Debate Advice and Dogma Bites Man

by Eric Martin

At some point in tonight's debate, John McCain will falsely accuse Barack Obama of planning to raise taxes on most, if not all, Americans (I expect a rehash of the debunked tax raise on families earning over $42,000 claim - McCain's not one to let fact checkers interrupt his flow).  McCain will follow this allegation with a plaintive warning to the American people that raising taxes costs jobs. "We know this," McCain will say with saddened expression. 

Obama should take a cue from Bill Clinton's convention speech on how to answer.  An oversimplified list of points to hit:  First, Obama should set the record straight quickly about the true nature of his tax plan: cuts for the middle and working classes, taxes increases for the wealthiest tax bracket. 

Then Obama should remind people about the last time the GOP tried to scare the public about a presidential candidate that would, supposedly, raise taxes and in the process lose jobs.  It was 1992, and the candidate was Bill Clinton.  Republicans said Clinton's plan was going to wreck the economy.  But Bill Clinton raised taxes on the wealthy, cut taxes on the middle class, and the economy boomed like never before (exaggerated for effect).  This helped to balance the budget and create a surplus.

Eight years later, a new Republican candidate appeared on the scene who said that the way to create jobs and keep Bill Clinton's strong economy going was to give the wealthiest Americans massive tax cuts, while leaving the middle and working classes out.  He said tax cuts wouldn't widen the deficit.  That candidate was George Bush.  Those policies did not work, and today we are experiencing the culmination of eight years of that approach.

John McCain wants to continue the Bush administration's economic policies of giving massive tax cuts to the wealthiest Americans, while trying to scare the American people about a Democratic candidate's plan for the economy...[INSERT CONCLUSION]

Obama would be well served by attempting to reveal these "tax raising/lost jobs" charges for what they are: scare tactics that mask a dysfunctional economic policy that has been driven by two, and only two, ideas for the past quarter of a century (tax cuts for the wealthiest, and widespread deregulation).  These dual panacea are evoked regardless of the changing context and exigencies, and regardless of the ability of these sacrosanct principles to generate a strong economy. 

For example, early on in Bush's tenure, the argument to cut taxes was based on a strong economy: there was a danger of paying off the debt too quickly and, when there is a surplus, the money should be doled out via tax cuts.  When the economy took a downturn, then the need to provide a stimulus was used to justify another round of tax cuts.  When the economy continued to sag, a stimulus package of tax cuts was prescribed by GOP physicians.  Most recently, in response to a credit market crisis, the GOP thought long and hard about the complex nature of the problem and decided upon...more tax cuts! 

The results have been consistently underwhelming.  But that's to be expected from an economic policy that refuses to account for the complexity of obstacles and refuses to adapt to changing circumstances.  Francis Fukuyama (my favorite recovering neoconservative) discusses this narrow minded fetishism in an interesting piece in Newsweek.  These paragraphs are relevant to the current post (and the rest of the piece is worth the read):

Ideas are one of our most important exports, and two fundamentally American ideas have dominated global thinking since the early 1980s, when Ronald Reagan was elected president. The first was a certain vision of capitalism—one that argued low taxes, light regulation and a pared-back government would be the engine for economic growth. Reaganism reversed a century-long trend toward ever-larger government. Deregulation became the order of the day not just in the United States but around the world. [...]

Prior to the 1980s, conservatives were fiscally conservative— that is, they were unwilling to spend more than they took in in taxes. But Reaganomics introduced the idea that virtually any tax cut would so stimulate growth that the government would end up taking in more revenue in the end (the so-called Laffer curve). In fact, the traditional view was correct: if you cut taxes without cutting spending, you end up with a damaging deficit. Thus the Reagan tax cuts of the 1980s produced a big deficit; the Clinton tax increases of the 1990s produced a surplus; and the Bush tax cuts of the early 21st century produced an even larger deficit. The fact that the American economy grew just as fast in the Clinton years as in the Reagan ones somehow didn't shake the conservative faith in tax cuts as the surefire key to growth. [...]

The second Reagan-era article of faith—financial deregulation—was pushed by an unholy alliance of true believers and Wall Street firms, and by the 1990s had been accepted as gospel by the Democrats as well. They argued that long-standing regulations like the Depression-era Glass-Steagall Act (which split up commercial and investment banking) were stifling innovation and undermining the competitiveness of U.S. financial institutions. They were right—only, deregulation produced a flood of innovative new products like collateralized debt obligations, which are at the core of the current crisis. Some Republicans still haven't come to grips with this, as evidenced by their proposed alternative to the bailout bill, which involved yet bigger tax cuts for hedge funds. [...]

Still, another comeback rests on our ability to make some fundamental changes. First, we must break out of the Reagan-era straitjacket concerning taxes and regulation. Tax cuts feel good but do not necessarily stimulate growth or pay for themselves; given our long-term fiscal situation Americans are going to have to be told honestly that they will have to pay their own way in the future. Deregulation, or the failure of regulators to keep up with fast-moving markets, can become unbelievably costly, as we have seen. The entire American public sector—underfunded, deprofessionalized and demoralized—needs to be rebuilt and be given a new sense of pride. There are certain jobs that only the government can fulfill.

Reminding people of the contrast between the economy of the Clinton years and the economy of the Bush years would be wise.  Especially in the context of shooting down the same GOP scare tactics that were mustered in 1992 to convince Americans that Clinton's policies would wreak the type of economic disasters that the GOP has actually brought about. 

While Obama's facing a familiar line of attacks that have proven succesful in the past, he has the advantage that history - recent history - is on his side.  Use it.

[UPDATE: More on the Fukuyama piece from Cernig, though he focuses more on the foreign policy half of Fukuyama's thesis.]

Comments

[cleek]

100% right on.

the only problem is that McCain's going to be in full feces-flinging mode tonight. and since the "moderator" is only there to lob questions and signal time, there's going to be nothing to hold him back. Obama's going to be shoveling furiously just to keep his head above the rising tide of scummy lies.

[The Modesto Kid]

Besides the raising taxes accusation, I reckon we can also expect Sen. McCain to attack Obama as insufficiently committed to earmarks reform.

[LT Nixon]

I don't really see tremendous differences in the McCain/Obama economic plan. They both supported the massive bailout (which is not exactly having the intended effect on the market as of right now as it slides lower today). They both don't want to address the elephant in the parlor of our massive entitlement obligations and our crippling national debt. These guys are both addicted to giving largesse to the voter in the form of free government goodies in some form or another. I'm all for a prosperous America with everyone health-insured and safe retirement, but when, like a 12-step program, do we "come to terms" with the fact that we just don't have enough money for all these government programs.

I really hope someone explains how we are going to pay down the debt tonight.

[Turbulence]

I don't really see tremendous differences in the McCain/Obama economic plan.

OK...who exactly on Obama's team has advocated policies like Phil Gramm?

Also, have you actually compared the economic plans on their websites? Or are you just working off of soundbites you heard on the evening news?

They both supported the massive bailout (which is not exactly having the intended effect on the market as of right now as it slides lower today).

The bailout was never intended to help the stock market directly. Note that the bailout plan hasn't even begun purchasing assets yet. No one ever claimed that the bailout would definitely work: the only claim I heard was that the bailout might reduce the likelihood of financial catastrophe. Finally, you can't look at a declining market and say "aha! the bailout is a failure"; the relevant point of comparison is not the market yesterday, but is what the market would have been with no bailout legislation.

They both don't want to address the elephant in the parlor of our massive entitlement obligations and our crippling national debt.

Our national debt is mostly due to foreign military adventures and homeland security spending. As for entitlements, social security is fine in the long term. The real entitlements problem we have is that the cost of medical care is growing faster then inflation, but this is a problem for all health care payers in this country: it affects private insurers no less than the government.

[Eric Martin]

What turbulence said.

Also: Paying down the debt will be made easier by first letting Bush's tax cuts for the wealthiest Americans expire (Obama) and second, not enacting a new round of even deeper tax cuts for the wealthiest Americans (as McCain proposes).

Social Security is solvent for the next seventy years, and then will need incremental help after that, but little tweaks can keep it functioning fine.

Medicare is a problem because of health care costs, but then what Turb said.

[Gary Farber]

"I'm all for a prosperous America with everyone health-insured and safe retirement, but when, like a 12-step program, do we 'come to terms' with the fact that we just don't have enough money for all these government programs."

We have enough money for an $840,000,000,000 dollar financial crisis bill, and enough money for $587,000,000,000 for Iraq, enough for $5k per year per Iraqi, but not enough for health care for our own citizens?

Ha ha ha.

[LT Nixon]

CNN says things ain't looking so good:

Wall Street's drubbing continued Tuesday, with a 500-point loss bringing the Dow's two-day scalding to nearly 900 points, as the Federal Reserve's plan to loosen credit markets failed to counter investor pessimism about the government's ability to rescue the markets.

Good thing I've got a shoebox full of cash buried in the backyard.

[aimai]

In light of L.T. Nixon's post I'd like to point out that I heard a very cogent discussion of the differences between McCain's health care plans for an actual family (a father, mother, and adult son) who have/don't have health care right now--and Obama's. This was on NPR and they brought in an expert to describe the current (dire and expensive) situation of these people and to discuss the implications of the two candidates plans. The implications of McCain's plan is that both the parents and the adult son would either lose, or be unable to afford, health care entirely and because of their current health problems would simply...uh..., uh..., uh...well, die, in a ditch. Under Obama's plan they would both probably be better off *if Obama could manage the politics of ramming his plan through.* This was equally true of McCain's plan--that is: it was costly, inefficient, destructive, and harmful but he, too, would have a hard time getting it through congress because its *insanely expensive.*

Now, a friend of mine and I used to have a joke--there are people who fantasize small, and people who fantasize big. But if you are fantasizing, big or small, the main difference is whether you are fantasizing something that would be good for you, or bad for you. McCain's plan pretends to be fiscally sound--but it isn't. In addition, its not even a *good plan.* It costs a shit load of money, and it ends up hurting people. Obama's plan might end up costing a lot of money. But gosh darn it at least he's trying to *do some good* with the money. Which, as we've seen in the current bailout, is going to be spent anyhow.

Me? I'd like to get national health care for my bailout instead of just getting John McCain's friends new jets with my bailout. And that is the difference between the two candidates right the way down the line. McCain's plans are outright harmful where they aren't merely neglectful. And they cost a bundle anyway. Just like "school vouchers" don't save the taxpayers any money, they just shift the same dollars to some taxpayers children and away from others.

aimai

[KCinDC]

Aimai, there's also the consideration that Obama might have a Congress that he'll be able to get legislation through, whereas even if McCain's plan made more sense it would have no chance of making it through a Congress that's going to be more Democratic than the one we have now.

[Tony P.]

LT_Nixon: I really hope someone explains how we are going to pay down the debt tonight.

Too bad I'm not running for President, for LT_Nixon would probably support my approach: let's privatize the national debt. Split the check. Assign every American his or her fair share of the national debt to service or "pay down" as he or she sees fit.

What could be more in tune with the GOP mantra that "people make better decisions about their own money"? Note that privatizing the debt would allow LT_Nixon to "pay down" his share -- and not mine. If he chooses to merely service his share of the debt all his life, his outstanding balance will be inherited by his kids -- and not mine. As things stand now, neither of us has a "choice": we are each obliged to service the national debt unless we both agree to pay it down. (Debt service being about 8% of the federal budget, it's fair to say that 8 cents of every dollar he or I pay to the feds goes to paying interest on the debt. "Paying down" the debt would require both him and me to agree to budget surpluses by cutting spending or raising taxes.) Since some of us prefer to service our debts, others to pay them down, shouldn't we individually be "free to choose"?

The big stumbling block -- and the reason why the privatize-everything crowd would never go for my modest proposal -- is that we'd have a hell of a time agreeing on a "fair" division of the debt. Divvying up strictly per-capita would never work. Per-capita, every man, woman, and child would currently owe about $35,000. Since a vast number of those men, women, and children could not even service that much debt, the bondholders (who know perfectly well that it's the American people, not some disembodied "government", who owe them money) would never go for a per-capita formula.

But a "progressive" division of the debt would run absolutely counter to GOP philosophy. In particular, remember that our current arrangement is this: we Americans, who are currently servicing a $10+ trillion debt, assign each American taxpayer a share of the debt, implicitly. If an American currently pays $100K in federal taxes, that American is paying $8K interest, and is thus "assigned" whatever debt balance $8K is the interest on. An American who pays $1K in taxes, and thus $80 of interest, is "assigned" a balance that's one-hundredth of the first guy's. But look: if you want to cut the rich guy's taxes, you are straightforwardly saying that you want the rich guy to be servicing a smaller fraction of the national debt. You are trying to push the distribution back toward a flat, per-capita division. Whether you believe the national debt is due to having gone overboard on tax cuts for the rich, or having gone overboard on services for the non-rich, further tax cuts for the rich imply a greater allocation of the debt to the non-rich. Even if we balance the budget next year, who owes how much of the outstanding debt is still a function of who pays how much in taxes.

The bondholders know all this. Voters who imagine that cutting taxes for the rich is a good idea probably don't.

--TP

[Robert M.]

At some point in tonight's debate, John McCain will falsely accuse Barack Obama of planning to raise taxes on most, if not all, Americans... "We know this," McCain will say with saddened expression.

It's only 9:36 by my clock, and he just did it.

[John Spragge]

Tax cuts feel good but do not necessarily stimulate growth or pay for themselves; given our long-term fiscal situation Americans are going to have to be told honestly that they will have to pay their own way in the future.

If Americans have to "pay their own way". I suspect the programs which have the most limited utility for Americans will get the hardest scrutiny. In this context, I expect American policy makers to "review" and quietly drop the policy of maintaining an unchallengeable military dominance. As long as they could persuade taxpayers they would never really see the bill, "national greatness" conservatives got by on the good feelings American power produced, on the memories of World War II, and on periodic attacks on the patriotism of their opponents. But when advocates of current levels of "defence" spending have to justify an average tax bill of two to four thousand dollars per family, the American people will find the concept of burden sharing more attractive, even when the quid pro quo of that burden sharing means letting other countries have a much greater say in world affairs.

In practice: don't expect replacements for this round of aircraft carriers. Expect the USAF to stop maintaing a large force of bombers and fighters in favour of drones. Either the F22 Raptor or the JSF program will come to a quick end, probably involving cutting torches. Some programs will go on, and many others will get cut (as always, politicians will not always make the choice wisely). More and more, American arms makers and procurement officers will have to answer the question: why do we need this to defend the United States? As this implies, the defence of Georgia or of South Moluccas will no longer suffice.

Look for this to trigger a reduction of world military spending overall, US spending declines and other countries no longer attempt to keep up with American military innovations. Look for other countries to take up specific burdens as the price for a seat at the regional or global table. Look for a real international debate on global security issues to develop. And, look for irresponsible regional powers (hello, Kim Jong Il, hi Soamli pirates) to behave more dangerously.

[Eric Martin]

In this context, I expect American policy makers to "review" and quietly drop the policy of maintaining an unchallengeable military dominance.

How about a review of the "War on Drugs"? That's an enormously costly boondogle.

[John Spragge]

Right; I think a review of ways to cope with some of the more problematic interactions between the individual psyche, brain chemistry, and society might come up with a slightly saner metaphor than "war".

On the other hand, let's not pretend crystal meth and allied drugs (oxycontin, crack, ecstasy) don't present a considerable economic and social problem.

[Gary Farber]

"On the other hand, let's not pretend crystal meth and allied drugs (oxycontin, crack, ecstasy) don't present a considerable economic and social problem."

I've never taken any of those four drugs, but while Ecstasy may be damaging in the long run, I'm unclear that it should be lumped in with the others. In fact, all four drugs are highly dissimilar, and probably not best considered otherwise.

I don't see why all drugs and intake questions shouldn't be treated -- and I mean "treated" -- purely as medical and psychological issues. Ditto tobacco, alcohol, and fatty foods.

(Obviously, driving while intoxicated, and the like, should remain crimes.)