The Most Under-Covered Success Story Of The Obama Era
About two years ago, NBC News establisheda tough benchmark: “As the GM bailout goes, so goes the Obama presidency.”
With that in mind, Jonathan Cohn offers us a helpful update on where things stand.
On Thursday General Motors announced that, for the fifth consecutive quarter, it had made a profit. And not just a measly one, either. The $3.2 billion was higher than experts had predicted and more than three times the profit of the same quarter in 2010, when the company was still struggling to emerge from its bankruptcy.
GM sales in North America were up 25 percent over that period. That reflects the recovery, obviously, but the increase in GM sales was still larger than the industry average. Even if GM can’t keep up that pace, it’s a sign of increasing health.
Still, the most interesting part of the news is not the profit itself. It’s how GM made it.
Right. After the federal intervention to rescue the automotive industry, GM shifted its focus, reducing excess capacity and developing a better lineup of fuel-efficient cars and crossover vehicles. It’s proven to be quite successful.
Cohn noted that GM recovery has not been flawless, and the transition has been painful for many. He concluded, however, “[I]f not for the Obama Administration’s intervention, the entire American auto industry might very well have collapsed and taken the Midwest with it. Instead, the industry is on the rebound, at least for now. That’s not bad for government work. Not bad at all.”
I’d just add, from a purely political perspective, that Republicans still consider this a failure. As far as the right is concerned, the Obama administration’s rescue of the American automotive industry wasn’t just wrong, it was one of the president’s most dreadful mistakes. Confront conservatives with reports like the latest from GM, and the response tends to be that the success of the policy doesn’t change anything.
The thesis about the right valuing ideology over practical results needs no better example.
By: Steve Beden, Political Animal, The Washington Monthly, May 5, 2011
Yes, Paul Ryan Does Cut Taxes For The Rich
A number of conservatives have asserted that, contrary to what I’ve written, the House Republican budget written by Paul Ryan does not cut taxes for high earners. (See John McCormack, Ramesh Ponnuru, Charles Krauthammer, and McCormack again quoting Ryan.) Here’s the argument. Ryan keeps overall tax levels the same as they are right now by making the tax cuts permanent. He would then reduce the corporate tax rate and the top income tax rate by ten percentage points, from 35% to 25%. But he would make up for that additional revenue loss by closing “loopholes and deductions,” many of which benefit the rich. Therefore, his plan doesn’t really cut taxes on the rich.
There are four problems with this claim, each of them fatal.
First, the argument simply reflects a legitimate difference in baselines. Under current law, the Bush tax cuts are in full effect, but expire at the end of 2012. Keep Bush-era tax levels in place is not a tax cut compared with the tax code now, but it is a tax cut compared with the tax code in 2013. Which is the true baseline? I think both sides have a point, and Congressional scorekeepers have taken to using both baselines.
When President Obama accuses Ryan of cutting taxes for the rich, he’s using the post-2012 baseline. I consider that the best point of reference because the most important force in our political system is inertia. Given our multiple veto points, it takes great effort to enact a policy change that the parties disagree upon. Ryan proposes to make that change. Therefore, I think it’s fair to describe him as “cutting taxes,” even if revenues did remain at present levels (which I dispute, but more on that later.) I do think there’s merit in both baselines. The argument that Obama is lying about Ryan — that calling him a tax-cutter is, in Krauthammer’s characteristically understated phrasing, “scurrilous” — rests upon the assumption that the current-policy baseline is not only more preferable but the only remotely honest point of reference. That seems like a huge stretch.
Second, even if we accept Ryan’s preferred baseline, his description of his plan is hard to accept at face value. Tax reform is a trade where you take away deductions (that’s hard) and use the money to reduce rates (that’s easy.) The rate reductions are specified. The reduced deductions aren’t. Another way to put this is that Ryan has proposed a specific tax cut that would benefit the affluent, accompanied by utterly vague promises to find offsets. At the very least, the rate-lowering portion ought to carry more weight than the deduction-closing portion.
Third, even if we accept both Ryan’s baseline and assume he will match every dollar in lost revenue from the rate cuts with another dollar in reduced deductions, he will almost certainly wind up cutting taxes for the rich relative even to the post-Bush tax code. Ryan implies that his plan would leave the rich paying the same effective tax rates as they do now because he’s “getting rid of loopholes and deductions, which by the way are enjoyed by the top [tax] rate filers, the people in the top two brackets.” But he hasn’t put out any details. In 1995, House Republicans loudly promised to promote shared sacrifice by rooting out corporate welfare in the tax code. The actual savings they produced turned out to consist of proposals that hurt the poor (by cutting the Earned Income Tax Credit), benefited business (by letting them swipe funds from employee pensions, keeping the money as profit and thus increasing corporate tax revenue), or other reverse-Robin Hood measures.
Now, Ryan was not around then. But we can get a measure of his intentions from the more specific tax plan laid out in his “Roadmap” from 2010. That plan constituted a massive tax cut for the rich, combined with a tax hike on the middle class.
The Tax Policy Center examined various proposals to reduce tax deductions while using the revenue to lower rates across the board. All the plans decreased the tax burden for the top-earning 1%. The problem is that tax deductions are just not worth as much to very rich people as low tax rates.
It’s true that the Bowles-Simpson deficit reduction plan includes proposals that would lower rates to around 25% while increasing the effective tax rate paid by the very rich. To do that, you have to do things like raise the estate tax rate and completely eliminate the preferential treatment of capital gains. But Ryan’s budget promises instead — and this is the only specific policy commitment in its tax section, other than lowering rates — to expand the preferential treatment of income from wealth:
Raising taxes on capital is another idea that purports to affect the wealthy but actually hurts all participants in the economy. Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock – the pool of saved money available for investment and job creation – has an effect on employment, productivity, and wages. Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation. That means more jobs, more productivity, and higher wages for all American workers.
Fourth — almost there! — even if you reject everything I’ve written to this point, Ryan’s plan includes the repeal of all the taxes in the Affordable Care Act, including the taxes on the affluent. Here’s the Path to Prosperity’s description of health care taxes he proposes to undo:
The new law imposes a 0.9 percent surtax on wages and a 3.8 percent surtax on interest, dividends, and capital gains. Both taxes only apply to filers in the top two income brackets, but as discussed elsewhere in this section, those filers include small businesses employing millions of Americans, and the new taxes on capital will reduce the pool of capital available for investment and job creation.
There. Per Paul Ryan, these are upper-bracket taxes he proposes to lower. He could keep those taxes in effect, and cover a few of the uninsured people he throws off their coverage, or make the progressively-more-inadequate health care vouchers he uses to replace Medicare slightly less inadequate. But he chooses not to do that, because he believes it’s more important to tax capital at lower rates. It’s fine for him to believe that. But he and his defenders have to stop insisting that he doesn’t propose tax cuts for the rich. He indisputably does so.
By: Jonathan Chait, The New Republic, April 20, 2011
GOP: Playing “Dangerous Games” With The Debt Limit
The debt limit is supposed to make Congress think twice before passing tax cuts or spending increases that add to the national debt. Instead, lawmakers routinely support policies without paying for them — like the Bush-era tax cuts and two wars — and then posture and protest when their decisions require raising the debt limit.
So it will be once Congress returns from its spring recess. The debt limit — $14.3 trillion — will be hit as early as mid-May. If it is not raised in time, the government will have to use increasingly unorthodox tactics to meet its obligations, which would disrupt the financial markets and the economic recovery.
Default is theoretically possible, though public outrage over the mess would likely compel Congress to raise the debt limit before then. The best approach, the most sensible and mature, would be to pass a clean and timely increase.
However, nothing sensible or mature is on the horizon. Republicans have vowed to extract more heedless spending cuts in exchange for their votes to raise the debt limit. To that end, they seem likely to demand changes to the budget process, like a balanced budget amendment to the Constitution, or spending caps.
Such reforms have a glib appeal — who can oppose something as prudent-sounding as balanced budgets? In fact, they are a dodge, because they cut spending broadly without lawmakers having to defend specific cuts. They are also often wired to block tax increases, without which deficit reduction efforts are not only unfair, but also will not succeed.
Take, for example, the balanced budget amendment to the Constitution that Senate Republicans recently endorsed. By rigidly requiring a balanced budget each year, it would deepen recessions by forcing tax increases or spending cuts in a weak economy.
Worse, the amendment would hold annual spending to 18 percent of the previous year’s gross domestic product, a formula that works out to about 16.7 percent in the proposal’s early years, according to the Center on Budget and Policy Priorities. That is a level last seen in 1956 — a time before Medicare, before the interstate highways, when many baby boomers were not yet born, never mind aging into retirement.
Sharply lower spending would, in turn, allow for big tax cuts. Those tax cuts would be virtually irreversible, since the amendment calls for a two-thirds vote of both houses to raise taxes.
Another bad idea is the spending cap proposed by two senators, Bob Corker, Republican of Tennessee, and Claire McCaskill, Democrat of Missouri. It would cap spending at around 21 percent of G.D.P., compared with about 24 percent now — which would require deep cuts like those in the House Republican budget plan. With its emphasis on spending cuts, the cap also seems intended to reduce the deficit without tax increases.
In the successful deficit reduction efforts of 1990 and 1993, budget process reforms were helpful. The key, however, was to first enact credible deficit-reduction packages — with spending cuts and tax increases — and then impose rules, like pay-as-you-go, to prevent backsliding. Process reforms alone avoid the hard work. Still, they can exert powerful political pull.
The White House and Congressional Democrats must not allow themselves to be taken hostage again.
By: The New York Times, Editorial, April 22, 2011
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