Mike Kueber's Blog

December 6, 2012

Room for Debate – sparing the middle class

Filed under: Economics,Issues,Politics — Mike Kueber @ 8:59 pm

One of my favorite columns in the New York Times is called, “Room for Debate.”  The recurring column consists of several guest columnists (usually 6 to 8) submitting relatively brief articles on a topical issue.  Today’s column focuses on whether fiscal sanity can be restored to American government without hurting the middle class.  The Times phrase it thusly:

  • So the politics are simple: neither side wants higher taxes on the majority of taxpayers. But does the math work? Can policy makers make a dent in the deficit without raising middle-class tax rates, ending tax breaks that benefit the middle class, or cutting programs that average Americans depend on?

This topic intrigues me because I have for several months argued that eliminating the Bush tax cuts for everyone, which is a major component of the fiscal cliff, makes a lot of sense.  In fact, as part of the class-war debate last year, many conservatives complained that too many Americans paid no federal income tax.  Eliminating the Bush tax cuts for everyone would ameliorate the situation. 

The Times topic, however, is broader than whether the poor should pay taxes.  Rather, it addresses the essence of the Democratic philosophy – i.e., you can solve America’s economic mess without raising taxes on the middle class or without cutting any of their entitlements.  Not surprisingly, the six guest commenters had a wide array of opinions, with the loony ones coming from the left and the sane ones coming from the right:

  • Loony professor James Galbraith from UT-Austin has an incredibly short-term perspective that pays no heed to deficits, however large.  (Ok, loony VP Dick Cheney also opined that deficits don’t matter.)  Rather his focus is exclusively on getting out of our current economic doldrums by creating demand through government spending.  Ultimately, he didn’t answer the question.
  • Quasi-loony Seth Hanlon from the Center for American Progress thinks America’s debt is OK provided we stabilize our debt as a share of the economy over the next decade, and this can be done with asking anything from the middle class.  Wrong answer, but at least he answered the question.
  • Sane Sita Nataraj Slavov from the American Enterprise Institute states the obvious – “We can’t solve our budget problems just by soaking the rich or by gutting programs for the poor. The broad middle class will have to step up and be part of the solution. It’s not an idea that wins votes, but it’s the truth.
  • Ultra-loony William Darity from Duke Univ. argues that an FDR-like public-works program that gave everyone at $20K would solve all problems.  This guy doesn’t even know what the question is.
  • Sane and balanced William Gale from the Brookings Institution Middle-class cogently declares, “Households will eventually have to see their taxes rise and some of their benefits fall as part of a long-term fiscal solution. The projected budget shortfalls in coming decades are too substantial for any large group to escape unscathed.  But increased tax revenue from high-income households alone could go a long way toward stabilizing the medium-term debt relative to the economy – a policy that could be achieved with about $2 trillion in deficit reduction over the next decade.”
  • Ultra-sane Gretchen Hamel of Public Notice presciently points out, “Tax increases for the rich might reduce the deficit, but it’s a Band-Aid on a gaping wound.  In June, the Congressional Budget Office said it was ‘possible to keep the laws for the large entitlement programs unchanged — but only by raising taxes substantially on a broad group of Americans.’ In other words, we cannot keep the same tax rates and maintain the current level of benefits. One has to change, and it has to change a lot. Raising taxes on the wealthy buys more time, but doesn’t fix the problem. Similarly, small cuts to entitlements delay the debate for a few more years.”

I especially like the comments from Gale and Hamel.  Gale fairly points out that the tax hikes on the rich will be helpful, while Hamel warns that this help might prompt the Democrats to kick the can down the road for a few more years.

Incidentally, Dennis Miller made an interesting insight last night on The Factor regarding the media’s description of tax hikes on the rich.  Miller accurately pointed out that these people aren’t necessarily rich, affluent, or wealthy.  Rather, they are high-earners who are being taxed on their income, or as Miller said, being taxed for their success. 

So let’s call it a tax on the most successful.

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