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What I'd like to hear Obama say about the tax cuts

obamahypotaxvuts.JPG

For all that the Republicans are being breathtakingly hypocritical in proposing the largest increase in the federal deficit in memory, President Obama and the Democrats are only being slightly less hypocritical by proposing a slightly smaller -- but still huge -- increase in the deficit.

This gets to something I've never understood about political rhetoric. Why not just level with people? Why can't Obama just sit down and say,"My friends in the other party want to extend George W. Bush's tax cuts indefinitely, which will add about $4 trillion to the deficit over the next 10 years. I'd like to extend only tax cuts for every American making less than $250,000. That will add more than $3 trillion to the deficit over the next 10 years. That's still a lot, but given our economic circumstances, I think it's worth it. But people may disagree. Another option would be to extend the middle-class tax cuts for three more years, and then let them expire, or phase them out, in order to begin bringing the deficit down. Either way, we should be clear about the choices we're making here."

I'm not saying this would be some sort of political coup. But I don't think it would be a political loser, either. And, at the very least, it would be honest, and contribute to a clearer discussion.

Photo credit: Jason Reed/Reuters.

By Ezra Klein  |  September 15, 2010; 2:05 PM ET
Categories:  Taxes  
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Comments

"the other party wants to extend George W. Bush's tax cuts indefinitely, which will add about $4 trillion to the deficit over the next 10 years."

Poor Ezra. Could somebody pay for him to go take an Econ 101 course at a local community college? Seriously, I can't believe progressives still fan the flames of the historically-proven myth that low tax RATES equals lost revenue, and higher tax RATES equals more revenue.

Ezra do common-sense a favor, and go back and compare annual income tax revenues before Bush tax cuts, and since.

For those of you smart enough to understand math (this is where Ezra can stop reading), the single largest cause of deficits....both in the past, present, and future....is out of control SPENDING.

Doubt me? Run up debts on your credit cards, then blame your spouse for causing your debts because they didn't get a big enough pay raise last year.

Progressives are nice people....just not very smart when it comes to math and economics.

Posted by: dbw1 | September 15, 2010 2:19 PM | Report abuse

Agree mostly, but I would note that

"I'd like to extend only tax cuts for every American making less than $250,000." isn't accurate.

The $250,000 is for married, filing jointly, not single people.

Posted by: jnc4p | September 15, 2010 2:30 PM | Report abuse

Ezra yours is a question that has plaqued mankind.

"People, I just want to say, you know, can we all get along? Can we get along? Can we stop making it, making it horrible for the older people and the kids?...It’s just not right. It’s not right. It’s not, it’s not going to change anything. We’ll, we’ll get our justice....Please, we can get along here. We all can get along. I mean, we’re all stuck here for a while. Let’s try to work it out. Let’s try to beat it. Let’s try to beat it. Let’s try to work it out.” ,Rodney Knig


Posted by: keirandcee | September 15, 2010 2:31 PM | Report abuse

I think Josh Marshall at TPM had a good point about this line of yours (although his was not directed at you since ya know, he wrote his before :) ):

"I'd like to extend only tax cuts for every American making less than $250,000."

This would be better and more accurate:

"I'd like to extend only tax cuts for every American on the first $250,000 they make."

The richest 2% still get tax cuts under Obama's plan.

Posted by: scalderwood | September 15, 2010 2:34 PM | Report abuse

Progressives do math and economics just fine: we emphasize education over ideology/ignorance.

Educated economists agree tax cuts add to the deficit and only cause it to grow. Personally, I would like to see all the Bush tax cuts eliminated. But the Republicans would pitch a total hissy fit, stamping their feet and holding their breath until they turned blue. And Democrats, acting like the abused partners they are, would cave. And the news media would provide the club.

Seriously, I like the idea of leveling with people about the true state of the state, but our competitive system allows for no graceful losers or competent governance. It is only a race for power and we are the losers for it.

Posted by: Darsan54 | September 15, 2010 2:42 PM | Report abuse

I actually think that is what President Obama has been saying. He also provided a very large tax break in the stimulus package but that has quickly been forgotten.

This is a very clear, easy battle for the Democrats. They provide a middle class tax cut and save $700 billion. This is a very tough vote for Republicans. Do they vote yes and enrage their base and wealthy benefactors. Or do they vote no on a tax break for all taxpayers? Very, very tough vote for them, right before an election when everyone is now paying attention.

Posted by: JimHannan | September 15, 2010 2:42 PM | Report abuse

Darsan54:

Show me an 'educated economist' who looks at 2000-2008, sees a 20% increase in REVENUES, a 95% increase in SPENDING, and still asserts that the deficit was mostly created by Bush's tax cuts.

Good luck.

Posted by: dbw1 | September 15, 2010 2:52 PM | Report abuse

"Progressives do math and economics just fine: we emphasize education over ideology/ignorance."

Then let's test your 'education': which is greater, a 20% increase in revenue, or a 95% increase in spending?

I would like to assume that such an educated progressive will be able to get the answer correct, but I can't say I'm holding my breath...

Posted by: dbw1 | September 15, 2010 2:56 PM | Report abuse

Why is one tax cut worth it while the other isn't?

Capital=Jobs

He needs to get jobs going instead of fighting class warfare.

If he doesn't turn around the job market, it doesn't matter how honest (or dishonest) he is, he's gone anyways.

Posted by: marteen | September 15, 2010 3:01 PM | Report abuse

Great idea Ezra. I agree entirely. But I would go one step further. Have the President lay out the whole thing: These are the services you (the American public)demand, this is what they cost, this is what we owe, this is what we are taking in and this is what we need.

Posted by: ostrogoth | September 15, 2010 3:04 PM | Report abuse

I wish someone would get this straight -- the very very rich will keep a huge tax cut under Obama. Just not on their top marginal dollar.

Posted by: AZProgressive | September 15, 2010 3:06 PM | Report abuse

The key here is that if nothing is done, everyone's taxes go up. That's what the Republicans are after, because that's a sure winner for them.
The Dems will surely get a bill out of the House, but the Republicans in the Senate will block it unless it includes tax cuts for the weathly.
It will force Obama to decide what to do.

If he goes along with the Senate Republicans he will alienate his base, look weak, and add fire to the deficit issue.
If he doesn't and pushes only for the middle class cuts, the Senate Republicans will block it and he'll get nothing. Then he'll like a "tax and spend" liberal and he'll lose in 2012.
Don't think the Democrats have the upper hand here, they don't.

Posted by: SeattleMark | September 15, 2010 3:06 PM | Report abuse

Replying to Seattle Mark, if Senator Reid uses the reconciliation process, the Democrats can pass the tax bill with 50 votes. This is how the Republicans did it in 2001 with their tax cut, which is why it expires at the end of this year. The Democrats definitely have the upper hand on this issue. They just need to stay together and pass this in the next two weeks.

Posted by: JimHannan | September 15, 2010 3:23 PM | Report abuse

What silliness.

Liberals naturally dismiss the obvious solution. Reduce government spending to 18-20% of GDP as it was during the entire 1990-2008 period.

Posted by: krazen1211 | September 15, 2010 3:24 PM | Report abuse

DBW1 - Tax cuts have to be paid for or they are lost revenue. Simple stuff here. It's like cutting back your salary while trying pay off credit card bills. Sorry, but this country is going to have to get the equivilent of a job working at Mickey D's at night to pay off it's war bill.

There is no magic tax fairy. Less taxes means less revenue which means higher deficits. I don't like taxes anymore than you do, but this isn't hard stuff to understand. We either pay down the debt or we don't.

Sometimes it's worth using the credit card and sometimes it isn't. This goes to the heart of what Ezra is saying. Let's be honest about this. I agree the commenter that said our politics prevents this. It's a real shame because now more than ever we need an honest appraisal of our situation.

Posted by: Alex3 | September 15, 2010 3:29 PM | Report abuse

Dude, populations grow and economies get bigger. Revenues and and spending grow accordingly. The question is, how do they grow compared to the economy as a whole? IE, what are revenues and spending as a percentage of GDP.

in 2000, revenues were 20.9% and spending was 18.4%, leading to a surplus of 2.4%

By 2004, revenues were 16.3% and spending was 19.9% leading to a deficit of 3.6% A full 3/4 of that deficit comes from the revenue side.

By 2008, tax revenues were up to 17.7% and spending had increased 21%, leading to a deficit of 3.2%. Compare this to 2000. Spending is about 2.5% of GDP higher and revenues are over 3% of GDP lower.

You really want to say that all that lost revenue had nothing to do with the deficits and debt?

Source:
http://www.gpoaccess.gov/usbudget/fy10/pdf/hist.pdf

Posted by: Nylund154 | September 15, 2010 3:30 PM | Report abuse

Telling the truth would indeed be a political coup.

Posted by: AMviennaVA | September 15, 2010 3:30 PM | Report abuse

I guess I have to repeat this in every forum I comment on, but budget deficits are not, in and of themselves, evil incarnate. In fact, during economic downturns such as the one we're in now, deficits are the recommended policy. Back in Iowa we called it priming the pump.

Posted by: stonedone | September 15, 2010 3:34 PM | Report abuse

"Reduce government spending to 18-20% of GDP as it was during the entire 1990-2008 period."

LOL! That's because Bush took both wars off the books.

Sheesh... This is the sort of stuff we are up against. Until we are honest with ourselves, we aren't going to make progress. Politicians will tell you what you want to hear. We got to break out of the morass by ourselves.

Unfortunately, I'm seeing mass waves of deception going on and the public drinking it up because someone is telling them what they want to hear.

i budget deficits are not, in and of themselves, evil incarnate

Absolutely not. Credit is indeed very nice in bad times. I do agree that making efforts to pay the debt in good times makes sense. These aren't good times. We need massive investment in this country the likes of which we haven't seen since Eisenhower.

Posted by: Alex3 | September 15, 2010 3:42 PM | Report abuse

Replying to Seattle Mark, if Senator Reid uses the reconciliation process, the Democrats can pass the tax bill with 50 votes. This is how the Republicans did it in 2001 with their tax cut, which is why it expires at the end of this year. The Democrats definitely have the upper hand on this issue. They just need to stay together and pass this in the next two weeks.

Posted by: JimHannan | September 15, 2010 3:23 PM | Report abuse


I may be wrong but is this even an option? Doesn't budget reconcilation have to be introduced by say "a budget". Dems didn't do one this year did they? If I'm wrong I'll gladly admit it but you can't put the cart before the horse.

Posted by: visionbrkr | September 15, 2010 3:53 PM | Report abuse

Two words: Walter Mondale.

Posted by: TomServo | September 15, 2010 3:56 PM | Report abuse

stonedone, agreed and reiterrated. It's also worth pointing out that the rate of growth in the economy as a whole compared to the rate of growth in debt is an important factor too.

It's also worth pointing out that there's a difference between admitting that you don't like deficits but think they're necessary in the short term and arguing that deficits are supremely important but that we should have huge tax cuts. As Ezra pointed out in a previous post, the Dems are still being a bit hypocritical on this issue, but their hypocrisy is blown out of the water by the Republicans'.

Posted by: MosBen | September 15, 2010 4:05 PM | Report abuse

"Have the President lay out the whole thing: These are the services you (the American public)demand, this is what they cost, this is what we owe, this is what we are taking in and this is what we need."

With charts and graphs a la Ross Perot...?


"Two words: Walter Mondale."

[ Admiral Ackbar's "It's a trap!" scene
http://www.youtube.com/watch?v=dddAi8FF3F4 ]

Posted by: tuber | September 15, 2010 4:15 PM | Report abuse

NYlund154 is correct.

dbw1 is wrong. S/he may be very ignorant, but it's much more likely that s/he is being purposefully misleading.

dbw1 insults other's intelligence and then screams a position that is not backed up by facts. dbw1 is a sophist (I mean that as an insult) and is making the best "argument" it can muster to protect someone's money.

Read the data and decide for yourself. It's obvious that dbw1 is misleading:
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Sorry, but that dbw1 line of rhetoric is just so tiresome.

Posted by: BHeffernan1 | September 15, 2010 4:20 PM | Report abuse

To dbw1: okay, I looked it up as you asked. Income tax revenues hit $1.211 trillion in 2000, before any "Bush" income tax cuts. This number fell to $0.925 trillion in 2003 with the 2nd "Bush" income tax cut. That's a $286 billion decline--revenues went down by more than 23 percent.

I've used only elementary school math that even Ezra would understand if he didn't take Econ 101, as you suggested. These numbers are not adjusted for inflation nor are they percentages of gdp. Such adjustments would make the numbers look much worse. The adjustments become even more important when comparing numbers more widely separated in time, as others have explained.

Posted by: pjro | September 15, 2010 4:43 PM | Report abuse

"LOL! That's because Bush took both wars off the books.

Sheesh... This is the sort of stuff we are up against. Until we are honest with ourselves, we aren't going to make progress. Politicians will tell you what you want to hear. We got to break out of the morass by ourselves."

Actually, no, those numbers include war spending.

Posted by: krazen1211 | September 15, 2010 5:16 PM | Report abuse

"Dude, populations grow and economies get bigger. Revenues and and spending grow accordingly. The question is, how do they grow compared to the economy as a whole? IE, what are revenues and spending as a percentage of GDP.

in 2000, revenues were 20.9% and spending was 18.4%, leading to a surplus of 2.4%

By 2004, revenues were 16.3% and spending was 19.9% leading to a deficit of 3.6% A full 3/4 of that deficit comes from the revenue side.

By 2008, tax revenues were up to 17.7% and spending had increased 21%, leading to a deficit of 3.2%. Compare this to 2000. Spending is about 2.5% of GDP higher and revenues are over 3% of GDP lower.

You really want to say that all that lost revenue had nothing to do with the deficits and debt?"

Lost revenue in the sense that the .com bubble ended and that revenues of 20.9% of gdp would not have continued anyway? Sure.

This is all moot, of course. When current politicians are spending 25% of GDP and plan to spend a minimum of 23% of GDP, well, no tax scheme gets there.

Posted by: krazen1211 | September 15, 2010 5:20 PM | Report abuse

That GPO access link is pretty useful. It illustrates the problem quite nicely.

2011 spending: 23.3% of GDP
2012 spending: 22.1% of GDP
2013 spending: 21.8% of GDP
2014 spending: 21.8% of GDP

A great way to lower those numbers to 20% would be to eliminate the increased pell grants and the $150 billion a year in PPACA spending.

Posted by: krazen1211 | September 15, 2010 5:26 PM | Report abuse

That GPO access link is pretty useful. It illustrates the problem quite nicely.

2011 spending: 23.3% of GDP
2012 spending: 22.1% of GDP
2013 spending: 21.8% of GDP
2014 spending: 21.8% of GDP

A great way to lower those numbers to 20% would be to eliminate the increased pell grants and the $150 billion a year in PPACA spending.

Posted by: krazen1211 | September 15, 2010 5:26 PM | Report abuse

"Poor Ezra. Could somebody pay for him to go take an Econ 101 course at a local community college? Seriously, I can't believe progressives still fan the flames of the historically-proven myth that low tax RATES equals lost revenue, and higher tax RATES equals more revenue."

Yep, thats why revenues were so low during the 50s - 70s.

Course, they didnt have the government health care industry complex then either.

Posted by: krazen1211 | September 15, 2010 5:32 PM | Report abuse

To Alex3:
"Tax cuts have to be paid for or they are lost revenue. Simple stuff here. It's like cutting back your salary while trying pay off credit card bills....Less taxes means less revenue which means higher deficits."

It is 'simple stuff', and unfortunately it sounds like you may be one of the liberals who still doesn't get it. By comparing taxes to salary, you demonstrate a fatal flaw to your logic....that taxes are 'fixed' like salaries. It's probably not your fault that you can't wrap your head around this point; progressives work overtime to convince people that economic activity is independent of tax RATES (i.e., that the same economic activity will occur regardless of what the tax rates are). History proves this progressive ideology is false, but they refuse to relent to reality.

Instead of thinking in fixed 'salary' terms, consider this better parrallel. Imagine you get paid on commission, but your company keeps back a share of your commissions to cover their costs. As they increase the RATE share of your commissions ever greater, your take home pay goes down. How long until you stop working as hard, and they start wondering why their sales are DOWN, and they can't figure out why they are getting LESS out of the share they take from your commissions even though they RAISED the rate?

The best favor a progressive could do for themselves is to divorce themselves of the progressive/liberal myth that the equation [Tax Rate x Economic Activity = Tax Revenues] is infinitely linear. Raising the RATE does not always mean more REVENUES will be collected, and the inverse is true as well. Read some history about the 1960's, 1980's, etc.

If progressive theory works, then why not just increase tax rates on the rich to 50%? Or 75%? Heck, people making millions would still be richer than everybody else living off of 25% of their income! C'mon liberals, raise the tax rates on the rich to 75% and prove how well progressive economic theories work!

And then when we are all out of jobs and tax REVENUES have fallen off the cliff, progressives can keep scratching their heads as to why their textbook theories never seem to work in practice....

Posted by: dbw1 | September 15, 2010 6:04 PM | Report abuse

BHeffernan1:
"dbw1 is wrong. S/he may be very ignorant, but it's much more likely that s/he is being purposefully misleading."

It's 'he', and do you care to offer any specific points of rebuttle? Or are you like many leftists on here and can only insult, but not offer any actual arguments?

By the way, you and NYLund continue to struggle with a simple concept. The numbers cited by NYLund are %'s-of-GDP, which only serve to illustrate my point made above....that progressives believe the same economic activity (i.e., GDP) would have occurred regardless of what the tax rates were/are!

How do you know the GDP would have been the same if tax rates had been higher? Do you know that the same investors would have invested the same amount of money in companies? Or would fewer people have been employed if tax rates had been left higher, and tax revenue as % of GDP may have plummented even further because fewer people were employed and paying any taxes at all?

We can debate those 'what-ifs' all day, but there is a single solid point that no progressive/liberal can debate....spending increase of 95% between 2000 and 2008....and astronomically higher than that since Obama and Nancy made a mockery of 'pay-as-you-go'.

If you want to bash Bush and the GOP for aiding in increasing SPENDING, I'm all ears and will be on your side. But if you want to keep repeating the progressive mantra that Bush's tax cuts caused the deficit, you will have to actually present some evidence because history and common sense is not on your side.

Posted by: dbw1 | September 15, 2010 6:22 PM | Report abuse

errr - the idea of tax cuts is that the money will be spent thus stimulating the economy. We know Ezra is a young dude but surely he is smart enough to understand this and therefore level with his readers

I mean this isnt the Weekly Reader is it?

Posted by: iam7545 | September 15, 2010 6:37 PM | Report abuse

errr - the idea of tax cuts is that the money will be spent thus stimulating the economy. We know Ezra is a young dude but surely he is smart enough to understand this and therefore level with his readers

I mean this isnt the Weekly Reader is it?

Posted by: iam7545 | September 15, 2010 6:38 PM | Report abuse

I say everybody making more than I do is FILTHY RICH. Tax them to the Max, these baastas.

By the way, I earn Twenty ($20K) grands a year.

Posted by: vatodio | September 15, 2010 7:10 PM | Report abuse

The best answer I've read to your question of why politicians can't just speak candidly is in Garry Wills' 1978 essay "Politicians."

You need to read his brilliant prose, but to sum up briefly, it has to do with having too many constituencies, with too many deals owed and pending among all those constituencies, and ultimately therefore not even having one personality that *could* speak with what we normally think of as "candid."

And those factors are much worse now because of the media explosion.

Posted by: KevinEgan | September 15, 2010 7:15 PM | Report abuse

After almost two years of demonizing corporate America, holding a “boot to its neck,” and doing nothing for small businesses, Obama suddenly pretends to reverse himself with a “corporate tax break.”

http://pacificgatepost.blogspot.com/2010/09/more-erratic-economic-notions-from.html

America is looking for a firm policy statement such as immediate major cuts in government spending.

Posted by: JamesRaider | September 15, 2010 9:06 PM | Report abuse

Historically, wars have been funded by increased taxes. The "Bush Tax Cuts" coincided with war on 3 fronts - Afghanistan, Iraq, Global War on Terror. The incremental costs of these actions since 9/11 are over $1.5 trillion. If only as a symbolic start, the tax cuts implemented during wartime should be allowed to expire. Congress should work with the President to compromise on the dual fronts of minimizing the impact of a reversion to pre-war/pre Bush era tax cuts to pay down this incremental cost of war and stimulate the economy. No easy task, but the rhetoric from both sides is too simplistic and accomplishes nothing but more pain.

Posted by: hafox | September 16, 2010 1:39 AM | Report abuse

With the Dems ambitious agenda for spending, the only credible stand that Obama can take is to let all the Bush cuts expire. That still wouldn't come close to the deficit the Dems are promoting

Posted by: Steve851 | September 16, 2010 9:29 AM | Report abuse

Ezra lied: "For all that the Republicans are being breathtakingly hypocritical in proposing the largest increase in the federal deficit in memory, "

Umm, why are you purposely ignoring the other part of the proposal to slash deeply into Fed spending. Why are you afraid of writing the truth? Did your daddy beat you or something?

Posted by: illogicbuster | September 16, 2010 11:48 AM | Report abuse

****WHAT IS MRS. OBAMA'S PROBLEM???*****

Spain was not good enough for her???

http://www.dailymail.co.uk/news/worldnews/article-1312462/Michelle-Obama-thinks-First-Lady-hell-says-Carla-Bruni.html

Posted by: wheeljc | September 16, 2010 1:42 PM | Report abuse

The problem with leveling with people about US taxes is: Where do you stop leveling with people?

A truly honest president - one who was big on hope and change - would say of the tax code: "My friends, this is 40,000 pages of noise that not even the Secretary of the Treasury or the outgoing Chairman of the Ways and Means committee can comply with. We need to scrap this mess and start over. No matter your inclinations, progressive income tax, flat sales tax, VAT, whatever your inclinations, I promise a great debate and sweeping revolution of our tax code in the year ahead. My promise to you is not tbe design of this new tax code, or what is in it for your demographic, but how simple it will be, that you will understand it as well as your accountant. You might not even need an accountant with this new tax code, which I guarantee will be less than one hundred pages, and utterly transparent and simple, and fair."

That's the only real honesty with this current tax code.

Posted by: HAL-9000 | September 16, 2010 2:55 PM | Report abuse

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