republican congress that would not let the Clinton Administration start any new programs.
The real lesson of the Clinton Adminsitraiton is that if the government regulations and tax laws are held steady for seven years the economy will benefit because businesses can plan for longer horizons.
How can any private sector, for-profit business make long term plans with the Obama Administration planning huge new regulatory programs and high planning on a series of new tax cuts and entitlement programs.
SD, take a look around you. Be objective for a moment about the devolution of our economy under the GOP. Consider how few “solutions” they've put forth to improve it. Also it's plain to see that stripping so many regulations (beginning with Reagan) has done more to hurt this country than to help it.
The Clintons, in fact, conceded to reality after the 1994 elections told them clearly that the public won't stand for a White House lunging strongly to the left. (Only the most left-wing fringe in this country would want them to go even more leftward.) I see here the misuse of “investments” and while I ancitipate tax-and-spend vote-buying that has been the model for Democratic political economy since the 1930s, I worry about the envy underlying what so many people want as well as the fascistic nature and harm of any kind of reintroduction of “industrial policy” — for fads like global warming, among other “reasons”! What's next, “social engineering” and stupid “requirements” for minimum percentages of alternative energy sources?
We'll also see the reintroduction of the staple Democratic stance, “deficits are not a problem, and in fact are necessary now [forever].” and “Don't believe the deficit myth or scare.” once the new taxes prove insufficient. (Income distribution in this country is similar to a log-normal distribution and the only way to tap substantial aggregate income for tax revenue is to levy substantial taxes on the non-wealthy as well as on the many-fewer wealthy.)
If Obama threatens to do these things, as these other people want even more than he appears to, Obama shouldn't and may well not be elected, tiresome as the GOP is (but safer and saner, too, when considering what some of these people want instead).
Intelligent Americans would prefer the political-economic equivalent today of another President Buchanan than be subjected to what some of these “progressive” activists want. First, do no harm!
“Btw, there is nothing inappropriate in taxing the extremely wealthy at a higher rate. … Paying fair taxes might also be considered patriotic.”
If you like Orwellianism in place of morality and true fairness, by all means believe what you state. “Fairness” is routinely associated with progressive taxation, even though it is the opposite of fair. The only argument in favor of progressive taxation and on the ability-to-pay principle is simply utilitarian; it hurts the wealthy less to pay taxes than those not as wealthy. Driving progressive taxation routinely are envy and resentment, neither a logical nor moral basis for taxation. (On the other hand, a generous exemption, higher than exists today, combined with a single rate, is both logical and moral.)
It's a subjective term. End of story. The truth is that in the last 20 years, with corporate taxes dwindling and with the rich paying less and less in income taxes, the gap between the rich and everyone else has exploded.
This country is being crushed under the burden of two wars, an expensive health care system that combines the worst of all worlds (massive government spending without bargaining for better prices), rising energy prices and a currency that's losing value because we have to keep borrowing so much to pay for all of the above.
Under those circumstances, it makes no sense to cut the taxes of those who wouldn't notice the difference anyways. Cindy and John McCain don't need $300k more to spend on household servants each year.
Chris,
class hatred never helped any economy. Of course, the Republicans have been miserable. That is why they are going to lose this year and will soon be irrelevant. No matter what John McCain is promoting, Senator Obama is promising to expand the government and will have the Congress to make it happen. the problem is congress did not put the break on President Bush and I doubt that the next Congress will put the breaks on Obama.
so, instead of framing the discussion as an election issues, frame it as an economic issue. What part of the private sector will benefit from an Obama Administration. where would you invest your retirement dollars. since layers, unions, or the government do not have stockholders, there is limited areas that will economically expand under an Obama Administration and where one can invest your retirement dollars.
With some luck, the green energy sector.
In a McCain campaign I would probably be forced to invest more in defense contractors.
“With some luck, the green energy sector.”
Note that McCain has shown willingness to help this sector, and fight global warming, too.
Obama would do more. We shouldn't overdo it, and have ridiculous minimum alternative energy use requirements (or ridiculously high fuel efficiency requirements now or proposed in the future, which intelligent people will only scoff and snort at). We don't want green, smiley-faced fascistic energy-related “industrial policy.”
Just proceed with reasonable R&D, and support realistically higher fuel efficiency goals. The latest Pew survey I linked peope to earlier shows strong support for these things and other action on behalf of the environment. The Dems and libs have really “won” the majority of the public on these issues. JUST DON”T OVERDO IT.
http://pewresearch.org/pubs/933/a-closer-look-a…
There is likely much support from the fraction of the public in desperate shape (far from being the typical or broad condition that scare-mongers would attempt to have us believe) for public spending and federal intervention in the economy, but you who want this need to be cautious and don't suppress demand that already is on the low side in the economy through punitive taxation or crippling industry in ways that result in more job losses, even potentially inducing a deflationary spiral. We who understand economics aren't going to succeed in showing you why this is wrong, but the results will be there once Obamanian intervention (largely a throwback to pre-1980 bloated spending and intervention) begans to be done. Again, DON'T OVERDO IT.
And of course, it's not “investing in,” it's “spending on” X, Y, or Z. Expenditure, not that evasive and sappy Dem euphemism, “investment.”
We'll probably see defense raided first and foremost to find money to spend on services and entitlement (not “human needs” [gag]). That, and taxes raised. (How long until the Social Security “doughnut hole” is closed by Obama, I wonder?)
Ha… you're all over the place DLS.
Do you have evidence that are taxes are too high? Do you have evidence that raising taxes on people making more than $250k a year would hurt our economy?
Our economy seemed to hum along pretty well in the 1950s and 1990s, and tax rates were much higher then.
Meanwhile, how do you expect our economy to flourish with a crumbling infrastructure and crippling health care costs?
DLS, assuming we are talking about the “green energy sector”, I appreciate your concern about overdoing it. Obama does seem to display a certain tendency in that regard. On the other hand, I have not seen much to convince me that “McCain has shown willingness to help this sector, and fight global warming, too.” He talks about it, but he has offered precious little more than talk. So I worry a lot that his tendency would be to dramatically underdo it. Except for nuclear.
I love this part: “We don't want green, smiley-faced fascistic energy-related “industrial policy.”
Did you get in enough scary adjectives in there? What about McCain's nuclear program? What's not even more smiley-faced and fascistic about that? Those things are more expensive than wind or solar thermal, and they will require about as much upgrade to the transmission network. Nuclear may serve a fill-in role, but it strikes me as fanciful to make it a center-piece.
Then there's the “investment” angle, which you have chosen to characterize as “expense”. So let me ask you, where is the capital aligned, chomping at the bit, and ready to go — nuclear or renewables? It's renewables. And why is that? I would say it's because renewables have a much brighter future. A $15 billion/yr over a decade investment (or expense, if you prefer) in nuclear is not likely to bring prices down all that much. Further, much of the intellectual property is owned by foreign entities, and most of the materials would also have to be imported. A similar investment in renewables would generate more capacity, stimulate more domestic manufacturing, employ more domestic intellectual property, and drive prices down, allowing an opportunity for greater exports. THOSE ARE THE REASONS why capital is aligned and chomping at the bit. One of the big impediments standing in the way are the vested interests (and their political cronies) which stand to lose in the event that we actually manage to do the right thing for the American people. Both candidates, Obama and McCain, are guilty of pandering to those interests. But my perception is that McCain (and the GOP in general) is far more inclined in that regard. Heck, recently “drill” and “nuclear” have all but completely replaced even lip service to “all of the above”. He needs to change that.
This suggestion on the part of DLS and SD that class hatred, envy, etc. are the driving forces behind progressive taxation is laughable. When you guys figure what's really going on come back and give it another shot; your current stance doesn't merit serious consideration.
Chris, you're getting illogical and excited again. The two seem to accompany each other, I've noticed. (As for J. Spencer's response, “laughable” is mirror talk. We all know about the envy and resentment behind progressive taxation and the ability to pay principle — which itself is utilitarian, having nothing to do with the fiction that the _real_ laughable people claim that one's outcome in life is explained generally or +wholly as the result of, and constituting, a benefit of government.) I am fully aware of the tired lie about progressivity equating with “fairness,” as a number of books on tax policy and other economic books such as those published by MIT Press, contains. (They also object to the frequent use of “successful” for “high income” individuals, an objection which has merits but which is also additionally revealing.)
Our economy had no competition in the 1950s and little in the 1960s. (Some, sadly, remain stuck in those years and have no idea the changes that had occurred by the 1980s.) People cannot expect any return to the bloated Big Three model with large lifetime paternalistic employers and hugely overpaid workers, no more than they can demand the silliness of seeing this nation converted rapidly into a european style “social democracy” (democratic socialist model underpinned by a collective world view alien to this nation).
I would like to see a paring down of government, especially in Washington, and to the extent that compromises in its size and scope are necessary, want taxes at the lowest amounts possible to raise the revenue rather than being unnecessarily (and for dark motives) being on the higher side, what leftists want, having government charge whatever the taxpayer-traffic will bear — and more, still. (This attitude has destroyed economies in places like New York and Michigan, for the record.) It adds insult and injury to have excess taxes driven by dark motives, including envy and resentment (emotional rather than reasonable and logical fundations of tax policy).
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“So let me ask you, where is the capital aligned, chomping at the bit, and ready to go — nuclear or renewables? “
Renewables cannot replace nuclear as a 24/7 energy source (for electricity production) but renewables actually have more interest now in this country than nuclear. (I'm not an anti-nuclear idiot.) The next gen for nuclear is promising but start-up costs are too high whereas there is progress in lowering the costs of the renewables. (I'm still intrigued by isobutanol from switchgrass, incidentally, though shorter-term, we should be pushing coal-to-liquids as hard as we can, even more.)
Chris did a good quick job earlier this month(?) pointing us to the costly state of the nuclear art and new art-to-be.
The Pew poll I posted a link to earlier-and-again shows strong support for progress on alternative energy uses and where it is promising or makes sense, Uncle Sam's rule is for R&D. (not so far as to constitute industrial policy, picking winners and losers, but following the leads as they develop independently) The areas where there is the most public agreement are where the Obama administration should move first, swiftly, to build support for it, and in this case it's on the side of an issue that libs and Dems and enviros — _and_ alt-energy fans — have been on for ages, so it appeals to most people while gaining credit for the Democratic Party. In fact, increasing spending on alt-energy R&D is as close to a winner for Obama and the Dems as they have after next January.
“your concern about overdoing it. Obama does seem to display a certain tendency in that regard”
He's offering pie in the sky to the starry-eyed, and some of it can be discounted, but I fear he and the Dems may get cocky and overconfident and go too far left with this issue, truly overdoing it, in other words. There are no instant, magical solutions and we don't want the energy sector to be made into a single organism directed and controlled by government, a “corporatist” (single-body) scheme Mussolini would love. (industrial policy, in this case)
“McCain (and the GOP in general) is far more inclined in that regard”
Status quo? Cheney Lite? Undoubtedly.
DLS, I've noticed you have a fondness for prefacing many of your comments with phrases like: “we all know”, “intelligent people know”, “adults know”, and so on. I suppose the hope is this will somehow lend weight to your comments? Good luck with that. Btw, there is no relationship between sheer quantity of words and the degree of truth to those words.
Getting back to the subject for a moment, I think the economy is going to be the main kicker in this election, and by association this will provide many folks, including many R's, the opportunity to rethink the whole tax-breaks for the rich concept… you know, that thing the GOP chose to make one of their first main priorities.