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Posted at 8:38 AM ET, 12/ 7/2010

The Morning Plum

By Greg Sargent

* The first glimpse of Obama's strategy for dealing with divided government: With Democrats reeling in the wake of Obama's deal to extend all the Bush tax cuts, Michael Scherer has a remarkably sane take on what happened, noting that the deal allowed Republicans to walk away with the major prize but also allowed Obama to present himself as the defender of the middle class against Washington business-as-usual.

What you're seeing is the first glimpse of Obama's political strategy for dealing with divided government. Obama will strive for deals with Republicans that require concessions on core liberal priorities, and openly concede unhappiness with those concessions, but argue that the deals he's reaching are the best possible under the circumstances.

Obama will insist that such deals are necessary to keep government functioning on behalf of the American people, casting himself as the middle class's defender-in-chief against partisan brickbats flying from both sides. He'll be Washington's resident adult in a town full of bickering children -- on the right and the left.

* Obama's plan: Scott Wilson reports that the strategy outlined above is exactly the plan: "To demonstrate his ability to compromise with Republicans and portray the president as the last reasonable man in a sharply partisan Washington."

* Tax deal about restoring Obama's post-partisan image? Also in the above link, administration officials say that the tax cut deal is all about responding to the lesson of the midterms, which is that "restoring the president's image as a post-partisan leader" is crucial if the party is going to win back independent voters.

* Brimming-with-enthusiasm endorsement of the day: Harry Reid spokesman Jim Manley responds to Obama's announcement of the tax cut deal with one sentence:

"Now that the President has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow."

This hints that Dem leaders know that they've got a very unpleasant task ahead of them today as they ask Democrats to swallow this deal.

* Tea Party Republicans want to see Obama get totally stomped: Some Tea Party Republicans actually think the GOP gave Obama too much by allowing an extension of unemployment benefits.

* Sherrod Brown keeps up the good fight: The Ohio Senator says the problem with Obama's tax cut deal is, well, that he didn't actually get a good deal.

* Indeed, a bloc of liberal Dem Senators could say No Deal: In a significant throwing down of the gauntlet, Senator Dick Durbin says a bloc of Senators may take a walk.

* Biden to the rescue? With angry Senate Dems set to discuss the tax cut deal today, Joe Biden will be on hand to try to sell the plan to liberals.

* The deal is likely to become law: With most Republicans and some Dems in both houses of Congress likely to support the deal, it remains likely to pass.

* Krugman's take: After having called on the White House to say no to any deal, he concedes it's "better than I expected."

* A second stimulus? David Leonhardt on why that's what Obama managed to achieve.

* The critique from the left: David Dayen has the most comprehensive takedown of the deal I've seen out there this morning.

* Estate tax a major cave? Pat Garofolo on why the "most pernicious piece of the deal is the estate tax cut":

It will amount to another $7 billion in tax breaks in 2011 that benefit no one but the ultra-wealthy.

* And the White House hits back at Congressional Dems: A senior White House official goes public, albeit anonymously, with the case that Congressional Dems are partly to blame because they punted on a middle class tax vote before the election.

This suggests that we're only seeing the beginning of just how tense relations among Dems are likely to become as Obama pursues this strategy.

What else is happening?

By Greg Sargent  | December 7, 2010; 8:38 AM ET
Categories:  2012, House Dems, House GOPers, Morning Plum, Senate Dems, Senate Republicans, taxes  
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Next: A liberal revolt over the tax cut deal?

Comments

Pat Garofolo should have asked mark_in_austin if the estate tax amours a benefit to no one but the ultra-wealthy. Hopefully, someone like Howard Dean or Russ Feingold primary Obama next year.

Posted by: clawrence12 | December 7, 2010 8:53 AM | Report abuse

Well known neo-conservative and member of the right-wing propaganda machine Diane Feinstein joins the propagation of fear over Wikileaks:

"When WikiLeaks founder Julian Assange released his latest document trove—more than 250,000 secret State Department cables—he intentionally harmed the U.S. government. The release of these documents damages our national interests and puts innocent lives at risk. He should be vigorously prosecuted for espionage.

http://online.wsj.com/article/SB10001424052748703989004575653280626335258.html?mod=WSJ_Opinion_LEADTop

Posted by: ScottC3 | December 7, 2010 8:57 AM | Report abuse

The fuller Krugman quote opposite Greg's little sunny-side up above:

"So, was this worth it? I’d still say no, although it’s better than what I expected over the weekend. It still greatly increases the chances of the Bush tax cuts being made permanent — especially because the front-loading of the stimulative stuff actually worsens Obama’s 2012 electoral prospects."

Posted by: Papagnello | December 7, 2010 8:58 AM | Report abuse

Once again, as I said last night, I commend President Obama on his leadership. The payroll tax cut alone yields savings of $1400 for a person or family earning $70k. Liberal Senators need to suck it up and back the deal. After all, it was partially their failure to garner the votes to pass a Middle Class-only tax cut that led to the deal in the first place.

Posted by: Ethan2010 | December 7, 2010 9:01 AM | Report abuse

Once again, as I said last night, I commend President Obama on his leadership. The payroll tax cut alone yields savings of $1400 for a person or family earning $70k. Liberal Senators need to suck it up and back the deal. After all, it was partially their failure to garner the votes to pass a Middle Class-only tax cut that led to the deal in the first place.

Posted by: Ethan2010 | December 7, 2010 9:01 AM | Report abuse

@ScottC3 (from previous thread): "I wanted to press you a little further about your support for letting the Bush tax cuts expire for anyone making more than $250k."

Support is a strong word. As I have expressed previously, I think a more progressive system that recognized that even at high level of incomes, there's a difference between a household making $250k a year and $2 million a year.

"Your reasoning seems to be that extra money in the pockets of 'rich' people will not have the economic stimulative effect that it will have in the pockets of those who make less than $250k, because those under $250k will spend it, and those over will not."

Again, that's a toss off. They might spend it on investments that have low or slow stimulative effective, or negative stimulative effects. They might invest in foreign markets or precious metals, which is the equivalent of putting the money in the mattress in terms of stimulus. They may spend it on things that should have a stimulative effect that aren't. The process isn't as important here as the result: as a long time supply-sider, our current economic doldrums in the face of (a) tremendous growth in cumulative wealth in the upper 5-10% (versus stagnation for the middle class) or so and 10 years of the Bush tax cuts suggest to me that there are other things at play, and that there will no more stimulative effect (overall) weather the rich have another 5% of money or 5% less.

Understanding nothing happens in a vacuum, etc.

"One of the main problems with this, I think, is that extending the Bush tax cuts would not add money to anyone's pocket that is not already there. We've been operating under the Bush tax regime for several years already. Extending the tax cuts will simply maintain the status quo. Failure to extend them, however, will result in less money in the pockets of taxpayers than currently exists."

But those same tax payers demonstrably have a lot more money in their pockets than they did 10 15 years ago. The fact is, even with a lot more cash available to them than a decade or two ago, it's not stimulating the economy (or insulating it against recessionary pressures).

"So the question we face, then, is not whether extending them for 'the rich' will have a stimulative effect for the economy, but rather whether the failure to extend them will have an anti-stimulative effect."

I think the answer to that, to me, is that it is highly unlikely. It may well adversely effect certain individuals, but "the rich" have significantly more cash in real terms (as well as comparatively) than they have ever had in the history of the country, and I see no sign that it has been stimulative or palliative to the economy as a whole. I have a hard time believing that cumulatively having a little bit less in real income than last year, but still far more than just 10 years ago, is going to retard the economy.

Posted by: Kevin_Willis | December 7, 2010 9:08 AM | Report abuse

Co-founder Sen. Kerry (D-MA) agreed that "there is real damage" and said that Assange should be arrested. "I was very much involved back in the days when the Pentagon Papers came out. This has no relationship to something like that. This is voyeurism. This is sort of anarcal . . ."

Posted by: clawrence12 | December 7, 2010 9:09 AM | Report abuse

"The Tax Deal
I’ve been on a bunch of planes, but catching up on my blog and email reading the progressive wonk consensus seems to be that the tax cut deal is . . . not as bad as people feared it would be based on what was happening the previous week. And I totally agree, though that’s largely a case of expectations management so I’m not going to break out the flowers.

What I will say, though, is that this has partially set my mind at ease about the prospects of a GOP strategy of economic sabotage. The tax policy the right wants, though in general bad for the country, is not bad for short-term economic performance. And the concessions they were willing to give Obama in exchange for boosting the incomes of rich people are expansionary in the short-term. So the terrain here exists well within the range of “normal” politics where conservatives want lower taxes on rich people. This is kind of nutty in my view, but it’s a deeply held article of faith on the right and not some ad hoc effort to sink the economy or anything.

In a non-optimistic vein, though, this is really kind of sad statement on where Washington is at the moment. What you can say in favor of this deal is that it is a kind of expansionary fiscal policy. But if expansionary fiscal policy is the order of the day, then this is a mighty ineffective way to go about. And if the reason we can’t have a real robust jobs program is that deficits are evil, then why on earth is it that we need huge deficit-expanding tax cuts for the children of the hyper-wealthy?"

http://yglesias.thinkprogress.org/2010/12/the-tax-deal/

Posted by: bernielatham | December 7, 2010 9:10 AM | Report abuse

ScottC, your comments on the previous thread weer either disingenuous or incomplete. You argued that increasing the rate on the top brackets would have an anti-stimulative effect since the rich would have less money with which to spend into the economy. But you know that the spending habits of the rich don't compare to that of the middle/lower classes. To a family making $70k, $1400 is a decent chunk of change and will no doubt be spent on necessities. A multi-millionaire whose taxes increase slightly will not significantly change his/her spending habits.

That you don't address this discrepancy is, as I said, either disingenuous at best or incomplete at worst.

Posted by: Ethan2010 | December 7, 2010 9:11 AM | Report abuse

ScottC, your comments on the previous thread weer either disingenuous or incomplete. You argued that increasing the rate on the top brackets would have an anti-stimulative effect since the rich would have less money with which to spend into the economy. But you know that the spending habits of the rich don't compare to that of the middle/lower classes. To a family making $70k, $1400 is a decent chunk of change and will no doubt be spent on necessities. A multi-millionaire whose taxes increase slightly will not significantly change his/her spending habits.

That you don't address this discrepancy is, as I said, either disingenuous at best or incomplete at worst.

Posted by: Ethan2010 | December 7, 2010 9:11 AM | Report abuse

Could I point out that everything the Republicans are now doing is directed towards the singular goal of regaining the power of the White House.

I expect some on the left would argue that there's little evidence presently that the WH has any or much power.

And the response to that is to recall what Reagan and Bush 2 managed to wreak on the nation while holding the presidency.

As any arsonist will explain, it is really much easier and far more dramatic to destroy a thing than to build a thing.

Posted by: bernielatham | December 7, 2010 9:17 AM | Report abuse

With the overall cost of the tax cuts ranging from $600b to $800b over the next two years and over half of it benefiting the wealthier citizens in this great country, I'll take what I can get for my middle class compatriots and the unemployed, I'll be anxious to watch the money flow back into the economy from the top. If and when it passes, I'm sure all Senators and Reps will fall in line, the uncertainty of taxes will be removed as a stumbling block for all of qb's friends and associates who constantly say they're holding back because of "uncertainty" to invest in the economy.

I do wish they could have thrown the 99ers a bone though.

Posted by: lmsinca | December 7, 2010 9:20 AM | Report abuse

A second stimulus? David Leonhardt on why that's what Obama managed to achieve.
------------------

If anyone chooses to crunch the numbers (using data available online), it looks like this deal is indeed a stimulus that may result in roughly 1.3+ million new jobs.

That said, I would love to see someone fully crunch the numbers & take a detailed look at the stimulative effects of all that the plan includes, just to see more precisely what kind of job-generation numbers will be seen.

But, anyway it's sliced, it does look like significant stimulus will be gained here.

Posted by: associate20 | December 7, 2010 9:20 AM | Report abuse

There was a good piece up at Ha'aretz (I can't find it now) from a Swedish diplomat arguing that the broad response from Europe and from mid-East nations coming to the aid of Israel during the huge brush fire demonstrates that most prior criticism has been directed at settlement and treatment of Palestinians, not a rejection of Israel's right to be.

A similar case is made here. Note who has come to help Israel...

http://thinkprogress.org/2010/12/06/palestinian-firefighters-israel/

Posted by: bernielatham | December 7, 2010 9:25 AM | Report abuse

So, now that Obama has signed off on tax cuts, they DO create jobs? Glad we settled that dispute once and for all.

Posted by: clawrence12 | December 7, 2010 9:26 AM | Report abuse

Estate tax cut: "It will amount to another $7 billion in tax breaks in 2011 that benefit no one but the ultra-wealthy."

Not just the ultra wealthy, but the underserving ultra-wealthy. There are not the risk-taking entrepreneurs that the Ayn Rand crowd is always swooning over. These are rich kids - brats who will be set for life merely for their fortunate birth. Why oh why do conservatives, who are alwyas braying about personal responsiblity and making it on your own, get all weepy and sentimental about the trust fund set. This one truly makes my head explode.

Posted by: Virginia7 | December 7, 2010 9:26 AM | Report abuse

Tomasky on the deal...

"It may still be true that Barack Obama folded and let the liberal base down and didn't put up a fight. But it's now also true, lo and behold, that the tax deal with the Republicans announced last night is far better than any Democrat could have expected..."

http://www.guardian.co.uk/commentisfree/michaeltomasky/2010/dec/07/obama-administration-republicans-the-tax-deal

Posted by: bernielatham | December 7, 2010 9:27 AM | Report abuse

Traitorous RINO appeaser america-hater Condi Rice goes all soft and liberal and argues for the ratification of START...

http://online.wsj.com/article/SB10001424052748703814404576002094121743636.html?mod=rss_opinion_main

Posted by: bernielatham | December 7, 2010 9:30 AM | Report abuse

@Ethan2010: "A multi-millionaire whose taxes increase slightly will not significantly change his/her spending habits."

Not because of a tax increase. Although I think a general sense that the economy is tough, and they should appear more frugal, and, say, avoid taking private jets to Las Vegas for a holiday or something, does impact their spending habits.

And, it may well be that the wealthy are worried about maintaining their wealth, and even if their income is higher this year than last, they may be skittish about the overall economy. So giving them more money isn't going to do much good, because they are going to be more frugal (and less stimulative) in their spending as a matter of personal responsibility.

Plus, I think we have given further tax cuts for the 250k+ set a good try, and I'm not sure it's manifested the promised benefits. Which is not that I think that the tax rate should go up to 70% (it shouldn't), just that between 1% and 3% would obviously be more than affordable, and, if such a thing could be used as leverage to cut middle class taxes a few more percentage points, it would be well worth the trade off. And then we could see how stimulative it is to put more money in the hands of the middle class, versus the top 2% of earners.

Posted by: Kevin_Willis | December 7, 2010 9:49 AM | Report abuse

I have one other comment re the tax cuts, although I admit I haven't researched it too well. The payroll tax cut affects Social Security, and of course the government will cover the shortfall, but I'm afraid we may be undermining our argument that SS is essentially sound until 2037. I can certainly see how this shortfall could ultimately fall into the camp of those advancing the notion that SS needs to be dramatically altered. Just a worst case scenario.

Have a good day all.

Posted by: lmsinca | December 7, 2010 9:57 AM | Report abuse

It's nice to see "compromise"...wish they could always work together like this.

However, the result is disappointing and I completely disagree with it. If we were gonna let these supposed job-creators keep their tax cuts, there should be conditions attached like the more the unemployment percentage goes down, the bigger the tax break they get. All they've done is fire people and maintain their profits. Why are we rewarding that or pretending that it's essential to our economic health?

Obama you totally sold out. Actually that happened a long time ago, I guess I'm just now admitting it.

Posted by: SDJeff | December 7, 2010 9:58 AM | Report abuse

A Modest Proposal:

President Obama,

From now on, clear all your promises with Mitch McConnell first. Also have him write your next State Of The Union Speech, since you will eventually end up doing only what Mitch wants done.

You have lost all credibility, and have made yourself look like a complete pushover.

Posted by: Liam-still | December 7, 2010 10:00 AM | Report abuse

Well, now if the economy doesn't boom, both Democrats and Republicans are to blame since this is a bi-partisan agreement.

Posted by: mikefromArlington | December 7, 2010 10:07 AM | Report abuse

When our "divided" government unites on anything, you know one thing for sure: it is going to cost a lot of money we don't have; both "sides" got what they wanted, which is more borrowed money. That is the bad news.

The good news is that I have made a killing in stocks this year and I won't even pay more in taxes. I feel so stimulated, I may even buy a boat.

Posted by: shrink2 | December 7, 2010 10:08 AM | Report abuse

Senate Democrats.

Demand that Republicans keep their promises, and pay for all the tax cuts now. Slow the entire process down, by having the CBO cost out how much the deal will add to the budget deficits.

Time to start playing hard ball against both the Republicans, and the Pushovers in the White House.

Posted by: Liam-still | December 7, 2010 10:09 AM | Report abuse

It's an early Christmas!

"US Chamber of Commerce loses member groups in key primary states

Forty-plus local chambers have now issued statements trying to place distance between their local emphasis and the actions of the national Chamber, Politico's Jeanne Cummings reported Tuesday.

Perhaps most interesting are statements issued from local chambers in key primary states: Iowa and New Hampshire."

http://www.rawstory.com/rs/2010/12/underreported-primary-states-shun-chamber-commerce/

Posted by: mikefromArlington | December 7, 2010 10:16 AM | Report abuse

Too late, Liam-still.

Posted by: clawrence12 | December 7, 2010 10:18 AM | Report abuse

claw is right^, we are kicking the can down the road. This is what we do best, we might as well just lie down and enjoy it, again. After all, my kids are going to pay my bills. I like that idea, the'll learn the value of a dollar (so I don't have to).

^more bipartisan agreement!

Posted by: shrink2 | December 7, 2010 10:22 AM | Report abuse

Kevin:

"Support is a strong word. As I have expressed previously, I think a more progressive system that recognized that even at high level of incomes, there's a difference between a household making $250k a year and $2 million a year. "

Fair enough.

"...but "the rich" have significantly more cash in real terms (as well as comparatively) than they have ever had in the history of the country, and I see no sign that it has been stimulative or palliative to the economy as a whole."

If your evidence for this is that the economy continues to stagnate despite the amount of wealth in the hands of the wealthy, then that isn't really evidence. During the '90s the "rich" also had significantly more cash in real terms than ever before, and the economy was booming. What we are talking about is the marginal effect on the economy, given all the other things going on. Just because the current tax regime did not prevent our current economic situation, or turn it around, is no reason to believe that it has had no effect at all, or that altering won't have effects.

"I have a hard time believing that cumulatively having a little bit less in real income than last year, but still far more than just 10 years ago, is going to retard the economy. "

I'm not suggesting it would "retard" the economy. But there is no doubt at all that the tax code provides incentives (or disincentives) to rich and poor alike. Altering the tax code will have an effect on behavior and hence the economy, regardless of how much money the "rich" have relative to times past.

(BTW, speaking of the tax code altering behavior, did you see this? http://www.nytimes.com/2010/12/06/business/06bonus.html?_r=2&pagewanted=1&ref=business)

Posted by: ScottC3 | December 7, 2010 10:22 AM | Report abuse

Next comes raising the debt ceiling. I'll bet we get bipartisan agreement on that too, after some austere posturing in front of some very soft questions from behind the cameras.

Posted by: shrink2 | December 7, 2010 10:26 AM | Report abuse

ScottC3-
"If your evidence for this is that the economy continues to stagnate despite the amount of wealth in the hands of the wealthy, then that isn't really evidence. During the '90s the "rich" also had significantly more cash in real terms than ever before, and the economy was booming."

I don't understand your point here. Just because something different happened in the past hardly makes what Kevin said no longer evidence. Given that the tax rates were higher in the 90s it may even support Kevin's point which really boils down to the fact that a small increase in the tax rate for the "rich" probably won't be a job killer. But given the virtually innumerable factors that go into a business decision on opening or expanding a business it's a hard to draw such sweeping conclusions.

Posted by: ashotinthedark | December 7, 2010 10:37 AM | Report abuse

all, good new post from Adam Serwer on the liberal revolt over the tax cut deal:

http://voices.washingtonpost.com/plum-line/2010/12/a_liberal_revolt_over_the_tax.html

Posted by: Greg Sargent | December 7, 2010 10:54 AM | Report abuse

the more it changes, the more it stays the same.

Liberals here are now consoling themselves with alternative, denial inspired explanations for keeping the current tax rates in place.

but they have not lost their greed for other people's money. As proof I offer the concerns expressed about the inheritance tax. There are no ethical or moral supports for such a tax, but liberals insist that the Federal government should snatch a significant portion of it because it was "unearned" by the receipient.

Here's a classic quote:
"Not just the ultra wealthy, but the underserving ultra-wealthy. There are not the risk-taking entrepreneurs that the Ayn Rand crowd is always swooning over. These are rich kids - brats who will be set for life merely for their fortunate birth. Why oh why do conservatives, who are alwyas braying about personal responsiblity and making it on your own, get all weepy and sentimental about the trust fund set. This one truly makes my head explode. "

sooooo, liberals think they should spend this money, rather than the heirs of someone successful because...?

Posted by: skipsailing28 | December 7, 2010 10:59 AM | Report abuse

@ScottC3: "If your evidence for this is that the economy continues to stagnate despite the amount of wealth in the hands of the wealthy, then that isn't really evidence. During the '90s the 'rich' also had significantly more cash in real terms than ever before, and the economy was booming."

Thus, it would tend to appear to be a non-factor, which is my point. The over all robustness of the economy is not dependent on how much money the top 5% or so have. If they have a little less or a little more, it's not going to impact the overall economy.

"Just because the current tax regime did not prevent our current economic situation, or turn it around, is no reason to believe that it has had no effect at all, or that altering won't have effects."

While true, I feel there should have been a clear benefit to the Bush tax cuts that just didn't seem to manifest. More to the point, how do tax cuts for the wealthy benefit the overall economy? By increasing the amount of money the job creators, etc., have to do economically stimulative things. However, they have more money than they did than before they got the tax cuts, and the economy is slower and more people are unemployed, and have been. So it's hard to argue, to me, that there's a direct causal relationship between a 3% tax increase (or cut) on wealthy families and the overall economy. I believe that to be happening in an area of zero impact.

So, if you're in the middle of a big room, you can swing your fists all you want, and it makes no overall difference. You're well outside of any area of real impact, and your fists don't hit anything. Now, if you get close to a wall, then it will make some difference. But until you're approach 10% taxation or 60% taxation levels, it doesn't look to me that it has a huge impact.

Also, to me, it is somewhat a matter of where the emphasis on economic importance lies--with the wealthy, or the overall economy. I'd be willing to trade an imperfect 3% tax increase on wealthy families for a steeper tax cut for the middle class. Not because rich people are bad and middle class people are good, but because if the goal is to get money out of government and keep it in the private sector, much more overall cash could be left to do good work in the private sector in that particular trade. A 3% tax cut on the middle class would put a lot more money in the private economy and a 3% tax increase on the top 5% of earners would take out of it. And I think that's a trade that could be made, politically, though nobody is offering it.

I'm not arguing that taxes and regulatory structures do not impact behavior (of course they do), only that I think it's worth trying (and making compromises in order to try) giving middle class people a serious tax cut and letting folks in the top bracket pay a little more. And that, failing that, maintaining middle class tax cuts is more important to the overall economy than maintaining top-tier tax cuts.

Posted by: Kevin_Willis | December 7, 2010 11:12 AM | Report abuse

@skipsailing: "sooooo, liberals think they should spend this money, rather than the heirs of someone successful because...?"

Because their kids, Marty! Something has got to be done about their kids!

But seriously, it's a counterproductive argument. If there's an argument for the estate tax, it's not that rich people's kids are entitled brats. If that's a justification for appropriating a lifetime of accumulated wealth for the indulgent spending of government bureaucrats, than that should be a justifiable reason to steal the car of that overpaid, obnoxious supervisor who has that nice corner office (that he doesn't deserve) down the hall.

I'm sure the police would understand why you stole someone's wallet if you explained that the fellow was an entitled brat and didn't deserve all his money, plus he has two iPads and you don't even have one.

Posted by: Kevin_Willis | December 7, 2010 11:18 AM | Report abuse

@KW: "I feel there should have been a clear benefit to the Bush tax cuts that just didn't seem to manifest"

Right.

That's because there WAS no benefit.

Just like there was no benefit to Reagan's Trickle-On-America economics.

As I've said a number of times, Kevin, ScottC's ONLY interest is increasing take-home pay of corporate executives.

Simply, if he wanted to support policies that stimulate job growth in the private sector he has a multitude of policies to choose from. And yet not only does the conservative wing not entertain those policies, they stoop to the intellectually dishonest Orwellian rhetoric that policies that incentivize job growth in domestic growth industries are "Job Killers".

It seems we really tend to agree on tax policy, Kevin, and I just wanted to point out the larger picture of what ScottC -- and other ultra-corporate "conservatives" -- supports, that being, more take-home pay for the corporate elite at the expense of everything and everyone else.

Posted by: Ethan2010 | December 7, 2010 11:36 AM | Report abuse

Kevin wrote: "but because if the goal is to get money out of government and keep it in the private sector, much more overall cash could be left to do good work in the private sector in that particular trade."

That, to me, is the goal.  I think Skip nails it when he writes about the morality of increasing taxation.  If your arguing about the economic impact of a slight tax cut here or increase there, your arguing that the government should have a strong role in managing the economy.  To me, it's like the Kelo decision.  Ultimately, if we're arguing that the government can make better decisions with a resource, than the argument is over.  I've ceded liberty, the right to have, to the concept of Utility. I just don't think that's governments role, though that is the structure we currently have.  Given that situation, I'm for fighting maniacally each time the government decides it can do better than the citizen, if only to slow the slide.

Posted by: TrollMcWingnut | December 7, 2010 11:55 AM | Report abuse

@Ethan2010: "Just like there was no benefit to Reagan's Trickle-On-America economics."

Well, we'll probably have to agree to disagree, there. The top marginal tax rate was 70% when Reagan took office, and I think there is an argument to be made that cutting top marginal rates from 70% to 50% at the time was economically stimulative. The top marginal rates of 91% in the 50s and 60s was, in my opinion, really crazy.

I don't think Scott's only interest is increasing the take home pay of corporate executives, either. But, I'm glad we can agree that middle class tax reduction is a good idea.

Posted by: Kevin_Willis | December 7, 2010 12:00 PM | Report abuse

"I think there is an argument to be made that cutting top marginal rates from 70% to 50% at the time was economically stimulative"

Kevin, I'm not all that well-versed in tax policy, but is there any documentary evidence that this is so?

Because Reagan also took an axe to federal regulations and the private sector surely benefited from that as well.

It would be interesting to see a review of his tax and regulation policies to see which had the more stimulative effect and to what extent they impacted the federal debt. I would guess that loosening regulations provided a larger economic stimulus than decreasing the marginal income tax rate, but the tax cut drove up the debt and that hampered economic growth.

You can see how "effective" Reagan's policies were in reducing the debt in this perfect chart:

http://en.wikipedia.org/wiki/File:US_Federal_Debt_as_Percent_of_GDP_by_President.png

Obviously, Reagan's fiscal policy contributed to an increase in the national debt as it relates to the GDP. Whether increase in the debt was a function of the decrease in the tax rate or of the weak stimulus of deregulation would be interesting to know.

Posted by: Ethan2010 | December 7, 2010 12:36 PM | Report abuse

Ethan makes a common liberal mistake. He blames the "deficits" incurred during the Reagan Admin on the president. Is Ethan ignorant of the constitution? Perhaps. Or perhaps Ethan simply adheres to liberal dogma that states clearly that all government spending is right and just and if the people get a tax cut and deficits result, well it can only be because the gummint hasn't stolen enough from the people to cover the right and just spending.

this ignorance of the constitution is also on display when liberals crow about the "clinton" surpluses. The fact that the congress was held by fiscal hawks who closed the government so stalwart were they.

so which is it Ethan? Ignorance of the constitution? Inability to understand the concept of spending cuts? Such a strong desire to crow about Clinton that you lie about Bush?

Posted by: skipsailing28 | December 7, 2010 1:06 PM | Report abuse

@Ethan2010: "You can see how 'effective' Reagan's policies were in reducing the debt in this perfect chart:"

Yeah, I didn't say anything about the debt. But the debt wasn't driven up by tax cuts.

In 1980, spending was 590.9 billion (versus 504 billion the year before). By 1984, it was 851.8 billion! By 1988, spending had topped a trillion dollars. On the other hand, tax receipts went up (not down) from 1980--up $150 billion by 1984, up by $400 billion (per year) by 1988. So, whatever else you want to say about the tax cuts, they certainly didn't drive up the debt.

In 1980, GDP was 2.7 trillion, and by 1988 it was 5.1 trillion. More importantly, in 1980 per capita GDP was $12,243, and by 1998 it had increased to $20,812. So, while there it's difficult to say there is causality (tax cuts = increased economic performance), it's reasonable to argue they did no harm. It also makes sense to presume that a tax rate of 70% or higher will influence big money to put the money elsewhere, to avoid taxation. Thus, confiscatory tax rates on upper incomes seem likely to be a drag on the over all economy. And 70% or higher seems confiscatory to me.

Posted by: Kevin_Willis | December 7, 2010 1:26 PM | Report abuse

Kevin,

You are making a series of assumptions here, particularly that the decrease in tax rate directly led to increase in tax receipts.

I am finding around the web that when you adjust income tax revenue to economic variables such as inflation, the income tax receipts in the 80s saw only a slight gain.

"""when marginal tax rates on high-income individuals were raised in 1990 and especially in 1993, the claim was made that these tax increases would damage the economy and that income tax receipts consequently would grow more slowly in the 1990s than in the 1980s. In fact, income tax revenues hardly grew at all in the 1980s (after adjustment for inflation and increases in the size of the working-age population) and grew 13 times faster in the 1990s than in the 1980s."""

http://www.cbpp.org/cms/?fa=view&id=119

Another analysis -- using tax receipts adjusted for inflation -- shows:

"An accurate accounting indicates that receipts increased from $599 billion in 1981 to $1.032 trillion in 1990, an increase of 72%. In 2005 dollars, the receipts decreased from $1.25 trillion in 1981 to $1.13 trillion in 1983 and did not return to $1.25 trillion until 1985. The receipts in 1990 were $1.5 trillion in 2005 dollars, an increase of only 20%.[40] In contrast, from 1991 to 2000, receipts increased by 90% in current dollars, or 60% in 2005 dollars."

http://en.wikipedia.org/wiki/Reaganomics#Criticism

If you don't adjust the income tax receipt data as per inflation, you come up with a whole different assessment than if you use non-adjusted numbers.

Bottom line, the undisputed result of Reagan's economic policy was that it created mountains of federal debt while decreasing worker pay -- not unlike the economic results of GWB's administration. So whether or not the GDP growth was caused by changes in the marginal income tax rates or by deregulation, the economic growth reflected in the GDP was unsustainable and, at the end of the day, economic policy had to be shifted more towards the Keynesian approach.

Posted by: Ethan2010 | December 7, 2010 2:46 PM | Report abuse

Kevin:

"Thus, it would tend to appear to be a non-factor, which is my point."

My point is it ought not appear that way to you. Just because it isn't the sole factor, or the dominant factor, doesn't mean it is a non-factor. Your conclusion that it is a non-factor does not follow, and is almost certainly incorrect.

"While true, I feel there should have been a clear benefit to the Bush tax cuts that just didn't seem to manifest."

Are you accounting for the effects of other factors and intervening events? You can't simply look at a single factor in isolation against the performance of the whole economy and make a judgement about whether that factor acted as expected. For example, the full Bush tax cuts were finalized in 2003. Between September 2003 and December 2007, the economy created on average of 162,000 jobs a month. Is this the manifestation of a clear benefit to the Bush tax cuts? Then, of course, the housing and stock markets started to drop, ultimately crashing, resulting in a huge loss of jobs over the next two years, wiping out all of the previous gains. Does this suggest to you that there was no benefit to the new tax regime all along? Isn't it possible that there were, and are, benefits to tax cuts, but those benefits can be, and have been, overwhelmed by other, negative events?

(BTW, and for the benefit of the soak-the-rich peanut gallery here, I am not claiming that the growth in the economy between '03 and '07 was due to strictly to the Bush tax cuts.)

"So it's hard to argue, to me, that there's a direct causal relationship between a 3% tax increase (or cut) on wealthy families and the overall economy."

Again, your conclusion does not follow, for there are other causal relationships that exist as well. If a person wearing a bulletproof vest gets shot 5 times in the chest but then dies because of one shot to the head, you wouldn't conclude that there is no relationship between wearing bulletproof vests and safety, would you? Tax cuts, including those for the wealthy, do not guarantee a booming economy because other factors matter to the economy as well. But tax cuts, including those for the wealthy, do provide positive benefits to economic growth...other things being equal (which, or course, they never are.)

(cont'd)

Posted by: ScottC3 | December 7, 2010 2:48 PM | Report abuse

Kevin (cont'd):

"I'd be willing to trade an imperfect 3% tax increase on wealthy families for a steeper tax cut for the middle class. Not because rich people are bad and middle class people are good, but because if the goal is to get money out of government and keep it in the private sector, much more overall cash could be left to do good work in the private sector in that particular trade."

Sorry, but this makes no sense to me. If you are trading a tax increase on demographic X for an equal (in absolute $ terms) tax decrease for demographic Y, you haven't managed to keep a single dollar out of government hands. By definition, they are equal and offsetting. And this...

"A 3% tax cut on the middle class would put a lot more money in the private economy and a 3% tax increase on the top 5% of earners would take out of it. "

...is simply untrue. You are forgetting that the top 5% already pay a majority of taxes. In 2008, the top 5% of income earners paid 58.72% of all federal income taxes paid. The bottom 95% of income earners paid 41.28%. So if what everyone else paid is X, then the top 5% paid 1.42(X). 3% of X will always be less than 3% of 1.42(X), as long as X is a positive number. Your plan fails its expressed purpose. You will have taken even more money out of the private sector and given it to the government.

Posted by: ScottC3 | December 7, 2010 2:51 PM | Report abuse

I want to ask you people...Who Should Be Taxed?? Who exactly are "the rich"? George Soros? Berkshire Hathaway? Progressive Insurance Co.?- In the end, folks, it is you and me that pay the taxes. Gas Tax, Income Tax, Sales Tax,Property Tax;
The Best Government is the one that governs and taxes least.- Let's get a tax reduction for everyone, us. Cut Gas Tax in half, Cut Income Tax in half, Cut All Taxes in half. That money goes into our pockets and not into some government employee's pockets,and benefits program.

Posted by: stormpost | December 7, 2010 3:01 PM | Report abuse

GOVERNMENT SPENDING = OUR TAXES. Any way you cut it. It's not someone elses money. It's not some company's money. It always ends up as Our Money going to some government attached employee. Our tax goes to his or her job, benefits, and pension.
The Private Sector pays out more (in taxes) and the Public Sector, takes more (our taxes).

Posted by: stormpost | December 7, 2010 3:07 PM | Report abuse

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