“The Facts Aren’t On Mitch McConnell’s Side”: Sorry, GOP, Tax Cuts Don’t Pay For Themselves
As they prepare to take control of Congress, Republicans are looking to change the rules of the game. To lend budget-busting tax cuts the illusion of fiscal responsibility, conservatives would codify the notion that these cuts pay for themselves into congressional accounting rules.
Democrats should not allow this to happen. But if conservatives insist on fudging the numbers, liberals shouldn’t shy away from making creative budgetary arguments of their own.
The accounting device promoted by the right is known as “dynamic scoring,” and it’s politically significant because of the basic policy positions of the two parties. Conservatives tend to favor tax cuts, which come at the expense of social services. Liberals tend to support increasing social services, which come at the cost of higher taxation.
But conservatives have an end-run around this dynamic. They point to the Laffer curve, an economic theory proposing that we can cut tax rates without sacrificing tax revenue, thus avoiding cuts to social services. This is because tax policy has dynamic effects on the macro-economy — that is, cutting tax rates incentivizes people (and particularly high-earners, who gain the most from tax cuts) to work harder, invest more, and generate more economic growth. As the economic pie grows larger, tax revenue can remain constant even as tax rates fall.
Though logical in theory, this idea hasn’t really been borne out in practice. The Bush administration repeatedly predicted that tax cuts would boost overall revenue, but they assuredly did not. And they still don’t, as Kansans have learned during Gov. Sam Brownback’s “real live experiment” in conservative economics, which has only blown a hole in the state budget.
This is because any potential dynamic effects of tax cuts take a long time to materialize, which makes these future benefits extremely difficult to quantify today. And as Congress’ authoritative accountant, the CBO is in the business of attaching hard numbers to would-be laws.
Understandably, the CBO has resisted the uncertain and speculative math of dynamic scoring. But the underlying argument still infuses and skews our political debate. Republicans feel less constrained when proposing tax cuts, while Democrats struggle to shore up revenue sources for government service proposals.
Ostensible fiscal conservatives like Sens. Mitch McConnell (Ky.) and John Kyl (Ariz.) argue that tax cuts need not be paid for at all because they are inherently good for the economy. “[T]here’s no evidence whatsoever that the Bush tax cuts actually diminished revenue,” McConnell contends, in spite of overwhelming evidence that these cuts diminished revenue at historic rates.
Yet these same Republican leaders still insist that spending on unemployment benefits be accounted for by cuts or tax increases elsewhere, even though there’s little compelling economic reason to treat tax cuts and social insurance transfers like unemployment benefits differently. Both policies promote economic growth by increasing disposable income and thereby boosting consumption.
Liberals have largely failed to point this out and haven’t effectively countered conservative attacks on these transfer programs. Contrary to what Speaker John Boehner (Ohio) says, there’s no evidence that unemployment benefits reduce work ethic. And other transfer programs can be carefully structured to minimize any potential work disincentives.
Liberals can do more than play defense in these debates. They, too, can conjure creative arguments for how targeted spending programs can “pay for themselves.”
Take liberal proposals for new or expanded transfer programs like refundable tax credits, child allowances, and other income subsidies. These relieve some of the strain on the budgets of low-income and middle-class Americans. More disposable income means more consumption, which generates higher economic growth and higher overall income, producing more tax revenue. By this logic, transfer programs could pay for themselves, too.
In fact, targeted transfers to the poor and middle class would likely give a stronger immediate jolt to the economy than would tax cuts for the wealthy. Compared with the wealthy, the poor spend a much higher share of each additional dollar of disposable income that they receive, providing greater stimulus to the economy. Policy measures that alleviate inequality are thus a boon for economic growth.
This isn’t to say that liberals should sit back and let dynamic effects fund their policy priorities. Any responsible party must provide revenue sources for new tax or spending programs. But drawing on this rhetoric would level the playing field of our skewed politics. The parameters of our current debate — where liberal proposals must be paid for while conservative ones don’t — are stacked against the interests of average Americans in favor of the wealthy.
Conservatives want to muddy the numbers for our lawmaking process. For the sake of a fair debate, liberals can and must show that two can play at that game.
By: Joel Dodge, The Week, December 19, 2014
“Pain For The Afflicted, Benefits For The Rich”: The Republican Party’s Top Priority Is To Raise Taxes On The Poor. Literally.
Following their convincing victory in the 2014 elections, everyone is wondering what Republicans will do with their new majority in the Senate and House. Well, their policy agenda is becoming clear. It will be unrestrained class warfare against the poor.
This priority was made apparent over the last week during the negotiation of a colossal tax cut package. Senate Democrats and Republicans had been doing some low-key negotiations to renew a slew of tax cuts for corporations and lower- and middle-income Americans, according to reporting from Brian Faler and Rachel Bade at Politico.
Then President Obama announced his executive action on immigration. Enraged Republicans promptly took vengeance on all the goodies for the working poor (as well as for clean energy), cutting them out of the deal and proposing a raft of permanent tax cuts for corporations alone worth $440 billion over 10 years. Cowed Democrats, led by Sen. Harry Reid (D-Nev.), were about ready to go along, prompting a decidedly justified outcry from liberals. Obama then threatened a veto, and the negotiations broke down entirely.
A few takeaways from this. First, it’s yet another reminder that Republicans don’t care about the national debt. Conservative carping about the debt is 100 percent of the time a rhetorical cudgel deployed with utter cynicism against programs they dislike for other reasons. When the topic is food stamps or unemployment insurance, they demand offsets to pay for them. (Because “we’re broke,” as Speaker John Boehner (R-Ohio) put it in a similar context.) But when it comes to dropping planeloads of money on corporations and rich people, Republicans will casually blow a half-trillion hole in the 10-year budget without blinking.
We can safely assume that should Republicans win in 2016, they’ll take all the reduction in the budget deficit accomplished over the Obama years (at great cost and for no benefit, but that’s another story) and do the same thing that George W. Bush did: hand it immediately to the rich.
That’s not all, though. Unlike Bush, who gave his eye-wateringly regressive tax cuts a patina of democratic legitimacy by cutting the non-rich in on a small fraction of the spoils, Republicans are now firmly committed to the idea that poor people don’t pay enough in taxes. The Earned Income Tax Credit was originally a conservative alternative to the welfare state, but increasingly only Democrats support it. Republicans are convinced that the EITC is riddled with fraud, and that voting for it means giving welfare to unauthorized immigrants. (In reality, the EITC results in quite a lot of technically improper payments, but mostly as a result of unnecessary complexity.)
Massive transfers of money to the rich are one half of the Republican economic policy agenda; massive transfers of money away from poor are the other half. And the cuts would be cruel indeed:
For example, a single mother with two children working full time in a nursing home for the minimum wage and earning $14,500 would lose her entire [Child Tax Credit] of $1,725 if the CTC provision expires. [CBPP]
Apparently, cutting the income of a poor working single mother by 12 percent is good and proper conservative policymaking in 2014. Because immigration.
Finally, we see that Republicans are still incapable of the basics of political governance. They can’t maintain any sort of agenda outside of being against what Obama is for. Once the president drives them into a frenzy — which is to say, anytime he does anything at all — any negotiations on deck will be blown up as punishment. These days, divided government means constant high-stakes conflict, as everything, including tax credits for working moms, is weaponized in a naked struggle for power.
But should Republicans ever get the run of things, we now have a very good idea of what’s in store: pain for the afflicted, and benefits for the comfortable.
By: Ryan Cooper, The Week, December 3, 2014
“We’ve Adapted Before, And We’ll Adapt Again”: Immigrants’ Energy And Vitality Ought To Be Celebrated
“This is a blessing from God.”
“I’ve always had to look behind my back. Now I don’t have to worry so much.”
“This is a very amazing moment.”
According to news reports, those sentiments — hope, relief, gratitude, joy — have been expressed by immigrants heartened by President Obama’s decision to delay deportation for as many as 4 million people who entered the country without papers. They are ordinary folks eager for a semblance of normalcy — the right to a driver’s license, the ability to get a job legally, the respite from constant worry — in the adopted country they now call home.
While Obama’s action has drawn withering criticism from his conservative critics, the president framed his decision as an attempt to keep families from being torn apart. According to the Migration Policy Institute, some 3.7 million adults who came into the United States without authorization have at least one child who was born here or has legal permanent status and has been here five or more years.
Those children are firmly ensconced in their communities, anchored in their schools or workplaces, and strangers to the nations in which their parents were born. They speak English; they surf the Internet; they obsess over the latest smartphone. In other words, they are as American as your kids and mine.
What sort of country would separate them from their parents or force them to leave? Why not embrace them for the vitality they bring to us?
Opponents of Obama’s executive order are given to a heavy reliance on the rules and regulations of permissible entry, the legal codes that govern borders and visas and citizenship. It’s certainly true that unauthorized immigrants have violated those statutes — stealing across a river, sneaking through a desert, ignoring a previously agreed-upon departure.
But surely there is something to be said for leniency, for mercy, for generosity toward those who have, after all, committed only a misdemeanor, which is how the law characterizes a first-time illegal entry. (Obama’s executive order pointedly excludes those who have committed felonies.)
That mercy ought to be freely meted out since Americans bear some complicity in the law-breaking, some responsibility for the unauthorized sojourns taken by so many gardeners, cooks and nannies, painters, ditch diggers and fruit pickers. Back in the go-go 1990s, we practically threw open the gates and invited in low-skilled workers who were happy to do the jobs that Americans didn’t want to do.
There was more than enough work to go around in an economy where the unemployment rate dropped to as low as 4 percent, and native-born laborers shunned sweaty work picking Vidalia onions, toting drain pipe and laying sod. Undocumented workers proved cheap and compliant, unable to complain when safety regulations were violated and wages were substandard.
So they came by the millions, in Democratic and Republican administrations. They stayed, they worked hard, they married and had children. They adopted our values and called this country their own.
Perhaps it was inevitable that a backlash would be swift and furious, especially after the economy turned sour and the middle class shrank. Besides, every immigrant wave in the nation’s history — whether Irish or Polish or Chinese — has provoked an eruption of anger and resentment.
This backlash has been building since at least the early aughts, when President George W. Bush tried to pass legislation that would give the undocumented legal status and a path to citizenship. Ultraconservatives in his party rebelled, even as business executives pleaded for a compromise that would satisfy their need for workers.
The resentment was seeded, in part, by the reality of demographic change — by, yes, the discomfort produced by racial and ethnic differences. Older Americans, especially, have recoiled at a country that grows browner and more diverse, where Spanish-language signs dominate some neighborhoods and soccer fields replace baseball diamonds. That, too, has happened before in our history as immigrants brought their customs and religions and languages.
But the nation adapted before, and we’ll adapt again. That constant rejuvenation is one of the nation’s strengths, that energy and vitality is one of our advantages. We, too, ought to be grateful those immigrants are getting a shot at the American dream.
By: Cynthia Tucker, Pulitzer Prize for Commentary in 2007; The National Memo, November 29, 2014
“Republicans Will Now Taste Their Bitter Harvest”: The “Party Of No” Has No Agreement On What Is Yes
In the early 3rd century B.C., after King Pyrrhus of Epirus again took brutal casualties in defeating the Romans, he told one person who offered congratulations, “If we are victorious in one more battle with the Romans, we shall be utterly ruined.” In his more sober moments, Mitch McConnell (R-Ky.), about to achieve his lifelong ambition of becoming Senate majority leader, may wonder whether he, too, has achieved a pyrrhic victory.
Republicans are still crowing about the sweeping victories in 2014 that give them control of both houses of Congress. They will set the agenda, deciding what gets considered, investigated and voted on. Their ideas will drive the debate.
But Republicans have no mandate because they offered no agenda. Republicans reaped the rewards of McConnell’s scorched-earth strategy, obstructing President Obama relentlessly, helping to create the failure that voters would pin on the party in power. But the collateral damage is that the “party of ‘no’ ” has no agreement on what is yes. Instead of using the years in the wilderness to develop new ideas and a clear vision, Republicans have used them only to sharpen their tongues, grow their claws and practice their backhands.
Republicans paid no penalty for obstructing every measure that might have given the recovery more juice, blocking even the infrastructure spending that has been a bipartisan response in every downturn. They paid no penalty for shutting down the government and forcing mindless austerity that cost jobs. They paid no penalty for their perfervid hysteria on foreign policy issues – screeching about phantom terrors of pregnant immigrants helping Islamic State terrorists and Ebola victims slip in the country to kill us here at home. They never needed to fill in the magic asterisks in Rep. Paul Ryan’s risible budgets, enabling him to deny the damage to Medicare, education, food stamps and the most vulnerable that his plans would require.
The result is that McConnell leads into a power a party truly unfit and unready to govern. Indeed, the wingnuts at its base want it only to dismantle, not to govern. As Terrance Heath reported, the ever-apoplectic Rush Limbaugh announced that Republicans have a mandate to “stop Barack Obama” and “were not elected to govern.” Fox News host Megyn Kelly fantasized that Obama would “offend” Republicans into impeaching him; Phyllis Schlafly argued the first priority should be blocking all Obama’s judicial nominees. Sen. Ted Cruz (R-Tex.) pledged once more to repeal Obamacare. The dyspeptic Sen. John McCain (R-Ariz.) will use his chairmanship of the Armed Services Committee to demand more “boots on the ground” in Iraq and Syria, harsher sanctions to undermine negotiations with Iran and more macho posturing over Ukraine. Sen. Jim Inhofe (R-Okla.) will use his likely chairmanship of the Environment and Public Works Committee to deny the existence of catastrophic climate change even while allocating billions for cleanup in the wake of floods, droughts and storms to come.
McConnell portrays Republicans as ready to embrace a conservative Chamber of Commerce agenda, repaying the big money that helped bring them victory. This would include giving multinationals a massive tax break on money that they stashed abroad to avoid taxes, passing fast-track trade authority, pushing ahead the Keystone XL pipeline, weakening the Consumer Financial Protection Bureau and repealing the tax on medical devices, first of the salami-style effort to slice up Obamacare.
But the zealots in the House and Senate expect more fire and less compromise. They want Obamacare repealed. They want the scorched-earth obstruction to continue: Obama’s nominations blocked, scandals real and delusional investigated, Dodd-Frank financial regulation reversed and taxes and domestic spending slashed.
It isn’t at all apparent that McConnell and Boehner can corral Republican majorities for any measures that Obama might accept. But even if McConnell could put the Chamber of Commerce’s bills on the president’s desk, one thing is apparent: None of these will do anything to address the profound crises the country faces. There is no relief for the sinking middle class and impoverished low-wage workers, no strategy for addressing climate change, no response to the destructive excesses of banks too big to fail.
McConnell won his majority by brilliantly waging a partisan, dishonest, unrelenting policy of obstruction. But now, the absence of any ideas or of any clue will be exposed. And next time, when voters sensibly want to throw the bums out, they may have a far clearer view of just who the bums are.
By: Katrina vanden Heuvel, The Washington Post, November 11, 2014
“The Millionaire’s Club Expands”: The Wealthiest 10 Percent Of Americans Own 75 Percent Of The Personal Wealth
The millionaire’s club isn’t what it used to be.
Time was that “being a millionaire” was a mark of unimaginable success. You’d joined the financial elite. People didn’t much discuss whether you arrived by wealth or income, because it didn’t matter much. The millionaire’s club was so small that the path to membership wasn’t worth discussing.
No more.
Millionaires aren’t as common as water, but there are plenty of them. A new study puts the worldwide total at 35 million in 2014, with about 40 percent (14 million) of them American. That’s about 5 percent of the U.S. adult population (241 million in 2014), or one in 20. Rarefied, yes; exclusive, no. After the United States, Japan has the largest concentration of millionaires with 8 percent of the world total, followed by France (7 percent), Germany (6 percent) and the United Kingdom (6 percent). At 3 percent, China ranks eighth.
The figures come from a study by Credit Suisse Research, which has been estimating worldwide personal wealth since 2010. The numbers reflect net worth, not annual income. The wealth totals add the value of people’s homes, businesses and financial assets (stocks, bonds) and subtract their loans. Doubtlessly, the number of millionaires would be much smaller if the calculations were based on income. In the study, an American with a $300,000 mortgage-free home and $700,000 in retirement accounts and financial investments qualifies as a millionaire.
On this basis, the study put global personal wealth in mid-2014 at $263 trillion, up from $117 trillion in 2000. Wealth in the United States reached $84 trillion, almost a third of the total. All of Europe, with a larger population, was virtually the same. Median wealth in the United States — meaning half of Americans were above the cutoff and half below — was $53,000, dominated by homes for many middle-class families. Japan’s total wealth was $23 trillion, but with a more equal distribution and a smaller population, its median was more than twice the American at $113,000. China’s wealth was $21 trillion and its median $7,000.
Credit Suisse did a special analysis of wealth inequality and, not surprisingly, found plenty of it. For starters, the analysis reminded readers that wealth inequality (basically, the ownership of stocks and bonds) is typically much greater than income inequality (basically, wages, salaries, dividends and interest).
In the United States, the wealthiest 10 percent of Americans own about 75 percent of the personal wealth, a share that’s unchanged since 2000; the income share of the top 10 percent is slightly less than 50 percent. But the study also found that wealth inequality is high in virtually all societies. Although the United States is at the upper end of the range, the low end is still stratospheric.
Consider.
In 2014, the wealthiest 10 percent owned 62 percent of the personal wealth in Germany; 69 percent in Sweden; 49 percent in Japan; 64 percent in China; 51 percent in Australia; 54 percent in the United Kingdom; 53 percent in France; 72 percent in Switzerland; and 68 percent in Denmark. These steep levels, the report noted, defied large cross-country differences in tax and inheritance policies.
There is, however, one country where wealth inequality is “so far above the others that it deserves to be placed in a separate category.” This is Russia. In 2014, the wealthiest 10 percent owned 85 percent of personal wealth. They aren’t oligarchs for nothing.
By: Robert Samuelson, The Washington Post, October 22, 2014
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