Tag Archives: Jonathan Cohn

Say goodbye to all Bush tax cuts?

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That’s what the New Republic‘s Jonathan Cohn wants to do:

Unfortunately, raising taxes on the wealthy will probably not be sufficient to solve our fiscal problems. If we are serious about living up to our financial commitments—in particular, the guarantees of financial security in retirement and provision of basic health care to all—then eventually we will need more revenue. There are lots of ways to do this. The ideal would probably be a carbon tax, because it would have the virtue of raising revenue and slowing global warming. There’s also a case for some kind of consumption tax, which economists tend to think is more efficient than income taxes. But since neither option seems to be viable right now, the next best thing might be to let all of the Bush tax cuts expire, so that everybody—not just the wealthy—go back to paying what they did during the Clinton era.

But wouldn’t raising taxes on the middle class slow the economy? Yes, if the rates went up right away. In fact, one of the most worrisome elements of the fiscal debate right now is that deficit reduction has so much focus. As the economist Peter Diamond has said, Washington is acting like we have a debt crisis and an unemployment problem, when the opposite is true: We have a debt problem and an unemployment crisis. Diamond’s point—which Paul Krugman made in the New York Times recently—is that we should concentrate on bolstering the job market now, while working to stabilize federal finances for the future. The former ideally would involve putting more money into the pockets of the poor and middle class, who are most likely to spend it. Raising taxes on the middle class immediately would, of course, have the opposite effect.

That’s why a better approach might be to preserve tax breaks on incomes up to $250,000, and to renew anti-recessionary programs like extended unemployment insurance and a payroll tax holiday, but only on a temporary basis. And rather than setting these measures to expire on a fixed date, Congress could try an idea economist Peter Orszag has floated: Setting these tax cuts to expire when, and only when, the economy had become stronger. For example, Congress could declare that the tax cuts stay in place until four consecutive months of unemployment below 6 percent, at which point they would slowly phase out. Or Congress could set the tax cuts to expire based on some other indicator, like the employment-to-population ratio, or a combination of several.

I’m with Cohn, at least on principle. I’d have to look more into the specifics to see exactly how this would work in practice. But eventually there’s no reason the Bush tax cuts for the middle class should remain as low as they are either, unless we enact significant reform of the tax code.

Irrational exuberance?

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[hulu http://www.hulu.com/watch/423753]

Frank Rich thinks so. Echoing his comments from mid-October (which I covered here), Rich insists that the post-election Democratic triumphalism is misguided, and that nothing has substantially altered the long-term prospects for Tea Party-style conservatism:

More seriously, if you look at the GOP’s suicidal talk right now, and the Democratic and liberal triumphalism, it’s very much a replay of what I wrote about in last month’s piece. After LBJ beat Goldwater in a far bigger victory, an out-and-out landslide, in 1964, Republicans moaned about being consigned to minority party status and possibly oblivion; Democrats talked about having won the war of ideas and demographics as well as the politics. (Goldwater only carried his home state of Arizona and a swath of the Confederate South.) Two years later, Ronald Reagan was elected governor of California, and four years later Richard Nixon became president. The core small-government credo of conservatives has been remarkably consistent and resilient ever since and still commands a majority following according to last week’s exit polling. What’s more, the GOP bench — Rubio (who’s very slick by the way), Ryan, Christie, Jindal, etc — is far younger than that of the Hillary-Biden post-Obama Democrats. This new Republican generation will find a way to put a kinder, gentler, Hispanic, female face on the GOP soon enough.

This is a depressing forecast. But it’s a useful counterpoint to jubilant predictions of Republican moderation (which I’ve expressed as recently as yesterday). Jonathan Cohn is on roughly the same page regarding the mindset of the American right:

It’s basically another version of the 47 percent argument—i.e., that 47 percent of the country is dependent on the rest of the taxpaying public. It was kicking around in conservative circles even before Mitt Romney invoked it at that now-infamous Florida fundraiser. And judging by recent commentary, it’s going to keep kicking around for a while longer. Last week, National Review’s Kevin Williamson concluded that “offering Americans a check is a more fruitful political strategy than offering them the opportunity to take control of and responsibility for their own lives.” Just today, Washington Post conservative writer Jennifer Rubin wrote that the Democratic Party won by “feeding its base cotton candy.”

It’s true that Americans, on the whole, are more enthusiastic about receiving public services than they are about paying for them. They always have been. And it creates real policy dilemmas, particularly as an aging population makes services more expensive. Do we scale back these programs or raise taxes to pay for them? Do we trust the marketplace to find efficiencies, or turn to the government? Conservatives need to be more forthright than they have been about their proposed answers to these questions: We can’t cut Medicaid by a third, as Paul Ryanproposed to do, without seriously harming low-income people. But liberals also need to confront some unpleasant realities. Over the long run, we can’t sustain the current level of benefits without asking the middle class to pay at least a little more in taxes.

But sometimes the argument about free stuff has a more insidious meaning—and you don’t have to strain to hear it. During the Fox News broadcast on Election Night, Bill O’Reilly declared, “It’s not a traditional America anymore, and there are 50 percent of the voting public who want stuff. They want things. And who is going to give them things? President Obama.” In case the reference to “traditional America” was too subtle, O’Reilly went on to talk about Obama’s strong support among blacks, Latinos, and women.

Tangentially, this “maker vs. taker” paradigm is no longer restricted to the United States: it’s taken on a global appeal. Fellow blogger Max Marder notes a very 47%-esque comment coming from a member of Israel’s new Yisrael Beiteinu-Likud party:

An article from Haaretz this afternoon quoted Likud-Beiteinu Knesset member Faina Kirshenbaum  Romneyesque’s diatribe against Israeli-Arab citizens:

“The Arabs are an economic burden on the state. They barely pay taxes and receive enormous budgets from the state,” Kirshenbaum told a German-Israeli sister cities conference held in Jerusalem by the Union of Local Authorities in Israel.

“The Arabs in the State of Israel pay NIS 400 million in taxes, but receive benefits worth at least NIS 11 billion,” she said.

“The Arabs in the State of Israel want equal rights, but they don’t contribute to the state. In order to receive equal rights, they must contribute to the state like every other citizen and serve three years, either in national service or in their communities.”

“Only 38 percent of Israeli citizens pay taxes, and a small portion of them are minorities. Tax-paying citizens of the state are carrying the rest of the population on their backs,” she added.

Kirshenbaum’s comments doubly mirror defeated presidential candidate Mitt Romney, who said both that a lack of Palestinian economic success vis-a-vis Israel was the result of cultural inferiority and that 47% of Americans were essentially moochers off of the state. What both Romney and Kirshenbaum miss, obviously, is that Israeli-Arabs are at best second-class citizens in the Jewish State. Israeli-Arabs, like African-Americans, are worse off than the majority because of historic discrimination, not laziness.

It’s a bitter irony that, following on the heels of one of the worst global recessions in modern history, the emerging narrative is that class warfare is being waged by the poor against the successful and wealthy. This seems odd, given the enormous bailouts staged in the United States and elsewhere simply to save this very same Team Successful from irreparable financial ruin. Clearly, no good deed goes unpunished.

I am becoming gradually convinced that one of the chief problems preventing genuine financial and tax reform in the U.S. is the massive blindspot that lower- and middle-class Americans have about…themselves. No one thinks of himself as a taker, but millions think that half the rest of the country is. How convenient, then, that all these nameless, faceless takers all turned out to have voted for Barack Obama. Maybe Frank Rich has a point.

(Video at the top is only marginally related to anything in this post, but I couldn’t let the opportunity to sneak it in slip away.)