Who Speaks For John McCain?

by hilzoy

Last week, I wrote about a Tax Policy Center report that found that there's a big difference between the tax policies John McCain says he'd enact in his speeches and the ones his campaign describes. A $2.8 trillion difference. To put that in perspective, the extra $2.8 trillion McCain promises to cut in his speeches is equal to the entire cost of Barack Obama's tax policies as stated by his campaign, using the least favorable scoring method; it's several hundred million greater than the entire cost of the proposals Obama describes in his speeches.

Slate asked the campaign about this. Here's the response:

"Douglas Holtz-Eakin, McCain’s chief economic adviser, says the numbers he provided to the TPC aren’t secret—they’re the same ones he provides to anyone who asks. He also disputes the way the study takes suggestions McCain has made on the stump out of context. “This is parsing words out of campaign appearances to an unreasonable degree,” Holtz-Eakin said. “He has certainly I’m sure said things in town halls” that don’t jibe perfectly with his written plan. But that doesn’t mean it’s official."

Ah. I see. A citizen at a town hall meeting asks John McCain a question, expecting to get, well, an answer. John McCain gives one. The citizen, naively, believes that John McCain knows what his own policies are, and that when he says something, it's "official". According to Douglas Holtz-Eakin, that citizen is wrong. You can't find out what McCain's policies are by asking him and believing his answer. You have to -- well, do what? Check the website? Become one of those experts to whom the actual, official details of McCain's tax policies are disclosed?

That's some straight talk, my friend.

Some enterprising reporter should ask McCain about this. Offhand, I can think of only three real explanations:

(a) The normal case: Holtz-Eakin has said that he, not John McCain, gets to say what John McCain's economic policy is, without any backstory. He's just saying: "don't listen to him; listen to me." In that case, I would expect Holtz-Eakin to be fired.

(b) McCain and Holtz-Eakin are making a calculated attempt to deceive. McCain says one thing in public, Holtz-Eakin quietly backtracks to experts; as a result, Holtz-Eakin gets to protest when anyone tries to cost out what McCain actually says, or to point out that it blows a hole in the federal budget. In this case, reporters need to call this attempted bluff.

(c) What Holtz-Eakin says is basically accurate. McCain doesn't know enough about economic policy. He has therefore outsourced his economic plan to people like Holtz-Eakin. So far, so normal. But in a normal campaign, the economic policy people go over various ideas with the candidate, the candidate chooses among them, and then that is the "official" position, which both the candidate and the campaign know about and try to defend. In this case, the economic policy advisors have gone over different ideas, McCain (let's imagine) wants to do the various things he's talked about on the campaign trail, his advisors say: no, that would blow a huge gaping hole in the budget, McCain agrees to a less costly policy, but that fact somehow doesn't take hold in his mind, and when he goes back on the stump, he reverts to his old ideas.

This scenario raises serious questions about McCain's fitness to be President. A President needs to be able to make commitments and stick to them. He needs to know what he has previously agreed to. If McCain cannot do that, that's very serious.

Personally, I suspect that (c) is most accurate. But whatever the truth is, we need to find out who actually speaks for John McCain.

A few more wonky details about Holtz-Eakins' response to the report below the fold.

Holtz-Eakins' reply in full:

"Douglas Holtz-Eakin, McCain’s chief economic adviser, says the numbers he provided to the TPC aren’t secret—they’re the same ones he provides to anyone who asks. He also disputes the way the study takes suggestions McCain has made on the stump out of context. “This is parsing words out of campaign appearances to an unreasonable degree,” Holtz-Eakin said. “He has certainly I’m sure said things in town halls” that don’t jibe perfectly with his written plan. But that doesn’t mean it’s official. For example, the study compares McCain’s promises on the stump to reduce the corporate tax rate immediately to his plan’s more gradual reduction. Holtz-Eakin objects: “You don’t say, I’d like to reduce it to 28 percent, then 26 percent, then 25 percent, then—no one talks like that on the stump. [You say,] I’d like to get it down to 25 percent.”

In other cases, Holtz-Eakin says, the TPC filled in gaps where the McCain campaign didn’t provide specifics. For example, McCain’s proposed Alternative Simplified Tax, a plan that would let taxpayers opt out of the current system in favor of a simpler two-rate system: “We were honest about the fact that we don’t have a specific proposal,” he said. “They didn’t have one, so they made one up.”"

This is disingenuous. Here are the main differences between what McCain says on the stump and his official policy, according to the TPC:

"Senator McCain has said repeatedly that he would repeal the individual AMT, allow businesses to expense all investments in equipment immediately, double the deduction for dependents, and give individuals the option to pay tax under a simplified alternative tax system. The campaign advisers say that the AMT will be patched but not eliminated except under the simplified alternative system, that only short-lived investments (for which expensing is not worth much) would qualify for immediate deduction, that the larger deduction for dependents would phase in slowly (and never equal twice the current-law deduction), and that the simplified alternative tax system would be revenue neutral."

It is easy to say that you will patch the AMT, rather than that you will repeal it. It doesn't require lots of details and percentiles and such; you just say you will permanently fix it, and if you get a follow-up question, you can get into the math. Moreover, "repeal" and "phase out" are just not quick and dirty ways of saying "patch". Repealing something means making it go away, period. Fixing or patching something means that you will make some change in it that will make the problems with it go away, while it sticks around. This is not parsing.

Likewise, it's very easy to say that you will allow some equipment to be expensed. Saying "all" is not a quick and dirty way of saying "some"; it's a way of saying something else entirely. McCain has said both. It matters which is "official."

And about that Alternative Simplified Tax: Here's what the TPC says about it:

"The last assertion is particularly questionable: few taxpayers will choose to pay an alternative tax if it does not reduce their tax bill, so an optional alternative is only revenue neutral if almost nobody elects it, which is probably not what the candidate has in mind. We estimated the cost of Senator McCain’s plan as described on the stump, assuming that all the provisions are fully effective immediately and that the optional alternative tax system is similar to the one proposed by the Republican Study Committee. Under those assumptions, the revenue loss attributable to the Senator’s plan increases to almost $7 trillion over the 10-year budget window."

Think about it. Suppose you had the option of figuring your taxes either under the existing system or under an alternative system. Why would you use the alternative system? Isn't the obvious answer: because it would lower your tax bill?

Suppose further that most people do, in fact, choose among the existing tax system and the new "alternative" tax system by asking: which system lets me pay least in taxes? In that case, there are two alternatives: (a) the new "alternative" plan would make everyone pay as much or more in taxes as they'd pay under the existing system, no one chooses it, and so it is revenue neutral -- since everyone chooses the existing tax system, having a new alternative which no one uses costs nothing. (Except for time and confusion to taxpayers.) Or (b) the alternative tax system lowers taxes for some taxpayers, and those taxpayers figure their taxes using that system. In this case, people do use the new system, because it saves them money, but for that reason it is not revenue-neutral.

The TPC chose a prominent Republican plan to base its calculations on. Possibly it was the wrong one -- as they admit, the campaign has not given them a lot to work with. But whatever specifics the campaign comes up with, it will not be revenue-neutral unless it's undesirable.

Comments

[Boltzmann's Elf]

How can our country's polity survive if "don't jibe perfectly" is allowed to used for "$2.8 trillion dollar difference".

I presume / hope that the Obama campaign is getting film of him making these divergent statements.

[Bernard Yomtov]

few taxpayers will choose to pay an alternative tax if it does not reduce their tax bill, so an optional alternative is only revenue neutral if almost nobody elects it, which is probably not what the candidate has in mind.

This is unduly polite.

The claim that you can offer an optional alternative that will be revenue-neutral is ludicrous. I really wish it would get the outright ridicule it deserves, from the press and the Obama campaign.

Why does anyone pretend to take it seriously?

[Tony P.]

The 'Alternative Simplified Tax' idea has got to be a joke. It is at least as silly as my occasional call to 'Privatize the National Debt'. I can only imagine that the AST is offered in the same spirit of irony as my own modest proposal.

Sometime last week, maybe on 'Fresh Air', I heard Holtz-Eakin raise a standard McCain talking point that Hilzoy's post doesn't mention, but which has never ceased to puzzle me since Dubya raised it a couple of years ago. We must not allow the top-bracket income tax rate cut to expire, the Bush/McCain argument goes, because many small businesses are sole props and pay income tax at personal tax rates.

Now, speaking as a sole prop (who does his own tax returns, even) I cannot for the life of me figure out who this argument is supposed to fool. Sole props pay income tax on their profit, not their revenue. They file Schedule C, on which the materials they buy, the wages and benefits they pay, and all other expenses of the business are subtracted from gross receipts. The bottom line of the calculation amounts to the proprietor's equivalent of a salary. That number goes on the 1040, just like your gross salary does. Whether you make $349,700 as a salary or as Schedule C profit, you may well prefer to pay 35 cents rather than 39 cents on your 349,701st dollar. Even if you earn considerably less, you might on principle believe that people who make that kind of money are over-taxed. But what the hell difference should it make whether your income is money your own business pays you, or someone else's business pays you?

-- TP

[Nell]

[possibility #2] McCain says one thing in public, Holtz-Eakin quietly backtracks to experts

Just as well the post isn't putting much emphasis on the 'deliberate effort to deceive' possibility, because the description above has uncomfortable echoes of Obama and Austan Goolsbee on NAFTA.

[Hob]

Tony: Now, speaking as a sole prop (who does his own tax returns, even) I cannot for the life of me figure out who this argument is supposed to fool.

I've been one too, and you're totally right, but I think I have managed to figure out who this argument is supposed to fool. Brace yourself:

It's supposed to fool people who don't know better.

The Entrepreneur occupies a spot in American folk religion just below Mom and a little above The Troops, but there are many, many people who've never been their own boss and have no idea how any of that stuff works. They just know that if you say something's going to hurt small businesses, it's bad.

[SeanH]

Now, speaking as a sole prop (who does his own tax returns, even) I cannot for the life of me figure out who this argument is supposed to fool.

Tony,

I'm betting it's supposed to fool the majority of folks out there who are employed by small businesses rather than owning them. I may just be too cynical, but I'm guessing they hope people that don't understand taxes or accounting will hear that and think, "Jesus, things get tight at work from time to time. If the Dems are going to tax the boss so bad we can't get through a tight spot we'll all be screwed."

[Brick Oven Bill]

The 1%er pulling the income tax train currently pays:

35%; plus
Some sliding percentage of social security/Medicare, say 6%; plus
State, say 8%; plus
Local, say 3%

Or around 52% of his income to the government. I personally think this is fair. But:

Raising income tax 4%; plus
Lifting the social security cap (9%); plus whatever else

And the government will take two-thirds of productive people’s income. This will change their behavior. They will say screw it and revenues will fall.

The tax system in its current form is pretty much optimized for raising revenue. Obama does not understand this. He is used to asking for government money for his programs. He thinks that if he is in charge, that he can simply demand more money. It doesn’t work that way.

[Brick Oven Bill]

James Madison was very smart. In the world that he lived, he recognized the natural human tendency to http://www.constitution.org/fed/federa10.htm ">faction.

"By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community."

He would not have recognized that his experiment succeeded to the point where it was able to financially support more than half of the population through government work and handouts.

Obama recognizes this though. Government handouts is his career. Obama also recognizes that you can demonize 1% of the electorate to create a powerful faction in the rest of the electorate. He does not recognize, or maybe he does, that this factioning is adverse to the aggregate interests of the community.

Obama is factioning in order to increase his personal power and wealth, not to provide benefits to the community. He is very arrogant. I think this will become a more widespread view before the election takes place.

[MeDrewNotYou]

(b) McCain and Holtz-Eakin are making a calculated attempt to deceive.

I think this is the actual situation. Of course, I question McCain's mental fitness, mostly viewing his gaffes, but this situation just feels dishonest.

For instance, with the Czechoslovakia http://tpmelectioncentral.talkingpointsmemo.com/2008/07/mccain_again_refers_to_czechos.php>incident, the man obviously didn't know a pretty big fact about the status of Eastern Europe*. This speaks poorly about either his knowledge of the world, or it speaks poorly about his memory. I think both are about equally dangerous. What wasn't present was a reason for McCain to be deceptive: The Czech Republic ex-pat vote isn't terribly important.

With taxation issues, however, deception is potentially beneficial. McCain gets to go out and say, "I'm going to go out and cut your taxes!" People hear that voting McCain means they will save money. To someone who actually gets into the plan, though, they learn that Bill Gates is the one who saves money, not the Smiths and Joness.

When not telling the whole truth (or out-and-out lying) in a situation like this, McCain is being deceptive, not merely not knowing something due to ignorance or age. It would be as if, knowing that uninformed Czech-Americans can win him the election, he told them, "We're going to go to stop those evil bastards from http://en.wikipedia.org/wiki/Slovenia>Slovenia from invading your homeland!" Slovenia has nothing to do with the Czech Republic! Likewise the tax policies of John McCain have nothing to do the average voter.

*Aside: I think knowing the basics about the former Soviet Bloc is less important than, say, 20yrs ago (Although I could be persuaded otherwise WRT nuke security), and I don't expect perfection from a candidate. If my President makes that mistake, though, that would be a bigger deal. Basically the Czech thing is a minus, but not a huge one.

[Tony P.]

BoB: as far as I know, John McCain has never drawn anything but a government salary. So give the 'government hand-out' crap a rest.

On your earlier post about those poor over-taxed rich people: explain to us exactly how a federal income tax bracket of 50% kicking in at $2 million a year would affect, say, Sean Hannity. What would it cost him? How would it impact his 'productivity'?

-- TP

[OCSteve]

Tony: John McCain has never drawn anything but a government salary. So give the 'government hand-out' crap a rest.

In my experience, it isn’t exactly a “hand-out”.

[MeDrewNotYou]

Tony- If a 50% tax makes Hannity seek employment elsewhere, I will write a letter to every single politician in the country to make it happen.

[Tony P.]

Hob and SeanH -- you're right, of course: that one GOP talking point (at least) is aimed specifically at the Stupid Vote. The GOP has gotten a lot of mileage out of its appeals to the Stupid Vote over the years, partly because Democrats have been too timid about saying, of GOP talking points, "You have to be stupid to fall for that."

I say that Obama, in particular, needs to face the fact that he cannot win the Stupid Vote. His best bet is therefore to try to minimize it. The best way to do that is to invite marginally-stupid voters to be contemptuous of really-stupid voters. Nothing raises a man's self-esteem like the ability to look his neighbor in the face and ask, "You mean you really buy that crap?" Fearlessly branding stupid talking points Stupid allows the marginal voter to feel good about being on the non-Stupid side.

Naturally, this campaign strategy carries a risk: it might reduce the Stupid Vote, but it might also cause the oh-so-unctuous corporate media to dive for the fainting couch. Can't have 'incivility', you know. Our political discourse must remain on the elevated level of implying that your opponent is a traitor -- as long as you don't use the actual word, and he's a Democrat.

-- TP

[Tony P.]

Cut me some slack, OCSteve; I'm arguing with BoB here :-)

But, in all seriousness, let's please agree that soldiers, sailors, airmen and marines are all 'government employees'. Increasing the size of the military is increasing the size of government. Hiring people to work in the military, the Congress, or the USPTO is not a 'hand-out', but it's not exactly free-market sink-or-swim capitalism, either.

-- TP

[OCSteve]

TP: My bad. I agree on the rest.

[Anarch]

FWIW, even though I know it's wrong, I keep referring to Czechoslovakia. Also the Ukraine. Force of habit, I guess? Dunno, but it's occasionally embarrassing.

[hilzoy]

I always thought Czechoslovakia could easily have been a slip of the tongue. I even thought that about the Iraq/Pakistan border, though that's more of a stretch (I mean, would you refer, by mistake, to the California/Ohio border? No, if you're in the US, because you just know that there is no such thing.)

More broadly, I really think that politicians should be able to make ordinary screwups without people jumping all over them. Sometimes I poke fun at them, but I at least try not to derive cosmic implications from them.

McCain on economics is completely different, though.

And here's a new one, from ABC's This Week. McCain and Stephanopolous are talking about Fannie Mae and Freddie Mac. McCain:

"We've got to send the signal that, over time, that these kinds of institutions have not helped the American homeowner. They've basically helped enrich a lot of people that otherwise shouldn't have been."

The idea that Fannie and Freddie have not helped the American homeowner is pretty breathtaking. Maybe he thinks significantly lower mortgage rates don't count as "help". Or maybe -- just maybe -- he doesn't know what Freddie and Fannie actually do.

[hilzoy]

Oh, and Anarch: congratulations!!

[Brick Oven Bill]

Tony P.

Sean Hannity is an idiot windbag and would continue to be a idiot windbag at a tax rate of 65%. He would continue to be an idiot windbag at a tax rate of 85%. But he is not representative of the typical guy, at least the ones I’ve had the pleasure to meet, who is making the big bucks.

Electricians bill out at $75/hr and get paid a third of that. So the successful electrician who has twenty employees makes $2 million a year in the ideal world. In reality, he probably makes $600,000.

He is probably an independent-minded Republican who will stop working 100-hour weeks if two-thirds of his earnings are taken by the government and distributed to others through social programs.

I’m not talking about the military. I’m talking about the ~70% of federal money that goes towards entitlement programs.

[Brick Oven Bill]

Good God Hilzoy.

Fannie Mae and Freddie Mac are the institutions that have caused housing prices to drop 30% since 2006 and are about to melt down the global banking system. Giving loans to people who aren’t ready for them does not help anybody except those F/F staffers who will be paying 65% on their $20 million a year.

Sorry, no disrespect meant for Sean Hannity.

[MeDrewNotYou]

Anarch- They let you be a PhD when you still say Czechoslovakia?! ^.^

Congrats, btw!

[Bernard Yomtov]

Hey Anarch. Good work!! Congratulations.

[J. Michael Neal]

Fannie Mae and Freddie Mac are the institutions that have caused housing prices to drop 30% since 2006 and are about to melt down the global banking system.

Fannie and Freddie are the institutions that have caused housing prices to drop only 30% since 2006. At this point, without them, the mortgage industry would have come to a complete halt, since they are the only sources of liquidity. The global banking system melted down by itself, without help from Fannie and Freddie.

That's not to say that there aren't problems, or that the GSEs shouldn't be restructured. Saying that they are the cause of the problem, though, is insane.

[Brick Oven Bill]

At the risk of self-promotion, I recommend reading http://brickoven.blogspot.com/2008/07/national-australia-bank.html ">this. It’s good to keep some cash around the house. My previous estimate was 30%; National Australia Bank is openingly stating 55%.

The free market only works in a vacuum. The insanity is politics. Which boils down to people. It just might be a big week.

[glasgowtremontaine]

So a successful electrician decides to stop working 100-hour weeks. I reckon that's a good thing. S/he will be less stressed, in better health, and have more free time to be a responsible citizen who notices when politicians are trying to pull the wool over his/her eyes -- in short, the kind of citizenry Adam Smith sought to create in _The Wealth of Nations_.

Meanwhile, presumably the customers won't stop needing qualified electricians -- so the extra 50 hours a week can go to a newcomer in the trade, enhancing the number of well-paying blue-collar jobs in this country. Hurrah!

Oh, and by the way, Obama is most definitely not "demonizing" the wealthiest 1%. Rather, he consistently points out the folks getting these tax cuts "didn't need them and didn't ask for them". He's not blaming the wealthy -- he's blaming adherence to failed economic theories.

[spaghetti happens]

Electricians clearing six-large? I've been in construction for 10 years and I haven't met one yet who makes half that much.

Even at this late date, the trickle-down theory, so manifestly discredited over the past seven years, still has its true believers, such as Bill. I see an education wasted, along with citizenship in a self-governing democracy. Go away, Bill, and take your stupid beliefs with you.

If you knew shit about anything, you would realize that "entitlement programs" are exactly what we should be paying our freaking taxes for--to support our own lives. Why do you think Europeans have the highest standard of living anywhere, even though they pay sky-high taxes? It's because their taxes come back to them in the form of free health care, free college, and world-class public transportation. Unlike us, their taxes are not pissed down the rat hole of an enormous military-industrial establishment that repays the country microscopically as to what it costs, both in lives and in treasure.

Figure it out, dude.

[Scott de B.]

"Think about it. Suppose you had the option of figuring your taxes either under the existing system or under an alternative system. Why would you use the alternative system? Isn't the obvious answer: because it would lower your tax bill?"

Or if the alternate system were truly 'simpler.'

[Tony P.]

spaghetti happens:

Our friend BoB is of course talking about a contractor, not an electrician. The electricians in BoB's example get $25/hr and put in (presumably) 40 hours/week. The 'Republican-leaning' contractor puts in a gruelling 100 hrs/wk for his personal income of $600K. Why he's doing business as a sole prop is unspecified. Why he doesn't hire a $100K/yr manager to take half his (presumably) administrative work off his back is a mystery.

But we should note this curious fact for BoB's benefit: if his sole-prop Republican-leaning contractor does hire that manager, the after-tax cost of doing so is NOT the $100K. If the sole-prop Republican leaning contractor's marginal tax rate is 35%, the manager costs him a net $65K. If (oh, woe!) the contractor's marginal rate were 39%, the net cost of hiring that manager would be only $61K. The Republican-leaning sole-prop contractor actually has more incentive to hire that manager if we RAISE his personal marginal rate :-)

-- TP

[trilobite]

Or if the alternate system were truly 'simpler.'

How much do you pay your CPA? H&R Block charges around a C-note for a personal return using Form 1040 & Schedules A & C. If you sold stock too, still probably less than $150. It takes less than 3 hours to input the information, a lot less if you have used them before and the your type of income and expenses haven't changed much. And IIRC, they usually have an under $50 special for truly simple returns (or you can just buy the software for about ten bucks). If your situation is simple enough to use the 1040EZ, you're probably spending $10 and less than an hour.

I realize many people find even that little expense and work annoying. But few people would switch to save $100 and a couple of hours work per year, if they lost more than, say $150 by the change. How exactly does a one-size-fits-all stay within $150 of the complicated system for most users? Magic?

Since that's not actually going to happen, most people are going to wind up with a gain or loss. How are people going to know whether they come out ahead or behind, or break even, unless they do the math? In which place, they're paying the same accountant the same amount, only they pay a little extra for the extra calculation.

This is even more true if you're rich: the more you pay the accountant, the more complicated your finances, and the more you have warped your deals and ownership to play the current system -- so why on earth would you change over without finding out which system profits you more? Again, you pay the accountant even more, not less. Each time.

Simplicity does not save trouble and expense when it's an option, it just adds one more complexity to the system.

[Oyster Tea]

"Think about it. Suppose you had the option of figuring your taxes either under the existing system or under an alternative system. Why would you use the alternative system? Isn't the obvious answer: because it would lower your tax bill?"

Or if the alternate system were truly 'simpler.'

Actually, not so. The current Federal Income Tax system allows you to simplify your returns by taking the "standard deduction". It becomes more complicated to itemize deductions, yet prople willingly do so. why? Because it lowers their taxes. The main reason the current system is so complicated is because it is full of little opportunities for certain individuals or groups to lower their net taxes. People don't choose the simpler, but more expensive system now. Why would they if we add another "simpler" system?

[Adam]

Hey, here's a thought. A sole proprietorship generally has to opt in to a more expensive healthcare plan because they don't have the negotiating leverage of larger firms. If they don't provide healthcare, they can't compete with larger firms on benefits.

Since Obama's economic plan uses the taxes he's planning on to provide for universal healthcare (to an extent), he's potentially saving all small businessowners money, even the ones that don't clear $300,000 in profit every year.

Look, the discussion about whether McCain is incentivizing people running businesses because they might have to take in $200,000 in income rather than $220,000 is ludicrous.

(a) No, those people are not going to pack up and go home because their tax rate goes up to where it was before the Bush tax cuts. No one who's thinking of starting a business is going to think twice because the top-range tax rate on Social Security is higher. Most entrepreneurs would be thrilled to get into the top 1% bracket -- that means your business succeeded. The claim is ridiculous.

(b) Even if they did decide to stay in their current jobs, it's not like they're going to just opt out of the economy. Anyone who's got the means/skills to stay in that top 1% is going to pay taxes anyway. Are we really still talking, in 2008, about whether people aren't going to "innovate" into the top tax brackets if we lift the Social Security cap? Seriously?

(c) However -- all that's irrelevant, since McCain's budget isn't balanced. The question isn't whether we should tax the top 1% or not, it's who we're going to tax to make up the $7T shortfall. If we can't pay for the government services that are expecting funding from that $7T, a lot of people are going to be out of work that way, too.

The money has to come from somewhere and the bottom line is that McCain doesn't know where it's going to come from because he can't afford it. He's proposing massive tax cuts that aren't offset by cuts in entitlements -- incidentally, exactly the stuff he's been arguing against for the last 25 years -- because he doesn't think he's going to get called out on it. So far, he's been right.

[Adam]

The electricians in BoB's example get $25/hr and put in (presumably) 40 hours/week. The 'Republican-leaning' contractor puts in a gruelling 100 hrs/wk for his personal income of $600K.

$25/hr @ 100 hrs/week = $2500/week
$2500/week @ 50 weeks/year = $125K/year

Even at $75/week that's $375K/year, so... yeah

However, that's not the real problem with BoB's weird example:

Electricians bill out at $75/hr and get paid a third of that. So the successful electrician who has twenty employees makes $2 million a year in the ideal world. In reality, he probably makes $600,000.

First, a guy employing 20 electricians is not an electrician, he's a guy running an electrician company. Connecting the per/hour billing rate of the individual contractors with their manager's profit makes no sense.

Second, the employer is probably paying at least $6000/worker/year annually for health insurance. At 20 employees, Obama's health care plan is worth ~$120,000 to the businessowner, either in real dollars or in terms of his ability to compete with larger companies.

Third, for your hypothetical business owner the difference between Obama and McCain's plans is about $8,000. Assuming no other distinctions, is your argument really that the guy running the electrician company is just going to go hang out at Walden Pond for the rest of his life over $8,000 a year?

[Adam]

Oh, and:

Fannie Mae and Freddie Mac are the institutions that have caused housing prices to drop 30% since 2006 and are about to melt down the global banking system. Giving loans to people who aren’t ready for them does not help anybody except those F/F staffers who will be paying 65% on their $20 million a year.

Uh, no they're not. Fannie and Freddie can only securitize conforming loans of a certain size and above a certain debt-to-income ratio. They're constrained by down payment and credit score requirements.

Increasing liquidity in the secondary market actually decreases the demand for the non-conforming loans you're talking about. Fannie and Freddie took a hit because of the subprime lenders that messed up the market, but they didn't cause it.

[superdestroyer]

Since Senator McCain has zero chance of winning in November, who cares what his tax (or any other) policy proposals are.

I guess spending time thinking about a candidate with zero chance of winning gives the progressive blogggers a good reasons to avoid looking at the policy proposals of
Senator Obama.

A good start would be taking each of Senator Obama's policy proposals and determing who the winner and losers are. An example would be how can the tourism industry in the U.S. survive in Senator Obama's energy policies are adopted.

[Jesurgislac]

Brick Oven Bill's troll comments are improving: they still derail discussion in unhelpful, but it's more difficult to tell them apart from real comments. This is of course the goal of a genuine Usenet-style troll post, and economic nonsense does it much better than racist nonsense.

[SeanH]

He is probably an independent-minded Republican who will stop working 100-hour weeks if two-thirds of his earnings are taken by the government and distributed to others through social programs.

This talking point is of a kind with the "hurts small businesses" one Tony was talking about earlier. BOB, if you'd take a minute to do the math you'd see that your electrician will still have plenty of incentive to work long hours. If 100-hour weeks barely earned him more money than 50-hour weeks then he'd lose money from a tax hike, but in that case he doesn't have much incentive to put in those extra hours anyway.

[felix culpa]

they still derail discussion
Au contraire, Jes.
Look at all that good stuff by way of refutation; at least, I thought it advanced and illuminated the issues.
economic nonsense does it much better than racist nonsense
Oh yes. D’accord. Here’s to Bill, the doctor of economics; our own in-house wingnut. Who needs The Corner? Just as OvWi posts take as their starting point some idiocy in order to clarify an issue, except domestic rather than imported.

[felix culpa]

Oh well, of course that should be ObWi.

[hairshirthedonist]

Look at all that good stuff by way of refutation; at least, I thought it advanced and illuminated the issues.

I agree. I often read BOB's comments knowing that they're bogus while also lacking the time or energy to dig into the specifics and refute said bogus comments. Fortunately, others here are either astute enough to do almost effortlessly what would require some degree of effort for me to do or they're not nearly as lazy as I am and are willing to put out the effort I am not. Either way, I get to read their stuff, and it's good.

[cleek]

as with everything else, McCain is lying to the uninformed because he knows the press is too afraid of looking biased to correct him, and that Obama is too afraid of looking like he's playing politics to go after him for it.

[Catsy]

I think hairshirthedonist may have just provided the first meaningful argument against banning BOB that I've heard yet.

And cleek pretty much succinctly nails what's going on here. Although I would venture that senility doesn't help.

[russell]

The 1%er pulling the income tax train currently pays

I always like to think about the question of tax equity in terms of how much total tax burden is paid, relative to how much of the total wealth is owned.

Google tells me the top 1% own about 21% of the money, and pay not quite 40% of the taxes. The first name on the Board of Directors for the organization publishing the document cited is Pete Du Pont, so I feel comfortable the numbers aren't skewed to a liberal POV.

So, when considered as percent of federal income tax burden divided by percent of total wealth owned, the top 1% is paying about twice their fair share.

Add in FICA, state tax, sales tax, user fees, etc etc etc, and the ratio of tax burden to percent of wealth owned evens out quite a bit.

The all-in allocation of tax burden to income is still progressive, but not absurdly so.

Regarding the effect of, for instance, a 39% vs 35% top marginal rate on the ambitions of our irreplaceable entrepreneurial class, I note that we used to have a top marginal rate of about 90%, and there was no shortage of folks doing their damnedest to get rich.

So, while it seems to make sense on paper that a slightly higher top marginal rate is a disincentive to creative hard work, I don't think it's actually like that in the real world.

Some folks are highly motivated to get rich. A difference of 4% in the federal income tax burden on their last dollar is just not going to hold them back.

Thanks -

[Hogan]

As long as we're making lemonade out of brick ovens: The marginal rate is not the effective rate.

The 1%er pulling the income tax train currently pays:

35%

The 35% rate does not apply to all of the 1%-er's income, only the income above $349,701 (half that if married filing separately); income below that is taxed at a lower rate. No one is paying 35% on all their taxable income, and not all of anyone's income is taxable.

[MeDrewNotYou]

Here's a selfish attempt to re-rail the conversation, so you guys can refute me instead of BOB for a bit. ^.^

http://obsidianwings.blogs.com/obsidian_wings/2008/07/who-speaks-for.html#comment-124059822>Here's what I said earlier, where I think Hilzoy is wrong about McCain's faculties. http://obsidianwings.blogs.com/obsidian_wings/2008/07/who-speaks-for.html#comment-124155942>Here is Cleek in what I read as an expansion on my point (but feel free to correct me).

We're being too generous to McCain by chalking up 'mistakes' to any mental issues. I think its easier and feels less 'mean' to say he's losing it, I mean, we all get old someday.

When Bush was running in 2000, the stupid things he said were called just that, stupid, by the media. He was a lovable, if not terribly smart, guy. Once in office, however, we saw just how dishonest he was.

I don't want the country to make the same mistake again.

[russell]

The Entrepreneur occupies a spot in American folk religion just below Mom and a little above The Troops

If I may, a (for me) brief comment on this.

I write software for a living. I recently spent 3 or 4 weeks adding a feature to the product I support. Spread over the product's installed base, that feature will likely generate enough value to cover my salary for this year. For me, and for most guys that do what I do, this is not unusual. It's where all the tech money comes from.

I know more than a handful of serial entrepreneurs, and damned few of them can boast that kind of ratio of value created for resource invested.

This phenonemon is by no means limited to the tech sector. People who actually make things, or who actually provide services, create a lot of value. They are, in fact, indispensable.

When entrepreneurs hit a home run, they also create a lot of value. A colleague of my wife's has started a number of businesses that have made a number of people (although, sadly, not us) millionaires many times over.

When they don't, they make value vaporize. The same guy has also crashed and burned quite a number of times, and a lot of money went up in smoke. "A lot" here is, as above, measured in millions. Most of that was other people's money, not his.

If he's at all unusual, it's in having a better batting average than most.

I frequently hear the entrepreneurial class described as our "most productive citizens". It think it's a lot of crap.

Entrepreneurs are an essential part of the mix, but I don't see that they, as a class, create any more value than anyone else. Likewise, I don't see that they deserve any special consideration.

Thanks -

[Tony P.]

We're being too generous to McCain by chalking up 'mistakes' to any mental issues. I think its easier and feels less 'mean' to say he's losing it, I mean, we all get old someday.

It's not just McCain we're being too generous to. Whether McCain is a shameless liar or a confused old man, some people buy his bullshit. Unequivocally exposing McCain's bullshit is tantamount to calling those people stupid. That is Just Not Done in 'civil discourse'.

For sure 'the media' have no incentive to call a fraction of their audience stupid. So they bury McCain's egregious 'mistakes' when they can, make light of them when they can't.

But there's no getting around it: the problem is not McCain the man, the problem is the Stupid Vote that McCain the candidate, wittingly or not, appeals to.

-- TP

[Slartibartfast]

but I don't see that they, as a class, create any more value than anyone else

That's an interesting point, russell. How much value do you think you would, personally, generate without a particular product line to work on?

I don't necessarily think entrepeneurs do anything magical other than actually going out and doing what lots of us could have gone out and done, but didn't.

[Slartibartfast]

BTW, I do all kinds of things for a living that generate value for my employer, and I'm just about 100% confident that no one at all above me in the corporate chain could even come close to doing what I do.

However, there are rather more people in the rest of industry that can, so if I were to leave, or die, I could be replaced. Granted, at some level of inconvenience to the company, but I don't kid myself that I have a completely unique skill-set.

So it's not really a question of whether you're highly productive, so much as whether you're more highly productive per unit salary dollar than anyone else they might be able to get.

None of the preceding is to imply that russell is disposable, in any sense.

[russell]

How much value do you think you would, personally, generate without a particular product line to work on?

Good point.

How much value would the insight and drive of the guy that owns my company generate if there were no tangible implementation of his good ideas?

It's not either/or. It's both.

I don't necessarily think entrepeneurs do anything magical other than actually going out and doing what lots of us could have gone out and done, but didn't.

I disagree. Most of us can't do what successful entrepreneurs do, which is turn a good idea into a profitable enterprise.

It's hard to do. You have to wear a lot of hats, and it generally takes a tremendous level of sustained focus. Most of the folks I know who are entrepreneurs are never not working. Not that many people can pull all of that off.

My skill set is quite a bit more common, and I'm therefore quite a bit more fungible as a labor asset. No offense taken there.

What I do not believe is that, net/net, the contribution made by entrepreneurs as a class is of greater value than that made by the folks who actually do the thing that people pay for. The entrepreneurial contribution is essential. So is that of the folks who produce whatever it is the enterprise traffics in.

I, personally, am considerably more replaceable than the guy that started, and who owns, the company I work for. However the value that he contributes to the enterprise is not greater than the value of everyone else who works here.

Successful entrepreneurs are very well rewarded. I applaud them. However I don't think they deserve special treatment in the tax code.

Entrepreneurs become entrepreneurs because they're ambitious, they have a lot of drive, and they're willing to tolerate a high level of risk to make their ideas happen. They don't become entrepreneurs because of advantageous marginal tax rates, and they won't stop being entrepreneurs if the top marginal rate increases by a few points.

Thanks -