Clive Crook’s gloss is right-on:
Take this budget at face value, and when Mr Obama talks about “a new era of responsibility” he does not mean: “We are all in this together.” He means: “The rich are responsible for this mess and it is payback time.” Leftist Democrats are thrilled, and rightly so. The budget has three themes: healthcare reform, public investment and unflinching redistribution. This is indeed a new social contract: we get, they pay.
This is, in fact, one of the reasons I am increasingly optimistic about liberaltarianism. I predict Obama’s unabashed embrace of throwback, dirigiste, soak-the-rich “liberalism” will not prove popular with generally pro-market, well-to-do voters who crossed over for the first time to pull the lever for a Democratic president. Yet the not-very-religious remain repelled by social conservatism all the same. As I’ve said, it doesn’t matter to me whether the Republicans become more liberal on “values” issues or whether Democrats adopt more sensibly market-oriented social and economic policy. Either way, by signaling the desire of contemporary Democrats to move even further left than is feasible in the U.S., Obama draws attention to the unoccupied space in American politics.
I don't know about 'further left than is feasible'. I think there are a whole lot of people who wouldn't mind getting free money from the government.
Hell, I'm a hardcore libertarian and I'm shrugging these days. You mean I can get all sorts of money for sitting at home? I'll sit here and collect the checks that come from all you suckers actually working for a living.
The problem with democracy is that at a certain point people vote themselves all sorts of free stuff. We are at that point. Soon we will be at the point where the system just doesn't work. The Soviet's tried it with communism 1.0 and Obama is trying it with communism 2.0.
This reminds me of the “We had to destroy the village to save it.” argument.
I think JB, Clive, and Will are not adjusting for history. Let's get a little perspective here. The so-called soak the rich tax policies basically take us back to the mid 90s where we soaked the rich much less than we did from the late 1930s to the mid 80s. So relatively speaking, I don't really think Obama is returning us to some soak-the-rich era. I see him as returning us to a more balanced era. Right now our income distribution matches that of the 1920s. From 1935 on it slowly evened out until 1980 when the wealthy started taking more and more until it now parallels the roaring 20s and the start of the Great Depression.
So maybe the rich will be paying more than during the wonderful Bush era, but it's a bit hysterical to use language like “The rich are responsible for this mess and it is payback time” and “soak-the-rich”. Obama is simply returning us to equilibrium. I mean, he's not even raising any marginal tax rates, he's just letting them expire while bringing a bit of sanity to our tax deduction system that favors high income earners.
And I forgot to add that he's not returning Capital Gains rates to their proper level, which is equal to income tax rates. It's really non-nonsensical in a market economy to tax labor higher than Capital. That imbalance has undoubtedly contributed to some of our current problems and yet Obama is proposing a Capital Gains rate of 20% instead of 15%, still far below what is logical if you really believe in free and equal markets. And that certainly benefits the rich, no?
“he's not even raising any marginal tax rates, he's just letting them expire “
The power of the doing/allowing distinction is immense! Anyway he's gunning at all sorts of deductions for the top brackets, so not only is the marginal tax rate being allowed to rise, there is much being done to raise the effective rate.
Part of the point of Clive's article is that it's impossible to pay for all the stuff without soaking the rich AND the middle class, but Obama's budget fantasizes that economic growth will be miraculous in order to conceal the punishing tax rates that would in fact be required to finance the announced spending.
“Proper level”? According to Larry Summers, that might be 0%.
My suspicion is that these recent months have been so confounding that people (I'm definitely including myself here) no longer have–or at least trust–settled political beliefs. The old principles just don't seem to suffice any longer, especially, the 'more' vs. 'less' government principles.
So, and especially among those middle and upper-middle class college educated voters who, given historical trends, are uneasy with high, soaking taxes and massive government liabilities: I think as long as stability is restored, they'll take what comes.
In other words, even though obvoiusly 3.2% projection at this point is clearly way too optimistic, as long as there is SOME growth, SOME reliability, and SOME stability, those voters will count Obama a success and re-elect Democrats–in still more other words, at this point, I'm proposing, most Americans would be happy to trade a much larger governmental role in the economy and higher tax rates for stability and predictability.
Obama's budget limits the size of mortgage deduction wealthy taxpayers can claim.
Doesn't that make you happy, Will?
I simply can't understand how you can characterize a reversion to Clintonian tax levels this way. This isn't revolutionary.
1) you must account for 1994-1998: tax hikes on the rich followed by economic expansion and massive wealth gain by upper income earners
2) how in the hell did tax cuts for the middle class and reversion to tax levels from 10 years ago get to be this huge radical initiative, that all good libertarians and conservatives must oppose to the death on principle? Why is this even approaching something we should even be disturbed by?
Seriously people, look at the numbers on tax levels for various classes of earners over the past half-century. Then ask yourselves how it is you can use all this hyperbole with a straight face.
But surely, you know, moving in an actual liberaltarian direction would be better for you than running in the opposite direction. I'm sorry, but this “by doing exactly the opposite of what I hope, he draws attention to the unoccupied space” argument seems weak to me. Certainly compared to actually occupying that space.
For what it's worth, yes, the result of this budget is to make self-described conservatives and CPAC attendees much more concerned about freedom than values.
But the argument of “It's a good thing that no matter who is power does the opposite of what I want, since that just makes the opposition be very close to what I want” seems strained. It would be better to have two parties that each have elements of what you want than a situation where whoever is in power is the opposite of your desires, and whoever is in opposition does what you like.
Though it worked for Malcolm Muggeridge, I suppose. Some people always prefer the cleansing feel of opposition
Clive & Krugman seem to agree that paying for the kinds of programs Obama is proposing will require a lot more government revenue from somewhere.
I'm reminded of this little figure:
http://lanekenworthy.files.wordpress.com/2008/0…
What this chart reveals is that to the extent to which states engineer redistribution, they tend to do it less through the structure of the tax code, and more through the way in which expenditures are organized.
To press this to policy, the US might institute a VAT (broad based consumption tax) which would, by its nature, be highly regressive. But suppose we use the money to pay for universal health care. Given that the chief beneficiaries of such a plan would be people in the bottom 2 quintiles of income distribution this would redistribute vast amounts of wealth.
Just saying. Economic liberty is not freedom from taxation, or even a “flat tax” rate. You also need to look at how the money is spent.
Not just Larry Summers. If you are trying to get as little government induced interference in peoples decision to consume or save income, the rate is 0% for reasons that I can't easily explain in a short reply, but this is a mathematical truth.
The problem's that arise with a 0% CG rate are more practical: they create a huge incentive to try to reclassify ordinary income as capital gains and eat up a bunch of resources in doing so.
Good luck with that! Why would higher tax rates and a larger governmental role produce more stability as opposed to a more corporatist bent to economic life– leaving people subject to the caprice of their government.– hardly a stable and predictable system.
“I'm sorry, but this “by doing exactly the opposite of what I hope, he draws attention to the unoccupied space” argument seems weak to me. Certainly compared to actually occupying that space.”
I'm trying to occupy it!
Reversion to Clintonian tax levels?
I would be less concerned about the feasibility of this budget if there was an actual reversion to tax rates under Clinton.
This plan does nothing but reduce the tax base.
There is no way this budget produces anything but ever larger deficits.
I would just say, Look around. Clearly low tax rates, large surpluses of capital, an unregulated, globalized securities and derivatives market–people aren't going to trust the political principles that allow this sort of world for a long, long time. If the price of higher regulation is lower and slower economic growth, if the price of averting total global financial meltdown is a quasi-nationalization of the banks…I just think at this point, give such options to the voter, and s/he'll choose the latter over the former.
Itsy, bitsy, tiny, teeny-weeny change we can believe in!
The wealthy buying homes they can afford is not the problem. The problem is using incentives to encourage people to buy homes who should not be buying them (until they are more responsible, have more money, etc.). The mortgage deduction is a systemic problem that tinkers with the market and encourages housing bubbles.
If Obama was 1/100th the man he claims to be, he would state this and do away with the mortgage deduction entirely. The first major political figure to seriously propose and back this will actually be a leader instead of an empty suit. The only comparable thing I've seen in the past 10 years is Bush attempting to reform Social Security. He may have failed, but I do give him credit for trying.
Given the option of things that sound like fantasy (i.e. workable communism) vs. things that intelligent people know produce wealth over the long-term, stupid people will choose the fantasy. No shock there.
They want their cake and to eat it too. It doesn't work that way no matter how many times Obama and his ilk say otherwise.
Have you looked at the freaking 'stimulard' and budget numbers recently?
There is no way these increases on the rich will come close to paying for all this largess. You are delusional or a liar if you think otherwise.
Further, do you really think rich people pay taxes? They have things called accountants, lawyers, and lobbyists to make sure that doesn't happen.
Yes, and in 1999 the CBO said we'd have a surplus of 381 billion in 2009. Whoops! Stupid delusional lying CBO!
Anyway, I'm not going to argue that these tax increases will pay for the largesse as you call it but it's a start and I think Steve's larger point stands: Quit being hysterical about tax levels on the rich that are still much lower than the median over the past 100 years!
I'm less concerned with a few of the tax increases, but the overall deficit spending is crazy. It's a lie or ignorance of such a level that it is evil that somehow 'the rich' can pay for all of this.
Obama is absolutely clueless.
Yes, you're trying to occupy it. But politicians aren't, especially not successful politicians.
If something is a perennial “unoccupied space,” then perhaps it is because it's a vote-loser. In which case the argument for your strategy of converting people intellectually is a good one, but the fact that successful politicians run away from your unoccupied space may imply that that space isn't really that big. Or at least not full of voters.
Consider the case of Tom Campbell the Republican Congressman, who ran against Dianne Feinstein in 2000 in California. He was a pro-abortion, pro-gay rights libertarian Republican who ran advertising his pro-decriminalization of pot stance. He was crushed by an even larger margin than usual in the Senate race. And this was in California, where you might argue that libertarian politics would have some kind of traction.
I just don't see how this “drawing attention to the unoccupied space” can possibly be viewed as a good thing.
Yes, you're trying to occupy it. But politicians aren't, especially not successful politicians.
If something is a perennial “unoccupied space,” then perhaps it is because it's a vote-loser. In which case the argument for your strategy of converting people intellectually is a good one, but the fact that successful politicians run away from your unoccupied space may imply that that space isn't really that big. Or at least not full of voters.
Consider the case of Tom Campbell the Republican Congressman, who ran against Dianne Feinstein in 2000 in California. He was a pro-abortion, pro-gay rights libertarian Republican who ran advertising his pro-decriminalization of pot stance. He was crushed by an even larger margin than usual in the Senate race. And this was in California, where you might argue that libertarian politics would have some kind of traction.
I just don't see how this “drawing attention to the unoccupied space” can possibly be viewed as a good thing.