by publius
I’ve made a lot of snarky references lately about how various Republican policies are really about helping rich people. As I plan to continue this line of snark, I should probably back it up with some substance. And the surtax debate gives me a good opportunity to do that.
Before I do, I should tell you about the ridiculously awesome iTunes U section, which I've recently "discovered." For those unfamiliar, this service allows you to essentially audit various college classes by downloading the lectures (MIT/Berkeley/Stanford have good collections). And it’s free! I’ve been listening to Professor Charles Anderson’s political philosophy class (which is very good thus far, though I’ve only listened to Hegel and Marx – Karl, not Richard).
Listening to the Marx lectures reaffirmed my take on him. Basically, I find his descriptive critiques of capitalism and ideology very persuasive. And I find his normative recommendations to be loopy and dangerous.
His ideology critique, though, is especially interesting. Marx didn’t necessarily say that ideology was a conscious strategy to deceive. As Anderson explained, Marx saw it in more Darwinian terms – a given ideology was adopted because it was useful to the people currently in power. It is “selected” for its usefulness, like any other biological trait. Thus, the ideology of “divine rights of kings” was useful to justify power relations in feudal society.
That’s basically how I see modern anti-tax ideology. It’s not so much that I think people are lying, or are making conscious efforts to deceive. Instead, I think people aren’t seeing the extent to which anti-tax narratives are useful in defending extreme concentrations of wealth and income.
Think about the reality of the surtax debate. Think about what’s really at stake. The actual policy debate is whether to increase tax rates on the top 1.2% of households by a few percentage points. There’s not much there there.
And that’s true of the larger tax debate. Although we need more tax revenues, it’s not like we’d be ushering in a socialist society even if, say, Crazy Communist Publius Hilzoy got to decide the appropriate tax rates (I’ll taunt her until she’s forced to return).
If progressives had their way, tax rates on the very rich would go up by maybe 10 or 15 percentage points. The “merely rich’s” rates would go up somewhat less, and most people’s rates would be essentially unchanged or up just a bit (in exchange for offsetting benefits like health care coverage). Them’s the stakes of our tax debate. It’s not exactly Russia 1917.
The anti-tax ideology, however, obscures the reality of this debate. To listen to Chris Wallace today interviewing Orszag, you would think that a massive redistribution is at issue. But it’s not – the tax debate in our country is about whether to shift the marginal rates on the fairly well-to-do by a few points.
In this respect, the anti-tax ideology – essentially everything you hear about “raising taxes” or “hurting small businesses with taxes”, etc. – is obscuring reality. It's not that I think people are consciously lying. They’re just not seeing how this ideology is really only useful to protect massive concentrations of income.
That’s what burns me about Ben Nelson and Susan Collins and Evan Bayh. They act like they’re populist crusaders defending yeoman farmers from socialism or something. What they’re really doing is preventing those people from getting valuable services by treating tax hikes on the wealthy as something other than what they really are.
To sum up, there’s a debate about how to fund things in this country. The anti-tax ideology expressed so loudly in conservative and “centrist” circles doesn’t really protect the middle class from significant tax increases – that’s not really on the table anyway. What is on the table is redistributing money from those most able to bear it – ones who most benefit from "bailouts" – to ensure that no American will ever again toss and turn at night worrying about pre-existing conditions. It’s not all that much to ask.
All that said, maybe you think concentrating wealth is the best way to go about spreading welfare, etc. That’s fine – but let’s at least be up front about it. Let’s not pretend that taxes on the very very rich are somehow the same as taxes on middle America.
What does it mean to "extend Medicare to the uninsured"?
Medicare charges premiums to its 65-and-over recipients. Would the under-65 uninsured be offered the chance to buy in at the same premiums?
Medicare will not turn away anybody over 65. Will an under-65 Medicare recipient who suddenly lands a job with great health insurance be dropped from Medicare? How about if s/he lands a job with crappy insurance?
What are the rules for defining "uninsured", anyway? If Blue Cross decides I'm too expensive to cover, can I buy into Medicare right away? Or do I have to prove that I tried every other possible insurer first?
How about if Blue Cross keeps raising my premium and reducing my coverage. Can I decide to drop them and go on Medicare?
These are sincere questions -- and not just for Sebastian, necessarily.
Incidentally, fellow libruls, given any healthy insurance reform plan: how confident are we that a future GOP administration won't do its best to run it badly?
--TP
Posted by: Tony P. | July 21, 2009 at 10:47 PM
"The Republicans had proposals and ideas"
Marty, a "stimulus" is spending; to say that you want more stimulus with less spending is to say you want a colder hot, or a shorter tall. Now, if your argument is that you don't believe in Keynesian economics, fine, or you want to therefore claim that you believe a stimulus bill wouldn't be helpful, fine, but in that case I don't understand how you can be arguing that the Republicans were trying to get a "better" stimulus bill, rather than, as we've been saying, either wanting to make the stimulus as small as possible, or simply not have one at all. If you want to say that you and the Republicans opposed a stimulus bill, fine, but please don't try to make the nonsensical and contradictory claim that you want a better, more non-existent, stimulus bill.
"My previous link supports this"
In what way? With what facts? Quote the facts you claim you are supporting with your link, please.
Which specific phrases in the following do you deny and need cites to?
Explain in actual words what actual facts in this link you cite contradict the claim you are rejecting."I guess this struck a nerve"
It struck my irritation that you want everyone else to do your homework for you, rather than bother to actually look up facts and cite them for yourself. I have better uses of my time.
Posted by: Gary Farber | July 21, 2009 at 11:04 PM
"Marty, a "stimulus" is spending;"
Well, yes, you are correct. The discussion was over who got to spend it, who was likely to spend it and what created the economic capacity to maintain that spending.
That's the difference in raising taxes so the government can spend or lowering them so everyone else can.
I didn't ask you to do any research, everything I have said would certainly be common knowledge to everyone of the knowledgeable posters and regular commenters on this blog. I had no intention of recreating what was surely an interesting discussion at the time.
Posted by: Marty | July 21, 2009 at 11:42 PM
"Uh, Sebastian? Just how am I supposed to produce posts of yours that don't exist? If in point of fact you have never said anything critical of the preferential tax break the rich received, just how am I supposed to 'produce' anything?
Now, as I have said, I've looked through things you've posted in the past, and I haven't seen anything. That is my evidence. Frankly, I'm wondering why, if these posts exist, you don't simply produce them."
I know you think this is logical argument, but as Catsy pointed out, it isn't. I have a multi-year history of posts and comments spanning thousands of instances and hundreds of thousands of words. I am not required to spend hours searching through them to satisfy your suspicion that I haven't been consistent.
You are trolling. I am banning you for 24 hours pending review from the other members of the blog.
Posted by: Sebastian | July 22, 2009 at 12:45 AM
"You are trolling. I am banning you for 24 hours pending review from the other members of the blog."
I'm just a lowly commenter, and I have at times found SoV quite annoying, and I certainly agree that SoV has a number of times made unfair accusations of you, Sebastian, but I don't see where the quotes you are responding to are "trolls." I can see them perfectly well as annoying, but it seems to me that, in this case, the appropriate response would be for you to simply restrain yourself to saying that you feel you've explained enough, and don't feel any need to produce further quotes. If SoV then became abusive, that would be grounds for banning. But as of now, and as of this specific exchange, I'm not seeing it.
"Being annoying" does not equal "trolling."
Posted by: Gary Farber | July 22, 2009 at 02:54 AM
Characterizing the passage of the stimulus bill that way is a complete distortion of history.
Wikipedia:
The Republicans in Congress were encouraged, repeatedly, to bring their ideas to the table. None of them had a plan to counter-offer. We accepted many of their proposed amendments to the bills, but the alternative "stimulus bill" that they proposed was a fantasy wish-list composed of steep tax cuts and slashed social programs--in other words, the same answers they've been giving for decades regardless of the circumstances or state of the economy, the same things that helped run up the current deficit and that Americans soundly rejected last fall.
This was delusional. It was not a serious proposal, it was a poke in the eye, the response of a party which had no new ideas for how to deal with the crisis.
And then, after thoroughly watering down some of the better parts of the stimulus in response to the concerns of the Republicans and conservative Democrats, the Republicans in Congress voted nearly along party lines against the bill anyway.
These are the facts of what happened. It was passed with zero Republican votes in the House and three in the Senate because most of them refused to behave like grown adults and participate seriously in the process.
Posted by: Catsy | July 22, 2009 at 11:05 AM
Gary, I think that the definition of trolling has expanded, but, in any event, we are taking into account SoV's history since he/she first appeared on or around March 25, 2009.*
If SoV is subject to a permanent ban, it will not be solely because of my and Sebastian's votes. I will count as "on the right" to avoid any appearance of impropriety.** SoV will also have a right to appeal, per the banning rules, should a permanent ban be instituted.
*Yes, I know nearly the exact date of SoV's first appearance under that name. That's because there has been concern about the wheat-to-chaff ratio of SoV's posts from nearly the get-go.
**The posting rules hold: "One writer (but only one) from the other side of the fence must agree to the ban for it to move forward (Von can vote as either side of the fence as he wishes)."
Posted by: von | July 22, 2009 at 11:10 AM
"And then, after thoroughly watering down some of the better parts of the stimulus in response to the concerns of the Republicans and conservative Democrats, the Republicans in Congress voted nearly along party lines against the bill anyway.
These are the facts of what happened. It was passed with zero Republican votes in the House and three in the Senate because most of them refused to behave like grown adults and participate seriously in the process."
This is your opinion based on the facts presented in Wikipedia. None of those facts support the conclusion that the bill was watered down or the "best" partss were reemoved. It is a factual representation of the publicly disclosed changes to the bill, which were not enough to make it a good bill. IMHO
I would suggest this is not a valuable back and forth as we are interpreting the same facts differently.
Posted by: Marty | July 22, 2009 at 12:38 PM
Oh, good grief, it isn't that hard. The Republican "stimulus bill" consisted almost entirely of tax cuts and steep cuts to programs that Republicans have long opposed anyway. Regardless of politics, it's an abuse of the English language to call that a "stimulus".
When given a chance to put forth a viable alternative bill, Republicans chose to offer the same answers they give no matter what the economy is like. Economy is down? Tax cuts! Economy's doing great? Tax cuts! Depression? Tax cuts! Housing bubble? Tax cuts! 1980? Tax cuts! 1990? Tax cuts! 2000? Tax cuts! Oh look, it's 2009 and regardless of whether the top marginal rate is 35%, 28%, or 90%, the answer is still: tax cuts!
News flash: when your proposed solution is always the same regardless of the circumstances, decade after decade, sooner or later people figure out that you don't really have any ideas, and stop paying attention to what you have to say.
Posted by: Catsy | July 22, 2009 at 01:11 PM
"News flash: when your proposed solution is always the same regardless of the circumstances, decade after decade, sooner or later people figure out that you don't really have any ideas, and stop paying attention to what you have to say."
I agree, when the answer is always "give the government more money and they will take care of it", then eventually people quit listening. I can certainly dismiss your position as easily as you dismiss mine if we want to use the demagogue tactics of our politicians. Neither is correct.
These are the symptoms of a larger discussion on the role of government. I have a different and more narrow view of that role than you. The new ideas are always in the details, which the headlines don't get to on either side, as a rule.
Posted by: Marty | July 22, 2009 at 01:37 PM
But Marty: Are you really suggesting that Bill Clinton wasn't business friendly? That he didn't enact many biz tax cuts? That he didn't rewrite the rules on financial regulations (with many terrible consequences) because that's what Wall Street wanted? Are you suggesting Clinton didn't sign welfare reform into law?
The difference is, the modern Democratic Party is NOT only about government solutions. Quite the opposite: the party is very interested in free market solutions first and foremost. When those fail, then it's time for the government to step in - as with climate change and health insurance (where the private sector's incentives run contrary to public good).
Posted by: Eric Martin | July 22, 2009 at 02:09 PM
But the GOP has indeed recommended, and when in power, enacted a series of tax cuts and argued under the rationales outlined by Catsy. That's not opinion, that's fact.
When Bush came into office, he argued that a surplus meant you had to cut taxes. When the surplus turned to a recession, he argued that a recession meant you had to cut taxes at first. When that recession dragged on, he argued that you had to cut taxes on a prolonged recession. When the situation leveled, he suggested it was a perfect time for a tax cut. Then when the crisis hit, the GOP argued that...you had to cut taxes as a stimulus.
Those, again, are facts.
Posted by: Eric Martin | July 22, 2009 at 02:10 PM
Marty: As several others have pointed out, the Republican "stimulus plans" were a joke. They were entirely tax cuts, like "cutting the corporate tax rate from 35% to 25%" and similar items. Of course, tax cuts are among the least effective kind of stimulus, as was discussed many many many times during the stimulus debate. On this very blog, even. Food stamps, extended unemployment insurance, aid to states to prevent budget collapses, and infrastructure spending all have much more bang for the buck. (here for one example of the chart.) The only part with a major benefit would have been a payroll tax holiday, and an across the board tax cut might have broken even. Most of their proposals, including the one you linked to, didn't have an actual payroll tax holiday, nor did they have much across the board tax cuts, they wasted space and money with corporate tax cuts, depreciation, etc.
And yet, the bill that was passed STILL had a huge chunk of tax cuts in it. Almost a third. And...0 House Republicans voted for it. And many of the beneficial things that were in the bill, like state aid, were cut or shrunk to negotiate with the "moderates" and Republicans. Which still got...0 votes in the House, and 3 in the Senate (one of those is now a Democrat, nominally).
So, of course, obviously, this is the fault of Obama and the Democrats. Or not.
Posted by: Nate | July 22, 2009 at 02:10 PM
Marty, I appreciate that you're trying to be fair-minded here, and on general principles I would agree that oversimplifications of your opponents positions aren't helpful. But you're indulging in the same kind of false balance that infects so much of our political punditry.
That wasn't an oversimplification of the so-called alternative stimulus bill the Republicans put forth. That's really all there was to it. A freeze on capital gains. Tax cuts targeted at business owners. Locking in the Bush tax cuts for the wealthy. Across-the-board tax cuts.
That sort of thing is all. There. Was. It's not an oversimplification to note that the GOP counter-proposal was nothing but a laundry list of the things they always demand no matter what the circumstances are. That's just the reality of it. I can understand that you would have a different view if your primary news sources are propaganda peddlers like Fox or Rush, but that ignorance is not my responsibility and I refuse to play along with it for the sake of argument.
I'm sure you thought it was somehow cute or clever to try to balance "your answer is always tax cuts" with "your answer is always to give the government more money and they will take care of it", but when it comes to the actual policies behind each of these summaries of the other's position, in the last few years Americans have stopped listening to one and affirmatively embraced the other. I'll leave the conclusion as an exercise for the reader.
Posted by: Catsy | July 22, 2009 at 02:18 PM
"When Bush came into office, he argued that a surplus meant you had to cut taxes. When the surplus turned to a recession, he argued that a recession meant you had to cut taxes at first. When that recession dragged on, he argued that you had to cut taxes on a prolonged recession. When the situation leveled, he suggested it was a perfect time for a tax cut. Then when the crisis hit, the GOP argued that...you had to cut taxes as a stimulus."
That is true but ininformative on the subject.
Tax cuts really are good at certain points in the economic cycle right? Your problem with Bush is that you don't like the fact that he proposed tax cuts in all circumstances--even inappropriate ones. But there are appropriate cases in the business cycle.
So ignore the question of when Republicans support tax cuts, and instead focus on when tax cuts are actually good. You're Keynesian, right? That is why we are talking about stimulus in the first place right? You want to pick good policies for the situation, right?
Posted by: Sebastian | July 22, 2009 at 02:27 PM
That's right seb.
But this was not the time for tax cuts ala the GOP proposal.
Posted by: Eric Martin | July 22, 2009 at 02:30 PM
"They were entirely tax cuts, like "cutting the corporate tax rate from 35% to 25%" and similar items. Of course, tax cuts are among the least effective kind of stimulus, as was discussed many many many times during the stimulus debate. On this very blog, even."
I am not surorised that that was the conclusion on this blog. It certainly doesn't make it a fact.
"And yet, the bill that was passed STILL had a huge chunk of tax cuts in it. Almost a third"
And yet only half of the original 300B in tax cuts in the original 1 trillion dollar bill, because to get it down to an acceptable number to Democrats and closer to the Republican view the tax cuts, which are the FASTEST stimulus were drastically cut.
The republicans believe in spending on critical programs also. So, NO spending was approved for social programs under Bush?
That is just not true either.
Posted by: Marty | July 22, 2009 at 02:31 PM
According to your understanding of the business cycle and interaction with stimulus, Eric, which times are the right times for tax cuts or rebates?
Posted by: Sebastian | July 22, 2009 at 02:45 PM
Marty, did you read the link I posted? It wasn't just the conclusion of this blog, it has been the conclusion of many studies. And tax cuts aren't the fastest stimulus, and they're among the least effective. What good is a tax cut to people who have lost their jobs?
Posted by: Nate | July 22, 2009 at 02:54 PM
"I am not surorised that that was the conclusion on this blog. It certainly doesn't make it a fact."
Actually there was a pretty significant amount of debate on the topic, and a pretty generous amount of evidence was presented for both sides of the argument.
This isn't a knee-jerk liberal site, and it's kind of annoying to have assumptions made about what "conclusions" were made on "this blog" asserted in the middle of a debate.
There are damned few "conclusions" drawn here because people hold a pretty wide range of opinion.
And for the record, your opinion doesn't establish facts either.
Nate makes reference to a discussion that predates your participation here. If you'd like to contribute to it, have at it. If you'd like to dismiss it, expect to have your point of view treated the same way.
Thanks -
Posted by: russell | July 22, 2009 at 03:04 PM
"Marty, did you read the link I posted?"
If he did, he gives no evidence of having done so.
Posted by: russell | July 22, 2009 at 03:06 PM
According to your understanding of the business cycle and interaction with stimulus, Eric, which times are the right times for tax cuts or rebates?
That's a serious question seb. Generally speaking (though the particular circumstances matter), some dips and recessions can be treated with tax cuts - although it depends on how you target them. Generally, if you want to stimulate demand and consumption, you're better off targeting the bottom side of the economic scale for a few reasons: they will spend the money right away (not save or invest), they will spend it domestically (not on attractive overseas investments), the money will flow toward the builders of the better mouse traps - not luxury items that create fewer dispersed positive effects.
Posted by: Eric Martin | July 22, 2009 at 03:06 PM
Surpluses could merit a tax cut if the economy is slowing down, but not if it's chugging along. Especially when there is a lot of debt to pay off in the meantime.
And when things are level, you're better off leaving well enough alone. Of course, when fighting two wars, and when there is enormous legacy debt, cutting taxes is a bad idea due to the deficit exploding potential. No other nation in history has cut taxes while fighting a war. We did it multiple times while fighting two.
Posted by: Eric Martin | July 22, 2009 at 03:07 PM
Sebastian: Very little would justify anything other than perhaps temporary tax cuts for small recessions (not targeted at the rich, either) until such time as the deficit is gone and at least some of our debt paid off. Because before then, any tax cuts now are just tax increases, with interest, in the future. And there is a good bit of stuff (infrastructure rehab, health care, for example) that should come on the spending side before more tax cuts.
Now, streamlining the tax code, that could be very useful. Most of the government paperwork most people have to do is for taxes, and the current mess of credits, deductions, etc, makes it more about hunting loopholes than anything else. A good place to start would be to look at statistics, find what the ACTUAL rate paid by the median family is, and then get rid of the current mess and implement a tax around that rate, with no deductions etc. You could make exceptions, but that starts back down to the place we are now, which would be better delayed. And then take that base rate, and curve it so it's progressive, probably something resembling a geometric or exponential curve, rather than linear, but that'd be a matter of details.
Posted by: Nate | July 22, 2009 at 03:22 PM
"Marty, did you read the link I posted? It wasn't just the conclusion of this blog, it has been the conclusion of many studies. And tax cuts aren't the fastest stimulus, and they're among the least effective. What good is a tax cut to people who have lost their jobs?'
I did read the link, amid several other things I was doing. Sorry I didn't respond directly to the conclusions of that source. Some of which I agree with whole heartedly.
I don't, and haven't, dismissed anyone's point. I wasn't here for the discussion so recreating it seems not quite right, and simply agreeing with the conclusion doesn't either.
Posted by: Marty | July 22, 2009 at 03:31 PM
And tax cuts aren't the fastest stimulus, and they're among the least effective"
I think the efficacy and time nature are discussed well here
"The mix between spending increases and tax cuts is roughly right," Zandi says. "Spending packs a bigger economic punch, but tax cuts are helpful because even though they're not as economically efficacious, they do work more quickly."
Posted by: Marty | July 22, 2009 at 04:00 PM
The common Kensyian economic wisdom is that middle to lower class tax cuts/refunds are somewhat less effective per dollar than certain other forms of recession fighting, but still much more effective than most government spending because it can happen immediately--and speed is incredibly important. That point remain true especially in larger economic downturns.
"Now, streamlining the tax code, that could be very useful. Most of the government paperwork most people have to do is for taxes, and the current mess of credits, deductions, etc, makes it more about hunting loopholes than anything else. A good place to start would be to look at statistics, find what the ACTUAL rate paid by the median family is, and then get rid of the current mess and implement a tax around that rate, with no deductions etc. You could make exceptions, but that starts back down to the place we are now, which would be better delayed"
I've written it many times, but I figure I'll throw it in here just because it has been a while. My ideal tax code would look something like: the bottom 1/3 exempted from taxes with an EITC-like structure easing into what I would call the basic rate. The basic rate would be set by the money the government needed to bring in from 2 years before (I originally thought 1 year but the need to know your rate is important). The basic rate would be shared by at least 50% of the population. It would be then scaled up progressively at whichever slope you like but to a maximum of about 10-15 percentage points more than the basic rate. There would be no deductions or other tax incentives. If we want to subsidize something, we do it through the much more transparent method of actually paying out money directly. This kills off much of the enormous tax avoidance dead-weight loss. This method preserves an exemption from crippling taxes for the poor, no incentive to stay poor, a common understanding that increased spending will hit your pocketbook, and a degree of progressivity that isn't just class warfare or attempts to avoid paying for new proposals. It reconnects the link between spending and taxing. Overall it would be a pretty darn good policy.
Posted by: Sebastian | July 22, 2009 at 04:27 PM
The common Kensyian economic wisdom is that middle to lower class tax cuts/refunds are somewhat less effective per dollar than certain other forms of recession fighting, but still much more effective than most government spending because it can happen immediately--and speed is incredibly important.
So what is the most effective?
Posted by: Eric Martin | July 22, 2009 at 04:31 PM
By the way, Keynsian or not, recent studies indicate that food stamp and unemployment insurance increases are the most effective in terms of speed and dollars converted to consumption.
Posted by: Eric Martin | July 22, 2009 at 04:33 PM
but tax cuts are helpful because even though they're not as economically efficacious, they do work more quickly
I don't think anyone's ever managed to show any evidence that tax cuts work at all, let alone "more quickly". What right-wing pundits who are paid to promote the "tax cuts are stimulus!" theory of economics say is no more relevant than are the opinions of right-wing pundits paid by the oil industry to fulminate against global warming.
If you actually want a serious and knowledgeable economist's view on tax cuts in a stimulus package, you only need to read this: but if you just want punditry that will back up your It Stands To Reason, you'll ignore it.
You have not yet shown your working for your assertion that the US was hopelessly poor and undeveloped from WWII to 1986 due to the high tax rates. Given that you apparently still assert that the US just can't cope with tax rates as high as 70% or the economy will nose-dive, I really have to ask you: show me what historical sources you're basing your idea that the US economy was in the tank, bottomed out, completely crappy, until Reagan cut taxes to 28% in 1986...?
Posted by: Jesurgislac | July 22, 2009 at 04:51 PM
How do tax cuts help the hundreds of thousands of people per month who are getting laid off?
What problem are you trying to solve?
Posted by: russell | July 22, 2009 at 05:02 PM
"By the way, Keynsian or not, recent studies indicate that food stamp and unemployment insurance increases are the most effective in terms of speed and dollars converted to consumption."
Yup, but I presume we are talking about the other things (like government projects). They are very effective in speed and consumption, but self-limiting in scope. There is only so many food stamps you can give out. And you can only make unemployment benefits so large before the incentive to quit your job kicks in (for arguments sake that might be 110% of salary or whatever, but it isn't amenable to just dumping down any money beyond that point).
Posted by: Sebastian | July 22, 2009 at 05:21 PM
"They are very effective in speed and consumption, but self-limiting in scope."
Seb, the same limits apply to tax cuts.
Posted by: russell | July 22, 2009 at 05:46 PM