I fear we are letting the Republicans set the agenda here, and then we are spending our time & effort arguing over points in their playing field. Whatever the outcome of the current Debt Ceiling dust-up, it will only hurt the still-struggling economy. And “it is the economy, stupid,” not the debt ceiling, where next year’s election will be won or lost. We need to change the agenda.
After reading Robert Reich’s “Aftershock” last year, I believe there is a relatively simple way to jump-start the economy, thus helping insure the President’s re-election with all its Congressional coat-tails. It will also rob the Republicans of their main issue and back them into a corner.
Here are the three salient facts that Reich presents in far more detail than I can here:
1. The day Ronald Reagan walked into the White House, the richest 1% of Americans commanded 9% of the income. Today that number is approaching 25%. For the record, “richest 1%” today means an income of $500,000 or more.
2. We no longer have a manufacturing-based economy. Today’s economy is highly consumer-driven, and consumers no longer have the income to support it (see #1 above). Reich believes that until we reverse this inequitable distribution of wealth, the economy will NEVER recover.
3. Tax cuts on the wealthy do not create jobs. This is the Great Republican Lie. Fact: throughout the post-war boom years, right up to the Arab Oil Embargo in the mid-70s, the top marginal income tax rate was never less than 70%. Indeed, throughout the 1950s it was 90% !!! If what the Republicans say is true, then when Reagan cut the top tax rate from 71% to 39%, we should have been up to our eyeballs in new jobs. Instead, the only thing that went up was the deficit. Ditto for Bush in 2002. However, when Clinton RAISED the top tax rate and cut the middle-class tax rate, jobs went up and the deficit flattened out.
Fact: the only thing that creates new jobs is market demand, and right now market demand is very low (again, see #1 above). If my small business (I have run one since 1988) can only sell 1,000 widgets a year, I am only going to make 1,000 widgets a year. A tax cut will not get me to hire another widget-maker. However, if the market demand for my widgets goes up, I most certainly will hire another widget-maker regardless of my taxes, because I can make more money!
So my proposal: with all the fan-fare and media attention we can muster, we call on our Congressional delegation to introduce a bill in Congress that cuts taxes on people making less than $100,000 a year. Dramatically – down to single-digit levels. We pay for it by equally dramatically by adding a new top marginal tax rate on incomes over $500,000 a year back to pre-Reagan levels. And simultaneously close up as many corporate loop-holes as we can.
This will instantly put more money in the pockets of middle-class consumers and begin driving up the economy. An improving economy will assure the President’s re-election.
It will also put the Republicans in a quandary. If they approve it, they are helping to insure the President’s re-election, while angering their top donor base – big business and the very rich. If they oppose it, we can point to them as being against a tax cut for the majority of voters, and of favoring the rich over the middle class.
What do we have to lose? Let’s reclaim the agenda now while there is still time. Otherwise we will wake up next November with a Republican President and a solidly Republican Congress, driven by the Tea Party. Imagine how much fun the next four years will be.
Ron Cordes
3rd Middlesex Representative
Mass. Democratic State Committee
Bedford MA
seascraper says
Ron, Keith Richards tells the story of how the Rolling Stones were getting socked by 90% income tax rates in Britain, so they moved to the USA where they “only” paid 70%. At the time, the USA was the place to move if you wanted to escape taxes. The problem with your proposal is that the current Keith Richards of all professions have much more choice than they did back then about where to exercise their labor and where to invest their money. While you haven’t been looking, Russia, Europe and the far east have been cutting rates to attract and retain talented people and growing companies.
Christopher says
I have no patience for your basic argument that seems to say we just have to let the rich have their way and we’re forced into a race to the bottom. The whole point of a strong government is to act as a counterweight against those whose power comes as part of the package with wealth in favor of those who cannot use wealth to fend for themselves. Then again, Keith Richards and the Rolling Stones wouldn’t do very well here if nobody had disposable income to spend on tickets to their concerts and album sales either.
seascraper says
Well they could have imprisoned the Rolling Stones and forced them to write, produce and perform in Britain and pay the 90%. They could have invaded the USA and made us reverse the Kennedy Tax Cuts and bring the top rate back up. They could have yelled at the Rolling Stones and tried to make them feel bad (they probably did this actually).
I can pose the problem in a way that the solution will be what I want, but posing problems is something internet commenters do. I never ran for anything in my life, finding solutions is up to this politician. Somehow he needs to balance getting the Stones here making music and the poor people who get services from the taxes.
Christopher says
You don’t get to complain and snipe about a proposal, then hide behind “I’ve never run for anything”. Responsible civic engagement means at least floating a solution, even if you don’t have all the details worked out yet, OR arguing that there’s no problem, which while a legitimate response, is one that in this case will get heavy pushback from me on the merits.
seascraper says
Do you exist in the same universe as the Rolling Stones?
nopolitician says
What impact on the USA did Keith Richards moving here have? A few more drug dealers found a customer. That’s about it.
seascraper says
And with our advantageous tax policy, the Rolling Stones made more music. We got to have more good music, that’s one impact.
sueb says
I like your ideas – the most important thing is getting the economy going & consumer demand is what drives our economy these days. Housing values killed us cause we were using them to buy things. But what I really like about your idea is that you are focusing on the available options. The only way to get it going w the congress we have is to push thing like tax cuts that they cannot vote against — at least not & keep their narrative.
jconway says
But it is important this is sold in plain as day language to the public which, after years of successful GOP spin and years of Democratic whimpering in response to it, has to be Truman esque. “We are raising their taxes to cut your taxes!” and say that over and over again. Radically cut my taxes, and I am almost paying 20% of my meager income in payroll taxes,and I will spend more on things besides bills. Raise the tax on my millionaire boss and make me feel good. But it has to be sold like that. Putting money in consumer hands works, I would totally buy that iPad and some made in America furniture I’ve been eyeing, a ton more books (publishing is still a big US industry). So get this done.