“America Is A Democracy, Not A Plutocracy”: It’s Time To Show The Rich And Powerful Who’s Boss
Who is in charge here, anyway? That, more than sequestered spending or how much we raise in new taxes, will be the most important question resolved by this “fiscal cliff” stand-off between President Obama and the GOP.
More than Republicans and Democrats forging an elusive consensus on shrinking the nation’s deficit, the real question before the country in these debates over debt is whether the American Republic has within it the will and the means to make its most powerful elites pay “just a little bit more,” as the President likes to say, at a time when those elites are determined to resist. And as we sit here today, the jury on that question is still out.
The power to tax may be the power to destroy, as the old saying goes. But as historian Francis Fukuyama reminds us, the reverse is also true: “Scandalous as it may sound to the ears of Republicans schooled in Reaganomics,” he says, “one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites.”
Those who have ever been to places like Jamaica and seen ramshackle shacks side-by-side with mansions behind their high, stone walls and iron-barred windows know Fukuyama is right when he says the most dysfunctional societies are those in which elites are able to either legally exempt themselves from taxation or evade it and thus shift the burden of public expenditure onto the rest of society.
There is another old saying among students of American politics: “The President proposes and Congress disposes.” Well, the new rule, as Bill Maher might say, seems to be that in America today the Plutocracy proposes and Congress – or at least that part of Congress that is Republican – does as it is told.
Listening to the supposedly sensible Republican Senator Tom Coburn on MSNBC’s “Morning Joe” program earlier today dodge and weave every time the show’s hosts tried to pin him down on whether Republicans could agree to increasing income tax rates on the rich, it quickly became apparent that when Republicans say we shouldn’t raise taxes on the rich what they really mean is that Republicans can’t.
When Republicans say taxes on the rich cannot go up, that is not a bargaining position. It’s an admission of weakness that Republicans literally can’t make it happen — either because their rigid ideology won’t let them or because Republicans have lost control of their own party. Maybe both.
Republican heretic David Frum helps shine a light on why Republicans are so boxed in on tax rates and why they are reduced to vague talk about closing loopholes and deductions with no specifics or numbers attached.
According to Frum, it’s okay for Republican lawmakers to advocate raising “revenues” by closing unspecified loopholes because upper-income Republicans in red states, like Texas, don’t really have that many deductions to begin with.
Deductions for state and local taxes don’t interest wealthy Texans because Texas doesn’t have a state income tax at all, he says.
“Nor is the mortgage interest deduction a matter of life or death,” says Frum, since housing prices are comparatively cheap in the Lone Star State, unlike blue states like New York or California where housing is more expensive, as are taxes.
“What Texas does have, however, is a lot of very high incomes who care a great deal about tax rates,” says Frum. And so the GOP’s big donors are willing to throw loopholes over the side, says Frum, since in the battle between the “ordinary rich” and super-rich, deductions matter a lot more to people earning $400,000 than to people earning $4 million or $40 million.”
That is why the Republican Party’s billionaire backers have sent the word out that there will be hell to pay if Republicans let tax rates go up even a fraction of a point on those making more than $250,000.
Republicans do their best to disguise their emasculated feebleness by whining that raising tax rates 4% would only bring in about $50 billion a year – chump change, a drop in the bucket, they say – while promising to bring in lots more dough by closing unnamed loopholes or through that fog bank of imprecision known as “tax reform.”
But rates going up on the richest Americans is off the table as far as Republicans are concerned. It is a non-starter, with violators punished by no-nonsense warnings of a leadership coup or, even worse, an intra-party civil war as conservative secessionists carry out their threats to abandon the GOP, en masse, and form their own ultra-right party.
One manifestation of the dysfunction affecting American politics is that once the Republican Party has dug in its heels and decided not to do something, their obstruction sets the terms of debate and the starting assumptions for the rest of the Washington Establishment.
When Republican’s wealthy benefactors decide they will tolerate no compromise on rates – none – the rest of us are expected to accept that recalcitrance as a “given” and work around it.
To confront that presumption head-on and challenge it directly, as President Obama has done – to declare that America is a democracy not a plutocracy by insisting that no deficit-reduction package will be signed by him unless Republicans agree to increase tax rates on top income earners – that is what Republicans mean when they say the President is “politicizing” an issue or “failing to show leadership” by either capitulating to Republican demands or neutralizing the negative consequences of the Republican Party’s own intransigence.
“President Obama has an unbelievable opportunity to be a transformational president – that is, to bring the country together,” said Speaker Boehner lieutenant Pete Roskam of Illinois. “Or he can devolve into zero-sum-game politics, where he wins and other people lose.”
You can tell Charles Krauthammer understands the Republican’s inside game here because the master propagandist accuses President Obama of playing it.
The President’s insistence Republicans put their big donor’s money where their mouths and show they are serious about deficit reduction “has nothing to do with economics or real fiscal reform,” says Krauthammer. “It is entirely about politics.”
How true, about Republicans I mean. Likewise, in response to news the irreconcilable right intends to launch a leadership coup or third party challenge should Republican leaders go along with the 70% of Americans who say they want taxes raised on the top 2%, Krauthammer accuses the President of bargaining in bad faith by making offers “designed to break the Republican opposition and grant him political supremacy.”
This is why, for example, Krauthammer says Obama sent Treasury Secretary Geithner to Republicans “to convey not a negotiating offer but a demand for unconditional surrender.”
Accusing ones opponents of that which you are most guilty of yourself is a well-traveled tactic on the right. And what’s obviously got Krauthammer most incensed is the dawning realization from the President’s less conciliatory posture since election day that two can play at the Republican’s give-no-quarter game.
The seeds for America’s political dysfunction were sown 30 years ago when Ronald Reagan and the Republican Party made the fateful decision to favor Wall Street over Main Street, finance over manufacturing, as America’s signature industry.
The inevitable concentration of wealth this favoritism produced empowered a narrow economic elite with the financial resources to capture a political party and then use that party to capture the nation’s government.
It was just as those early Jeffersonians foretold more than 200 years ago when they worried about those “Anglomen” who stood to profit from Alexander Hamilton’s scheming over the National Bank and a Commercial Republic far more entranced by pecuniary promises of profit than the public-spirited virtues of civic republicanism.
And since 1980 all of these ancient fears have come to pass as a greater share of the nation’s wealth has fallen into fewer and fewer hands – 25% of income and 40% of assets controlled by 1% of the population – with the predicable distortions this concentration of economic power has had on the American political system.
A GOP that is the wholly-owned subsidiary of that super elite “may no longer be a normal party,” wrote David Brooks at the height of the debt ceiling crisis 18 months ago.
Brooks was outraged when Republicans passed on what he called the “mother of no brainers” by turning down a perfectly good deal with Democrats to resolve the impasse because, in Brooks’ view, Republicans a.) have been “infected by a faction that is more of a psychological protest than a practical, governing alternative;” b.) do not accept the logic of compromise, no matter how sweet the terms; c.) do not accept the legitimacy of scholars and intellectual authorities; d.) have no sense of moral decency if they can talk so “blandly of default” and their willingness to “stain their nation’s honor”; and finally e.) have no economic theory worthy of the name since tax levels are all that matter to them.
There are sound economic arguments for reducing debts and deficits – maybe not now while unemployment is still high and interests rates low, but over the long term. But there is none – none – for taking upper income tax rates off the table as part of the final deficit-reduction agreement. And the only reason we are hung up on taxes for the top 2% is that this powerful special interest thinks it can flex its muscles and vacate the verdict of a national election by getting its demands met regardless of majority public opinion.
“The conservative insurgents of today argue that their anti-tax cost cutting agenda is designed to revive the economy, boost the job market and get America on the move again,” writes Thomas Edsall in The Age of Austerity: How Scarcity Will Remake American Politics.
“There is, however, another equally probable motivation,” he says, “that this cashiering of moral restraint on the Right reflects its belief, conscious or unconscious, that we have reached the end of the American Century.”
In that event, says Edsell, the “adamant anti-tax posture of the Right” can be seen as “an implicit abandonment of the state and of the larger American experiment — a decision that the enterprise is failing and that it is time to jump ship.”
The real news on the American right, agrees professor Mark Lilla “is the mainstreaming of political apocalypticism” led by people he calls “redemptive reactionaries” who think the only way forward “is to destroy what history has given us and wait for a new order to emerge out of the chaos.”
Once there was a conservative Golden Age, these reactionaries believe, where the world was ruled by the “Best and Brightest,” the “job creators,” Ayn Rand’s “makers,” and the top 2% who now threaten punitive action against Republican leaders or civil war within the party if their non-negotiable demands against tax hikes are not met.
But then came the New Deal, the Great Society and the civil rights movements of the 1960s that emancipated heretofore marginalized minorities of all kinds – in other words “an apocalypse” so horrible in its consequences that the only sane response was “to provoke another in hopes of starting over,” says Lizza.
And ever since, these reactionaries have been working toward a counterrevolution “that would destroy the present state of affairs and transport the nation, or the faith, or the entire human race to some new Golden Age that would redeem aspects of the past without returning there.”
Grover Norquist’s “no tax pledge” perfectly captures the Judgment Day spirit of this reactionary mentality. So does the Senate filibuster. So does the so-called “fiscal cliff,” which itself is the apocalyptic can Democrats were forced to kick down the road to escape the calamitous consequences of the first Doomsday can Republicans constructed 18 months ago by refusing to raise the debt ceiling and allow the government to pay its overdue bills, thus pushing the nation to the brink of insolvency for the first time in US history.
And so, when Republicans assail President Obama for trying to make a political “statement” when he insists that taxes on the wealthy must go up as part of this deficit-cutting deal that Republicans demanded in the first place, it’s good to remember that this is a valuable statement to make, since every once in a while it’s important to remind these rich and powerful “redemptive reactionaries” just who’s boss.
By: Ted Frier, Open Salon Blog, December 7, 2012
“An Issue Of Fairness”: Suddenly America’s Top Corporate Leaders Are Shunning Tea Party Extremism
Leaders of the American business community, who have long indulged the Republican far right as an instrument toward their own ends, seem to be growing weary of its political excesses. Recognizing the public verdict of last month’s election, corporate officialdom is moving toward moderation on taxes and other issues, showing support for the Obama White House and edging away from congressional Republicans.
The latest top executive to endorse the president’s position on rescinding the Bush tax cuts for the top two percent is Fred Smith, CEO of Federal Express and a former economic advisor to Senator John McCain — who denounced as “mythology” the notion that raising the top rate would damage the U.S. economy.
Smith joined a lengthening queue of business leaders from all sectors who have stepped up over the past week to voice their acceptance of increased taxes as part of a budget agreement to break the stalemate on Capitol Hill — not only to avoid the so-called fiscal cliff on December 31, but because fairness requires the wealthy to pay their fair share. Randall Stephenson, chief executive of AT&T, the nation’s largest telecom company, told Business Week that higher taxes and more revenue must be part of any budget agreement. So did Lloyd Blankfein, the CEO of Goldman Sachs. And so did a group of defense industry executives from companies such as United Technologies, RTI International, TASC and Northrop Grumman.
Income tax rates “need to go up some,” said David Langstaff, the CEO of TASC, at a Washington press event organized by the Aerospace Industries Association, a defense lobby. “This is a fairness issue — there needs to be recognition that we’re not collecting enough revenue. In the last decade we’ve fought two wars without raising taxes. So I think it does need to go up.”
Indeed, the president was warmly received this week when he visited the Business Roundtable, a powerful Washington lobbying group that officially prefers Republican policy on maintaining the Bush tax cuts unchanged. “This room likes a winner,” said Roundtable chairman James McNerney, the CEO of Boeing, as his members applauded the president, who worked the room as if among old friends. They didn’t seem terribly upset when the president told them that tax rates — their tax rates — would have to go up, and in fact, they are reportedly supporting him on the need to avoid another destructive struggle with Congress over the debt ceiling. Evidently they won’t go along with the kind of blackmail game that congressional Republicans played with the debt ceiling in the summer of 2011, leading to a credit downgrade and slower growth for months afterward.
The suddenly sensible sounds emanating from the business community are astonishing when contrasted with the anger displayed toward the president by many of these corporate suits only weeks ago, when they berated Obama as “anti-business” and loudly yearned for a corporate-style Romney presidency. Resoundingly rebuked by the electorate, which overwhelmingly favors Obama’s positions on taxes and entitlements — and stands ready to blame the Republicans if no budget agreement is achieved — the business leaders are backing ever so subtly away from their traditional alliance with the GOP.
These brand-conscious executives suddenly have realized that the Republican brand, especially at the congressional level, is politically toxic. And they would rather not be too closely identified with it at this dangerous moment.
Remarkably, the Tea Party Republicans have now alienated their party’s most important constituency — the upper echelon of the business community. It is a profound irony that the issue raising friction between these politicians and their erstwhile backers is a fanatical partisan determination to defend the tax benefits enjoyed by those same wealthy executives.
The president’s opponents are backing themselves into a corner where even their own old friends cannot defend them. Meanwhile Obama may finally have learned that if he stands firm and refuses to negotiate with himself, he can win over public opinion and break the partisan obstructionism.
By: Joe Conason, The National Memo, December 7, 2012
“Unbridled Hypocisy”: Laura Ingraham Has the World’s Worst Imagination
Conservative radio host Laura Ingraham is outraged — outraaaged! — that President Obama met with some MSNBC anchors at the White House on Tuesday, according to her daily newsletter:
“Rachel Maddow, Al Sharpton, Lawrence O’Donnell, and Ed Schultz all stopped by the White House to discuss the President’s fiscal cliff proposal. Can anyone even imagine how the press would have reacted if Fox News hosts and conservative personalities had stopped by the Bush White House to discuss policy? They would have been rightly outraged.”
Yes, let’s all put on our imagination hats and try as hard as we can to imagine what that meeting would look like. George W. Bush would be seated in an Oval Office chair, doing jazz hands in front of a bust of Winston Churchill. On his left, Fox News host Sean Hannity would be pensively smelling his hand on a couch with conservative personality Michael Medved. On his right, conservative personalities Neil Boortz and Mike Gallagher would be sharing another couch. And, just for imagination’s sake, let’s put conservative personality Laura Ingraham in there, too, right next to the president. Now, obviously, such a scene never actually transpired, but — wait, what? Oh. It did.
After Media Matters revealed Ingraham’s hypocrisy to the world, a producer responded with the classic “Ingraham didn’t actually write the newsletter, and also, the two things are totally different because I said so” defense.
During Laura’s brief radio hiatus, the Daily Fix is written by staff. Although I didn’t know Laura had visited the Bush White House with other conservative radio hosts, the circumstances of her meeting the president were quite different. Laura did not go to the White House to advise the president, but was simply briefed on policy for perhaps an hour.
For what it’s worth, the MSNBC hosts didn’t “advise” Obama. They were, uh, briefed on policy:
“This afternoon at the White House, the President met with influential progressives to talk about the importance of preventing a tax increase on middle class families, strengthening our economy and adopting a balanced approach to deficit reduction,” Earnest said in a statement Tuesday.
As embarrassing as this whole episode is for Team Ingraham, they’re not the only ones who should have done a little research before going into full fauxtrage mode about the MSNBC meeting. Take the hosts of Fox & Friends (please!), for example, who overreacted in typical fashion. “I’m shocked by that,” Brian Kilmeade said. “To invite five talk show hosts in, all from the same channel? That’s outrageous.” Mike Huckabee, who has a show on Fox News, claimed yesterday that the sit-down with Obama destroyed any “illusion whatsoever that there’s objectivity going on at MSNBC.”
By: Dan Amira, Daily Intel, December 6, 2012
“The Big Budget Mumble”: Republicans Can’t Play Their Usual Con Game Of Just Saying No
In the ongoing battle of the budget, President Obama has done something very cruel. Declaring that this time he won’t negotiate with himself, he has refused to lay out a proposal reflecting what he thinks Republicans want. Instead, he has demanded that Republicans themselves say, explicitly, what they want. And guess what: They can’t or won’t do it.
No, really. While there has been a lot of bluster from the G.O.P. about how we should reduce the deficit with spending cuts, not tax increases, no leading figures on the Republican side have been able or willing to specify what, exactly, they want to cut.
And there’s a reason for this reticence. The fact is that Republican posturing on the deficit has always been a con game, a play on the innumeracy of voters and reporters. Now Mr. Obama has demanded that the G.O.P. put up or shut up — and the response is an aggrieved mumble.
Here’s where we are right now: As his opening bid in negotiations, Mr. Obama has proposed raising about $1.6 trillion in additional revenue over the next decade, with the majority coming from letting the high-end Bush tax cuts expire and the rest from measures to limit tax deductions. He would also cut spending by about $400 billion, through such measures as giving Medicare the ability to bargain for lower drug prices.
Republicans have howled in outrage. Senator Orrin Hatch, delivering the G.O.P. reply to the president’s weekly address, denounced the offer as a case of “bait and switch,” bearing no relationship to what Mr. Obama ran on in the election. In fact, however, the offer is more or less the same as Mr. Obama’s original 2013 budget proposal and also closely tracks his campaign literature.
So what are Republicans offering as an alternative? They say they want to rely mainly on spending cuts instead. Which spending cuts? Ah, that’s a mystery. In fact, until late last week, as far as I can tell, no leading Republican had been willing to say anything specific at all about how spending should be cut.
The veil lifted a bit when Senator Mitch McConnell, in an interview with The Wall Street Journal, finally mentioned a few things — raising the Medicare eligibility age, increasing Medicare premiums for high-income beneficiaries and changing the inflation adjustment for Social Security. But it’s not clear whether these represent an official negotiating position — and in any case, the arithmetic just doesn’t work.
Start with raising the Medicare age. This is, as I’ve argued in the past, a terrible policy idea. But even aside from that, it’s just not a big money saver, largely because 65- and 66-year-olds have much lower health costs than the average Medicare recipient. When the Congressional Budget Office analyzed the likely fiscal effects of a rise in the eligibility age, it found that it would save only $113 billion over the next decade and have little effect on the longer-run trajectory of Medicare costs.
Increasing premiums for the affluent would yield even less; a 2010 study by the budget office put the 10-year savings at only about $20 billion.
Changing the inflation adjustment for Social Security would save a bit more — by my estimate, about $185 billion over the next decade. But put it all together, and the things Mr. McConnell was talking about would amount to only a bit over $300 billion in budget savings — a fifth of what Mr. Obama proposes in revenue gains.
The point is that when you put Republicans on the spot and demand specifics about how they’re going to make good on their posturing about spending and deficits, they come up empty. There’s no there there.
And there never was. Republicans claim to be for much smaller government, but as a political matter they have always attacked government spending in the abstract, never coming clean with voters about the reality that big cuts in government spending can happen only if we sharply curtail very popular programs. In fact, less than a month ago the Romney/Ryan campaign was attacking Mr. Obama for, yes, cutting Medicare.
Now Republicans find themselves boxed in. With taxes scheduled to rise on Jan. 1 in the absence of an agreement, they can’t play their usual game of just saying no to tax increases and pretending that they have a deficit reduction plan. And the president, by refusing to help them out by proposing G.O.P.-friendly spending cuts, has deprived them of political cover. If Republicans really want to slash popular programs, they will have to propose those cuts themselves.
So while the fiscal cliff — still a bad name for the looming austerity bomb, but I guess we’re stuck with it — is a bad thing from an economic point of view, it has had at least one salutary political effect. For it has finally laid bare the con that has always been at the core of the G.O.P.’s political strategy.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 2, 2012
“Good Cop, Bad Cop”: Conservative Think Tanks’ Responses To Default Is Another Reason To Kill The Debt Ceiling
House Republicans are looking to weaponize the debt ceiling again, while the Obama administration is trying to make removing the threat of default part of any agreement.
Here’s one reason why the debt ceiling needs to go: the conservative intellectual infrastructure cheered on a potential default. I had imagined that there would be a good cop/bad cop dynamic to the right. Very conservative political leaders would be the bad cop, saying that they weren’t afraid to default on the debt, while conservative think tanks would play a version of the good cop, warning of the dire consequences of a default for the economy if their bad cop friend didn’t get his way.
For instance, here’s bad cop Sen. Pat Toomey (R-PA) saying that the markets “would actually accept even a delay in interest payments on the Treasuries,” especially “if it meant that Congress would right this ship, address this fiscal imbalance, and put us on a sustainable path, and that the bond market would rally if it saw we were making real progress towards this.” Missing interest payments is fine; in fact, it is great for the country if it is used to pass the Ryan Plan.
Financial analysts, to put it mildly, disagreed. JP Morgan analysts wrote that “any delay in making a coupon or principal payment by Treasury would almost certainly have large systemic effects with long-term adverse consequences for Treasury finances and the US economy.”
Here’s where the think tanks are fascinating. You could imagine them saying “our partner Toomey is nuts, we can’t control him, and you’d better do what he says or there’s going to be real damage.” But that’s not what they did. It’s best to split the work they did on the debt ceiling in two directions:
1. Technical Default Ain’t No Thang. The first is arguing, like Toomey, that a “technical default” wouldn’t matter, and in fact it could be a great thing if the Ryan Plan passed as a result. How did James Pethokoukis, then of Fortune and now of AEI, deal with a Moody’s report arguing a “short-lived default” would hurt the economy? Pethokoukis: ”I guess I would care more about what Moody’s had to say if a) they hadn’t missed the whole financial crisis, b) didn’t want to see higher taxes as part of any fiscal fix and c) if they made any economic sense.” Default doesn’t matter because Pethokoukis doesn’t want taxes to go up, and there’s no economic sense because of an interview he read in the Wall Street Journal.
Others went even further, arguing that the real defaulters are those who, um, don’t want to default on the debt. Here’s the conservative think tank e21 with a staff editorial arguing that ”policymakers need to stay focused on the real default issue: whether the terms of the debt limit increase this summer will be sufficiently tough to ensure that the nation’s debt-to-GDP ratio is stabilized and eventually sharply reduced.” All these people who want a clean debt ceiling increase are causing the real default issue. As someone who used to do a lot of credit risk modeling, this is my favorite: “Indeed, those demanding the toughest concessions today actually have a strong pro-creditor bias.” S&P disagreed with whoever wrote that editorial and increased the credit risk (downgraded) based on the threat of this technical default.
The Heritage Foundation wrote a white paper saying that you could just “hold the debt limit in place, thereby forcing an immediate reduction in non-interest spending averaging about $125 billion each month,” and that “refusing to raise the debt limit would not, in and of itself, cause the United States to default on its public debt.” Dana Milbank noted that these kinds of shuffling plans would still leave the government short and likely cause a recession. Milbank: ”Without borrowing, we’d have to cut Obama’s budget for 2012 by $1.5 trillion. That means even if we shut down the military and stopped writing Social Security checks, the government would still come up about $200 billion short.” The Cato Institute also jumped in with the technical default crowd here.
But that was the reaction from the number-crunching analysts. What about the bosses?
2. Civilization Hangs in the Balance of the Debt Ceiling Fight. Here’s the president of AEI, Arthur C. Brooks, in July 2011: “The battle over the debt ceiling…is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism…No one deserves our political support today unless he or she is willing to work for as long as it takes to win the moral fight to steer our nation back toward enterprise and self-governance.”
Even better, the president of The Heritage Foundation, also in July 2011, compares Democrats to Japan during World War II and then argues: ”We must win this fight. The debate over raising the debt limit seems complicated, but it is really very simple. Look beyond the myriad details of the awkward compromises, and you see an epic struggle between two opposing camps….Congress should not raise the debt limit without getting spending under control.”
So the the conservative intellectual infrastructure, which consumes hundreds of millions of dollars a year, looked at the possibility of a debt default and determined it was both inconsequential and also the only way to stop statism in our lifetimes. No wonder the time period around the debt ceiling in 2011 was such a disaster for our economy, killing around 250,000 jobs that should have been created. There’s no reason to assume all the same players won’t play an even worse cop this time around.
There’s no good reason for the debt ceiling, and now there are really bad consequences for its existence. Time to end it.
By: Mike Konczal, The National Memo, December 6, 2012
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