The Obama Tax Plan
Jason Furman and Austan Goolsbee, economic policy guys for Barack Obama, have an op-ed in The Wall Street Journal defending their man against accusations of being an economy-wrecking tax-hiker. They point out that Obama’s conservative critics should have little credibility on this issue:
They said President Clinton’s 1993 deficit-reduction plan would wreck the economy. Eight years and 23 million new jobs later, the economy proved them wrong.
They also point out that the real difference between Obama and McCain is in terms of the distributional impact of their tax policies:
Sen. Obama is focused on cutting taxes for middle-class families and small businesses, and investing in key areas like health, innovation and education. He would do this while cutting unnecessary spending, paying for his proposals and bringing down the budget deficit.
In contrast, John McCain offers what would essentially be a third Bush term, with his economic speeches outlining $3.4 trillion of tax cuts over 10 years beyond what President Bush has already proposed and geared even more to high-income earners.
Last, they argue that Obama won’t even raise taxes by very much:
Overall, Sen. Obama’s middle-class tax cuts are larger than his partial rollbacks for families earning over $250,000, making the proposal as a whole a net tax cut and reducing revenues to less than 18.2% of GDP — the level of taxes that prevailed under President Reagan.
All of this is true. Unfortunately, the third part is a little too true. As Furman and Goolsbee say in the first passage I quoted, the lesson of the 1990s is that a tax burden in the neighborhood of 20-21 percent of GDP is perfectly consistent with very robust economic growth. At the same time, we have growing public sector needs in terms of health care, education, and transportation infrastructure. Under the circumstances, it would probably be expedient for the federal spending share of the economy to go higher than the level of tax revenue that was coming in during the Clinton administration. Obama is proposing to leave tax revenues considerably lower than where they were ten years ago. The political rationale for what he’s doing is clear enough, and I think it makes sense for Democrats to avoid leading with their chins on taxes, but at the same time making the case for, at a minimum, a return to Clinton-era revenue levels shouldn’t be very difficult.
27 Responses to “The Obama Tax Plan”
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
August 14th, 2008 at 9:35 am
Dems are going to take it on the chin no matter what they propose. you think political journalism is about presenting facts ?
August 14th, 2008 at 9:37 am
Hello. I was reading someone elses blog and saw you on their blogroll. Would you be interested in exchanging blog roll links? If so, feel free to email me.
Thanks.
August 14th, 2008 at 9:46 am
With due respect to Bill Clinton’s winning deficit-reduction plan, wasn’t the 20+ million job growth more a result of the digital revolution and globalization?
August 14th, 2008 at 9:51 am
I am sick and tired of all the cost increases associated with my house. If the plubming bill needs me to pay more then why can’t someone just slash the plumbing budget, because I’m tired of paying to fix the plumbing, and also when I hire a plumber sometimes other things break so they’re just ripping me off. Nobody should be able to tell me that I have to pay for something just because there’s water flooding some room somewhere.
This is about Freedom, and I’m tired of all the liberals trying to warn me that if I don’t pay to fix the plumbing now there will be some sort of ‘damage’ to my house that the skeptics say won’t happen, or that somehow someone is going to come try & make me pay for this ‘water’ which will supposedly leak out of this plumbing that the social-plumbocrats keep wanted us to pay to get fixed.
My friend has some good conservative references who have nothing to do with the so called ‘plumbers’ mafia and they say that if I just give them a bunch of private contractor money that they will show up when it’s really important and do a much better job than all these so-called elite ‘experts’ who speak all this gobbledy-gook about plumbing this and that.
August 14th, 2008 at 10:02 am
As an aside, I personally think it is reasonable for the long term goal to be a gradual reduction in government spending as a percentage of GDP, and thus a gradual reduction in government revenue as a percentage of GDP. That is because I think that over the long run, many of the necessary functions of government should not be increasing in cost as fast as the economy is growing.
But of course that is over the long run–in the short run, maybe we will need to increase spending as a percentage of GDP to deal with particular issues, and of course to the extent revenue policy has become disconnected from spending policy (as it recently has), we definitely may need to increase revenues to correct such issues.
Still, I think it is worth not leaping to Matt’s conclusion (that just because we need more spending on some programs, that means we need more spending overall). In other words, I think Matt should take more seriously the idea that maybe a lot of the new spending he would like to see can in fact be paid for by other spending cuts (or just slowdowns), rather than increased revenues.
August 14th, 2008 at 10:15 am
I think liberals and progressives misunderstand alot of the hostility towards taxes. It isn’t because of a failure to understand that the government spends money on worthwhile things. Its because the government spends money on things people think are not worthwhile. This is true from the progressive point of view as well, I think the Iraq War is soaking up more tax dollars than Head Start.
Even if you assume that most government spending is on warm and fuzzy social programs (it isn’t), for various reasons there is alot of opposition to the social programs. Many people also think that if any level of government spends their money, it should be their locality. In other words, its not enough to argue “taxes are wonderful, look at all the government programs they fund” since what people really oppose are the government programs, not the taxes.
August 14th, 2008 at 10:29 am
Ha ha! There’s always an excuse. Nowadays, the R’s call the good economy of the 1990s “the Clinton bubble”. On the other hand, while it was happening, they called it the obvious and inevitable result of the previous decade of Republican tax policy.
PS: Have CAP install a Preview button.
August 14th, 2008 at 10:39 am
Of course, one of the things that helped President Clinton was six years of a Republican controlled Congress that would not let the Clinton Admnistration start any new programs and would not let him raise taxes a second time.
What the Clinton Administration shows is that the private sector can function with with higher taxes as long as the taxes do not change each year. I doubt that an Obama Administration supported with large majorities in Congress will be able to resist tinkering the the tax code each year or starting new entitlement programs.
August 14th, 2008 at 11:22 am
The big news here is the max of 20% on capital gains. I can tell you how strongly those in the business sector feel about capital gains taxes and how high taxes would be a drag on the economy. They really believed Obama was going to double it to 30%. 20% is a BIG relief to them, and that’s why this is in the WSJ op-ed page.
http://strategy08.blogspot.com
August 14th, 2008 at 11:33 am
Let us hope that we do see a fundamental change in economic policy, and with it a change in tax policy, in any future U. S. government. Underplaying this in a campaign is necessary. Actually maintaining the current course when our economy so badly serves the majority of Americans now and threatens to leave our nation a shadow of its former self if continued would be spectacularly irresponsible.
August 14th, 2008 at 12:53 pm
But didn’t the Anchoress teach us that leading with your chin is actually a good thing?
August 14th, 2008 at 12:53 pm
So Matthew thinks federal taxes should be around 20% of GDP, while Obama is proposing 18%. Maybe we could just make a plan to cut defense spending by 2% of GDP. Of course it could be dangerous to have a defense budget only 8 times China’s, instead of the current 15 times.
Note that current spending in Iraq and Afghanistan is roughly 1% of GDP, so just leaving Iraq would get pretty far toward this goal.
August 14th, 2008 at 1:11 pm
….all of which presupposes that over the next few years, the economy stays more or less where it is now, which may be delusional thinking. Plummeting housing values means less property tax revenue, means budget shortfalls for schools, means layoffs on the local and state level, means loss of purchasing power, means businesses close, means none of these folks are paying taxes, means government revenues shrink, means an epidemic of further layoffs and a services shortfall at the very time those services most needed. The only people who come out safe here, are the very people who’ve engineered the entire debacle. (Thank you, Grover Norquist and friends, who will always eat well no matter what happens to the rest of us.)
I sincerely hope Obama’s getting together a plan for dealing with all this, but I wouldn’t expect to hear about it in a campaign context even if he were.
August 14th, 2008 at 1:19 pm
Obama’s going to reduce “unnecessary spending”? On what programs? There’s the war, of course, but other than that what’s he going to cut? The vast majority of the budget that goes to defense, Social Security, and Medicare? Good luck getting that through Congress! Public broadcasting? Enforcement of environmental regulations, market regulation, or civil rights laws? The impossible-to-cut 0.0034% of the budget that goes to agricultural subsidies? The 0.6% of the budget that goes to NASA? Does he promise the imaginary savings from cutting unspecified “waste, fraud and abuse” all Presidential candidates claim they’ll find?
If there’s anything the public hates more than unnecessary spending and tax increases, it’s cutting spending.
August 14th, 2008 at 1:42 pm
I think it makes sense for Democrats to avoid leading with their chins on taxes,
I disagree. McCain touts an “all of the above” approach to energy, but the one thing he’s ruling out is tax increases. Obama should drive home that without taxes, there won’t be any revenue we can spend on infrastructure and research for energy issues. In other words, given his tax priorities, drilling that won’t get us any energy for a decade really is the entirety of his energy plan–any other promises he makes are inconsistent with tax cutting.
Considering that tax and fee increases for oil companies are the root of McCain’s mild opposition to the Gang of 10 plan, it shouldn’t be hard to show voters a trade-off between tax cuts for the rich and energy reform.
August 14th, 2008 at 3:43 pm
During WWII those making over $3 MILLION a year were levied tax rates of 90% for everything OVER $3 MILLION in annual income. America ended up not only winning wars on two continents against two fascist empires but also ended up being the strongest nation on earth.
The Democrats were in charge, America was strong, and Republicans were angry. The Republicans had nonsense theories that tax cuts and warfare were synonymous.
So in the last six years Republicans have run up well OVER $3 TRILLION IN DEBT, largely borrowing from fascist China in return for giving them America’s manufacturing base.
Republicans misspent way over a $1/2 TRILLION dollars against the wrong nation (Iraq) while the Taliban fester and grow stronger in the country the Republicans ignored (Afghanistan).
Republican predatory deregulation (Gramm/McCain/Bush/Greenspan) has gutted the American middle class at home while seceding America’s sovereignty to international corporations.
But McCain wants to double down on Republican right-wing extremism: more tax cuts for $100 millionaire heiresses, trillions more in debt for our Nation, even more predatory deregulation at home, while selling out our Nation to the highest international bidder.
McCain’s international lobbyists will sell out to any nation that will pay them. Look what the Republic of Georgia got for their investment in McCain’s lobbyist Randy Scheunemann.*
The left is to polite to point out that foreign born Republican John McCain has as much loyalty to his adopted country as he did to his first wife.
* Maybe that’s not a good example, the Republic of Georgia paid off McCain’s lobbyist Scheunemann for “strategic” advice and ended up getting themselves invaded by Russia while McCain ended up getting talking points to “look strong” in the 2008 election. Good deal for McCain, not such a good deal for the Republic of Georgia.
August 15th, 2008 at 3:55 am
The Clinton economic record is shabby at best.
October 10th, 2008 at 4:50 am
On October 5, 2008, the CW Network premiered a new TV show from the creators of The Sopranos. The new show is called Easy Money. The show is about a family that owns and operates a “high-interest loan” business called Prestige Payday Loans. It’s pretty typical to see shows being unrealistic when it comes to what actually happens in real life. After watching one of the trailers for Easy Money, as well as a few of the episode synopses, I can tell that the premise for the show is based solely on vicious media stereotypes. Think about the last time you saw a news story either online or on television news talking about the payday loan industry. Chances are, the story spun tales of “real” people’s troubles getting stuck in an “endless cycle of debt.” According to such “articles,” these cycles of debt all started when these people needed to borrow money to pay for a surprise expense. Stories like this are further proof that most news networks sensationalize controversial issues for the sake of winning the ratings wars. It seems like the CW is doing the same in an effort to recover viewers lost during the Writer’s Strike. One preview opens with the tag line, “for this family of loan sharks, money is easy.” It will be interesting to see how the show’s creators misconstrue the payday loan industry throughout the upcoming episodes.
Post Courtesy of Personal Money Store
Professional Blogging Team
Feed Back: 1-866-641-3406
Home: http://personalmoneystore.com/NoFaxPaydayLoans.html
Blog: http://personalmoneystore.com/moneyblog/
February 17th, 2009 at 5:43 am
There is obviously a lot more to figure out about this issue, but you made some really good points. I will definately be checking here more often. Thank you.
March 1st, 2009 at 7:02 pm
cialis
Great site. Good info
March 11th, 2009 at 4:53 am
Incredible site!
March 14th, 2009 at 5:36 am
Excellent site. It was pleasant to me.
xanax
March 22nd, 2009 at 6:25 am
tramadol
Excellent site. It was pleasant to me.
March 22nd, 2009 at 10:33 am
buy viagra online
I want to say – thank you for this!
April 3rd, 2009 at 4:21 am
Very interesting site. Hope it will always be alive!
cheap brand pfizer viagra
April 9th, 2009 at 7:00 am
thanks !! very helpful post! viagra
April 19th, 2009 at 9:43 pm
Xa1eJa nadkdnzjnqzy, [url=http://vybvhheycfmd.com/]vybvhheycfmd[/url], [link=http://cekeizgdbtfp.com/]cekeizgdbtfp[/link], http://flnywowmxjsk.com/