So Is Obama WH Caving on Bush Tax Cuts That Won’t Stimulate Sh*t? SHARE: Tweet </noscript> One surefire way for President Obama to lose his liberal base is to give in on the Bush Tax Cuts on the same night the draft of the fiscal commission suggests massive, fundamental transformation-esque cuts to Social Security, Medicare/Medicaid, and discretionary spending. That’s a game changer. In a battle now playing out in the media, it appears as if the Obama White House is signaling it will cave in to Republican demands and extend the Bush-era tax cuts. Let’s review how we got here first: George W. Bush in 2001 and 2003 enacted tax cuts that lowered rates across the board on income, dividends and capital gains. Those tax cuts will expire at the end of the year, December 31st to be exact. Republican leaders, with their passion for campaign slogans and distaste for reality, want to extend all of these cuts permanently, or at least until they can elect a president who will do so. The White House’s plan was to protect the middle class and permanently extend the tax cuts for an individual’s first $200,000 and a family’s first $250,000 of income, but to let taxes on income above that level come back to Clinton-era rates. Now there’s a question of which side will cave. And according to the Huffington Post, it’s the White House that’s blinking first. The Huffington Post brandished its usual 734-point ALL CAPS font to say: “WHITE HOUSE GIVES IN ON BUSH TAX CUTS.” President Barack Obama’s top adviser suggested to The Huffington Post late Wednesday that the administration is ready to accept an across-the-board, temporary continuation of steep Bush-era tax cuts, including those for the wealthiest taxpayers. That appears to be the only way, said David Axelrod, that middle-class taxpayers can keep their tax cuts, given the legislative and political realities facing Obama in the aftermath of last week’s electoral defeat. “We have to deal with the world as we find it,” Axelrod said during an unusually candid and reflective 90-minute interview in his office, steps away from the Oval Office. “The world of what it takes to get this done.” “Not so fast, my friend,” says the White House doing an impression of Lee Corso. Greg Sargent writes in his Plum Line blog at the Washington Post that the White House is “sharply” denying the story and its position remains unchanged: Axelrod emails: There is not one bit of news here. I simply re-stated what POTUS and Robert have been saying. Our two strong principles are that we need to extend the tax cuts for the middle class, but we can’t afford a permanent extension of the tax cuts for the wealthy. And White House comm director Dan Pfeiffer adds: The story is overwritten. Nothing has changed from what the President said last week. We believe we need to extend the middle class tax cuts, we cannot afford to borrow 700 billion to pay for extending the tax cuts for the wealthiest Americans, and we are open to compromise and are looking forward to talking to the Congressional leadership next week to discuss how to move forward. Full Stop, period, end of sentence. So we’re still nowhere. And this will no doubt play out in the national media and on Twitter and the blogs. But for those of you, and those Republicans, who believe extending the Bush tax cuts for the wealthiest two percent is a stimulative move that will save the American economy, know this nonpartisan fact: The Congressional Budget Office has noted that most Bush tax cut dollars go to higher-income households, and these top earners don’t spend as much of their income as lower earners. The CBO, in fact, examined 11 potential stimulus policies over the summer, and an extension of all of the Bush tax cuts ties for lowest bang for the buck. Fact. As for the myth that failing to extend the tax cuts for the wealthiest 2 percent will be a small business job killer, consider the nonpartisan fact that fewer than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets. Anyone who tells you this will kill small business is lying or misinformed. Well-respected tax guru David Cay Johnston asks the important question: “How much more evidence do we need that we made terrible and costly mistakes in 2001 and 2003?” Here’s some of the analysis he put together: “So how did the tax cuts work out? My analysis of the new data, with all figures in 2008 dollars: Total income was $2.74 trillion less during the eight Bush years than if incomes had stayed at 2000 levels. That much additional income would have more than made up for the lack of demand that keeps us mired in the Great Recession. That would mean no need for a stimulus…Average incomes fell. Average taxpayer income was down $3,512, or 5.7 percent, in 2008 compared with 2000, President Bush’s own benchmark year for his promises of prosperity through tax cuts. Had incomes stayed at 2000 levels, the average taxpayer would have earned almost $21,000 more over those eight years. That’s almost $50 per week. “Just measuring the second through seventh years we find that total income was still nearly $2 trillion lower than if 2000 level income continued. Stacking the deck in President George W. Bush’s favor does not change the awful performance or even soften it much. The tax cuts cost $1.8 trillion in the first eight years, according to an analysis by the Tax Policy Center, whose reliability the last administration went out of its way to praise. Those cuts were heavily weighted toward the people candidate George W. Bush famously called “haves and the have-mores . . . some people call you the elite. I call you my base.” He’s right. How much more evidence do we need?
Borsa 5pts Your post assisted me in my college project on time. I think I will give my task next week.
RationlXuberant 5pts "The Congressional Budget Office has noted that most Bush tax cut dollars go to higher-income households, and these top earners don’t spend as much of their income as lower earners." let's pretend for a moment that anybody actually believes the congressional budget office... just because people don't spend their money doesn't mean that it's somehow wasted. it's not like rich guys are piling up gold and swimming in it like scrooge mcduck. unless they just stuff it in the mattress (and the fact that they're wealthy strongly suggests they don't), they do something with it-- put it in the bank, invest it in the stock market, etc. all of these activities contribute just as much (and arguably more) to the economy as "spent" money. more money in banks means banks can lend more. more money invested in stocks means companies can make capital investments and grow. so on and so forth. there is more to the economy than consumption, despite what politicians would have us believe.
ethan 5pts Thanks for the dialogue! I (obviously) love discussing this stuff. Here are some counterpoints: “The people whose taxes are in question (those making $250,000, 500,000, 1,000,000, 100,000,000 and Mark Zuckerberg) are not part of the mess.” False. The tax cuts applied to the middle class as well (hence the reasoning behind NOT repealing the cuts, AND the argument provided in the quotes by the WH in the article). Second, the richest typically have the most money invested in an economy and thus the most (in absolute dollar amounts) to lose. If they take huge losses in a bad economy, then they pay less in taxes (and, as you noted, they are the biggest providers of government revenue, so the government loses a lot). Implying they have no interest in the current financial mess because they are “above it” is absurd, no? And this is even ignoring how crazy it is to say "we with the guns will force you top 1% earners to provide 20% of our revenues" (and i actually think it's closer to 40%). “You may argue that percentages don’t matter, because if there’s more overall wealth being created than everyone benefits. But everyone doesn’t benefit. In the past 10, 20, 30, 40 years, minimum salaries have leveled off while living expenses have skyrocketed.” I just don’t agree. Everyone DOES benefit from the creation of wealth, or more directly, from the innovation that spawns the creation of wealth. Cell phones, cars, TV’s, internet, etc. Creation and development of these things provide monetary wealth for a small sub-set of people, but EVERYONE benefits. For this reason, while certainly the past 2-3 years have been bad, I would argue that the standard of living for lower and middle classes have improved immensely in the past 40 years (ask any current senior citizen how much they went out to eat, traveled, spent money on leisure activities in their prime earning years compared to middle-aged folks now). By no means am I implying the poor are living some life of luxury, but they are certainly relatively better off now than they were in 1970. Ironically, this is often thanks to places like Walmart, who are then decried as some horrible monster…for selling lots of goods for extremely cheap prices. “from where and from who the government should get the money it needs” I will never, ever, ever agree that a government NEEDS money. An individual’s financial needs are so much more important than the government’s, and thinking otherwise implies citizens are slaves to their government. Sadly, this idea of government “need” is the current fundamental paradigm of our society – that we as individuals somehow cannot exist without government entities, and that their needs supersede ours. I say, fuck that. If a government must exist, it should exist to serve the people, not the other way around. “If you’re a single person, or a group working with a common goal, this is true. However, if you’re a loose collection of individuals working in their own self-interest, this is both false and dangerous.” I don’t understand this statement. You’re saying a loose collection of individuals working in their own self-interest SHOULD have limitless coffers? You think it’s dangerous for these types of people to NOT have limitless coffers? I must be missing something…because that, of course, is insane. “Considering the current national debt, why isn’t it being discussed that we lower government salaries, subsidies to big business, war spending, defense spending, or other massive burdens that don’t directly affect the people, instead of likely trying to cut retirement and health benefits and social services?” I have some news for you. Government salaries, subsidies to big business, war spending, defense spending DO DIRECTLY AFFECT PEOPLE, and worse, for the most part, all negatively. I agree all these types of spending should be eliminated/reduced. BUT retirement/health benefits make up ~40% of national spending (with projections nearing 70% by 2020, per the CBO). This is why they are constantly the hot topic. Of course, for example, farming subsidies should be eliminated, but doing so has minimal impact compared to getting a handle on the unsustainable expense of social security and medicare. “if the stimulus plan was to give everyone money to put in the bank and never use, you’d be right” Um, then I’m right! Interest rates are close to zero, and people aren’t borrowing or spending. People are saving and trying to pay off debt. The industries bailed out did not use the free money to increase spending or add jobs – they cut, cut, cut and used the money to get rid of bad assets and balance their books. You’ve just pointed out how this was a colossal failure. “Lastly, the “programs/policies” that are traditionally thought of as being “cost effective” aren’t necessarily cost effective in reality.” I could care less what is “traditionally” thought of as cost effective. I want to objectively know what truly IS cost effective. The three obvious offenses (of NOT being cost effective) are military spending, social security, and medicare…and these make up ~65% of our national expenses (per the CBO). “For example, where does it get factored into the national economic equation that veterans who lose their minds in war come home, require tons of psychiatric care and ultimately ends up homeless and roaming the streets of downtown Los Angeles, depressing real estate values, causing wealth to consolidate in more remote suburban areas, creating a greater likelihood of crime, that puts people in jail, causes children to be raised without parents, etc, etc, etc?” This is a bit sensationalist (you can’t really believe homeless vets are playing a substantial role in real estate values dropping), but thanks for pointing out another reason why we should end the friggin wars in the middle east AND the “war” on drugs (which constantly puts non-violent offenders behind bars)! “My point is that giving the government less money from rich people won’t cause it to really consider what’s important” As you point out, the top 1% of earners pay a huge chunk of the government revenues. If they’re not getting as much revenue, how can they NOT really consider what’s important? I don’t understand any argument that implies an institution with less revenue won’t start making better decisions. They are literally forced to consider what’s important since they don’t have the resources to pay for what isn’t important!
Alvin Greene 5pts First of all, DeMint started the recession. Secondly, Ethan, you refer to the recession and "getting us out of this mess." The people whose taxes are in question (those making $250,000, 500,000, 1,000,000, 100,000,000 and Mark Zuckerberg) are not part of the mess. They are quite literally above it. Obviously everything and everyone are connected to some degree, but in the same way that the vast majority of wealthy Americans have zero connection to our overseas wars, because no one they know will have to go and die there), the vast majority of wealthy Americans have zero connection to "this mess" over than watching people talk about it on television. The reason for that is because 20 percent of the wealth of the nation is held by 1% of the people. You may argue that percentages don't matter, because if there's more overall wealth being created than everyone benefits. But everyone doesn't benefit. In the past 10, 20, 30, 40 years, minimum salaries have leveled off while living expenses have skyrocketed. The in-take of the wealthiest has also skyrocketed. You know this. The fact of the matter is being upset about government spending (which, in the past 2 years, has mostly been in response to what was perceived, true or not, as an oncoming economic collapse) is a distraction from what this article is discussing -- from where and from who the government should get the money it needs, because you'll surely agree it needs to come from the people. Also, you write this: "An institution with limitless coffers has no reason to act efficiently. In fact, they have the incentive to spend wastefully, because there’s always more money where that came from! Maybe if they had less revenue, they’d actually get around to the hard but necessary decisions about what programs/policies are truly cost effective." If you're a single person, or a group working with a common goal, this is true. However, if you're a loose collection of individuals working in their own self-interest, this is both false and dangerous. Considering the current national debt, why isn't it being discussed that we lower government salaries, subsidies to big business, war spending, defense spending, or other massive burdens that don't directly affect the people, instead of likely trying to cut retirement and health benefits and social services? Is it because elected officials ("the institution") are searching for what programs are truly cost effective? Or because they're looking out for their own individual self-interest? You also said: "To pay for the borrowing, you have to tax the public, which takes money out of their pocket and immediately reduces spending. So the thing you’re doing to increase spending simultaneously reduces spending. And if you don’t increase taxes, you have no way to pay for all the debt accrued." You don't have to increase taxes to pay for the debt if economy is stimulated and creates tax revenue on its own... if the stimulus plan was to give everyone money to put in the bank and never use, you'd be right! But if it's building a bridge that can increase productivity and ease transportation in an area plagued by traffic, while paying laborers to build it, who then go and buy food in the supermarket, which hires an extra cashier, and those people's salaries and goods are being taxed, there's no need to then increase taxes. Lastly, the "programs/policies" that are traditionally thought of as being "cost effective" aren't necessarily cost effective in reality. For example, where does it get factored into the national economic equation that veterans who lose their minds in war come home, require tons of psychiatric care and ultimately ends up homeless and roaming the streets of downtown Los Angeles, depressing real estate values, causing wealth to consolidate in more remote suburban areas, creating a greater likelihood of crime, that puts people in jail, causes children to be raised without parents, etc, etc, etc? Would cutting $1 billion in social security benefits, for example, be a net gain of $1 billion for the government? Or would the long-term effects on the people it's hurting have tangible, financial consequences for the country? My point is that giving the government less money from rich people won't 'cause it to really consider what's important... because it won't actually be affecting any of the people making decisions (only changing the gov. salaries and, more importantly, campaign finance can do this). Rather, it will result in weak people being hurt more, which will likely have greater costs for society and the economy as a whole.
ethan 5pts white house says: "we cannot afford to borrow 700 billion to pay for extending the tax cuts for the wealthiest Americans" No shit! But that didn't stop you from borrowing that exact amount for TARP, or from supporting Ben Bernacke's printing press making $600 billion out of this air last week! You can't simultaneously borrow like a man man to run the deficit to historic levels and then suddenly claim you are worried about the borrowing/deficit. This is either total hypocrisy, or an acknowledgment that the white house had no plan whatsoever to pay for the stimulus package. It's horrific either way. Of course tax cuts at any level reduce government revenue! No one can refute that. But there are two major flaws with all the complaining about tax cuts. (1) The entire stimulus plan is based on the idea that we can spend our way out of this economic mess. Repealing the cuts and taking more (tax) money from citizens is a complete contradiction with this "spend, spend, spend" philosophy. If the cuts are repealed, we'll all have less to spend. Herein lies the obvious contradiction of the Keynesian stimulus approach. To pay for the bailouts/stimulus that you believe will increase spending to save the economy, you borrow money. To pay for the borrowing, you have to tax the public, which takes money out of their pocket and immediately reduces spending. So the thing you're doing to increase spending simultaneously reduces spending. And if you don't increase taxes, you have no way to pay for all the debt accrued. This is obviously a lose-lose situation, right? My point is, stop complaining about the lack of tax cuts and start complaining about the theory used to justify all this spending. It's enormously risky (as extreme borrowing always is) and clearly unsustainable! Isn't it ironic and nonsensical that extreme borrowing is what caused the financial collapse, yet the current regime believes MORE borrowing will get us out? It's like shooting yourself in the foot, and then to fix it, shooting yourself in the other foot. How would that possibly work? (2) This is more a macro issue, but why is the baseline assumption that the government somehow deserves or should get all this revenue? An institution with limitless coffers has no reason to act efficiently. In fact, they have the incentive to spend wastefully, because there's always more money where that came from! Maybe if they had less revenue, they'd actually get around to the hard but necessary decisions about what programs/policies are truly cost effective. RationlXuberant 5pts "Of course tax cuts at any level reduce government revenue! No one can refute that." obviously you know i generally agree with you, ethan. but consider yourself refuted. :)
RationlXuberant 5pts "Of course tax cuts at any level reduce government revenue! No one can refute that." obviously you know i generally agree with you, ethan. but consider yourself refuted. :)