Skip to main content

Since the first 10 minutes of the first Obama/Romney debate, I've had a nagging question that I have expected to hear someone - whether the Obama campaign, the punditry, the smart folks at DK, anyone - ask.  Perhaps it is just too simple, or maybe I just don't understand the argument, so if it is the latter, I'm hoping that someone here can enlighten me...

Throughout the entirety of this campaign, we've heard the GOP argue that the prescription for healing the economy is to lower taxes on the "job creators" so that they have "more money in their pockets" to "create jobs," and that these tax cuts will therefore result in a pony, whoops, an explosion of economic activity which will benefit all.

Since early in the first debate, however, the Romney / Ryan position has been that they will lower tax rates but will, for high-earners, cancel out the cut in rates with elimination or limiting deductions, so that the upper income brackets do not pay less in taxes, i.e. their effective tax rate will be unchanged.

Can someone explain to me what the supposed economic effect of rearranging the furniture like this would be?  If we just monkey with rates and deductions so that the ultimate effect is the same effective tax rate on the "job creators," how can this possibly spur any job creation - even if one buys into this trickle-down malarky to begin with?

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  I've been asking myself the same question. (11+ / 0-)

    Frankly, I think it's ideological, and I think that "job creators" are not stupid nowhere near as ideological as Romney pretends to be and Ryan is. These people believe the very word "tax" makes job creators repel, but if you come at the revenue from another perspective, they will happily pay the money because it isn't a "tax". It's the same thinking that allows Romney to say that he didn't raise taxes in Massachusetts: he didn't raise taxes, but upped the fees for everything from gun licenses to inspection stickers. It's tax by another name.

    Here's the other thing that gets me: "revenue neutral". That's another word for bullshit.

    If I were president Obama, I would come out and say "what America needs is real solutions to real problems, not amateurs playing Monopoly with taxpayer dollars". Because that's exactly what the Romney/Ryan agenda is. I'd say plan, but they don't have one.

  •  No, I don't think that anyone (11+ / 0-)

    can explain this to you because there is no explanation.  

    If I'm not mistaken, I think Joe might have made essentially your point, noting that it's not a tax cut if you are taking with one hand and giving back with the other.

    But in reality it is smoke and mirrors to try to hide what will actually happen, which is that rich people's tax rates WILL go down because Congress will never limit deductions significantly enough to make a dent.  Instead, as Clinton so well articulated, the GOP would blow up the debt and the middle class will be stuck with the bill for paying all the interest on that debt.

    Ryan's budget has been magical, fairy-dust horse-puckey from the get-go, and your analysis above is absolutely correct.

    "Put your big-girl panties on and deal with it." -- Stolen from homogenius, who in turn stole it from a coffee mug.

    by Mother of Zeus on Fri Oct 12, 2012 at 08:16:57 AM PDT

  •  Biden scored on the "job creator" meme, took it (7+ / 0-)

    down effectively. He pointed out that a lot of those "small businesses" RR are talking about are hedge fund operators etc.

    Their plan is just hooey, which is why Biden was totally correct in laughing and mocking it.
    It's just a scam.

    Your question would be a valuable one to use. Hopefully someone can forward this to Obama  or his camp will think of it themselves.

    You can't make this stuff up.

    by David54 on Fri Oct 12, 2012 at 08:20:35 AM PDT

  •  Serious question deserves serious answer (4+ / 0-)

    In the first debate, Romney addressed this and indicated that the rearrangement within the top 1% would focus available funds in places that would lead to job creation.

    There's no reason to believe this is true or even possible, but conceptually it's not ipso facto absurd.

    BTW: Colbert presented your question last night a bit more entertainingly than you've done in his 'Worthy Opponent' segment.

    Am I right, or am I right? - The Singing Detective

    by Clem Yeobright on Fri Oct 12, 2012 at 08:20:39 AM PDT

    •  Well, I find it absurd. (4+ / 0-)
      Recommended by:
      luckydog, phonegery, gfv6800, greengemini

      Why? Because as we've seen in this recent financial crisis--and the banks are a great example of this--when the top 1 percent sees a windfall, they aren't spending it, they're keeping it invested. That might create a job or two on Wall Street but it's not going to do anything for Main Street and both Romney and Ryan know this is true, because they are both enormously wealthy.

      Who's kidding whom?

      •  Ummmm, investment generates employment (1+ / 0-)
        Recommended by:
        commonmass

        It's called 'capital', and it's a pretty fundamental concept in economics - even socialist economies utilize it.

        Am I right, or am I right? - The Singing Detective

        by Clem Yeobright on Fri Oct 12, 2012 at 08:33:22 AM PDT

        [ Parent ]

        •  Right now, corporations are sitting on trillions (4+ / 0-)

          of profits, and not spending them to build new factories or update. I don't see how giving them more money to sit on will create more jobs. It just goes to the Caymen Island.
          Just ask Mitt.

          My experience, as a former business person, was I created more jobs because I had more demand for my services.

          As long as wages stay flat and healthcare costs continue to go up, there won't be any extra money to create that demand. Cutting social security will take even more money out of the economy.

          That's why I think we do need govt investment in infrastructure, energy, research, education. Things that are an investment in America and will create jobs, which will stimulate personal spending and create that demand, that creates more jobs.

          Today's problems are yesterday's solutions. Don Beck

          by Sherri in TX on Fri Oct 12, 2012 at 09:09:19 AM PDT

          [ Parent ]

          •  Great comment. (1+ / 0-)
            Recommended by:
            greengemini

            Thanks.  

            There seems to be a 'which came first, the chicken or the egg' question between 'investments' vs 'demand' creates jobs.

            Another way to look at it is what use of  money creates the most demand, and therefore the most jobs.  The money spent by lower and middle income people is the most effective, I think.  It gains by how fast and how often the dollar is  spent locally.  If I pay a bill I owe you, you can use that money to pay a bill you owe someone else, and that way the money is spent and re-spent.  It has a velocity, a speed, so that each dollar of initial spending is generally worth two and a half dollars of earning/spending activity.  The 'lock up in the vaults, sidelined dollar does not generate that increase in demand.

            Time is a long river.

            by phonegery on Fri Oct 12, 2012 at 10:05:41 AM PDT

            [ Parent ]

  •  Or on Medicare... (2+ / 0-)
    Recommended by:
    commonmass, greengemini

    If you do away with Obamacare, a Medicare voucher to purchase insurance will be useless. No insurance company is going to insure an elderly person for a reasonable cost.

    "Lets show the rascals what Citizens United really means."

    by smiley7 on Fri Oct 12, 2012 at 08:21:30 AM PDT

  •  My guess is... (2+ / 0-)
    Recommended by:
    commonmass, greengemini

    ...that the deductions and loopholes they'd go after would be those used by lower and middle income people.  

  •  seems your answer is "Screw the middle class." (2+ / 0-)
    Recommended by:
    commonmass, greengemini
    Q:...what the supposed economic effect of rearranging the furniture like this would be?
    Seems like that answer has been addressed several times in several ways by the Pres, the Veep, and various other folks.

    Seems like the kinda confusion you're highlighting may simply be a result from the republicons repetitions of falsehoods - it may just seem like no one's answering the question, 'cause republicons refuse to acknowledge reality...

    Cheers.

  •  The Romney/Ryan job creation plan: (2+ / 0-)
    Recommended by:
    commonmass, greengemini

    Tax Cuts + (??????????) = Jobs

    We're supposed to elect them before we find out what's in the brackets there.

  •  Every time we say "job creators" I think (4+ / 0-)

    Frank Luntz gets a residual.

    "Gentlemen, you can't fight in here! This is the War Room." - President Merkin Muffley

    by Farkletoo on Fri Oct 12, 2012 at 08:24:40 AM PDT

  •  Short answer: Look! Shiny thing! n/t (1+ / 0-)
    Recommended by:
    commonmass

    Barack Obama is not a secret socialist class warrior who wants to redistribute wealth in America. But I'll still vote for him, anyway.

    by looty on Fri Oct 12, 2012 at 08:31:31 AM PDT

  •  A serious answer (0+ / 0-)

    I believe what they'd say is that a less complicated tax system would lead to better economic performance by reducing the time spent on manipulating one's economic affairs to avoid taxation (and which may not be the most economically productive uses of one's income), as well as the time spent on tax preparation itself.

  •  Here's a more direct, related question (3+ / 0-)
    Recommended by:
    Red Bean, Sherri in TX, greengemini

    "Gov. Romney, right now, tax rates are at historic lows, the wealthy in this country are richer than they've been in 100 years, and their income is growing rapidly. Corporations have more cash on hand than they've had in decades. If lower taxes will spur economic growth, why isn't our economy going gangbusters right now? And why do you think that even lower taxes will help the economy? Especially when those taxes are what could help pay-down the national debt?"

    To me, this is the crux of the issue, and I wish someone would just come out and bluntly say it.

    Freedom isn't free. So quit whining and pay your taxes.

    by walk2live on Fri Oct 12, 2012 at 08:48:13 AM PDT

  •  Here is the argument that Romney was using (1+ / 0-)
    Recommended by:
    greengemini

    Picture yourself as a "job creator."  

    You have the option of working 10 hours a week and pulling in $1,000,000 on a project, or working 20 hours and pulling in $2,000,000.

    Assume that by working hard, you will "create" twice as many "jobs," which is more than 0.

    If you are taxed at 50% and can deduct $500,000 (which we assume does not go up if you make more money):

    working 10 hours a week your taxes are ($1,000,000-$500,000) * 50% = $250,000, so your take home pay is $750,000.

    working 20 hours a week, your taxes are ($2,000,000-$500,000) * 50% = $750,000, so your take home pay is $1,250,000.

    Since deductions do not increase with the amount of time you work, then the change in your after-tax pay is the change in your income times the tax rate.  The assumption in their argument is that in this scenario you would rather golf the extra 10 hours a week because the $500,000 extra take-home pay isn't enough to motivate you to work.  Note that the govt. gets $250,000 in taxes from you in this scenario.

    They are proposing to limit deductions and cut rates, so imagine that taxes change so that you get no deductions, but your rate is 25%.

    If you work 10 hours, you will have the same take-home pay, and the government will have the same taxes.  If you work 20 hours a week, you will take home $1,500,000 and the govt will get $500,000, and you decide that the extra $750,000 is worth working for instead of playing golf.

    Everybody wins.  You make more money.  You "create" twice as many "jobs," and the government gets $250,000 more in tax revenue from you.

    This in a nutshell (plenty of those in a nuthouse) is their argument.  Plugging in numbers that actually makes sense in the real world is a problem for them, because the growth in work and jobs created that they assume is completely unrealistic, but they can always pay think tanks to say that it is realistic, which is where 1 of their 6 "studies" come from.  2 others are, I believe blog posts by the campaign, and 2 others are right leaning op-ed pieces.  If I'm remembering correctly (and I don't remember my source), they get to 6 because 1+2+2=6 because math.

    Numbers are like people . . . Torture them enough and they'll tell you anything.

    by Actuary4Change on Fri Oct 12, 2012 at 08:48:49 AM PDT

  •  You make an excellent point. (1+ / 0-)
    Recommended by:
    greengemini

    As you describe, it shows that the republicans themselves know that millionaires would move further ahead under their policies, otherwise there wouldn't be additional money there to trickle down.

    A strong argument could be made here by the Obama campaign, and it could be made in a simple, common-sense way. You just say:

    "Romney argues that their plan will benefit the economy, because if the 1% does better, this will trickle down to the middle class. First off, we know this doesn't work. But second, isn't this an admission that their policies put more money in the pockets of the 1%? After all, you can't hope for more trickle down unless there's more to trickle down. The very basis of their entire economic philosophy is to put more money into the hands of the well off."

  •  First of all, the executive branch does not write (0+ / 0-)

    tax legislation, or any legislation for that matter.  So, Willard and Pauli are promising something they cannot as a practical matter do. Of course, if something can't be done, then no blame will attach to not doing it. Some thing with promising to cut out abortions. That can't be done either, which, in that case, makes it a nice perennial issue, obviating discussing all the things that could be done, but aren't.

    Secondly, the tax cut agenda has, in fact, been used by Congress for decades and accounts for why we have all those favorable provisions in the tax code that advatage first one, then another employer who controls large numbers of votes.
    So, what's happened this time is that the candidate for the executive are using the legislative campaign handbook, because, being instinct-driven people, they naturally ape what they see other people do; besides it's worked so well for Congress. Frustrated legislators like Ryan often think if they just had an executive position, they could get their way.
    Lust is one of the seven deadly sins and R&R have it in spades -- not a lust for sex, but for power.

    Tax cuts are a faux issue.  Why does Obama talk about them, as well? On the one hand, since Congress holds the purse strings, he has to placate them to a certain extent.  Also, Democrats have been responsible for keeping the budget front and center for a long time. Even though we've now been operating without one for two years, the budget process allows legislators to spend other people's money on projects they can brag about and get themselves reelected on -- their major priority. Also, the artificial scarcity makes it possible to argue that some things should not be done, without having to go into great length.  It's the mom at the candy counter routine. "No, we don't have enough money for gum (guns)."

    The real question is why authoritarians want to privatize public functions.  And the answer is because American enterprise has always been suckled at the public teat (that's how wealth got to the 1%) and universal suffrage, FOIA and accounting standards have made public service a PITA, especially for members of Congress who want to be poobahs not servants.  If they send contracts and dollars to their friends in the private sector, then, like the unjust steward in the Bible, they can feather their nest.

    We organize governments to provide benefits and prevent abuse.

    by hannah on Fri Oct 12, 2012 at 08:55:14 AM PDT

  •  Really, not much. (0+ / 0-)

    There is an argument that by reducing marginal rates--the rate that a person would pay on additional income above what they actually earned, if they earned it-- people are encouraged to actually earn that extra money.  The idea has some merit, but its effects have been widely exaggerated.  

    And really, the more important thing is your effective marginal rate, not the stated rate.  For example, if you use that extra income to qualify to buy a larger house with a larger mortgage, under existing law your marginal tax rate is higher, but you are taking a bigger deduction for your mortgage every year.  If those offset, there is no incentive.

    For some, their effective marginal rate could be lower under the current system than under the Romney "plan", because they would spend the extra money on things that allow them to take deductions that more than offset the lower rates.

    Anyway, that is really the only argument for their plan, as they have stated it.  (Of course, their plan is impossible, and would by necessity raise taxes on the middle class and cut taxes on the ultra wealthy.)  If they were actually eliminating deductions, they could at least argue that doing your taxes would be simpler.  But they can't even argue that, since their latest "plan" they've floated is to keep all the deductions, just cap them.

  •  Loophole (1+ / 0-)
    Recommended by:
    greengemini

    One of the "loopholes" they intend to close is the home mortgage deduction, which will allow them to cut tax rates and force the middle class to pay for it.

  •  Lower taxes to create jobs -- sheer BS (0+ / 0-)

    Bush did that already.  And see how well that turned out.  Businesses are sitting of Trillions of Dollars as it is, but the truth of the matter is that jobs are created in response to higher demand.  There is no demand right now because people are paying down debt as fast as they are able and are not consuming.  No consumption, no new jobs.
    Government needs to step in and create demand.  That's what the American Jobs Act is designed to do by improving infrastructure in the short term.  That would put people back to work and all those people with jobs will start buying stuff again, creating demand and growing the economy.   But the Republicans won't move because it may make Obama 'look good' and they can't have that.

  •  It's similar to Romney's "repeal Obamacare, but (0+ / 0-)

    keep the good parts" BS.  First off, why do it that way, when it's already already doing pretty much what you say you want it to?  In the case of Obamacare, if you think you can get the votes for a repeal, why not just pass a fix?  You're just forcing a messy restart that will harm health care consumers for a longer time.
       Second, for the really thorny problem of ridiculously low taxation of un-earned income: Romney's 15% rate on 20 Million for example, There Are No Loopholes.  It's just a really, really low rate.  Oh, and NONE of those dollars creates a single American job outside of the financial industry.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site