A real conversation starter: Taxing the rich

By Nicholas Wilbur

Talking about talking is a phenomenon in politics that has no equal.

We all smell smells and taste tastes. We sing songs and say sayings. And though thinking about thinking may be an exercise only the philosophically inclined among us entertain as a form of entertainment, we all think thoughts – when we're not busy dreaming dreams, puzzling over puzzles, believing in beliefs, supposing suppositions and fantasizing about fantasies.

Beyond our promises, however sincere, to call mom on Sunday, Americans don't generally talk about talking. If we want to talk, we talk – or "converse," if we're part of the "professional elite," or "conversate," if we're card-carrying members of the Tea Party.

When it comes to the big stuff, politicians don't want to have a conversation, they want to have a conversation about having a conversation. 

 

source: Kevin Kallaugher

When Rep. Paul Ryan proposed a plan to turn Medicare into a voucher program in April, he was spurned by the American public and shamed into silence by the leadership of his own party, but he nonetheless was commended by many on the Right for "starting a conversation" about the future of entitlements. Unfortunately for Ryan, polls showed that his plan to "end Medicare as we know it" wasn't the best way to start that conversation, which is why it was so short-lived. The only conversation Ryan actually started was a conversation about starting a conversation.

Similarly, Texas Gov. Rick Perry, the current co-frontrunner (with Mitt Romney) in the GOP's presidential primary race, said during a debate on Sept. 12, 2011 that "it's time to have a legitimate conversation in this country about how to fix [Social Security]."

He was correct: it is time. But describing an overwhelmingly popular anti-poverty program for seniors as a "Ponzi scheme" definitely isn't the best way to begin that conversation. As we've seen, there was no "legitimate conversation" that came out of his call to action. There was only nitpicking between pundits over whether Social Security does or doesn’t fit the definition of a Ponzi scheme.

President Obama's call on Congress to pass the American Jobs Act is another example of a politician trying to start a conversation. 

Let us not pretend that his American Jobs Act, or the tax increases on the rich he says should pay for it, has any chance of passing in the Republican-controlled House of Representatives. It doesn't.

"It could, however, be the catalyst for deal-making," according to The Economist ("No More Mr Nice Guy," Sept. 24, 2011). 

In "Hunting the Rich," also from the Sept. 24 edition, The Economist writes: 

In general, this newspaper's instincts lie with small government and against ever higher taxation to pay for an unsustainable welfare state. We reject the notion, implicit in much of today's debate, that higher tax rates on the wealthy are justified because of the finance industry's role in the crunch: retribution is a poor rationale for taxation. 

That said, The Economist gives "three good reasons why the wealthy should pay more tax": 

First, the West's deficits should not be closed by spending cuts alone. Public spending should certainly take the brunt: there is plenty of scope to slim inefficient Leviathan, and studies of past deficit-cutting programmes suggest they work best when cuts predominate. Britain’s four-to-one ratio is about right. But, as that ratio implies, experience also argues that higher taxes should be part of the mix. In America the tax take is historically low after years of rate reductions. There, and elsewhere, tax rises need to bear some of the burden. 

Second, there is a political argument for raising this new revenue from the rich. Spending cuts fall disproportionately on the less well-off; and, even before the crunch, median incomes were stagnating. Meanwhile, globalisation has been rewarding winners ever more generously. Voters' support for ongoing austerity depends on a disproportionate share of any new revenue coming from the wealthy.

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[T]he third argument for raising more money from the rich is that it can be done not by increasing marginal tax rates, but by making the tax code more efficient... Getting rid of the deductions would simplify the code and raise as much as $1 trillion a year. Since the main beneficiaries of the deductions are the wealthy, richer folk would pay most of that. And since marginal rates would be untouched (or reduced), such a reform would do less to discourage them from creating wealth. 

The result would be "[a] larger overall tax take from the rich, without hurting the dynamism of the economy."

Our elected leaders would be wise to take The Economist's advice, as reforming the entire tax code – "curbing exemptions, credits and deductions" – would save $1 trillion of the $1.5 trillion in spending Congress is tasked with cutting by November 23. It lowers the debt without slowing economic growth or punishing "job creators."

You can't take The Economist's words as the Gospel – especially in a literal context, as there's very little "good news" in the whole news magazine – but its (anonymous) editors are correct. Taxing the rich is fair. Budget cuts hit the less-well-off more disproportionally than the wealthy. And common sense says balancing the budget requires balanced sacrifice.

The president has already agreed to trillions of dollars in budget cuts over the next decade. Politically, he has made his sacrifice, and by doing so he's given himself the credibility necessary to start that "real," "honest," and "legitimate" conversation with America, with Congress, and with the millionaires and billionaires who've been "generously rewarded" by globalization and years of "historically low" tax rate reductions. 

Obama isn't talking about talking about tax increases. He's actually starting a conversation. In contrast to Perry's attack on Social Security as being a fraudulent scam, or Ryan's call for destroying Medicare, the tax increases in Obama's American Jobs Act are popular, and therefore possible.

(Cross-posted at Muddy Politics.)