2008 Issue Briefing: Taxes and the Economy

We all know John McCain is out of touch personally - par for the course when you can't remember how many houses you own. But did you know McCain's economic policies are equally out of touch? Actually, you probably did - but we bet you haven't yet seen it presented in shiny PDF form. Well, now all of your dreams have come true!

The Harvard Dems Legislative Committee proudly presents the first in a series of weekly briefings on issues in the 2008 election. Download the fact sheet here.

Comparing the Obama and McCain tax plans

Look:

These are from the Tax Policy Center's new report (PDF here, it's dense and detailed but worth reading if you're a wonk) on the two presidential candidates' tax plans. The differences are pretty stark: McCain wants to keep the ludicrous Bush tax cuts (and, incredibly, cut corporate tax even more), while Obama wants to roll them back on the wealthy and introduce targeted exemptions and credits for everyone else. Consequently, as you can see above, the Obama plan produces an immediate gain for the bottom 80%, while McCain's is helpful to the top fringe. In the long term, working-class and middle-class Americans will benefit more greatly from the Obama plan, while McCain's plan overwhelmingly favors the ultrarich elite.

Another illuminating policy difference is the estate tax, which is levied on multimilliondollar inheritances (read: Daddy's yacht. And to preempt the inevitable Harvard Republican rebuttal, no, family farms and 96% of small businesses are NOT affected by the estate tax. Do your research). Obama will keep the current exemption levels (slated for $3.5 million in 2009) and set the rate above exemption at a sensible 45%. McCain, however, would raise the exemption to $5 million -- meaning someone who inherits $4.9 million would pay nothing on it -- and set the rate at just 15%. You don't need an economics degree to figure out what's happening there.

So in short: Democratic policy supports the interests of the middle and working class, while Republican policy amounts to a handout to the superrich elite. In other news, grass is green and the sky is blue. But this is a helpful reminder of both how radical John McCain (and the entire Republican Party) really is, and how basic the issues really are in 2008.

(from TaxProfBlog via TPM)

UPDATE (Monday, June 16): Paul Krugman argues in his column today that Obama doesn't go far enough in raising revenue, and has accepted the conservative framework that tax cuts are the best thing you can do for working people. It's a valid argument, but I think -- and this is one of the only times I've ever found myself disagreeing with Paul Krugman -- the key thing is the progressivity of the tax system. Raising taxes on the rich is preferable to raising taxes on everybody, and Obama's plan embraces that philosophy (in a way, also, that will make it very palatable to the public). The revenue we need for UHC and deficit reduction and whatever else can come from spending cuts (esp. in defense once we're out of Iraq) and further tax hikes on corporations and the highest brackets.

Ahem

Not to toot my own horn, but:

Republicans seem to be losing the anti-tax card that has helped them win elections over more than a quarter- century. A majority of poll respondents oppose leading Republican presidential candidates' plans to cut taxes on corporate profits and maintain lower rates on investment income such as capital gains and dividends.

A majority of Americans also say they would tolerate higher taxes to help pay for universal health care... By 52 percent to 36 percent, Americans favored health and education spending as a better economic stimulus than tax cuts.

R.I.P. Reaganomics. Like I've been saying, old-fashioned Republican complaints about tax and spending are losing their traction entirely (no matter how much they may crow about Charlie Rangel).

Bloomberg poll writeup here: full results & methodology from the L.A. Times here. I hope to write at length about this poll shortly; some of the breakdowns by gender and income level are worth further investigation.

Meanwhile, here's one other figure that jumps out: 13% of American households contain someone who's "staying in a job they want to leave mainly because of fear of losing your health insurance". Think about that: One in ten American families are being held back from employment opportunities because they can't trust our health care system. That's not right. (Also, interestingly, that figure holds pretty steady across income groups; people in solid middle-class or even upper-class jobs are just as afraid of being left without insurance.) I wonder what Jacob Hacker, who has been arguing for years that the most serious consequence of the modern economy is a spread of economic risk, has to say about this...

Why I Like Canada

Because it's so refreshing to see headlines like this:

Tax supporters rally at City Hall

Toronto Star -- Dozens of supporters of Mayor David Miller's new taxes for Toronto, decked out in yellow scarves, rallied in front of City Hall and then flocked into the council chamber this morning.

Council votes at its meeting starting today on Miller's proposed land transfer tax and vehicle registration tax -- measures that will raise as much as $356 million a year for the city...

"When I say Service, you say Fees! Service!" "FEES!" "Service!" "FEES..."

...Of course this is all so much political theater, and the Toronto Star -- long in the pocket of the Liberal Party -- is nobody's ideal of objective journalism. Still there's no doubt that in Canada, taxes are viewed in a much different light than the United States; from my experience they're generally seen as a fair tradeoff for our outstanding health-care system, strong schools, lack of toll roads, etc. There is comparatively little political hay to be made out of tax as an issue; if voting in '84 Canadians would have elected Walter Mondale--

--in a landslide.

As would many other First World countries, actually. It's a peculiarly American, specifically right-wing American, thing to rail categorically against taxes; even here, for decades (especially post-New Deal) that was the kind of thing only a Goldwater-caliber wingnut would campaign on. But for whatever reason, anti-tax mania took over our discourse during the Reagan and Gingrich eras, to the point where these days an American pol won't let even a suggestion of new taxes slip his lip for fear of political crucifixion. Today's Republicans -- the party of Fiscal Responsibility, recall -- find themselves running up ginormous deficits and/or slashing social programs rather than touch even a marginal rate; and frankly Democrats are little better. Even the 2008 frontrunners, who are on the whole more progressive than we've seen in quite a while, won't allow afor nything more harsh than a rollback of the Bush cuts and maybe a slight increase on the wealthy / capital gains; these moves, though laudable, are baby steps. We have candidates who pledge to create universal health care, a stable Iraq, and all other such wonderful things, but for political reasons won't go near the tough fiscal moves necessary to pay for them. Once one of them is actually in office, of course, this may create something of a problem.

What we have to remember is that taxes are not, in and of themselves, normatively or politically problematic -- rather it's a specific function of this country's politics in the past 30 years. And I think that that anti-tax attitude is reaching the end of its shelf life; supply-side economics are totally discredited (among the sane), there's no Ron Reagan in sight, and on the whole fiscal issues are losing their salience behind more pressing concerns like job security, health care, and of course the war. (This, I wrote a while ago, is a big problem for Rudy Giuliani, whose campaign on non-terrorism issues is totally a 1980s throwback.) The more conservatarian bits of the Republican base may still be crowing about big government, but Reagan Democrats certainly aren't anymore; in today's economy the concern is less "I wish I wasn't paying so much tax" and more "I wish I had a job." (Not to mention, given the subprime market, "I wish I had a house.") If the economy continues in its current pattern it won't be long before the middle class is willing to accept (maybe even expect) some reasonable tax increases in exchange for a stable home and community; at which point, events like the one in Toronto today won't seem nearly so far-fetched.

This Should Not Be Happening

You know, there was a time when people thought the roads of the 21st century would look like this--

--not this:

--

Can you imagine anything more profoundly terrifying than having an Interstate bridge collapse underneath you? It's an image from a nightmare.

--

After that steam-pipe exploded in Manhattan, there were a number of stories about how America's infrastructure is growing old and decrepit. Nothing came of it, but I was struck by the thought; isn't America supposed to be the country where things work? Wasn't America the country that engineered the rest of the world, that built incredible public structures as -- among other things -- momuments to human accomplishment? And what does it say that now they're falling apart?

TIME Magazine wrote this (emphasis mine):

A burst pipe in midtown Manhattan on Wednesday stirred the anxieties of New Yorkers who have experienced plenty of them since 9/11. But given the decrepit state of the country's urban infrastructure, the debacle could very well have been at a bridge in Boston or a sewer in Philadelphia. Indeed, the Manhattan steam-pipe geyser might be compared to the flooding of New Orleans after Hurricane Katrina and the 2003 blackout of the Eastern Seaboard: accidents and catastrophes that might have been prevented with the right funding and political priorities.

Urban planning experts say America's older cities are modern-day Pompeiis - within range of volcanoes of infrastructure failures like New York's. On Wednesday, a pipe, laid in 1924, exploded near Grand Central station, killing one person and injuring 30. Maintaining a sewer system is hardly a sexy political issue, but years of funding neglect and a subsequent lack of maintenance nationwide have left many of the country's engineering systems unprepared to handle future stresses. "We have an aging infrastructure in this country, and we are not doing enough to maintain it and replace it," said Sarah Catz, director of the Center for Urban Infrastructure at University of California-Irvine. "What you saw happen in New York will happen in all types of infrastructures."

The issue is widespread, said Dan LeClair, who teaches city planning at Boston University. "It's not just pipes," he said. "It's bridges, it's roads, it's electrical systems, it's a variety of things that can happen in a man-made environment that can have a disastrous effect." A recent report by the Urban Land Institute determined that America's comparatively low investment in various transportation infrastructure - airports, public transit, railway systems, roads and bridges - has created an "emerging crisis." Of the 30 state transportation planning directors surveyed for the report, 25 said the nation's transportation infrastructure is incapable of meeting the nation's needs over the next decade.

It's too early to speculate on the cause of this particular disaster -- while Minnesota's Republican governor had been making enormous cuts to state services (as Republicans like to do while lowering taxes on the rich), there are conflicting reports on the bridge's structural integrity and whether inspections had been happening properly. Besides, our hearts are all with the people in Minnesota who lost loved ones today, and right now they need to trust their governor.

But at some point we need to confront this idea that America's infrastructure simply works on its own. It's not true. And this habit of cutting government funding for such things -- which has been around since Ronald Reagan and the "small government" mania of the 1980s -- has got to stop. Conservatives, it seems, fail to understand that when you don't fund your infrastructure it fucks up. And then people die.

Think about that.

Not the Best Way to Start the Week

Good morning! (Well, it's morning in my mind.) Happy Monday, everyone. First I would like to point out that that lake in Chile is still missing, so if you see a trace of Carmen Sandiego anywhere for heaven's sake call ACME.

But the big news today is from the Supreme Court, which this morning has crapped out a whole bunch of rulings. It's a mixed bag; I approve of the decision to permit interest-group TV ads right up to election day, since the old rule banning them after a certain deadline was terribly arbitrary, and there's really no excuse for limiting political expression like that anyway. Also, as disappointing as it is to hear that the awesome "Bong Hits 4 Jesus" kid lost, I tend to sympathize with the idea that advocating illegal activity within a public educational institution does not count as protected speech. (Think of it this way: if the banner had said "Kill People 4 Jesus," you wouldn't want that permitted in a high school, would you? From a legal perspective the standard is the same.)

What gets me, though, is the 5-4 decision in Hein v. Freedom From Religion, which came to the truly sick conclusion that taxpayers do not have standing to challenge federal government programs. Excuse me? The people who pay for something are not entitled to complain about it? Justice Alito (and I still shudder a little every time I hear those two words together) apparently employed this logic:

"If every federal taxpayer could sue to challenge any government expenditure, the federal courts would cease to function as courts of law and would be cast in the role of general complaint bureaus."

This might be acceptable thinking from a fast-food restaurant that decides not to accept credit cards so its line moves faster, but it's hardly a way to run your national justice system. It's bad enough to say that people cannot question the constitutionality of programs they pay for, but to make that decision for reasons of efficiency is just repulsive. What's next, do we start cancelling elections because they're too much of a hassle?

And I'll bet you can guess exactly who agreed with this statement: Alito, Kennedy, Roberts, Thomas, and Scalia. George Bush's posse. Surprise!

Reason #270 to elect a Democratic president in 2008: no more of these turkeys on the Supreme Court.

UPDATE (1:30 PM): On "Bong Hits 4 Jesus," Justice Stevens' dissent raises some good points I hadn't really thought about. First, he argues that drug advocacy is not serious enough to merit censorship:

It is also perfectly clear that "promoting illegal drug use" comes nowhere close to proscribable "incitement to imminent lawless action." Enouraging drug use might well increase the likelihood that a listener will try an illegal drug, but that hardly justifies censorship... No one seriously maintains that drug advocacy (much less Frederick’s ridiculous sign) comes within the vanishingly small category of speech that can be prohibited because of its feared consequences. Such advocacy, to borrow from Justice Holmes, "ha[s] no chance of starting a present conflagration."

And second, he argues that even if it did, this poster hardly qualifies as advocating illegal drug use:

To the extent the Court independently finds that "BONG HiTS 4 JESUS" objectively amounts to the advocacy of illegal drug use—in other words, that it can most reasonably be interpreted as such—that conclusion practically refutes itself. This is a nonsense message, not advocacy... [Complainant] Frederick’s credible and uncontradicted explanation for the message—he just wanted to get on television—is also relevant because a speaker who does not intend to persuade his audience can hardly be said to be advocating anything.

I'm not really convinced by the second point -- the student's intent has little to do with the eventual effect of his message, and it's perfectly possible to merge nonsensical humor with advocacy. (For proof of that see this, or any, blog.) But when Stevens suggests that drug advocacy does not present a serious threat of disruption, he may be on to something... it's tough to disentangle that question from the issue of whether marijuana use is really harmful at all, though, and that point it stops being a free speech question and the court would get hopelessly lost. Wouldn't a better standard, for First Amendment purposes, be simply to proscribe speech in public schools that promotes illegal action, whatever that action may be? I'm open to hearing from someone who knows about law on this.

"But You Just Can't Say That"

Everyone's pal Drudge, in an unusually accurate and realistic headline choice, links to this story as "John Edwards: 'We'll have to raise taxes'...". The gist:

WASHINGTON (Reuters) - Democratic U.S. presidential candidate John Edwards on Sunday said that he would raise taxes, chiefly on the wealthy, to pay for expanded healthcare coverage under a plan costing $90 billion to $120 billion a year to be unveiled on Monday.

"We'll have to raise taxes. The only way you can pay for a healthcare plan that cost anywhere from $90 to $120 billion is there has to be a revenue source," Edwards said on NBC's Meet the Press news program.

Now, it's understandable why Drudge would choose not to embellish this story with his usual breathless right-wing hyperbole (HILLARY: 'I WILL CRUSH YOU'). A politician looking into the camera and saying "let's raise taxes" has, historically, been tantamount to suicide (see: Mondale, Walter).

But I'm not so sure that, in today's political climate, this is the same kind of flamethrower it once was. Since the departure of smaller-government harpies like Newt Gingrich and the emergence of more tangible problems, there has been little public discussion of taxes. The issue is worming its way out of our consciousness, or at least our newscasts. Further, Americans are generally in favor of a more-nationalized health care system, and with reservations endorse such a thing even if it means an increase in taxes (see this ABC/Post poll from 2003 which found a stunning 80% willing to accept a tax raise for universal health care). The 80s are over, Reagan is dead, and it seems like the old "tax-and-spend liberal" accusation might be losing its luster.

And more generally, one can hope that American voters are ready to respect the honesty of such a policy. I'm sure I have a bias here, considering that I worship the ground on which John Edwards walks, but: a scenario can be imagined where the electorate says "Hey, he's got the balls to say it, I'm impressed with his courage and conviction." It's at least a nice contrast from the typical politician, whose campaign produces Miracle Wonder Solutions for everything which never ever have negative repercussions. ("More social programs!" "Lower taxes!" "Balanced budget!" "Tastes great!" "Less filling!")

Edwards may be ahead of his time in rejecting the tyranny of Grover Norquist, and/or Drudge may be behind the times in accusing him of an antiquated political faux pas. I'm not sure. But the way this plays, especially if Edwards' unveiling of his detailed plan on Monday receives significant coverage, may be revealing as to how the tax issue markets in the 21st century. Keep an eye out.

Update: Taegan Goddard at Political Wire is feeling it. "[H]e's the "straight talk" candidate... Edwards seems to have little interest in dancing around tough issues and finessing his answers... he comes across as a very different kind of politician. It's worth watching."