JONATHAN CHAIT JANUARY 28, 2011
-
Read Later
READ LATERAvailable only to subscribers. SUBSCRIBE TODAY
-
Listen
ARTICLE AUDIO
- Font Size
One of the things that happens when power shifts in Washington is that people expect far more change than actually occurs. New officeholders may talk loosely about change, but the underlying forces driving the status quo haven't changed, and neither will the policies.
Two New York Times stories published today illustrate this quite nicely. The first is about corporate tax reform. President Obama and some members of Congress have discussed reforming the corporate tax code, which has high nominal rates but enormous loopholes. The trouble is, people who benefit from the loopholes don't want to reform the system:
But recent efforts to rationalize the code all have failed, and some members of both parties express skepticism that this time will be different. The problem, in a nutshell, is that the popular step of lowering taxes for industries like trucking requires the unpopular step of raising taxes for industries like biotech.
The very idea is already drawing howls from the corporate sector.
Moreover, many of the individual exceptions that allow corporations to shield profits from taxation actually enjoy broad popularity, like tax breaks to support domestic manufacturing, low-income housing and green energy.
Guess what? The interest of the companies benefiting from loopholes outweighs the interest of the companies that would like lower rates. If nothing else, loss aversion will drive the loophole beneficiaries to lobby harder than non-beneficiaries. My prediction: nothing happens.
Meanwhile, you know how Tea Party candidates were talking about trimming wasteful defense spending? That isn't going to happen either:
To hear the Republican leadership tell it, the once-sacred Pentagon budget, protected by the party for generations, is suddenly on the table. But a closer look shows that even as Speaker John A. Boehner and Representative Eric Cantor, the House majority leader, insist on the need for military cuts, divisions have opened among Republicans about whether, and how much, to chop Pentagon spending that comes to more than a half trillion dollars a year. ...
So far, few Tea Party-backed members on the House Armed Services Committee have said specifically where they would cut. In public remarks at the hearing on Wednesday, several spoke up in favor of favorite military programs or of protecting military installations at home, illustrating the difficulty of balancing their overarching philosophy and goals with the immediate concerns of their districts.
Guess what? Wasteful defense spending exists because it creates jobs in somebody's congressional district. That hasn't changed. My prediction: very little happens.
6 comments
You disappeared for an entire day and no explanation? And when you didn't show yesterday, I expected Noam or someone else to post on your blog, but there was nothing. What happened? You can't go far wrong predicting business as usual on the reformation of corporate taxation or on defense spending cuts. Inertia will prevail.
- liberalref
January 28, 2011 at 10:00am
I hope that the national media picks up on the hypocricy of the Tea Partiers. While I imagine that there are some who would accept cuts in areas that benefit themselves, they generally appear to have a childlike belief that "government" means things that they don't like, and that spending can be cut without affecting themselves or anyone they care about. I'd bet that the guy who said "I don't want your government healthcare plan affecting my Medicare" is fairly typical of their thinking along with the Tea Party Congressman who was furious that his health coverage wouldn't kick in quickly enough. I also remember a NY Times article that reported that a large number of people at Tea Party rallies were living on unemployment benefits, social security or other government stipends. A Tea Partier who said "I will cut government by bringing home the troops from Afghanistan regardless of what happens there when we leave, reducing the benefits under social security and medicare for everyone including my parents/grandparents, not repairing federal highways, and by reducing/eliminating farm subsidies putting some of my rural neighbors out of work" would be someone that I would disagree with, but who I would also respect for ideological candor. I don't see that from anyone with the possible exception of Ron Paul.
- PeteM
January 28, 2011 at 10:03am
On corporate tax reform, undoubtedly the constituencies for specific loopholes will lobby harder than companies and groups generally interested in lower rates or "tax simplification." But the same thing was true in 1986 and (to many people's surprise) similar broadly based and roughly revenue neutral tax reform was enacted that year. That was not the result of some good-government miracle as it's sometimes portrayed. Basically the '86 Tax Act had enough "transition rules" and special goodies to placate enough special interests, to a sufficient degree, to allow the bill to be enacted. No guarantees, but the same thing could happen this time.
- rriley
January 28, 2011 at 11:00am
Since hypocrisy seems to be the charge of the day, how about Obama's selection of Immelt to boost employment. GE, being a multi-national (and very adept at increasing employment - overseas), benefits from the corporate tax loopholes, in particular the rules for apportioning income and expenses between US operations (taxed) and foreign operations (not taxed). If you think splitting the atom is complex, take a look at the "controlled foreign corporation" regulations.
- rayward
January 28, 2011 at 11:07am
As has been pointed out, virtually the entire Obama State Of The Union address was one big "Put up or shut up!" to the Republican Party, and more importantly the Tea-Party. Obama has put on the table virtually everything the Tea-Party has demagogued about since he was elected. Because it's only when their dogma is moved from nice fuzzy platitudes into actual policies that their hypocrisy and lack of realism becomes obvious. It's easy to DEMAND pie-in-the-sky, and create disatisfaction and even hatred, until YOU become the party that has to provide the pie-in-the-sky.
- AllanL5
January 28, 2011 at 11:18am
I believe Entropy, more so than inertia, prevails.
Meet your new regime, same as the old regime.
- GSpinks
January 28, 2011 at 12:47pm