The question on many minds right now, with the fiscal cliff negotiations looming, is will the President have better luck implementing his tax policy than he did the last time we were faced with the expiration of the Bush tax cuts. We all know that he is an excellent campaigner, but can he show the same astonishing level of skill and competence in implementing the economic agenda that he was elected on, and which won overwhelmingly? And yes, it did win overwhelmingly. The resounding Electoral College win, reflecting carrying every battle ground state except one, the huge win in the Senate, gaining seats despite all of the Democratic seats in play, and even the House, where Democrats won the majority of the votes, all confirm this. This victory came in the face of an economy that still has a long way to go towards full recovery, and yes, is a mandate confirming that the public backs the President’s approach, and not that of the GOP. This was fully and exhaustively debated during the campaign, and the President and Democrats won – period.
After the last renewal of the Bush tax cuts for the wealthy, the President drew a line in the sand, saying that he would not extend them again. Will he be able to follow through? This can only happen if overwhelming pressure is put on Republicans in the House to pass the bill doing so. The first step is that GOP arguments against this need to be weakened substantially, including in the minds of their own supporters, many of whom who at the present may at least temporarily willing to listen. Let's look at a few of these arguments:
"There is no need for a tax hike on the wealthy. Increased revenues can better be obtained by closing loopholes, and broadening the tax base, while lowering rates.":
Ok, time to put up or shut up. Taking these one at a time, which loopholes do they want to close? Keep in mind, all of these loopholes have constituencies. Are they going to limit home mortgage deductions? Is this really smart at a time when housing is weak? Are they going to reduce medical insurance deductions? This will give businesses incentive to drop insurance plans, which again will not exactly go over well. Are they going to drop deductions for the payment of state taxes? This doesn’t exactly sound fair, and will increase the revenue to the Federal government any time state taxes go up - that doesn’t sound like something Republicans will buy. I know, how about deductions on carried interest, the one put in exclusively for the benefit of hedge fund managers. You wanna bet whether they want to cut that one?
So let’s move to broadening the tax base. What exactly does that mean? I hope it doesn’t mean increasing Federal income taxes on the poorest of our citizens. Many don’t pay income tax due to the Earned Income Tax Credit, which Reagan himself said was "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress." If work doesn’t pay more than not working, people won’t work. Time to quit this ridiculous talk about “skin in the game”. If this isn't what they mean, and loopholes won't do it, then how does the tax base get broadened? Finally, talking about reducing rates in the face of all this, well that just makes the entire job more difficult, if the goal is to increase revenues. The entire Romney plan was based on these arguments. It was sensibly voted down by the electorate, and can no longer be considered as part of a serious proposal.
Let’s look at another GOP argument: “fixating on eliminating tax-cuts for the rich rather than looking at the entire picture is self defeating. “ Well, from my perspective, it is the Republicans who are fixating on extending these tax cuts. Why isn’t it equally a fixation in their case? Why can’t this be part of a larger plan to eventually reign in deficits? Why doesn’t it make sense? We’ve already seen that the closing loopholes idea seems to make a lot less sense, at least in terms of political feasibility.
Next Republican argument: “The Democrats say that you can’t cut your way to prosperity. Well, you can’t tax your way to prosperity .“ But the first step towards prosperity is to increase economic growth. And economists nearly unanimously believe there are far better ways to stimulate the economy than through tax cuts for the richest among us, and as a bonus, we can invest in America to better ensure that economic growth is sustained in the long term. These investments cannot be implemented without funds to do so.
Also, the Republicans like to talk about how important having confidence that the deficit will be controlled is to the markets. Well, when Bill Clinton was first elected President, he realized that the one of the best ways to instill confidence that the government was serious about this was to responsibly raise taxes on those who could afford it. This was the reasoning behind the increases contained in the 1993 Omnibus Budget Reconciliation Act, which among other things famously raised the top marginal rate to 39.6 percent. The Republicans then, and most were the same actors as those around now, were hilariously wrongin their predictions on the impact that this would have. For instance
Do you know what? This is now your package. We will come back here next year and try to help you when this puts the economy in the gutter. And virtually every major economic estimating firm in this country says your bill is going to kill jobs. That is why we are passionate about it.Dick Armey:
Taxes will go up. The economy will sputter along. Dreams will be put off and all this for the hollow promise of deficit reduction and magical theories of lower interest rates. Like so many of the President's past promises, deficit reduction will be another cruel hoax. Tax revenues will lag because the economy will fall. Government spending will increase at least another $300 billion a year. And the deficit will reach another record high.Newt Gingrich:
I believe this will lead to a recession next year. This is the Democrat machine's recession, and each one of them will be held personally accountable.And there are plenty more where these came from. They haven’t even bothered to update these arguments for 2012 – they are are word for word the same as the wrongheaded ones they made 20 years ago. We all know what happened then: 22 million jobs were created, and the government ultimately ran a surplus. Good policies produce good outcomes, bad policies produce bad ones.
Finally, my favorite argument: “Raising taxes on the rich will only raise 80 billion dollars per year – this is a small fraction of the yearly deficit. “ Are they serious? First of all, what are they saying, that doing nothing is better than taking a step in the right direction? But much more importantly, this is a necessary step in order to make any other progress. It will be absolutely impossible to ask the middle class to accept any changes to entitlements unless there is a perception of fairness. They will not trust the government to not once again sell out to the voices of the 1%, unless steps are taken to demonstrate that things have changed. No, raising taxes on the wealthy is not sufficient to put our economic house in order, but it is an absolutely necessary first step towards doing so.
It is time for the President, the media, and all of us, to demand details from the Republicans, if they truly have superior ideas. Their soundbites are worthless without specifics. Do they have answers to the counterarguments offered here? So far, and throughout the entire Presidential campaign, getting them to go beyond empty platitudes was as frustrating as trying to nail Jello to a wall.