Our next president has come under some fire on this blog for apparently breaking a campaign promise to raise taxes on the wealthiest 5% of Americans. Lee — the other regular blogger on this site — has suggested that this is an important issue:
Let’s get this straight: Obama campaigned on the promise of raising taxes on a certain segment of “high-income” Americans. He won. He might be said to have received a mandate from the American people to do so. Does anyone think it’ll be easier to return to this promise in 2011?
Lee also reiterated his belief that the left needs to put pressure on Obama to steer this country in keeping with the views of the left-wingers who made it possible for him to win:
Obama’s weakness, his dependency on large numbers of enthusiastic (mostly progressive, but somewhat cynical and alienated) voters, is our strength. Politicians should ideally fear their supporters. They should be terrified of betraying their supporters because doing so, theoretically, ought to destroy their credibility and careers in the long term.
So here’s to the so-called “netroots.” Keep twisting the screws. Keep putting on the pressure. Make Obama sweat.
I don’t have a problem in principle with the idea of making Obama sweat – if Obama is doing things that are bad for the country, we need to speak truth to power. There’s plenty of evidence that pressure from online activists prevented Obama from appointing John Brennan to head the CIA.
But I do have a problem with the idea of trying to “make Obama sweat” for abandoning his plan to immediately push for a tax increase on the top 5% of the population, income-wise.
I don’t think it’s a good idea, politically or economically, for Obama to push for a tax increase on anybody right now. Eventually, the wealthiest 5% of the population should be paying a lot more in taxes — but I don’t think such an increase would help the economy in the short-term, and I think pushing for this increase could sabotage everything else Obama must strive to accomplish over the next six months.
That said, I wanted to point out that if Lee and like-minded activists want to try to “make Obama sweat” over the tax hike issue, they’ll have to do it with no help whatsoever from the most prestigious left-wing economic pundit in America — Nobel Laureate and New York Times Columnist Paul Krugman.
I’m not a huge fan of Krugman because I feel he was disrespectful of Obama supporters during the Democratic primary earlier this year, and because I thought he was somewhat misleading in explaining his opposition to the $700 billion bailout plan originally proposed a few months back by Treasury Secretary Paul Krugman.
But I have to acknowledge Krugman’s prestige and credibility right now — and it’s hard to imagine how the netroots could “make Obama sweat” over tax increases while Krugman has Obama’s back.
Here’s an excerpt from a recent interview Krugman gave on NPR to Tom Ashbrook:
ASHBROOK: Question for you from our website, www.onpointradio.org: ”Mr. Krugman, please discuss how the tax structure should be changed in order to help bring the new gilded age to an end,” by which I guess our correspondent here is looking at income inequality.
KRUGMAN: Yeah, uh, there’s a fair bit you can do. Although most of the surge in inequality has been in pre-tax income. But it’s been exaccerbated by a real reduction in the progressivity of taxes. So we’ve gone from — well, if you go back to the days when that Socialist Dwight Eisenhower was in the White House, the top tax rate was actually 91% and now it’s 35%. Now, most economists, myself included, don’t actually think that a 90% tax rate is actually a good idea. But, we certainly have sharply reduced taxes at the top end of the scale, which has made things worse. I’m not sure that you — Yeah, let me say that reforming the tax code is not in itself going to be enough to bring us back to a middle class society, but it sure is a step in the right direction and we have to get over this notion that if you tax rich people even a dime more, that somehow they’ll all go away and refuse to invest or be entrepreneurial. If you require some CEO to pay 38% of his income instead of 35% of his income in taxes, he’ll quit his job and go home. We have a lot of scope for being more progressive again in taxes.
ASHBROOK: Obama has indicated he may put off those higher taxes for upper-income groups while we’re in this ditch. Are you with him on that?
KRUGMAN: Yeah. I actually never thought it was going to happen anyway until 2010. I mean, the, uh — Legislatively, it’s quite hard to change the tax code. The Democrats, unless Al Franken pulls it off and there’s an upset in Georgia, are not going to have 60 seats in the Senate, so the great hope for rolling back the Bush tax cuts actually was the fact that Bush tried to hide the true cost of it, wrote it so the tax cuts turn into a pumpkin at the end of 2010.
So I never thought it was actually going to happen before 2011, anwway. And look, raising taxes in the face of a recession is not great policy even if the tax cuts were very ill-advised when they took place. Ideally, we’d be able to completely restructure the tax code right now, instantly, and also, in the process, avoid having too great a tax increase. But you know, that’s too hard to do, legislatively. So, you know, I don’t have a problem with that. I don’t think that’s a major concession on Obama’s part.
So here’s the deal for those of you hoping to “make Obama sweat” for abandoning his campaign plan to push for a tax increase — a rolling back of the Bush tax cuts — as soon as he took office: If you try to pressure Obama to keep his promise, your opponents (if they feel the need to even argue the point at all) will point out that even Krugman, the most left-wing progressive economist with a national audience and a Nobel prize, says “raising taxes in the face of a recession is not great policy even if the tax cuts were very ill-advised when they took place.”
Now why would Krugman say a thing like that if it weren’t true?
You’ll need an answer to that question, liberal netroots, if you intend to convince Obama that he’ll face the wrath of the lefties if he doesn’t follow through on the tax hike.
Of course, it’s ridiculous to assume that a tax increase on the rich would be bad right now just because Krugman says so. Obviously, Krugman could be wrong. But Krugman’s opinion is a lot to overcome if you want to rally an anti-Obama revolt.
Obviously everyone has different priorities, so what matters to Krugman won’t matter to others, and vice versa. Krugman’s lack of concern is only evidence that he has little to say on this matter.
But even so: it’s not clear what your — or Krugman’s — logic is here.
You quote Krugman as saying that changing the tax code is hard and is going to take a lot of time. That because it was legislatively hard to do, the Democrats were going to have a hard time fixing the tax code. Fair enough.
Then Krugman changes topics completely and says that changing the tax code in the midst of a recession is a bad idea. But what’s his argument to support this claim? It’s an assertion without evidence to back it up.
If anything, by Krugman’s own logic we may be at the tail end of a recession before any legislation actually gets passed. So I see nothing here to dissuade me from the belief that Obama should stick by his original campaign pledge.
In fact, Krugman’s argument about the difficulty of changing the tax code–assuming it’s true–suggests just the opposite: this is a long-term project that shouldn’t be derailed because of local and temporary economic circumstances whose future we can’t predict.
Under socialist president Dwight Eisenhower, we experienced what economists often refer to as the “golden age of capitalism,” an era of broad widely shared growth–with a robustly Keyensian, interventionist state. Which isn’t to say that progressive taxes were the primary cause of the greater equality of that era — as Krugman says, correctly, inequality is largely a pre-tax thing — but that increasing taxes to what the electorate currently deems a fairer level won’t damage our economy.
Obama’s advisers’ claims to the contrary — their sudden post-election claim that the recession “changes” the economic logic of tax cuts for the rich — seem insincere to me; repeatedly asked how the tanking economy would change Obama’s plans, Obama essentially answered: no major changes except for foreign aid. Not “I’ll have to revise my tax plan given the state of the economy.”
Unless someone can flesh out the claim that beginning the (apparently long-term) project of increasing taxes on the top 5% of Americans “is not great policy” right now. I’m willing to be persuaded, but neither this post nor any other claims I’ve read has attempted to lay out the argument beyond saying “this is politically hard to do.”
Comment by Lee — December 6, 2008 @ 3:44 am
I agree I haven’t done much to lay out the argument that raising taxes on the top five percent right now would be bad for the economy. And neither did Krugman in his interview with Ashbrook — he simply said “raising taxes in the face of a recession is not great policy even if the tax cuts were very ill-advised when they took place.”
But you write, “Krugman’s lack of concern is only evidence that he has little to say on this matter.” I suppose it’s possible that a Nobel prize winning professor of economics has “little to say” about whether raising taxes in the face of a recession is good policy or not. But what do you mean when you refer to Krugman’s “lack of concern”?
Lack of concern for what? He demonstrates in the quote above that he is very concerned about making the tax code more progressive. He writes, “let me say that reforming the tax code is not in itself going to be enough to bring us back to a middle class society, but it sure is a step in the right direction and we have to get over this notion that if you tax rich people even a dime more, that somehow they’ll all go away and refuse to invest or be entrepreneurial.” I think he is very concerned about raising taxes on the richest Americans — he just doesn’t think it needs to be done right now.
As for the logic of my post — my logic relates to the fact that you’re clearly trying to rally people to pressure Obama into implementing these tax cuts as soon as possible, rather than waiting until they expire or until the recession is over. You’re saying we should “make Obama sweat.” My point is that the people you’re trying to rally should know they’ll be wasting their time on a fool’s errand, as they haven’t even managed to convince Krugman that their cause is worth fighting for.
I can understand fighting for a lost cause — but why this lost cause? And how do you expect to make any headway whatsoever when even Krugman doesn’t share your priorities?
You yourself can claim some small share of the responsibility for Krugman’s prestige. You wrote the following on this very blog a few months ago during a discussion about the tanking economy:
“My point is, from what I’ve read there are better models for such bailouts on the books, both in the US and in other countries. Krguman cites the S&L scandal and the Swedish financial crisis as examples of smartly organized bailouts. When he says this one makes no sense, I tend to trust him. He has been consistently right in his economic analysis, form his claim that the private utilities were gouging California to his claim that the housing market was experiencing a bubble.”
So if he was right about those other things, why isn’t he right when he says that tax increases in the face of a recession isn’t great policy? I’m not saying you’re wrong and Krugman is right — but if you want to get people fired up to go after Obama on this tax hike thing, you and your fellow activists will need an argument.
That’s my point: Most Americans — Krugman included — accept the idea that tax hikes aren’t a good idea right now. If you want to put pressure on Obama and Congress to act contrary to that idea, then it’s incumbent upon you to explain why Krugman and like-minded Americans are wrong.
Of course, you’re entitled to believe anything you want for any reason you want — but there’s a big difference between passively wanting Obama to raise taxes and “making Obama sweat” about it. To make Obama sweat, you’ll need a powerful argument that inspires people to join you.
Furthermore, if you’re willing to accept that this is a “long-term project,” then what is there to “make Obama sweat” about? Obama has said he may raise the taxes soon, or he may wait until they expire in 2010. But Obama hasn’t given up on the idea that these taxes should go up. So there’s nothing to make him sweat about of you’re comfortable waiting a year or two.
You write, “Obama’s advisers’ claims to the contrary — their sudden post-election claim that the recession “changes” the economic logic of tax cuts for the rich — seem insincere to me”. I agree it is interesting that Obama campaigned on these tax hikes until the day he was elected — usually, you’d expect a candidate to try to win votes by running against higher taxes, and then break his promise in the other direction when he got elected.
My interpretation of what happened is that Obama’s great strength was his consistency — he campaigned on the tax increases from the very first day of his campaign to the very last day, and he didn’t want to make adjustments during the campaign that would muddy his message and dilute the sense that he was prepared to stand for a single set of ideas. After he was elected, he knew he could make the argument that changing circumstances require changing policies.
So I believe Obama’s insincerity came before election day, not after. Obama the candidate wanted to stand by a single set of ideas and ride those ideas to victory — but president-elect Obama had to grapple with everything that had happened between early 2007, when he fashioned his platform, and late 2008.
But his reluctance to adjust his campaign policies during the campaign is about more than just winning votes — you correctly point out that his election is a mandate to raise these taxes, and that mandate will still be legitimate in 2010. If he had decided, a month or two before the election, to give up on the tax hike, then Republicans could claim later on that Obama had no such mandate. So he was right to campaign the way he did, I think.
Anyway, if you’re right — that raising taxes on the rich is a cause worth fighting for right now — then I hope my pushback will help you strengthen your argument so you’ll be more effective in fighting the good fight.
Comment by Ian — December 6, 2008 @ 1:05 pm
A few comments on a long response above.
(1) Regarding the difference between my level of trust of Krugman on taxes vs. the buying ‘trash assets’/injecting capital debate. I tended to trust Krugman’s analysis on the former because I head it mirrored in many places–and the more I investigated, the more I came to understand the distinctions that were being argued for.
It seemed as if lots of economists were saying: history shows that the way to deal with crises of this sort is to directly inject capital–and correspondingly take a stake in the companies and ensure they use the injected money to move credit markets–and that buying bad assets won’t necessarily get the markets going. What people seem to agree now is that we’ve achieved the worst of both worlds: to give capital rather than buy trash assets, but not to direct how that capital is used, so banks are using the money the government has given them not to restart lending but to buy other companies, etc.
I grasped the distinction in a way that I don’t understand the sudden claim that it’s somehow a bad idea to raise taxes during a recession. All the evidence I’ve cited in my previous posts argues against this notion, and I haven’t been able to find any specific claims re: taxes during recession. So I tend to want more information from someone like Krugman or anyone. Why the gap between what I’ve researched and what he’s saying?
When Krugman writes about things like the credit crunch or housing bubble he writes editorial after editorial and blog post after blog post going into great detail on these matters. One reference in a single interview isn’t a complete enough picture for me; and the question seems not to matter enough to Krugman for him to dedicate, say, a whole column to the question.
Which is fair, since, as I said, he’s entitled to different priorities. Which isn’t to say he doesn’t also support more progressive taxation.
(2) The one adjustment I made to my views based on the Krguman interview is the length of time I now believe it takes to change the tax code. I’m not super-familiar with the horse trading and in-fighting and bureaucratic procedures of the Congress. It seems plausible to me that the tax code would be a sticky area of legislative change.
It now seems to me, if what Krguman says is true, that changing the tax code is a hard thing to do.
It’s sort of akin to Hillary Clinton’s taking the William Ayers question seriously at one of the debates. By pretending to think the question mattered, you give it credence.
How much better equipped to counter progressive taxation will Republicans be if people interpret the claim (in the Reuteurs article) that “Obama may be wary of imposing any additional tax burden at a time of deep crisis” with the fallatious claim higher taxes (on some or all) = automatic damage to the economy.
Given this adjusted picture, Obama should not give ammunition to those who would try to defeat a tax increase on the top 5% of incomes.
(3) Conclusion: either (i) changing the tax code is a hard thing to do and would always have taken a long time, or (ii) changing the tax code is no harder than any other sort of legislation. If (i), then Obama’s claim that the recession will cause him to have to delay raising taxes is disingenuous because he would never have been able to raise taxes so quickly. If (ii), then Krugman is incorrect about his assessment of the procedures in Congress and then actually needs to change the emphasis from “it wasn’t going to happen anyway” to “this is specifically why changing the tax code during a recession is a bad idea.”
Again, I tend to trust Krugman — barring evidence to contradict what he says, as w/ recession taxes — and so suspect that Obama’s “raise the taxes on the top 5%” pledge was always disingenuous to the degree that it gave the impression that it would be at the top of his agenda — and the claim that he’s backing away from that pledge now for “pragmatic” reasons.
Which is all the crazier because he actually campaigned on a pledge he knew he couldn’t make but which — supposedly — gave his Republican opponents significant leverage over him. What’s wrong with this picture?
Comment by Lee — December 6, 2008 @ 2:35 pm
My feeling is that Obama genuinely believed at that beginning of his campaign that raising taxes on the wealthy was a smart economic move, and would help the country in the long-run. But, along the way we went into a deep recession and the economy changed like we have never before seen in our lifetime. I agree with his current position that rasing taxes right now is not a smart move. I also beleive that he knew this well before the election; he didn’t just get elected on Novemebr 4th, and on the 5th realized that now he can’t raise taxes like he promised. This message was working with his supporters and the people clearly wanted this. But, the people don’t always know what is best for them. Many people, including myself, don’t understand the economy well enough to know exaclty what the consequences of rasing taxes or lowering taxes will have. Right now it seems that most “experts” widley agree that rasing taxes now would not be a smart move.Lee, you write that Ian doesn’t provide any evidence that rasing taxes during a deep recession would have negative effects. Maybe he doesn’t, but at the same time, I don’t think you have provided any evidence that rasing taxes on the wealthy will work.
Comment by rbates — December 6, 2008 @ 5:42 pm
Dear rbates: You write, “I don’t think you have provided any evidence that rasing taxes on the wealthy will work.” You’re right, but that’s partly because based on the (albeit non-comprehensive) evidence I’ve read, I don’t think that raising taxes on the top 5% of the population is going to save our economy. It almost certainly won’t–and may not even have an effect on the economy.
The only argument I know of that suggests that raising taxes on the top 5% might have a positive effect on the economy is this: that tax money spent by the government on infrastructure-related jobs would be more productive than money spent on consumption (or not spent) by the top 5%. But this argument tends to get undermined by the fact that there aren’t as many “ready to go” infrastructure jobs as is supposed. So while infrastructure projects are a good long term investment, and a bulwalk against recession, it’ll take a long time for the productive value of those dollars to be realized. Which has nothing to do with immediate recession-based stimulus.
Given these many caveats, the only claim I’m making is that the question of taxes is independent of the question of how to get us out of a recession in the short term. I base this claim on what I’ve read of books like Taxing Ourselves, etc. But it’s true that these books don’t specifically address the question: how do taxes affect the economy specifically in a recession. I can’t think of why the economic logic would be different, but it might.
Comment by Lee — December 6, 2008 @ 6:35 pm
Lee: You write “there aren’t as many ‘ready to go’ infrastructure jobs as is supposed.” This is an important point, I think, since so much of the Dems’ economic stimulus agenda is about pouring money into infrastructure projects they say can begin immediately. I’ve heard several governors — including Granholm of Michegan and Arnold (I can’t spell Schwartzenegger) of California saying they can get a lot of projects underway within weeks or a few months — like, workers at the jobsite working underway. So can you indicate where you got this info that there aren’t that many of these jobs ready to go?
As for the taxes question: you write “You’re right, but that’s partly because based on the (albeit non-comprehensive) evidence I’ve read, I don’t think that raising taxes on the top 5% of the population is going to save our economy. It almost certainly won’t–and may not even have an effect on the economy.”
Do we know how much money the tax hike part of Obama’s plan would raise? That seems to be a crucial question when it comes to tax increases.
Anyway, you produced this a few blogs back:
“Tax reforms are sometimes touted to have strong macroeconomic growth effects. We consider the impact of a major tax reform on the long-term growth rates of the U.S. economy using three approaches. The first approach is to examine the historical record of the U.S. economy to evaluate whether tax cuts have been associated with economic growth. The second is to consider the evidence on taxation and growth for a large sample of countries. And finally, we use evidence from micro-level studies of labor supply, investment demand, and productivity growth. Our results suggest modest effects, on the order of 0.2 to 0.3 percentage point differences in growth rates in response to a major tax reform that changes all marginal tax rates by 5 percentage points and average tax rates by 2.5 percentage points. Nevertheless, even such small effects can have a large cumulative impact on living standards.”
Now, a 3% or 4% increase in the tax rate for the top 5% of the population is going to raise a lot more money than an increase on the bottom 50%. And anyway, the study you provide is about cutting taxes — not raising them. Cutting taxes and raising taxes aren’t the same.
But you still aren’t confronting the basic point of my blog, which is about politics first, and economics second. My point is that you’re now making Krugman out to be a tool of the right-wing (wittingly or unwittingly) but you can’t explain why.
You write, “How much better equipped to counter progressive taxation will Republicans be if people interpret the claim (in the Reuteurs article) that “Obama may be wary of imposing any additional tax burden at a time of deep crisis” with the fallatious claim higher taxes (on some or all) = automatic damage to the economy.”
But that’s more or less the idea Krugman espouses: “And look, raising taxes in the face of a recession is not great policy even if the tax cuts were very ill-advised when they took place. Ideally, we’d be able to completely restructure the tax code right now, instantly, and also, in the process, avoid having too great a tax increase.”
Why does Krugman want to avoid too great a tax increase? Because he’s a Republican stooge? Because he’s a right-wing ideologue? Because he doesn’t understand economics? Why does he say raising taxes in the face of a recession isn’t good policy?
This isn’t an economic question, it’s a political question? It could be that Krugman is saying this because that’s what most economists believe and he is just going along with the crowd. Or it could be that Krugman wants to compromise with the right-wing in order to promote himself as a “pragmatist” or a “centrist.”
If you can’t offer up an explanation as to why Krugman would make such a fallacious, destructive claim about why higher taxes are bad, can you at least point to a single economist who can say clearly that raising taxes in the face of a recession is good policy?
You may be right and Krugman may be wrong — but you can’t just assume that people who don’t know you will take your word for it and not his.
rbates hits the nail on the head when he writes, “Right now it seems that most “experts” widely agree that rasing taxes now would not be a smart move.”
Is rbates wrong? Can you provide any evidence to contradict rbates claim?
Comment by Ian — December 6, 2008 @ 7:32 pm
Searching for evidence on the effect of increasing taxes during a recession, I found this paper by Peter Orszag and Joseph Stiglitz.
Comparing the effects of spending cuts and tax increases under conditions of economic slowdown, the authors conclude:
This suggests to me that the best way to close budget shortfalls under recession conditions is to tax the top income brackets. The economic logic is in line with the reasoning I outlined in my previous comment: a dollar spent on infrastructure is better than a dollar saved. Such projects could also be financed via debt and deficits, but why should they?
On MSNBC, Steven Pearlstein, the business columnist for the Washington Post, said:
Comment by Lee — December 6, 2008 @ 9:01 pm
Thanks for these quotes.
As for the Peter Orszag and Joseph Stiglitz quote, they both are saying that raising taxes during a recession would have a negative impact — just not as negative as what would happen if the govt cut spending. So they’re saying something in line with what Krugman said.
You write, “This suggests to me that the best way to close budget shortfalls under recession conditions is to tax the top income brackets.”
But do we know how much money is likely to be raised by following through on the tax hikes Obama campaigned on? Because there’s no way we’ll be closing budget shortfalls anytime soon. So my question is, is the additional money raised worth the political trouble and the potential negative impact on the economy?
Comment by Ian — December 7, 2008 @ 1:37 pm
“[I]s the additional money raised worth the political trouble and the potential negative impact on the economy?”
This is the question I’m searching for evidence to answer. As of now, I am more convinced that the questions are still largely separate.
The Stiglitz and Orszag article does seem to assume that taxes might cause some negative effects, but the whole conversation they’re having is one of convincing state legislators — and states with “balanced budget amendments” — that cutting spending is a much worse idea than increasing taxes. Is their acceptance of some bad effect of a tax increase, which isn’t backed up by economic reasoning in the paper, just a rhetorical bone thrown to those legislators–who reflexively assume the bad effects of tax increases? Cause while I can find people saying it’s bad, I have yet to find someone saying why it’s bad, including Stiglitz and Orszag.
Pearlstein, by contrast, gives a clear economic model that I understand, and which backs up my sense that taxes and recession economics are largely independent topics or not necessarily related. A sense that is enhanced by the fact that the political process Obama will need to undergo to revoke the Bush tax cuts is going to be a long hard possibly post-recession project. Which is to say that to speak of recession and taxes may have no bearing on the political reality of tax change.
Perhaps Obama has simply calculated that letting the Bush tax cuts expire is more politically expeditious than overtly trying to repeal them. Time will tell. By 2012, the Bush tax cuts will either have been allowed to expire; or they will have been renewed by a Democrat-controlled Congress and signed by a President Obama.
Comment by Lee — December 7, 2008 @ 2:23 pm
I should add that I really dislike talk of political expeditiousness, especially in this case. I can perfectly well understand that sometimes you have to give up one set of political priorities to acheive another set, but when you give them up, you should be open about what you’re doing.
If Obama is giving up the fight for tax increases (before anyone even began to try to oppose him) for political reasons, and not because raising taxes during a recession is bad for the economy, then he is doing us all a disservice by giving a misleading explanation for why he’s abandoning the fight to do what many partly elected him to do (again, before he even takes office).
Comment by Lee — December 7, 2008 @ 2:28 pm
You criticize Obama for giving up the fight for a tax increase “before anyone even began to try to oppose him.”
But that flies utterly in the face of reality. On this very blog, we’ve heard people like rbates say raising taxes on anybody would be “crazy” right now. Conservatives in this country have been fighting against tax increases for decades (if not centuries), and to pretend that nobody has begun to try to prevent them is just not a reasonable position to take.
You also write, “I should add that I really dislike talk of political expeditiousness, especially in this case. I can perfectly well understand that sometimes you have to give up one set of political priorities to acheive another set, but when you give them up, you should be open about what you’re doing.”
“Political expeditiousness” is another word for focusing on results. If Obama fights a losing battle to achieve a goal that shouldn’t actually be a high priority right now, he stupidly sacrifices political capital, endangering his ability to win the battles that he must win — on Iraq, on the economy, on health care, etc.
In life, we have to pick out battles. If Obama decides to put his reputation on the line for a small tax increase at a time when his ability to lead is so desperately needed elsewhere, I’ll be very disappointed. Raising taxes on the rich may be a good idea, but it’s just not where I want Obama to be focusing his attention right now.
I guess you’re saying, “It’s fine for Obama to back down on the tax increases — as long as he announces to the world that he’s backing away because he’s afraid he can’t win.” If Obama did that, wouldn’t it make him look weak and undermind his effectiveness? Wouldn’t it just be another way for Obama to say, “I may be the most powerful man in the world, but I still can’t stop those damn Republicans in Congress.”
It would be foolish for Obama do deal with this issue that way.
Furthermore, I believe it would be dishonest. As I’ve noted, Krugman believes raising taxes in the face of a recession isn’t great policy. Isn’t it possible that Obama believes the same thing? Isn’t it possible that most Democrats believe the same thing? You want to pressure Obama to do something that he may not actually want to do — which would make sense if this tax issue were important, but it’s not.
Is it?
Comment by Ian — December 8, 2008 @ 6:33 pm
By “before anyone opposed it,” I meant to refer not to those who had already opposed it during the election — the voters gave their answer to that opposition — but before anyone opposed such a tax increase legislatively. There wasn’t even a legislative fight over raising taxes; the logic of raised taxes during a recession = bad was just accepted as fact by the Obama administration before he even took office. It reminds me a bit of the 180-degree turn Clinton took on NAFTA, though Clinton’s 180 was far more destructive.
More to the point, is raising taxes on the top 5% during a recession bad?
As I’ve noted repeatedly, many people are willing to say that raising taxes on the rich is a bad idea during a recession. Literally no one I’ve read who says this has explained the economic logic of why this is so or cited a study that explains why they believe this. It’s just assumed.
Meanwhile, everyone who says it doesn’t really matter if you raise taxes on the top 5% — that the questions are independent — offers a cogent and persuasive argument for that position.
I can only conclude that the facts support the latter argument. If facts and arguments can be presented to persuasively support the former position, I’ll be the happy to concede the point.
Comment by Lee — December 8, 2008 @ 8:44 pm
First of all, I utterly disagree with you when you write “everyone who says it doesn’t really matter if you raise taxes on the top 5% — that the questions are independent — offers a cogent and persuasive argument for that position.”
What is this “cogent and persuasive argument” to which you refer? Could you share it with us, or are you keeping it secret?
The same goes for these facts you say support your conclusion that raising taxes on the top 5% doesn’t matter. Please post them so they can be accessible to everyone.
You also write, “There wasn’t even a legislative fight over raising taxes; the logic of raised taxes during a recession = bad was just accepted as fact by the Obama administration before he even took office.”
Avoiding a legislative fight is a good thing, not a bad thing! Why pressure Democrats with conservative constituencies to support an unpopular position in a losing battle when you’ll need their support later on to actually get something done. You say you care about results, but the results of a legislative fight for a tax hike right now will be a weakened Democratic party, a newly-rallied conservative movement, etc.
Besides, it’s unreasonable to expect Obama to fight for something he doesn’t actually believe in. And I think we have to consider the possibility that Obama actually believes raising taxes during a recession is not great policy, as Krugman put it. So we have to change his mind before we could expect him to fight a legislative battle.
Comment by Ian — December 9, 2008 @ 11:23 am
I find the following sarcastic question of yours a bit baffling: “What is this “cogent and persuasive argument” to which you refer? Could you share it with us, or are you keeping it secret?”
It’s a little irritating to be asked to repeat arguments that you could read for yourself by looking back over the comments, so let me just quote my own previous comment:
“On MSNBC, Steven Pearlstein, the business columnist for the Washington Post, said:
Comment by Lee — December 9, 2008 @ 9:09 pm
I apologize if you find it irritating. But it wasn’t my laziness that prompted me to ask you about the “cogent and persuasive argument.” It was my strong belief that no such argument exists — my intention was to challenge you to provide evidence to support your claim that this argument exists.
What you have provided merely proves my point. The Pearlstein quote above isn’t a “cogent and persuasive argument” — it’s merely an idea. You know as well as I do that there are hundreds if not thousands of business columnists — not to mention economists — who would say that raising taxes during a recession IS a bad idea.
If the Pearlstein quote above meets your definition of a “cogent and persuasive argument,” then it’s hard for me to believe that you’ve actually found any real research to support your point. A business columnist who agrees with your basic point is not the same as a “cogent and persuasive argument” to support that point.
Let me ask you this: Did you decide that raising taxes weren’t always bad during a recession AFTER you read the Pearlstein quote, or did you agree with Pearlstein before you read his quote? Because you should know Pearlstein’s quote is utterly unpersuasive for people who don’t already agree with him.
Comment by Ian — December 10, 2008 @ 11:26 am
I want to offer up a more believable apology for my sarcasm above. I have tremendous respect for your viewpoint, and I don’t believe sarcasm and mockery is the way we want to be debating on this blog. When we get into these “heated” debates, you are better than I am at maintaining a tone of civil discourse, and it serves you well. So I do apologize for being sarcastic, and I regret it because it makes me appear jerkish.
I’m honestly afraid of what would happen if Obama spent his precious political capital fighting a losing battle for a tax increase right now. It would unite the Republicans, divide the Democrats, divide the country, distract the public’s attention from more pressing matters, and contribute to the right-wing’s characterization of Obama as someone who cares more about “wealth redistribution” than economic growth.
It’s a battle I don’t want to fight because I don’t think it can be won — and if it is won, it will be won at great cost. You seem to believe either (a) the battle can be won, or (b) the battle is worth fighting even if Obama is destined to lose it. Either way, you’ll need a powerful argument if you want to combat the notion that raising taxes during a recession is a “crazy” idea, as rbates said.
In other words, I’m only being a jerk about this because I’m trying to get you to give me the ammunition I need to fight this fight with you. The Pearlstein quote isn’t sufficient, in my opinion, because we’re going to spend tons of money whether we raise these taxes or not. The issue isn’t “raise taxes so we can spend the money,” the issue is “raise taxes to reduce the deficit.” But our whole economy strategy seems to be based on the idea that we shouldn’t worry about deficits, at least for a few years.
Anyway, I’ll try to do some research of my own on this issue.
Comment by Ian — December 10, 2008 @ 12:37 pm
In the end Ian, I think I have to agree with what I understand your argument to be – the, sort of, cost-benefit analysis, both politically and fiscally, of raising taxes on the wealthy, would come with too high a political cost.
I still maintain that it is good fiscal policy and I will try to find better evidence to back that up.
Comment by aaron — December 12, 2008 @ 3:22 pm
[...] Krugman has a post on his blog relevant to some of the discussions about taxation that have come up here before. Against conservative notions that government spending might somehow make the economy less [...]
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