We just went through a presidential election where the Republicans demonstrated an unhealthy obsession with cutting the marginal income tax rates of the job creator, high earners who “built that” in the top two percent of the income distribution. We also caught a glimpse of the Republican presidential nominee showing extravagant contempt for the forty-seven percent of the income tax distribution who have no net income tax liability. You would have thought that the Republicans had hit a low and, having learned their lesson, would seek to craft a message and issue agenda that was more attractive to middle-class and working-class voters. Some Republicans are working for that, but some are actively trying to make things worse.
Marc Thiessen for instance. He argues that the US should go over the fiscal cliff and allow middle-class taxes to rise. Thiessen writes:
Don’t get me wrong: It would be better not to raise taxes on anyone, pursue pro-growth tax reform and cut the size of government instead. But that’s not what the American people voted to do last month. Americans cast their ballots for big government.
Now it’s time to pay for it.
Now this statement is wrong in one very obvious way. Its division of political labor is disastrously counterproductive. It should (and if the Republicans were thinking rationally would) be Obama’s job to propose Obama-level taxation to fund Obama-sized government. It should be the job of the Republicans to propose Republican-level taxation to fund Republican-sized government (whatever that size might be.) Having the Republicans proposing middle-class tax increases to fund Obama-level spending converts the Republicans from an opposition and alternative into the “tax collector for the welfare state.”
But that’s not what is most wrong with Thiessen’s position. Imagine if Obama came out for extending the current tax rates on high earners. Would most Republicans continue to insist on going over the fiscal cliff if there wasn’t an agreement on cutting spending by X amount? Some Republicans might insist on broad tax increases in the absence of big spending cuts (Thiessen might even be one of them), but I suspect most Republicans would vote to pass the tax cut extensions and deal with the spending next year. The standoff would be over.
So the real argument isn’t about how we should cut spending or else allow taxes to rise. It is about what we should do with middle-class tax rates if high earner tax rates are set to rise. The Republicans can’t block a high earner tax increase, but they can produce a middle-class tax increase to go along with it. In practice the Republicans are saying “You know what middle-class? We can’t stop tax increases on all of the high earners, but we can take you down with the noble job creators who built that. This is us teaching you a lesson. Vote Republican.”
I don’t think the lesson the public learns would be the one Thiessen and the rest of the “make them pay” Republicans think they are teaching. The more likely lesson would be that the Republicans have extended their contempt for the forty-seven percent to a further fifty-one percent and all in the interest of the two percent. And the Republicans wouldn’t even be helping the two percent out at all. The tax rates of high earners would be the same with or without an extension of the middle-class tax rates. From the perspective of the middle-class taxpayer, having the defeated party raise middle-class tax rates to go along with high earner tax increases looks less like responsible government and more like:
for hate’s sake I spit my last breath at thee.
December 30th, 2012 | 3:57 pm
[...] We just went through a presidential election where the Republicans demonstrated an unhealthy obsession with cutting the marginal income tax rates of the job creator, high earners who “built that” Source: Postmodern Conservative [...]
December 30th, 2012 | 5:44 pm
America needs an intelligent, center-right party capable of governing. The Republican Party, while not yet quite “The Stupid Party” as some of its critics believe, is trending that way. The Republican Party has cornered itself into a small space dominated by hard-right ideologues like Grover Norquist and Wayne Lapierre. Instead, the GOP needs to be thinking about how to deal with America’s problems through market-based policies that preserve indivdual freedoms yet improve conditions in our country. Where are the Roland Reagans and Jack Kemps of today’s GOP? Will Republican become the Smart instead of the Stupid Party?
December 30th, 2012 | 6:39 pm
Joseph Kott, the Republican Party HAS become “The Stupid Party”. They are captive to their special interests, and they are working to please their masters, not to save the nation from ruin. The Democrats are doing the same thing, and worse, for their special interest masters, but the point here is the failure of the Republican Party.
I have withdrawn membership from the GOP, and I am seeking a party whose values and ideals are consonant with orthodox Christian beliefs.
December 30th, 2012 | 8:01 pm
[...] Vote Republican Or We'll Burn Your House Down » Postmodern … Go to this article [...]
December 30th, 2012 | 8:43 pm
As a non-Republican, I don’t much care if the GOP decides to shoot itself in the foot, or any other body part. They’ve already demonstrated they couldn’t care less about solving the country’s fiscal problems, so what good are they? The establishment GOP is fully on board with demonizing the Tea Party, so they can go to heck for all I care.
“Oh, but the Democrat Party is SOOO much worse!” you might say. To which I say that going over the cliff (the real fiscal cliff coming up in the next decade, not this pathetic fraud) at 100 mph isn’t really any worse than going over at 95 mph.
December 30th, 2012 | 10:29 pm
I believe Mr. Woodman has hit the perverbial nail on the head. It’s time for a conservative, American party that stands for republican principles, opposes the slaughter of both infants and the elderly, and seeks to restrain the unwashed.
December 31st, 2012 | 1:44 am
Pete what if you are drastically wrong about Macroeconomics?
“Don’t get me wrong: It would be better not to raise taxes on anyone, pursue pro-growth tax reform and cut the size of government instead. But that’s not what the American people voted to do last month. Americans cast their ballots for big government.
Now it’s time to pay for it.”
i.e. the way I understand it, the deficit hawk position is a special interest of certain rich people. Mostly big investment banks who will be able to continue to force Bernanke’s hand on the 29 trillion. The top two percent might indeed be better off from having taxes raised on themselves and raised on everyone else. They are almost certainly better off if taxes go up on everyone vs. just the top two percent. So “The Republicans can’t block a high earner tax increase, but they can produce a middle-class tax increase to go along with it.”…that is in fact good lobbying for the 2%! When the economy tanks a bit we can expect the 2% to be very sophisticated (or have sophisticated agents) and to be long VIX contracts and short certain financial instruments that will more than recoup the negative financial effects spread upon everyone else. That is what is clearly bad for the economy, and what is clearly good for the economy is clearly good for the 2% (who can position themselves in either direction) Remmember the teaching of Mitt Romney, whoever wins in Nov. the rich will be okay.
Given the output gap, I technically think that Obama level taxation to fund Obama level output/government is probably lower than it currently is. The reason you raise taxes here is because you are short the market. In particular I guess that going over the fiscal cliff would be good for being short wind energy.
There are I believe all sorts of ways you could be a tax collector for the welfare state which potentially would be very beneficial to well positioned members of the 2%. If you can’t think of any, you lack immagination, and probably couldn’t get a job at Bain Capital.
In addition republicans are probably scheming for ways to block the raise in the debt ceilling.
Dear Lord, all the middle class is trying to listen to John Hancock: “The sky is not falling”, buy and hold, believe in an ownership society. Meanwhile the rich are loading up on VIX.
December 31st, 2012 | 12:07 pm
John,
“i.e. the way I understand it, the deficit hawk position is a special interest of certain rich people.”
Sure, but the Republicans (and especially the Republicans I have in mind) are not Michael Blooombergs on this issue. Holding up extending the middle-class rates in order to extract an extension of the top marginal tax rates or else letting them both go up together isn’t about bringing the deficit down.
I would like to push back against the suggestion that Republican members of Congress are doing what they are doing in service to the rich. That is certainly what it looks like to someone who follows the rhetoric, but there are plenty of Republicans who are nowhere near the top two percent who approve of this course of action (and plenty of high earners who think it is insane.) Some Republicans have:
a. Turned the defense of the current tax rates on high earners into an aspect of their political identity and are politically overinvesting in this issue – by a lot. And…
b. Are sore at the electorate for the outcome of the election and have turned this into a way to get back at the voters.
December 31st, 2012 | 10:42 pm
“We just went through a presidential election where the Republicans demonstrated an unhealthy obsession with cutting the marginal income tax rates of the job creator, high earners who “built that” in the top two percent of the income distribution.”
I hear this sort of thing time and time again, and I have yet to see one scrap of solid evidence that someone being rich beyond the dreams of avarice has created a single job for anyone else.
Where are the jobs that Grover Norquist has created? that Mitt Romney has created? that Warren Buffet has created? What state or city do they abide in? What companies pay the salaries of them? Who are the people who occupy them?
Can anyone here answer these questions with anything but assertion of Articles Of Faith? With facts, numbers, and evidence?
Now I know this is part of journal of faith, but I had assumed that this faith was in Christ as the Son of God, not faith in Mammon as the Creator of Jobs.
It seems to me that in speaking of Mammon (or Ceasar for that matter) only facts, numbers, and evidence counts. At least it does if you are going to talk sense about them.
Steve Jobs was and Bill Gates is an immensely rich man. But Microsoft and Apple were not created by the Jobs or the Gates fortune. Their fortunes were created by Microsoft and Apple.
The money accumulated by Microsoft and Apple came from uncounted millions of ordinary people buying products. And that money is what created the jobs, as well as the fortunes, not the mere skimming of the cream of the profits by the founders.
Jobs are created by millions of people buying an uncountable number goods and services, not by dozens of billionaires buying a boat, ten cars, and five mansions, each with space enough for ten cars and a boat.
If you stole all those billionaires cars at once, you probably would be able to fill a large urban parking garage, or the streets of a modest town, but hardly much more. And it isn’t that number of cars that keeps the auto industry afloat and it’s jobs intact, no matter what the net worth of the rightful owners.
Nor are jobs created by equity speculation. Borrowing capital is only one component of production of real goods and provision of real services (which is what jobs are there for). And the aftermarket trading in the issued stocks makes little difference to the success or failure of the business doing the employing.
To say otherwise is another Article of Faith about the tail wagging the dog. However inflated or deflated the stock trading price the earnings of the company come first. When the stock price outpaces the earnings, sooner or later the bubble bursts and the people holding the stock are left holding the bag and losing money. When the earnings outpace the stock price, the shrewd buy the stock cheap and sell it dear, and so are left holding the money and not the bag.
And what you pay the CEO so that he or she can buy the one boat, ten cars, and five mansions, is truly irrelevant to either the stock price or the company earnings.
Can anybody here bring forth any facts, numbers, and evidence to say otherwise?
January 5th, 2013 | 12:23 pm
Maybe Pete. I certainly think that republicans might have a) + b) as an excuse. I am not as sophisticated as I would need to be to really figure out what Washington is up to. Political Economy is more of a hobby. In general I am more of a monetary Hawk and a fiscal dove. That is in theory. Of course in practice right now being a monetary hawk with this congress would be pretty bad for the nation. So I told you bernanke realized this… I am still in the process of trying to understand QE-3, but what is interesting is that I posted this comment a while back (check the time stamp…then notice the Fed Minutes that came out where some monetary hawks suggested that QE-3 should end in 2013.) Of course in terms of economic projections that seems unlikely, Bernanke is going to keep up this unprecedented monetary policy until things get better.
While rhetorically if you are Kudlow you can say stupid stuff about “King dollar” and slam the Monetary Doves…the entire system is brilliantly corrupt.
Rhetorically you can be “principled” and be a monetary dove and a fiscal dove and a true libertarian supply sider!
But in practice the financial titan deficit hawks are really fiscal doves, or those bennefiting the most from Bernanke policies.
I would actually be more comfortable with an Obama that supported Krugman. The real Obama on the other hand seems okay with also being a deficit hawk and a monetary dove.
So basically my complaint is that democrats and republicans are happy with the status quo they are enabling in terms of monetary policy, and have thus moved on to class warfare. (Obama wanting more progressivity to the income tax, while republicans want more regressive policies).
So cutting spending(and even raising taxes, under the current environment) never made sense to me except under a very deeply cynical view. i.e. the washington consensus was in thrall to special interests impacting the negotiating positions of both the republicans and democrats, and probably to the detriment of the nation as a whole.
@ Joseph Marshall, I am sympathetic to your sense of justice, but the questions you ask are too easy, and or too complex. Too be very simple about it Bernard Mandeville’s Fable of the Bees is still partially true today, or just as true as Malthus, or Marx.
For example:
“Jobs are created by millions of people buying an uncountable number goods and services, not by dozens of billionaires buying a boat, ten cars, and five mansions, each with space enough for ten cars and a boat.”
Well jobs are created by both. It is true that the character of the consumer spending differs, and that tax cuts that target the middle class have a higher multiple…but Billionaires buy boats (that themselves employ many people in the manufacture.) A single billionaire probably also provides enough legal work for a small law firm. (admiralty law for when the Billionaire get high on coke and has an allusion(a collision) of his yatch in international waters. Or perhaps listening to his admiralty lawyer the Billionaire hires a captain for his yatch, and also goes to Lloyds and gets the boat insured. A billionaire will also provide employment for a team of accountants to ensure the best forum shopping for loopholes, and then he will hire an agency full of middle class blokes like Pete, to sell the injustice of the top line 35% (even as he pays around 4%). A billionaire will buy some farm land in Kansas and Oklahoma, and allow the familly farm owners to get a bunch of high tech equipment (which employs folks building Deere combines and Cummins engines) to persue the best yields (thus also ensuring the full trickle down from Monsanto patent) (and also collect depreciation on the equipment). He will go and buy some wind turbines from GE(which employs folks building those), and then he will go and hire a law firm who will influence the decisions of Kansas Senators who will make sure Obama and Boehner keep the wind credits alive in the fiscal cliff package.
I will disagree with this statement (which I think is agreeing with you in spirit).
“And what you pay the CEO so that he or she can buy the one boat, ten cars, and five mansions, is truly irrelevant to either the stock price or the company earnings.”
Not exactly, in many ways it is directly relevant to the stock price and the company earnings. What is really wrong (and some folks are paid to do) is that you can shift all this attention to politics and away from business. A case in point for this would be Cisco. (google a good critique of Cisco, you will basically see how all the stock based compensation dilluted stock owners, thus dilluting earnings.)
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