PLANK OCTOBER 5, 2012
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One of Mitt Romney’s more effective jabs at President Obama in the Oct. 3 debate was about raising taxes in the present weak economy:
Why is that I don’t want to raise taxes? Why don’t I want to raise taxes on people? And actually, you said it back in 2010. You said, look, I’m going to extend the tax policies that we have. Now, I’m not going to raise taxes on anyone because when the economy’s growing slow like this, when we're in recession you shouldn't raise taxes on anyone.
Well, the economy is still growing slow. As a matter of fact, it’s growing much more slowly now than when you made that statement. And so if you believe the same thing, you just don’t want to raise taxes on people.
Wow, I thought at first. Romney really drew some blood with that one. But then I remembered a couple of things:
1.) The United States wasn’t in recession in 2010. It was in recovery. A weak recovery, to be sure, but by the start of 2010 the recession had been over for more than six months. Why would Obama be talking about what you do in a recession when the recession was over? That doesn’t make sense!
2.) The White House’s 2011 budget, introduced in Feb. 2010, called for extending the Bush tax cuts on incomes up to $250,000, just as Obama wants to do today. Effectively, Obama was calling for a tax increase. Congress blocked it. Why would Obama say that it's unwise to raise taxes when he he was trying ... to raise taxes? That doesn’t make sense either!
That's when I decided to find out when Obama said what Romney said he said. Easy enough to do, because it went viral on You Tube (see below). It wasn’t 2010, as Romney said. It was Aug. 2009.
That may not sound like a big, lying difference, but it is. In Aug. 2009 everybody thought we were still in recession. We weren’t (the economy hit bottom in June 2009), but we wouldn’t find that out until one month later, when the National Bureau of Economic Research (the official recession scorekeeper) announced that the recovery was underway. Moreover, Obama didn’t say “I’m not going to raise taxes,” as Romney claims. He said, “Normally you don't raise taxes in a recession. Which is why we haven’t. And why we've instead cut taxes.” When pressed by NBC's Chuck Todd that the not-yet-passed health care bill might raise taxes on the wealthy (as it did in the end; weirdly, the provision raised little ruckus from the right when introduced in 2010) Obama very sensibly replied, “We have not proposed a tax hike for the wealthy that would take effect in the middle of a recession. Even the proposals that have come out of Congress—which, by the way, were different from the proposals I've put forward—still wouldn’t kick in until after the recession was over.” And indeed, Obamacare’s new Medicare tax hike on incomes above $250,000 won't kick in until Jan. 2013.
The economy isn’t growing very quickly, and it’s true that during this past quarter the economy grew more slowly than it did throughout 2010. But it grew, as economies do when they're in recovery. It didn’t shrink, as economies do when they're in recession. Obama made his statement when he thought the economy was in recession, and he made it retrospectively, and within one month we’d all know the economy was in recovery, and within six months Obama would be proposing a tax increase that he continues to favor today. There is absolutely no contradiction in any of this.
The question remains: Is it unwise to raise taxes during a weak recovery? Conceivably it can be, but it’s hard to find evidence that it is. The last significant tax hike occurred in 1993 under Bill Clinton, during a similarly weak economic recovery. The economy boomed. Conservatives like to argue that it boomed because Clinton (under heavy pressure from a Republican Congress) cut the capital gains rate in 1997. But the cut didn't take effect until 1998, by which time the tech boom was well underway. Indeed, the Congressional Research Service recently issued a report saying it could find no correlation between tax rates and economic performance going all the way back to 1945. “Analysis of such data,” CRS said, “suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.” For all we know, even raising taxes during a recession isn’t necessarily harmful.
21 comments
Okay, so technically we're not in a recession. Having unemployment over 8% just FEELS like we're still in a recession, because in theory the economy "is bad". If you cut spending at this point, in some mis-guided attempt to balance the budget through austerity, you'd start firing people and go right back INTO recession. On the other hand, if you raised taxes at this point, you'd have... what, no effect on unemployment? I know that's heresy compared to Supply-Side Economics, where only tax CUTS stimulate and tax INCREASES de-stimulate. But I've never believed that part of Supply-Side economic thought either. If you raised taxes, maybe you wouldn't have to fire anyone, and you'd have more money for social programs. So raising taxes in a recession would be a good thing to do -- as Eisenhower did in the 1950's with our 90% top tax rate.
- AllanL5
October 5, 2012 at 2:55pm
In addition, Obama only preserved the Bush tax-cuts, because the Republicans held Unemployment Benefits hostage to make him do it. Doesn't anyone remember December 2010, when the Lame Duck Congress got all that stuff done before the Tea-Party House came to power? Just think how much the Deficit would have fallen, if we'd had a few hundred billion dollars of additional revenue coming in for 2011 and 2012.
- AllanL5
October 5, 2012 at 2:57pm
What Noah reveals, unintentionally most likely, is that Obama's tax policy in 2010 (which, you may recall, was an election year, an election that didn't go well for Democrats) was an ambiguous mess, an ambiguous mess because he didn't propose his own tax policy but borrowed bits and pieces from GWB's tax policy and then put them together with chicken wire. After the 2010 debacle, the commentariat on the left attempted to develop a rational post-mortem on the Obama political team's apparent incompetence during 2010; but my observation was that it wasn't incompetence at all, not if your number one goal (the goal above all others) is the re-election of Obama in 2012. Here we are on the eve of that election, and once again Obama's tax policy, to the extent it exists, is an ambiguous mess, as he has yet to propose his own tax policy and instead continues to borrow bits and pieces from others. In a month we will know if the strategy worked. But in the meantime, I suggest to Noah that he not spend any of his very valuable time trying to figure out the Obama tax policy; he's more likely to see Elvis than a clear vision of the Obama tax policy.
- rayward
October 5, 2012 at 2:59pm
Why should Progressives be satisfied with constant economic misinformation with no pushback? Do not tnr readers not know that all taxes and spending are not equal?? Keynesian calculations consistently show that raising taxes on those making above 1M (possibly even 250K) has VERY little effect to reduce job production--- and does decrease the deficit. And spending that money on appropriate items can stimulate job growth. As one example, to increase taxes on a billionare by say 10M probably leads no job loss-- or maybe a job or two. If that 10M is spent on 25,000 jobs at $40,000 avg for teachers, police, firemen, or WPA type positions you have a net huge employment gain for jobs that have a large multiplier effect. Or-- if your a conservative ideologue-- spend it on 25,000 new Marines. About the same effect so long as they spend their $ in the US.
- drofnats1
October 5, 2012 at 3:41pm
Ray, I agree that Obama's tax policy has been less cohesive than one would like. I think what has tripped him up the most is the difficulty of the Democratic party trying to take point on tax increases. Because of public perceptions of each party, there are certain things they each can do with less adverse public reaction. Since the Dems are generally regarded as the creators and defenders of welfare, Medicare, Social Security, etc, they are better positioned to enact reforms in those areas -- everyone thinks, "If the Dems are ok with it, it must not be so bad". Republicans are in that role in regard to withdrawing from wars (since they are not assumed to be 'going soft') and raising taxes. What Obama desperately needs, and of course will never get, is for enough Republicans to go along with tax increases to give him some cover. As things stand, he is attempting to muddle through without taking the enormous political hit not only for himself but also for the entire Democratic party. Not an eviable position.
- Fishpeddler
October 5, 2012 at 3:46pm
rayward. Agreed re BHO's tax policy. But extend it to include overall economic policy. BHO's Keynesian-Hooverian economic policies (including tax policy) are the 2012 equivalent of 1612 astronomical beliefs that would combine geocentric and heliocentric calculations and considerations -- an unholy mess that might well lead to preferring the beliefs of Pope Urban VIII as at least having internal consistency.
- drofnats1
October 5, 2012 at 3:57pm
Fish. Polls rather consistently show that voters are NOT against raising taxes per se. And US taxes are low compared with most any other first-world country. What is lacking in this country are more Progressive leaders at the national level who consistently make arguments for- and support --Progressive policies.. Voters are NOT going to make the case for politicians. BHO has had the perfect bully pulpit to make the case-- he has not and will not. So long as voters hear only right wing ideology mildly opposed by less-right wing positions, the US will constantly move further to the right. That's what you get by re-electing BHO. In stimulus spending, health care, economic refoirm, tax policy, wars not in the national interest, etc., etc. It is painfully obvious that the conditions will change in either party only following a devastating defeat. That is not likely to be in the cards for either party in 2012. Keep an eye on 2014. Unfortunately, that's likely to apply to the Dems.
- drofnats1
October 5, 2012 at 4:13pm
Dr. O -- You're spot on with pointing out the multiplier effect of hiring a batch of teachers, firefighters, etc. I have been so frustrated at the inability of Obama to even try to explain this very basic concept that public sector employees spend their paychecks, thereby stimulating demand, helping to create more jobs. You could have a very simple ad with some graphics (showing $ signs flowing from gov't to firefighter to store to manufacturer, to manufacturer's employees, etc.) to illustrate how it works. It's not that hard; my kid understood it when he was six years old. I previously had thought of it as a rationale for stimulus/deficit spending (or as an argument against cutting public spending) but the same rationale should apply to show how a high-end tax cut would have a net stimulative effect on job growth.
- shellski
October 5, 2012 at 4:28pm
"It is painfully obvious that the conditions will change in either party only following a devastating defeat." There was this year called "2000" that you may not have been born in time to have experienced, but it was a pretty devastating defeat (ignoring for now whether it was a 'legitimate' defeat). Losing elections doesn't change much, because liberals still have to sell their souls to monied interests to have a chance to win again. We don't need to lose more elections, we need to be able to win them even if we talk loud and proud about the need for greater income equality, more progressive taxation, etc. And the only way that will happen is through earth-shaking reforms to our entire electoral culture and finance system. The Democratic party moved somewhat away from labor and toward Wall Street not by choice but by necessity -- during the 80's it was adapt or die under the flood of corporate money that was going to Republicans. I don't like it, and clearly neither do you, but your solution just means Dems will be commiting ritual suicide over and over and over.
- Fishpeddler
October 5, 2012 at 4:28pm
"I previously had thought of it as a rationale for stimulus/deficit spending (or as an argument against cutting public spending) but the same rationale should apply to show how a high-end tax cut would have a net stimulative effect on job growth." That's a natural, intuitive response, but unfortunately it doesn't work that way. The wealthy don't spend additional earnings in stimulative ways (mainly because they don't even spend it), also because what they do spend isn't even necessarily local, and much of it goes to wildly speculative investments that cause problematic bubbles in things like real estate (as we saw), commodities (as we saw more recently) and ________ (whatever is next. Tulips?).
- Fishpeddler
October 5, 2012 at 4:33pm
This applies to Romney's new "Trickle-Down Government" idea too. "Trickle-Down" is extremely ineffective when you flood wealthy people with yet MORE dollars, and tell them "create jobs". 90% of that just goes to inflating the stock market. But Government trickle-down is directly to the people who need it and will spend it immediately, with minimal overhead. It's immediately stimulative, and in fact stimulates private businesses who serve the people as well. In Keynesian terms: Of COURSE you raise taxes in a recession! How else you going to pay for all that stimulus?
- AllanL5
October 5, 2012 at 5:47pm
Fishpeddler -- I agree; wrote the post backwards -- I meant that a high-end tax increase (not cut) can still be stimulative (i.e., Romney is wrong)! (Hopefully the previous paragraph indicated that I understand how the stimulus works and wish Obama would explain it clearly.)
- shellski
October 5, 2012 at 6:03pm
Well, Obama is probably bad at explaining stuff like salaries from teachers, so forth, benefit the economy because HE SHOULDN'T HAVE TO. It's self-evident to anybody with more than a pair of brain cells. Reptiles probably know intuitively that more critters = more food for THEM. Republicans on the other hand don't seem to be able to figure this out.
- Sophia
October 5, 2012 at 6:52pm
When Romney said it, Obama was standing right next to him. Why couldn't he defend himself? Why wait until the next day to push back?
- scrubby
October 5, 2012 at 7:01pm
If I am comparing the wealthy taking their tax savings and investing in other countries of paying the money to other investors to buy stock against the federal government spending the same amount here in the United States on infrastructure or high speed rail, etc. then tax increases on the wealthy will, as they did under Clinton, improve the economy. Also, when Clinton lowered the capital gains rate, job growth went down. When Reagan eliminated it, job growth went up. Bush increased it and job growth has stunk for 12 years.
- Nusholtz
October 5, 2012 at 9:14pm
I watched Ann Coulter on C-Span being asked about Mr. Noah's piece on why respectable conservatives don't condemn voter supression and Coulter went on about how we need photo I.D.'s to prevent people from crossing state lines to vote all over the country. I'm thinking, about people waking up early, voting, driving, voting, driving, voting and doing it all before the person they somehow selected to vote as has not voted yet, and yet never getting caught.
- Nusholtz
October 6, 2012 at 2:50am
Yes, the GOP insanely allows themselves to be held hostage by Norquist on taxes. But, the Obama/Pelosi/Reid Dems shoulda let ALL of the Bush tax cuts expire as planned in 2011, or do it in 2012. And, Obama's tax holiday on some of FICA withholding was the worst idea ever - NEVER hand a temporary tax cut to the GOP, but, more importantly, stop starving the SS and Medicare trust funds for a temporary tax break. as for voter ID's? In 2004, I realized I could vote in both states where I had a residence, but chose not to because it would be wrong. But, there is NO way to cross-check voter rolls between states, and I suspect the GOP really fears all the New Yorkers and Californians with second homes in swing states, e.g. Florida or and Nevada respectively.
- K2K
October 7, 2012 at 10:00am
wait for it - Obama will get nailed on gas prices if Romney ever gets the point across about opening Federal lands to shale gas and shale oil. Far greater impact on new jobs, lower household costs (gas at $4/gallon is worse than a tax for most of us), and a flow of royalties to the Federal gov. Ironic that Pennsylvania's growing economy from shale gas development on private land is helping Obama, even tho his EPA would probably love to shut it all down.
- K2K
October 7, 2012 at 10:07am
Uh, it's shale gas the same as natural gas, and therefore in no way impacts the price of a barrel of oil? It does help the price of energy, I suppose, but the last time I checked the natural gas market wasn't making that big of a dent in prices at the gas station.
- GSpinks
October 7, 2012 at 12:33pm
Uh, Colorado has shale OIL deposits that are estimated to be = 100 years of US consumption of OIL at today's usage. If Americans knew about this, I bet we would vote to use eminent domain to seize Colorado in the interest of national security. That is in addition to all the deposits of shale (natural) gas. I made a point of writing "...about opening Federal lands to shale gas and shale oil. ..." just to be precise that the USA has both. Anyone with curiosity can follow the shale oil and shale gas stories on their own. Israel has shale OIL deposits SE of Jerusalem that = Saudi Arabia's proven reserves. Israel recently signed agreements with Canadian firms, just before PM Harper closed Canada's embassy in Iran.
- K2K
October 7, 2012 at 1:47pm
I say that Romney's weakness is that his plan for the economy to stimulate investment (top down) by cutting taxes on investors, and his plan to free up businesses with less regulation, were both taken off the table by Romney during the debate when he said he will not cut taxes on the top income earners and was in favor or regulation.
- Nusholtz
October 7, 2012 at 6:06pm