Posts Tagged ‘ taxes ’

At least he’s honest…

This guy, who wrote a column in Forbes yesterday is basically a conservative, supply-side stereotype in every way except one: he’s honest about his policies and about what they would do. Usually when someone with views as extreme as this guy starts talking, they at least try to pretend that tax breaks should go to everybody (not just the rich) and that giving gobs of money to the super-wealthy will help the rest of us. Not this guy (can he really be an editor at Forbes??). Observe:

Obama will never do it, but the only tax cuts that are effective are those that impact the “vital few”, or the highest earners whose capitalistic exploits employ us and raise our living standards on a daily basis. Much as naive minds want to believe that the “great middle” is the source of our nation’s economic strength, the more realistic truth is that we gain our strength from the kind of individuals that populate the Forbes 400 and other rich lists…

Businesses are not in business to create jobs. If this is doubted, try to get your venture funded by leading with your plan to hire lots of workers. You won’t. Businesses attract investment precisely because they promise to get the most output with as little labor input as possible as a way of achieving profits. Of course, profits attract more investment that leads to new ventures, and jobs are invariably created. But to pay businesses to hire is not the spark that will ignite the economic rebound. It puts the cart before the horse. (italics mine)

That’s supply-side economics in all its naked glory. He outright admits that he thinks that the only tax cuts that matter are those that go to the richest of the rich. These people already only pay 21 percent of their income in taxes, a much lower percentage than the typical middle class family, but damn it! They need to pay less! I take it that this person’s ideal tax system would draw all of its income from the poor and middle class while taking nothing from the rich.

And when the rich pay less in tax, it’ll help everybody else out because these people are “job creat…. O wait. Our ever-so-helpful author informed us that businesses are not out to create jobs. Jobs are just the unfortunate and costly by-product of attaining wealth. There goes that Republican talking point.

I do think that a lot of Republicans (not all) think this way. However, they usually try to cover it up and appear fair by saying that they want tax breaks for all, not just the rich. The Bush tax cuts did toss a couple nickels toward the poor even as the rich got loaded up with Benjamins. And Republicans usually say that giving money to the very rich will create jobs for the rest of us. You have to do those kinds of things to achieve popular support. Its good to see that this author has dropped all pretense and told us the truth about businesses and supply-side economics. Neither care anything for you if you aren’t worth $50 million. As I said, at least he’s honest.

Republicans want to raise taxes on the poor, lower taxes on the rich

I really wish we lived  in a world where both political parties had convictions and fought for them. That way, even when you would disagree with someone, you still knew that your disagreement was simply the result of philosophical differences. You’d still be able to rest comfortably knowing that both parties wanted what was best for the country. Obviously, this is not the state of American politics today.

Republicans are the party of low taxes, right?? Well, no more. Republicans have come out opposed to a proposed payroll tax cut. This tax cut would affect almost every working American and would be one of the best ways to stimulate the economy. So what’s the problem, GOP? The problem is that President Obama supports this tax cut. So, throw all of your pre-conceived notions about the GOP out the window. The Republican Party cares nothing for the good of the country (or even for one of their party’s central tenets!) if it means they have to agree with President Obama.

Ezra Klein tackles this Republican hypocrisy, thoroughly dissecting 3 possible explanations for why the GOP is suddenly against tax cuts, here are the excerpts:

One possible answer is that (1)a large tax increase in an election year is good for them because it’s bad for President Obama and the economy. But that’s a pretty cynical explanation. Another is that (2)they care more about tax rates on the rich than they do about tax rates on the poor. But they resist that argument. The real answer, Republicans says, is that (3)they just don’t like temporary tax cuts.

But that claim does not stand up to scrutiny, as he concludes:

…In other words, Republicans have frequently fought for temporary tax cuts. When offered the choice between a larger temporary tax cut and a smaller permanent tax cut, as happened in 2001 and 2003 and 2010, they have opted for the temporary tax cut. Now that Obama has come to endorse a temporary tax cut, they have stopped supporting it — a pattern we’ve seen on many other issues, as well. But the idea that the party has had some steady, policy-based objection to temporary tax cuts just doesn’t fit the record.

So, with explanation 3 completely debunked, we  are right back at examining explanations 1 and 2. Ezra tends to lean toward explanation 1, that Republicans want to increase payroll taxes because raising taxes on the poor and middle class will hurt the economy and thus hurt Obama’s chances of winning the election in 2012. There’s a very good chance he is right, but I also think there’s something to explanation 2: that Republicans just don’t care taxes on the poor and middle class so much as they care about taxes on the rich.

The thing about the payroll tax cut is that most of the money would go to the working poor and the middle class, not the rich. Republicans don’t really care so much about taxes on the poor (see: The Bush tax cuts or this article) but love tax cuts for the rich. I think that Republicans would jump on a chance to massively lower taxes on the rich, even if it was Obama who offered them that chance. To be sure, it would be a tough choice for them, if that situation ever arose. The two most important things to Republicans are destroying President Obama and lowering taxes on the rich, country be damned.

Is the US tax system fair?

Warren Buffett, the mega-billionaire investor, recently wrote an editorial in the New York Times entitled “Stop Coddling the Super-Rich.” In it he argues  that the  rich should pay a higher amount in taxes than they currently do. He uses himself as an example, saying that he only paid 17.4% of his income in taxes last year. He also argues that “people invest to make money, and potential taxes have never scared them off.” Buffett himself invested very heavily and made lots of money in the 1990s and 1980s, when taxes were higher than they are now.

Against Buffett, we have people who divide Americans into two camps of “tax  payers” and “tax eaters,” while you can barely listen to a Republican talk about taxes without hearing them say that 50 percent of Americans pay no income taxes. That leads us to the question: is our tax system fair? Continue reading

The false equivalence of Democrats’ and Republicans’ negotiating positions

If you watched even 5 minutes of coverage of the debt limit debate, you probably heard the refrain “Democrats refuse to allow cuts to entitlements and Republicans refuse to allow tax increases.” This was repeated by every major news outlet as the basic underpinning of political negotiations over the US debt. If we take it at its word, it means that neither party is serious about the debt because solving our long-term debt problems will require us to both raise taxes and cut entitlements. The major problem with this view is that it is completely wrong. There is no equivalence between the parties’ negotiating positions.

Let’s start with the Republicans and their no-new-taxes stance. This line is completely true. No leader of the national Republican Party has passed, or pushed their members to pass, a statute increasing taxes since President George Bush Sr in 1990. That instance was widely viewed as a betrayal of Bush’s “read my lips: no new taxes” pledge is also widely viewed as the reason Bush Sr. was not elected to a second term. Ever since then, no Republican Congressional leader or major national politician has dared to propose or vote to raise taxes. The closest we have come recently (in my memory) was when John Boehner almost went public with the $4 trillion debt-solving deal he had made with President Obama earlier this year. As a result of Republican refusal to raise taxes on absolutely anyone, the United States lost its AAA credit rating and almost defaulted earlier this month. Republicans are almost unanimously, stridently and absolutely opposed to any new revenues.

Now Democrats and their apparent “no entitlement cuts” stance. We can look back just a year and see that Democrats are not really philosophically opposed to cuts in entitlements, like Republicans are ideologically opposed to any new taxes. The Affordable Care Act cut the deficit because it slowed the growth of Medicare by $500 billion over a decade. In doing so, it added several years to Medicare’s life and provided a mechanism for reducing costs without cutting benefits  (the IPAB). Also, even from the debt ceiling deal we saw that Democrats recognize that Medicare’s growth has to be curbed. The Democrats agreed with Republicans that should Congress fail to agree to a debt-reduction deal  in the next year, a set of triggers will kick in. One of those triggers is a $200 billion cut to Medicare. How much of the trigger consists of tax increases? None. Because the GOP would never let tax increases get on the table.

The GOP is militantly against tax increases and so is militantly unserious about solving the US’s debt problem. How should we then view the Democrats’ anti-entitlement cuts stance? Its a bargaining position, meant to counter the GOP’ anti-tax stance. Democrats say there can be no cuts to entitlements without new taxes and are therefore able to negotiate taxes into deal (besides looking like the responsible party, on the side of public opinion) while “giving up ground” on entitlements. That’s how negotiations work. We know its  a bargaining position because  Democrats have shown that they are flexible there.

Well, wait. How do we know the GOP’s stance isn’t just a bargaining position too? We know because since 1990, the GOP has never given ANY ground on its no-new-taxes stance. The GOP base crucified Bush Sr. for giving in on that issue and nearly did the same to Boehner. The GOP was ready to see the country default, rather than give an inch on taxes. No new taxes is a matter of orthodoxy for the GOP and that is why they are completely radical and unserious in the debate over the debt.

Should we raise taxes or cut Medicare?

Soon America must face a choice. Our government’s status quo taxing and spending policies cannot continue much longer. No, this isn’t based on Obama’s spending over the past few years or Republican intransigence over the debt limit. Those are important to this debate, but they’re not the long-term factors I’m talking about here. Spending and taxing have to change because we, as a society, are getting older and our health care costs are continuing to increase. Those two factors alone mean that our traditional rates and methods of taxation cannot support the traditional benefits given out by our government. The following graph shows that the effects of an aging population will mean that our country must spend 3.5 percent more of its GDP on Medicare by 2035 than it does today. The fact that health care costs grow faster than the economy as a whole means an additional 2 percent of GDP will have to go to Medicare by 2035.

via Ezra Klein

The very predictable rising cost of aging and health care leads us to a societal choice: either we give up the social contract that America has maintained for the past 50 years, or we raise taxes AND reform our programs to support the Baby Boomers just as the Baby Boomers supported their parents in retirement.

Republican lawmakers, by and large, have chosen the first option. Most have voted for Paul Ryan’s budget plan, which gets rid of traditional Medicare by changing it into a voucher program which only covers a third of seniors’ healthcare costs. That is the path you have to take if you do not want to raise taxes or get rid of tax loopholes to pay for the cost of Baby Boomers growing old. The most important thing to most Republicans is to protect the rich from increased taxes. If their vision wins out in the future, (tax revenues stay where they are right now) the government will have to shift costs onto seniors, undoing the social contract that we have in this country. Instead of the government covering seniors’ health insurance through Medicare, seniors will have to pay out of pocket to afford private insurance. If seniors living on fixed incomes can’t afford to buy private insurance with their voucher, then too bad for them. If the government doesn’t raise taxes, it cannot afford to help them.

There is another option though. If taxes are raised, or if we just clean up the tax code so that there are not so many loopholes, we do not have to face a world of seniors dying in their homes of diabetes or cancer because they could not afford private insurance. Its also important to emphasize that this is not a complete either/or question. We can still reform Medicare to make it cheaper while raising taxes to help pay for the inevitable additional costs the program will incur. This is generally the Democrats’  position.

Either we increase taxes (by raising rates or cutting loopholes), or we have to get rid of our Medicare program. The only other option is to adopt a complete system of socialized medical insurance  to keep our costs down. Those are our options. Americans must choose.

GOP Presidential Candidates Series: Tim Pawlenty

Tim Pawlenty is conservative to the core. That’s the message his campaign has been screaming from the rooftops. Every single ad, policy proposal, or public statement seems to be designed to tell the Republican electorate that this former 2-term governor of Minnesota is the “real deal” when it comes to conservative bona fides. But no, his campaign will tell you, Pawlenty is not one of the “crazy” conservatives (like Michele Bachmann or Herman Cain) that make corporate CEOs and Republican party elites very nervous. He is the kind of candidate that is both exceedingly conservative (let me tell you) and also a dependable good ‘ole boy.

Pawlenty has a long record as a fairly successful and mostly uncontroversial politician. He has risen through the ranks of the GOP, rising from the city council to become governor, while notably foregoing a a US Senate run to make the higher-ups in the party happy. He is unremarkable in demeanor, has taken almost no controversial stances (his past support for cap-and-trade, now repudiated, is a notable exception), has picked limited fights with democrats in the past, and has good relations with the party elite.

In short, Pawlenty is an extremely generic and uncontroversial Republican candidate. In many years, the Republican nomination goes by default to such a candidate.

However, the Republican party already has a default heir apparent for their nomination-Mitt Romney. Romney ran for the nomination four years ago, has  a considerable donor base, experience running a national campaign, high name-recognition and a national network of former supporters  to call on. However, he also has a flaw–the health reform he signed into law as governor of Massachusetts is nearly identical to end-of-the-world law Obamacare!

Hence the Pawlenty campaign’s focus on his conservatism. Pawlenty is trying to present himself as a credible alternative to Romney among voters who are concerned about Romney’s past support for an individual mandate, health reform, abortion rights and gay rights. Pawlenty is showcasing his conservatism at every turn so that he becomes the anti-Romney in this campaign among establishment Republicans and party elites.

However, there are also challenges for Pawlenty on the “conservative” front. There are several other candidates in the race who have much stronger conservative  credentials than Pawlenty, among them Bachmann and Cain. If the nomination becomes a race to see who is the most forceful conservative, Pawlenty can’t hold a candle to the charismatic and absolute conservatism of Bachmann and Cain. So, Pawlenty has to present himself as comparable to those Tea Partiers on the conservative front, but much more electable, and with a proven record as a public servant.

If it seems like Pawlenty is defined as a contrast to other candidates, its because that is what his campaign is based on. He is running as everyone’s second-option. He wants to be everything to everyone in the Republican party. Pawlenty’s own story is acceptable, but not compelling, he is conservative, but not unproven and unpredictable. He will be the electable alternative to Bachmann and Cain among conservatives and Tea Partiers and he will be the true conservative for establishment Republicans who may worry about Romney.

Now let’s look at how Pawlenty has tried to showcase his conservatism. He recently released an ad bragging about causing the first-ever government shutdown in Minnesota state history by refusing to sign a budget raising taxes on the richest Minnesotans. Instead, he and the legislature compromised on raising taxes–oops! I mean raising “fees”–on cigarettes (conservatives don’t raise “taxes,”  they increase “fees”). The ad also says he fought unions by causing one of the longest transit strikes in the nation’s history. The ad portrays Pawlenty as a fighter who will harm thousands of innocent people–do anything really– in order to stick it to unions and protect the richest Minnesotans from paying a bit more in tax. I guess the image of a governor who is willing to sacrifice the most vulnerable in order to score cheap ideological points plays well in Republican circles.

Pawlenty was one of the first candidates to urge the government not to increase the debt limit (see? he’s sooooo conservative). Why? He says it will “force hard choices now” and keep America from becoming Greece. Well, doesn’t Pawlenty know that failing to increase the debt limit will mean the government has to discontinue 40% of its spending this year? Does he have a plan to do just that? Absolutely not. No one does. Doing so would be impossible and unthinkable. No one has a plan to do that. Pawlenty says that this “hard  choice” on the debt should involve cutting nothing from defense while “means-testing the cost-of-living increase in Social Security benefits,(this is actually a good idea, but it won’t do anything to keep us from hitting the debt ceiling) capping and block-granting Medicaid payments to states,(cutting Medicaid) and moving Medicare to a more efficient, pay-for-performance model (already being done through Obama’s ACA, and no one knows how well it will work).” Note that the savings from these action would NOT solve our debt ceiling problem or even come close to it. But Pawlenty has released a detailed economic plan, so let’s take a look at that.

Pawlenty’s economic plan is sheer madness. Pawlenty proposes to solve all of our nation’s problems by (you guessed it) LOWERING TAXES! Its a plan so incredibly simple, he can’t believe more people havn’t thought of it! In his plan massively lowering taxes on the rich will both solve our deficit problems and launch us into a period of prosperity unknown in modern American history. It will cause 5 percent growth for a decade. Never mind that America hasn’t seen 5% growth for any 3 consecutive years in modern history, let alone 5% growth for a decade. Pawlenty has found the secret: tax cuts for the rich. So what will these magic tax cuts look like? Let’s compare them to the Bush tax cuts:

No one will ever be able to out-conservative Pawlenty on economics. As Ezra Klein says, Pawlenty makes Bush look like Robin Hood. Pawlenty basically looked at the Bush tax cuts and said “the problem with them was that they didn’t give enough money to the rich, if they would only have shoveled MORE money to the top 1%, we would be in an economic paradise now. O, and these tax cuts will actually raise revenue.” How does cutting taxes raise revenue? I don’t know, but that cognitive dissonance makes about as much sense as anything else in his plan. The right-leaning Economist completely trashes Pawlenty’s plan saying

And no matter what party you belong to, you should find it troubling that Mr Pawlenty’s ridiculous economic plan could ever be considered acceptable by a large portion of the population.

But of course Pawlenty has a response to these reality-based critiques of his plan: anyone who doesn’t think it will work just doesn’t believe in America!

Though he has an interesting political strategy, if any of the things that Pawlenty says he wants to happen actually do happen, America is in trouble. I can’t endorse someone who glorifies shutting government down, wants the US government to default, backs the Republicans’ terrible balanced budget amendment, claims to be a serious candidate while laying out completely unfeasible economic plans, and proposes to balance the budget on the backs of the poor while passing massive tax cuts for the rich.

For past entries in the series, see: Herman Cain.

Why Obama won’t use the “Constitutional Option” for the Debt Ceiling

Talks over increasing the nation’s debt limit have gotten shaky over the past week. Faced with Republican demands for $2 trillion in spending cuts and absolutely no tax increases before Republicans will agree to raise the debt limit, many liberals, law professors, and even a top Democratic senator have begun popularizing the notion that the debt limit is unconstitutional. They argue that President Obama can just ignore this man-made crisis and continue to pay for the US’s fiscal obligations without a raise in the debt ceiling. Their rationale comes from section 4 of the fourteenth amendment, which reads:

 The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. (emphasis mine)

It would seem that they have a good case. Our country has legally incurred a large amount of public debt and by not raising the debt ceiling, Congress would be saying that it never intends to repay its legally incurred debts. That seems to be the exact action this amendment was designed to prevent. Also, it is unlikely that anyone would have the standing to sue the treasury in court for ignoring the debt limit.

This seems to be the easy way for Obama to both get out of dealing with an increasingly implacable and uncompromising GOP and to save the economy from a near-certain economic implosion. So why did he appear to rule it out yesterday?

Any expert who seriously discusses the US  budget agrees: the debt ceiling must absolutely be raised. If not, the economy will go into a tailspin and innocent people will suffer as they lose their jobs, Social Security checks and medical coverage. The only problem is polls show that raising the debt ceiling is unpopular. Even when pollsters include the caveat that failing to raise the debt ceiling would be severely damaging to the economy, a plurality still opposes the increase.

Even if the debt limit is unconstitutional, Obama would pay a huge political price for unilaterally declaring it so. Sure, by doing so he would save the economy from a catastrophic collapse (assuming no agreement on debt is made by Aug 2), but he would pay a large political price for getting rid of the debt limit. His numbers on his handling of the debt are already very low and this would just add fuel to Republicans claims that he is a high-spending politician who is out of touch with the American public.

But what about the fact that getting rid of the debt limit would save the economy from a double-dip recession? Wouldn’t Obama be rewarded for protecting the economy from foolhardy and crazed Republicans who would do anything to prevent a tax increase on the richest Americans? In a word, no.

If there is anything Obama has learned in the past 2 and a half years, its that you can’t campaign on what might have been. Republicans can hammer Obama on the economy and his stimulus bill even though independent experts agree that things would have been much worse without Obama’s actions to prop up the economy. We might have had unemployment at 12% without the stimulus, but might-haves don’t run in elections. The banking system might have completely collapsed without TARP, but the fact that we could be in a full-blown depression right now doesn’t make people feel any better about the bailouts. People vote off their current situation and their current impressions. Might-haves or near misses will rarely impact the electorate’s votes.

So, for Obama to get any credit for saving the economy from ruin, or to pin any blame on the Republicans for leading the economy to the abyss, the country actually has to cross the threshold of a default and begin to feel the pain of a government working with only half of its limbs. Otherwise, Obama will be the bad guy. The Obama team seems to see these dynamics at work, and because they seem to be unwilling to let the country default in order to score political points, Obama has offered the Republicans a deal that’s 83% spending cuts and 17% tax hikes. Or in other words, its a plan that’s 83% what Republicans want and 17%  what Democrats would prefer.

Obama has bent over backwards to give Republicans a dream-like deal because he A) does not want the country to default on its debt and B) knows that he can gain nothing from declaring the debt limit unconstitutional. Obama seems to have decided that it would be better to give  the Republicans almost everything they want, rather than to take either of the other two options open to him.