Cutting Through The Fog
The good news: it's the beginning of the end. The general campaign is underway, and we're finally slouching towards November. Not the home stretch yet, but one can harbor a glimmer of hope that this longest campaign season ever will eventually end.
The bad news: the debate is already off the rails, and misinformation is swirling like balloons at the convention. Here are some low-lights, mostly re tax policy, along with a highly naïve plea for a better debate.
We won't get fooled again: There's a new and fascinating sleight of hand in the McCain economic plan that's worth some close attention. A few weeks ago, I posted this piece noting that the ten-year cost of McCain's tax cuts amount to $5.7 trillion. Well, according to a new analysis by the same group (the Tax Policy Center, or TPC), his plans have changed, and the cost of the cuts is significantly reduced, down to $3.7 trillion (Obama's tax plan costs one trillion less, according to the TPC). How'd that happen?
One of the ways they cut the costs was to employ the same kinds of phase-ins and sunsets that the Bushies used to disguise the true costs of their tax cuts. In this particular card trick, you hold down the revenue losses by scheduling your tax cuts to end in a given year. That way, when the authorities score the plan (estimate its impact on the budget), it costs less than if the revenue losses kept piling up.
But, and note the connection to the very debate we're having today, when the day's over and the sun is scheduled to set, i.e., the time comes for the tax cuts to expire, you a) insist on making them permanent, and b) accuse anyone who disagrees of raising taxes. As we speak, Congressional Republicans are running around yelling that the Democrats are trying to pass the largest tax increase in history.
The TPC recognizes this tactic: "like President Bush's tax cuts, the true cost of McCain's policies may be masked by phase-ins and sunsets...that reduce the estimated costs." They score the phase-ins and sunsets as cutting about $400 billion off of McCain's price tag, but the Obama campaign finds that "measured realistically McCain's tax cuts would be well more than $1 trillion more expensive than the Tax Policy Center estimates."
Noise and Fog: Basically, McCain's line on this is that he's the big tax cutter and Obama's going to raise your taxes through the roof. That's not just a little bit wrong, as in "I'm exaggerating a real difference to make my case." It's a lot wrong.
As noted, according the TPC, compared to scheduled law, which is the way these ideas are scored in the budget, they both cut taxes pretty deeply. But the similarities stop there.
Tables 1 and 6 in the TPC report (link above) tell the story. Obama's middle class tax cut is more than three times bigger than McCain's (about $1,000 vs. $300); 81% of households get a tax cut under O's plan; for McCain, it's 56%.
The biggest differences are at the top of the scale. Obama allows the Bush cuts to sunset for those with incomes over $250,000, which ends up as an average tax increase of $116,000 for the top 1%. Conversely, McCain's biggest cuts go to the top 1%, whose tax liability falls by over $45,000.
Upstaircase, Downstaircase: While the TPC's work is extremely useful for quantifying the candidate's priorities re tax policy, their analysis is by definition incomplete. As we've seen, McCain has changed his plan, both in terms of the timing tricks just noted, as well as scaling back his ambitions (e.g., according the TPC analysis, he no longer eliminates the alternative minimum tax--his website as of Sunday morning, 6/15, however, still says its toast).
There's also this little matter of Congress, which tends to want to have some input re tax policy.
But whatever the ultimate details, perhaps the most important message from the TPC study is the picture they paint in their Figure 1, the average percentage change in income after taxes, by income group. The Obama plans maps out as a downward staircase; the McCain plan paints an upward one.
That means that the impact of Obama's tax plan is to raise after-tax incomes more for lower income families than higher ones, and visa versa for McCain. In econo-parlance, Obama's tax changes are progressive, McCain's, regressive.
A Very Naïve Plea: Nobody, and I mean nobody, is guiltless when it comes to campaign spin, and, truth in advertising, I'm informally advising the Obama squad. But as I stressed above, on this part of their economic plans, McCain's claims would lead you to believe he's holding the TPC's figure 1 upside down.
I very naively plead to his team to drop that nonsense and have a truly useful argument about whether the country needs progressive or regressive tax cuts. (Frankly, a much better argument would be whether the country needs tax cuts at all, but apparently, you can't run for office anymore without going there, so that argument will have to wait for a more enlightened time.)
Granted it's a tough argument for the McCain team. Inequality inducing market forces have delivered a level of pretax inequality that we haven't seen since 1927. Why would they want to exacerbate market-generated inequalities with an even more skewed post-tax outcome (economist Alan Blinder throws a flag on this play, calling it "unnecessary roughness")? The only answer this have is supply-side economics, the belief that if you cut the taxes of high-income people, they generate more economic activity than they would have otherwise, and the benefits trickle down to everybody else.
Only thing is, they don't. The 2000s, in particular, provide us with a natural economic experiment of this strategy. As I stress here, unless by "down," they mean "up," trickle down has been found to be a dismal failure. Yet McCain wants to double down.
You Can't Get There From Here: Obama's plan adds some much needed balance back into the tax code, and these days, it takes a lot of courage to take this stand during a presidential campaign--it's much easier to just say you're going to cut, cut, cut.
But there's no way you can offset the forces driving inequality solely through the tax code. The fundamental problem is that too few people are fairly benefiting from the economic growth they themselves are creating. Their diminished ability to bargain for their fair share of growth is behind the productivity/income split--the fact that the American workforce is working harder, longer, and smarter to bake a bigger economic pie, yet ending up with smaller slices. Obama, Clinton, and Edwards know this and stressed it repeatedly during the primary.
It's not that the tax discussion is a sideshow. It's obviously key, in no small part because we can't rebalance our economic system without an adequately funded public sector. But it's not the whole shooting match. It's one piece of the blueprint in a policy architecture designed to reconnect economic growth and broadly shared prosperity.
You can read about more of the blueprint here, or more pointedly, on the campaigns' websites. But--and again, forgive my naivety--it's going to be tough to have that debate if the other side is holding the graph upside down.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
GOP= borrow the USA into bankruptcy to spend on your war profiteering cronies,
Smart=pay as you go progressive taxation.
If we are ever going to get out of the economic mess, somenody is going to have to raise taxes somewhere. Like everybody else, I don't like paying taxes but, by the same token, I'm nt crazy about paying my credit card bills either. It's something that has to be done, though. The dems will probably win the WH and some more seats in congress come November and they will probably reverse the tax cuts in order to extricate us from the mess and "pay the credit card bills". The repubs will then accuse the dems of raising taxes. Then the repubs will get back in come 2012 or 2016 on the strength of those accusations and get back to doing their damage. And the cycle continues.
Poor McKain has a record we can use to compare what he says to what he has done. It's a considerable disadvantage. Does anyone believe Obama, assuming he really intends to do the vague things he promises to do, will be able to get the Senate and Congress to make any serious change in anything the government does. They will gut his proposals, tack spoiling ammendments onto them, and fill them with loopholes so they can continue to opperate business as usual. You want change . . . then eliminate both the republican and democratic parties, because the parties are the problem, not the government.
So in other words:
Democrats = Tax & Spend
Republicans = Spend & Spend
I can't imagine why our country's in debt up to our eyeballs!!!!
Yeah, nobody pays retail for government services these days.
What exactly is the alternative for tax and spend? No roads (unless they are tolls), no schools (unless they are private with a tuition most can't), no healthcare (unless you are wealthy) etc...
The "let's kill government" mantra sounds great on paper, but most people don't really think the alternative is all that great.
Tax and spend is the fairest way for all of us to invest in the country that has given so much to so many.
Democrats = Tax & Spend on economic issues and Look the Other Way and a 'Unplug the White House Christmas tree' mentality on military response. As for debt, you Democrats have managed to spend 7 trillion dollars on social programs since 1965 and we now have 68% of black women with children unmarried, over 60% of prison inmates are black males while our black population is only 14% and now our borders are open to anyone who has the ability to sneak under a fence and fill out a form to get free income from my paycheck. We don't want another incompetant Jimmy Carter in the White House.
LOL. I haven't read such a laundry list of disparate facts all summed p with a bogus conclusion since Newt and Buchannan had political cred.
I'm calling shennanigans.
Cut the military budget in half and tax the upper 1% a hell of a lot more (I'm thinking pre-JFK levels)... then invest all the extra money in public transportation, education, health care, green energy (not this ethanol nonsense), parks, et al.
p.s. None of this should be construed as "liberal" -- our country is a**-backwards, there's no two ways about it.
You got it! Expecting people to cut back on driving without providing a method to arrive at work is pretty bassackwards too! Our country is teetering on the brink this very minute. We through RESPONSIBLE government can save it. Or, we can let the billionaires keep their money and hope they drop a few crumbs for the other 299 million citizens.
Your naievete is honorable in its admission ( "my ironies don't seem to iron out anything" -- Robert Frost) and your points are well taken, particularly when it comes to the fundamental inequities in the US economy at present.
Things have accelerated beyond Reaganesque supply-side trickle-down theory to the point that we need a new hyphenated banality to convey current practices and trends.
Very true, though how the old worn-out shell game of "I'm a Republican-so-I-trust-you-with-your-own-money and Democrats are nothing but tax-and-spend-big-government-liberals" arguments continue to be played out by McCain. Also true the tactical mendacity of sunsets and phase-ins.
Congress and the administration do not have the Constitutional authority to do most of what they are doing. They are not doing the things that they have the authority to do like protect our freedom and our borders.
The list of things that you can still do without directly or indirectly paying taxes is pretty short. You have paid taxes on the air you breath. You have paid taxes on whatever you look at. You have paid taxes on the lake or stream you take a drink from. If you try to walk nude to avoid the sales tax on clothes, you have already paid taxes on what you're walking on. If you try to lay there holding your breath with your eyes closed, you have paid taxes on what you are laying on. While the act of thinking is not actually taxed, if they took away all of the things that are taxed, what would you think about? The stars. The Sun. The moon. Sorry. We've already been there.
Can you think of one thing? Our chains grow heavier with each new piece of legislation.
Freedom is a powerful word. It creates fear in those who would prevent it and courage in those who would have it.
And is often bandied about by people who have no idea about the costs of freedom. When was the last time you thanked a veteran for your right to sit here and act like an entitled child who has lived off the backs of others without ever giving back to the system?
I was very skeptical this AM when McCain's Chief Economic Advisor presented a synopsis of his tax plan on C-SPAN's Washington Journal. I was sure she was giving us a line about Democratic Congress planning to raise all our taxes. Your depiction of the 2 major candidates' plans makes great sense & no surprise in light of tradititional Democratic v. Republican approaches. McCain seems to be politically schizophrenic. He wants people to believe on one hand he's been very "independent" of Bush over the past 7 years, despite voting for 95% of his proposals, while having supported every one of his tax cuts for the rich. IMHO, if you earn $100K or above, you're wealthy, plain & simple. Don't give me any nonsense about people living in NYC earning that amount aren't rich. If you live in NYC, especially on the Upper West Side, you have to be rich or move to a cheaper region of the country. McCain clearly wants to reincarnate Reagan's tax cuts and exascerbate those of GW Bush. Obama has his head in the right direction & was wise to identify the purported "gax tax holiday" as the phony gimmick it is from the outset. McCain's Economic Advisor nevertheless this AM alleged that gas tax plan would be immediately effective and offer prompt relief, but the evidence seems rather shoddy.
A number of people who debate whether making a hundred thou a year and living in NYC should be considered rich or not are missing the point. When someone says if NYC is too expensive... "move", what they're ignoring is that in order to participate in the vital job market, one has to live in these high-priced areas. What should we do? All move to some small village and become librarians? (Nothing against librarians, by the way.) The point is (among some bloggers) there's an unspoken bias against ambition even though if it were not for smart, ambitous people this country would not have attained the level of prosperity it has....which all citizens have one way or another benefited from. Obama wants to uncap social security and put a cap on available options for hard working ambitous people. If you're graduating from college this year you might want to consider that.
Obama also plans to give generous tuition credits to all prospective college students who decide to work in public service, regardless of whether it's military or in the peace dividend, akin to JFK's Peace Corps or Clinton's Americorps. Obama doesn't plan to disencourage ambitious people from raising themselves financially, but only to compel the more fortunate among us to pay their fair share. The American people would fare well to pay Bill Shakespeare more heed: The only 2 guarantees in life are death and taxes. George Carlin also gives sound advice when he wants church officials who want to dictate our private sexual lives to "pay their admission price like everybody else."
Yes. You could move. I had a job a a private university making a decent salary on the east coast.
I took a several thousand dollar a year pay cut and moved to the midwest and was actually able to afford to own a home making less money. The cost of living in NYC is crazy. But it isn't that much inflated. People in NYC waste money. You've got to have shoes from here and suits from there.
http://www.bestplaces.net/col/
This cost of living calculator says that if I make $100,000 in Oklahoma City, I'd need to make 208,000 to not feel a move to NYC. Most of that is in housing. Crazy overpriced housing.
Conversely, if I run it the other way. If I make $100,000 in NYC, I only need to make $48K in OKC. You'd live pretty phat here on 48K, if your wife worked, and you didn't have any kids or alimony. Don't like the progressive tax structure that our country needs to begin to retire its $40 trillion+ debt, then move to a locality where housing is more reasonable or shut up and pay it to live in the city that doesn't sleep. but don't hold the rest of the country's tax policy back b/c you choose to live in an inflated housing market.
Dappered is Delusioned.
I will use simple language here. O'bama's head in the right direction? He has declared he will double the capital gains tax and I will tell you simple minded folks that this will do nothing more than create lay-offs and add to his depressive economic stratedgy. Most jobs are created by small business. The more expensive you make it for the business person, the more that person has to look for ways to make their business cost less to operate. Labor is the most expensive component of operating a small business. That line item cost is at the top of the business operator's list of cost reduction options. Once again, you liberal hacks ignore history. Tax cuts induce spending. Tax increases induce layoffs. Up until the past year, our economic engine has been doing very well. Liberals don't want to admit that. The only change that Obama will bring will be unprecendented foriegn policy blundering and an economic depression. The left breeds pacivism and pacivism leads to war. Read your history books folks.
Does anyone but the terminally stupid believe that conservative economics works?
The conservatives crashed the economy in record time!
Conservatives have no economic creds.
Conservatism is just robber barons wanting to further dominate and enslave the mob.
Has been since "Hoovervilles" at least.
http://images.google.com/images?q=Hooverville&ie=UTF-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&sa=N&tab=wi
"Government is the problem" whenever Repukes are running it.
Great article, Jared.
As David Korten noted, we are socializing losses and privatizing profits.
While Obama's tax plan may be only a piece of a solution, when it is coupled with his restrictions on NAFTA and other trade agreements (which benefit global corporations), effective limitations on insurance price gouging, crackdowns on mortgage fraud, creation of green energy jobs with funded job training, next generation broadband and its expansion into rural areas, Obama can move us into a nation where middle class prosperity is once again possible.
Also, his recognition that rural America has been left out of programs to decrease poverty makes equal opportunity for all a viable future reality.
There are many strong points in here. To really follow the debate you need to know what is actually happening in the national economy:
http://www.huffingtonpost.com/max-fraad-wolff/caco-phony-and-clarity_b_106990.html
Don't forget that all of these "so-called candidates" are sitting United States Senators. Therefore, get familiar with the library-of-congress website, http://thomas.loc.gov.
If you want to know, definitively, anything and everything that these people have ACTUALLY done or said, when and where it actually matters... it's all there.
Read it. And weep.
The democratic congress has already gone out of its way to declare that it is putting a ceiling on the opportunities and advancement of millions of voters who work in the energy industry or as vendors to the energy industry, through the auspices of a "windfall profits tax" on "big oil".
So really dems are already well on their way to snatching defeat from the jaws of victory, as usual.
Obama needs to get a hold of himself and lead on economic issues.
Republicans are the party of tax and spend. They have put massive tax increases on the national credit card and Americas credit score is so bad that the dollar is in free fall against the currency of other nations that are progressing day by day with healthy fiscal policies that put us to shame.
Republicans don't want to create energy choices because they are funded by the oil sheiks of Dubai and the higher the oil prices go, the more money the Bush/Cheney family will make.
I don't get what's so hard about stepping up on economic issues. If we can't win this one then we don't deserve to win the presidency, period.
Obama should take advice from a range of advisers and come up with a political plan. Has he ever spent any time with Bill George of the Harvard B school?
"I don't get what's so hard about stepping up on economic issues."
I think, personally, because the Dems have a fetish for government spending as the means to create a fairer economic result. It is a belief that, somehow, the public sector is "good" and the private sector is "bad, selfish, etc."
This remains a stubborn belief no matter how skewed income and tax policy become in favor of the wealthy, and no matter how many folks in Iraq die as a result of war built on lies by the present administration, and supported in those lies by the Democratic majority Congress.
Perhaps, Barack will change this. Perhaps, as he did to the DNC, he will declare a new regime. But, based on the writings of flacks like Jared here, I hold less hope than I would like.
Still Barack does have more than a million organized supporters who may swing this thing in unpredictable ways.
http://pogoprinciple.wordpress.com
"fetish for government spending'
Republicans have a fetish for military spending.
"The democratic congress has already gone out of its way to declare that it is putting a ceiling on the opportunities and advancement of millions of voters who work in the energy industry or as vendors to the energy industry, through the auspices of a "windfall profits tax" on "big oil".
We need to redefine energy so that it is not synonymous with oil.
By taxing oil profits, those in the energy service industry have needed incentive to align with solar, wind and other emerging clean alternative energy sources.
We could also cut out the est $34 billion subsidies to oil companies, or better yet, redirect that money to research and development of renewable clean energy.
Personally, I'd be very much in favor of a windfall profits-type tax on the rapacious and monopolistic oil companies any day of the week, ESPECIALLY Sunday, since Even God is shamed by the OBSCENE profits taken DIRECTLY out of the pockets of every American consumer........................................................................................................tm
Windfall profits is a laughable and misguided attempt by some to fool the foolish. First, oil companies make about four cents profit on each gallon of gasoline sold. The government, which does nothing, take no risk, produces only noise, takes 15 cents at the federal level -- not counting state and local taxes. But guess who doesn't pay taxes -- corporations...it's a cost passed on to consumers.
The noise from the left leadership is simple -- fool the public with a pledge of a windfall profits tax. Then watch gasoline prices soar further (thanks to the Democrats blocking any attempt to tap into America's oil reserves) and personal investments falter -- reduced earnings in energy stocks not only damage individual investors but nearly everyone with a 401-K -- there are a lot of funds invested heavily in energy stocks.
Jared, can you tell us why Barack believes the federal government need $700 billion more dollars over the next ten years?
And, if he gets it, will that finally be enough to fund all those aircraft carrier groups cruising around the Persian Gulf?
http://pogoprinciple.wordpress.com
"Government is not the solution. Government is the problem." Blah, blah, blah...
That argument is so tired, Charley. Get a new one.
I apologize for being consistent.
How tired is it to suggest government is just another lobby standing in line begging the voter to cough a little more and it will fix everything. Just as we have been promised electric cars, clean energy, and an end to this despicable war?
But, that is not all:
When you go into the grocery store and food is through the roof because of ethanol handouts to the agriculture lobby - how tired does this argument sound?
When you go to the pump and spend 4+ dollars for a gallon, because investment banks were bailed out by the Fed - how tired does this argument sound?
When you watch the constant ticking off of another young life lost in Baghdad, and, this does not even include the 1.2 million Iraqi dead - how tired does this argument sound?
Your fetishistic belief that government enlargement is a net social good is demonstrably unproven, and, clearly wrong by recent history.
If the left continues to cling to this fetish, every appealing argument to the contrary will lead voters into the slimy arms of the Republicans.
There is no justification for sailing aircraft carriers around the Persian Gulf when 47 million people don't have health care.
You're supposed to care for the sick, FIRST, then for Oil Sheiks.
And, there is no justification for Democrats to plead insufficient budgetary means to accomplish the above when they are more than willing to tolerate this.
http://pogoprinciple.wordpress.com
Why? Because we have a crushing national debt of $9 Trillion.
I don't know how you live your personal life but spending what you don't have only lasts for so long. Sorry, but you need to pay up at some point.
Or, live on a budget and make choices.
Such as:
Cut the debt service, aircraft carriers, and, the war.
Pay for healthcare, and a tax rollback.
Wow. Workers making over $200K are considered middleclass? How many of them are living in your neighborhood? Folks, those people are upper middleclass/ lower wealthy class workers. John McBush has no intention of giving the lifeblood of Amerca to those in intensive care, he only wants the wealthy to store it up in their vaults for those "Just In Case Moments". The middle class and poor are not struggling, they are hanging over the abyss of financial ruin by their fingernails. Actually, I have to coorect that; there is no middle class. There exists in America only two classes; those that have wealth, and those that work for them.
Of late it has seemed that those two classes might be named:
Those that have seen their standard-of-living swept away by globalization et. al................
........And those that will soon..................................................................tm
As long as the top 1% make up the rules, and they do, the more they're going to steal from everyone else. The top 1% control the private sector , the government, the press and the media. They have the voice and the power and the money. What chance do the rest of us have? We just don't have anyone on our side making noise.
Everyone we see on television, where most Americans get their information, is making mega millions. They get huge pre tax income, then huge tax breaks. Do you think they are going to give all that up? Do you think they'll present all the information Americans need to make decisions in THEIR interest objectively?
Of course not.
You must be logged in to comment. Log in or connect with
