“What drags our entire economy down is when the benefits of economic growth and productivity go only to the few … and the gap between those at the very, very top and everybody else keeps growing wider and wider.”
— President Obama in a speech to Florida college students on Tuesday, April 10, 2012
With Rick Santorum’s exit from the Republican race, the country now informally enters the general election. Not surprisingly, the president seems to be revisiting the broken wealth redistributive philosophy that was so successful in the Soviet Union.
To be fair, Americans have been benefiting from relatively lower Federal taxes in recent years, while the government has been on an accelerated spending binge. Much of this state of affairs is by design. During recessions, deficit spending can help fill slack consumer demand. However, at some point the American people and their government must restore the balance by paying more taxes and spending less, respectively.
As such, I do not disagree in theory that Americans ought to pay more taxes to help reduce the deficit. The American government can accomplish much of this task by simplifying the tax code so that the pain is spread around and the overwhelming majority of Americans pay more.
By default, a simplified tax code would result in the wealthy paying a higher percentage of their income in taxes. Nevertheless, rather than supporting a policy that would ask all Americans to contribute their “fair share” to reduce long-term fiscal deficits, President Obama chooses to scapegoat a small percentage of the population, and demand that it carry even more of the outsized tax burden than it already does.
How is this responsible? How will dragging one group down raise everyone up? What happened to improving the conditions for economic prosperity for everyone? How does the president think inciting class envy against a tiny fraction of the nation’s citizens will help solve America’s problems?
After all, when almost half of the population no longer pays Federal income taxes, they will increasingly vote for more programs from which they benefit, but for which they bear none of the costs. The result is ultimately bankruptcy followed by chaos. Wealth redistributive policies do nothing but increase government dependency, and stifle the competitive spirit that once made America the envy of the world.
Surely, President Obama is above engaging in such base and divisive politics. Scapegoating didn’t work well amidst the 1930s’ economic turmoil. It is unlikely to offer a good solution today.
Reflections of a Rational Republican 
So you agree that we need higher taxes, you believe the tax code should be simpler, and you believe that such a simplified tax code would place a heavier tax burden on the rich…but Obama is a communist because he says that we should worry about economic inequality?
“So you agree that we need higher taxes”
Yes
“you believe the tax code should be simpler”
Yes
“you believe that such a simplified tax code would place a heavier tax burden on the rich”
I believe it will place a heavier tax burden on most Americans, not only the rich.
“but Obama is a communist because he says that we should worry about economic inequality”
I never said he was a communist. I also never said that we should or should not worry about economic inequality. I did say that scapegoating and redistributing the income of one group of Americans to satiate the class envy and bitterness of those who consume most of the country’s services, but pay little in return, is beneath an American president.
I never said he was a communist.
Here’s what I’m going off of: “the president seems to be revisiting the broken wealth redistributive philosophy that was so successful in the Soviet Union.” It sure sounds like you’re calling him a commie.
It’s a little nuanced, but I intended to call him a socialist. The Soviet Union favored redistributive policies, but also seized all means of production. A communist favors both, while a socialist only favors the former and not the latter.
I know I’m splitting hairs here.
Amen to that!!! You are right on here!
Bee
Thanks, Bee!
How’s the book doing?
I agree and disagree. I think the Buffet rule doesn’t tear anyone down, but given the budgetary crisis we’re facing and how the poor and middle class have suffered the most, I think it does make sense to have the wealthiest pay more. I also note that tax cuts helped lead to bubbles (as did cheap credit) so having the wealthy keep more didn’t go to sustainable job creation but destructive bubbles. That said, I agree that tax reform is needed, and that social welfare programs have to be reexamined so that they do what they are intended to do – liberate and create more opportunity — rather than create dependencies. Both political parties have good ideas to bring to this, but I suspect both parties will engage in similar levels of partisan games during this election cycle.
“Both political parties have good ideas to bring to this, but I suspect both parties will engage in similar levels of partisan games during this election cycle.”
Unfortunately, I agree.
I think you answered your own question: “the country now informally enters the general election”.
Obama is not above utilizing partisan politics to win an election (winning elections is one thing he has consistently proven himself adept at), and “tax the rich” is a political winner. It also highlights a difference between he and his opponent that he thinks will end up in his favor.
Did you catch Bruce Bartlett’s column today (or maybe yesterday) about legitimate tax reform? It was quite interesting, mostly because it pointed out all the reasons none of the current plans to reform taxes will work (everybody loves their own exemptions, but hates everyone elses).
A fair point. It’s a shame that things have gotten so bad in this country that dragging one group of people down resonates more with some Americans than bringing Americans up.
I didn’t see the column, but thanks for pointing it out. I will take a look.
Thanks for the reference. The article was from Apr 10 and worth reading.
Those poor dad gum reach people, how will they ever survive?? Ok, my comedy act is over. “Statistics” and “spin” are the back bone of politics, no doubt, and spin is what’s done to state that ‘less than 50% of the population pays all the taxes.’
That is ‘true’ and ‘not true’ all at the same time, and amazingly, I told the ‘truth’. By this I mean
Sorry about the unfinished post, for somereason my computer wouldn’t let me back on to complete. I apologize.
Let’s start here:
By this I mean ‘less than 50% of the population pays all the taxes’. This is a true statement, in a sense. According to the information I just looked up, the median household income in the US is approximately 40K a year. If by chance these poor saps are so ‘ignorant’ as to actually think they are ‘allowed’ to procreate and have children, these ‘irresponsible citizens’ would have either a ‘zero tax burden’ or very very close. In fact, there is the distinct posibility they would get more back than they paid to begin with. Great, even more people on the gov’t tit!
Of course I am being extremely sarcastic!!! Yet what I am saying is actually “true” with regard to thier personal “tax burden”.
Sean
Republicans have scapegoated plenty when it suits them.(Obama cutting Medicare remember? ) I guess its called politics eh? …Anyway, how much longer do you think Republicans will last when the middle class is finally broken with a reduced social safety net, a tanked healthcare system, continued losses of manufacturing, and stagnated wages ? Most Republicans forget or ignore that 8-10 of the biggest regional strongholds of their party receive some of the largest amounts of federal social services, and while they may keep those monies flowing to those regions and those votes alive (despite the constant rhetoric to cut them) that when the spigot finally gets turned off and those red state users have to make due with far less, the Republicans will start losing seats all over the nation. The fact remains these people who vote Republican and have a zero (or negative) net worth, and rely on free medicaid, food, and housing are keeping the party in power! They may be conned into voting against their self interest for now, but trust me…….it will end.
I often laugh when I ask the question to my fellow right leaning friends about what they feel is the greatest period of American strength and economy, and they most always suggest the post war 1950s and the 1960s. When I proceed to tell them that the corporate tax rates were in the mid 50% range, and the top 1% tax rate was as high as 91% they cringe and look at me in disbelief. While I agree whole heartedly that a 91% tax rate borders on criminal ………I somehow realize that the top 1% back then had a more patriotic view of their nation and its well being…….and I am sure the thought of harboring billions in offshore accounts or anonymous swiss accounts was looked on as downright anti American. Today I see no sense of shame and real love of ones country, as all I see is greed and PERSONAL gain in mind with the blame falling on the middle class and the poor . The thinking today is never about “what you can do for your country”……as its all about the short term goal with never any thought about the consequences.
Yes half of Americans pay no taxes………but if you peel that onion you will see who set those policies in place, and the blame equally falls on both parties. It seems to me………in the race to buy votes party principle will fly out the window …..and I mean GONE. …..example: In 2002 GWB signed a 191 BILLION dollar farm subsidy bill right( to prop up farm prices) before the midterm elections to basically try to win some close elections in several farms states. Nevermind the mantra about “free markets” and government keeping their hands away from private enterprise.
I went ballistic with my fellow Republican friends who spent a few days trying to justify Bush’s actions …..and they all did….trust me. And I consistently see this behavior again and again with my fellow Republican friends. They talk down the healthcare mandate when it was a Republican and Heritage foundation idea . They scream about personal freedoms and liberties when they have no problem with inacting laws that restrict and reduce the rights that women have fought for for the last 50 years. Some of the state legislation right now being presented by Republicans looks like its right out of the 1950s
If Republicans want to really gain some solid ground with independents and swing voters, they will embrace clean reform of the tax code, and raise taxes on the upper tiers……….do away with the carried interest loophole and other hidden goodies. I have no problem with everyone paying the same rate, and perhaps with loopholes and credits gone that rate could be lower for everyone? Is this possible while lobbying is the yoke which binds us?
Jeff,
While I chose not to respond with the same frustrations you just described for it would be viewed as rhetorical rantings. I share the exact experiences you just described. If we can ever develop a sense of “duty to the country”, we must not point fingers as you did several times. Similarly, Sean should avoid his scapegoating rhetoric such as “redistributive philosophy that was so successful in the Soviet Union” because while it may sound more sophisticated, it is exactly those terms that fire up the defenses in people’s minds. I know any “rational” democrat or republican would agree that those on the lower fringes can use a helping hand, those on the upper fringes should be and are able to lend more of a helping hand, and those in the middle should do their fare share.
The US had very high marginal tax rates under Ike. Kennedy lowered them some, and most social policies were created when Nixon was in office (and he wanted a national health care system more extensive than Obama’s — but the Democrats were holding out for more). Obama doesn’t want to go back to the policies of Eisenhower and Nixon. So if Obama is “socialist,” so was Nixon! So were most Republicans during the Cold War — yet our economy was growing fast back then!
I think the increasing gap in relative wealth is a dangerous trend. I think we should have as a goal a more even distribution of wealth. The means has to be government helping to create conditions where people achieve better results. The right has thought “trickle down” will do it, but that’s failed. The left has thought more welfare payments to the poor could do it, but that’s not been working. Both have to engage in moving away from ideology and towards pragmatism — what can work and how.
It strikes me as a pretty tame quote. There is a very wide gap between the very wealthy and everyone else. That’s not inflammatory – it’s the way things are.
Nor is Obama accusing the wealthy of having done something illegal or wrong. He’s making a policy argument that they should be taxed at a higher rate.
Finally, to the extent you think he is scapegoating – of all people, aren’t the most wealthy in America the most able to stick up for themselves? .
Just to be clear, the quote is the tip of the iceberg. There’s more scapegoating in the CNN article I linked to.
My main point is that Obama is unnecessarily targeting one segment of the population when he could just as easily bring in more tax revenue by simplifying the tax code.
While I agree that the wealthy have more resources to defend themselves politically, they don’t have the resources to defend themselves physically. The President is doing nothing more than unnecessarily stoking a class war for political gain. I think it’s beneath the office of the president to engage in such crude tactics.
That”s what frustrates me the most about the dialogue – across the board tax reform really isn’t discussed except only in the context of class warfare. Go after the entire tax code first, attack govt waste second, make it clear to the public what those two acts would save/bring in as far as revenue third, then talk about how it’s spent. Why is that so hard?
What would be interesting (hypothetically) would be to put a “tax the rich” question on the ballot, separate of which candidate you vote for. “Should those making over $1m/yr household income pay: 1) 25%, 2) 50%, or 3) 75% marginal tax rate?” Let everyone vote on it, and then the entire country can live with the consequences of whatever choice wins by majority, without being able to blame one party or another for the results over the next four years, only themselves. 🙂
As for the thoughts of going back to ’50’s or ’70’s tax rates, money can move too fast and too far for that to be feasible, I believe, and there’s far too much global competition for capital as well so I see it as a pipe dream that would never work in today’s times.
“That”s what frustrates me the most about the dialogue – across the board tax reform really isn’t discussed except only in the context of class warfare. Go after the entire tax code first, attack govt waste second, make it clear to the public what those two acts would save/bring in as far as revenue third, then talk about how it’s spent. Why is that so hard?”
I completely agree.
“What would be interesting (hypothetically) would be to put a “tax the rich” question on the ballot, separate of which candidate you vote for. “Should those making over $1m/yr household income pay: 1) 25%, 2) 50%, or 3) 75% marginal tax rate?” Let everyone vote on it, and then the entire country can live with the consequences of whatever choice wins by majority, without being able to blame one party or another for the results over the next four years, only themselves. :)”
It would certainly be interesting, particularly watching the government take less revenue at the 75% marginal tax rate as the Laffer curves kicks into gear.
“As for the thoughts of going back to ’50′s or ’70′s tax rates, money can move too fast and too far for that to be feasible, I believe, and there’s far too much global competition for capital as well so I see it as a pipe dream that would never work in today’s times.”
Exactly.
Let me apologize in advance for the redundancy with some of my questions that others have touched on but for clarity’s sake I feel this benefits both of us.
“the president seems to be revisiting the broken wealth redistributive philosophy that was so successful in the Soviet Union.”
You think that by raising the tax rate for millionaires and billionaires by 2-3% is comparable to what the Soviet Union did? I think you’ve made quite a stretch here Sean.
I agree that if there were some tax reform and we kept the progressive tax that we would gain more needed revenue from the wealthy 1% but let’s be honest here and understand that many of these wealthy people own companies and private property that put more wear and tear on our electrical grid system, roads and other vital infrastructure. So even if there were no loop holes that currently allow this small segment of society to essentially pay lower tax rates than low and middle income wage earners, the “redistribution” you refer to would only be fair, no?
Let’s also keep in mind that percentages don’t truly reflect how people are affected when their income is reduced by taxes. An extra 1% in taxes for a millionaire is $10,000. While that’s a whopping sum for a wage earner who makes $50 thousand, the millionaire still has $990,000 to help him eek out an existence. That $500 the person making $50 thousand gets hit with has a greater impact in an economy with rising prices on essentials like fuel and health care expenses.
“Nevertheless, rather than supporting a policy that would ask all Americans to contribute their “fair share” to reduce long-term fiscal deficits, President Obama chooses to scapegoat a small percentage of the population, and demand that it carry even more of the outsized tax burden than it already does.”
Couple of things wrong here. The president has always affirmed that all Americans need to contribute their “fair share”. Millionaires and billionaires have avoided this because as their tax rates have increased so too has their income – SIGNIFICANTLY. Low and middle income families have seen their pre-tax wages stagnate and even decrease over the last 30 years even though their tax rates have also increased over this same period. So very wealthy people’s “outsized tax burden” has matched their outsized income. And because some 60% of businesses avoid paying taxes on their profits by passing them on to investors (known as pass throughs) “federal corporate tax collections amounted to just 1.3% of GDP in 2010, well below their mark of 2.7% in 2006 and far beneath their peak of 6.1% in 1952.” SOURCE. Obama is simply pointing out that there isn’t a level playing field here. This isn’t “scapegoating”.
“Surely, President Obama is above engaging in such base and divisive politics. ”
It seems like his hand has been forced here to fight fire with fire Sean. All his earlier attempts at bipartisanship were a waste of time. The goal of the GOP since Obama took office was summed up in the words of their leader in the Senate, Mitch McConnell – “The single most important thing we want to achieve is for President Obama to be a one-term president” And of course there’s John Boehner’s refusal to seek compromises to work with the president
“I agree that if there were some tax reform and we kept the progressive tax that we would gain more needed revenue from the wealthy 1% but let’s be honest here and understand that many of these wealthy people own companies and private property that put more wear and tear on our electrical grid system, roads and other vital infrastructure. So even if there were no loop holes that currently allow this small segment of society to essentially pay lower tax rates than low and middle income wage earners, the “redistribution” you refer to would only be fair, no?”
Sure they own companies; companies that create jobs. A point that seems lost on our current president. Strain the electric grid these companies may, but they do it providing jobs and a better life for their employees. Moreover, as late as 2006, “the share [of income tax] paid by the top 1% of earners in America rose from 28% in 1988 to 40% in 2006.” That’s an awfully dependent tax system on a small percentage of the population with the wherewithal to simply pack up and leave the country for domiciles that don’t tax them so punitively. Not only do the 1% pay more than their “fair share”, but our federal budget is dangerously dependent on them. Corporations have offshored, in part, because America has one of the highest corporate tax rates in the world. Why wouldn’t the top 1% want to leave, especially when half the country probably wants to lynch them, no thanks to our president’s unnecessarily hostile political rhetoric.
“Let’s also keep in mind that percentages don’t truly reflect how people are affected when their income is reduced by taxes. An extra 1% in taxes for a millionaire is $10,000. While that’s a whopping sum for a wage earner who makes $50 thousand, the millionaire still has $990,000 to help him eek out an existence. That $500 the person making $50 thousand gets hit with has a greater impact in an economy with rising prices on essentials like fuel and health care expenses.”
A fair point, but I’m not arguing that 47% of the population pay a substantial amount of their income in federal taxes. All I am advocating is that they pay something. Surely, you can see how inherently unstable it is to have almost half the population able to vote endlessly for more and more services that support them without any personal financial cost whatsoever?
“Couple of things wrong here. The president has always affirmed that all Americans need to contribute their “fair share”. Millionaires and billionaires have avoided this because as their tax rates have increased so too has their income”
If the top 1% paying 40% of all income taxes does not represent their “fair share”, what does? Should they pay half of all income taxes? 60%? 70%? 90%? When will they every pay their “fair share”?
I mostly agree with you here, though I might not use the Soviet comparison. I’m not fond of the populist Obama, though I’m likely to vote for him. Romney has a better resume, but I think he seems committed to reducing the share of GDP going to revenues. That seems unrealistic to me. On foreign policy I lean Obama more strongly.
I think Romney would be much more capable of fostering pro-growth policies. Though, I’d have to reluctantly agree with you on defense. However, it’s not Obama, it’s his rather erudite advisers who have carried his foreign policy in an impressive manner.
I’ve read “Obama’s Wars” and I have to say that compared with Bush, Clinton, and Reagan, Obama’s style in foreign policy seems very strong. He comes across as a really effective leader — and recent reports show that he’s been often following his instincts and getting more involved in nuts and bolts on foreign policy than in his first year. Foreign policy is to me an Obama strength — both in content but also in the quality of his decision making style. I try to read as much as I can that gives inside info (e.g., about the killing of Bin Laden, etc.) and everything I read paints Obama as very strong. That said, I’d also say that George W. Bush wasn’t near as bad as many on the left think he was on foreign policy style and decision making. He made some big errors early on in his administration, but recovered from many of them quite well.
I actually think Obama’s foreign policy is his strongest point, much as it was George Bush, Senior’s. That said, like George Bush senior’s case, its the issue of the economy that will drive voters in December.
Neither party has come to grips with what growth would mean. The GOP seems to think just cutting taxes and letting the market do it will work; that isn’t true. The Democrats have focused on stimulating the economy and investing in green industry. Stimulating the economy when debt is 100% of GDP (total debt including private is 400% of GDP) isn’t that effective. Green industries are just a segment and won’t pay off for awhile. I don’t think either party is really thinking out of the box enough to come to grips with real structural problems facing the US economy. Magic from the market or magic from the government isn’t the solution.
By the way, I think Obama’s statement was true. Stating a truth is not scapgoating. He may be wrong, but if he thinks our system has increasing the relative maldistribution of wealth in a way that harms our overall economic health, he shouldn’t be afraid to state it. Calling it scapgoating seems to suggest that any critique of how our system may increase the relative inequality in our society is by definition scapgoating the wealthy. It’s not – it’s a criticism of the system. That’s a mistake I see the right make — to accuse the left of ‘class war’ when it’s actually a real policy disagreement about how the system functions. It’s a legitimate complaint. It may be wrong and there are counter arguments.
I made basically the same argument Obama made last month on my blog: http://scotterb.wordpress.com/2012/03/29/the-failure-of-the-free-market-experiment/
Neither seems coherent on economics. Foreign policy – Democrats.