14 Mar 2009
Obama, Taxes and Class Warfare

Even occasional readers of these rants will recognize that my political predilections are decidedly left-libertarian, and as such will assume (correctly) that I have an anti-government bent, perhaps to the point of outright anarchism. And they wouldn't be too far off the mark, although we could quibble about the meaning of the word.

As such, I consider the coercive expropriation of revenue to be what it is: theft. And not being much of a criminal myself, I have assiduously avoided discussions of such things as "progressive" versus "regressive" tax polices, the wisdom or lack thereof in certain types of taxation and generally the topic of taxes in general. I'm about to make an exception, because the howling from the political Right is getting positively deafening.

Joe the Plumber (whose first name is Samuel, is not rich, and isn't a plumber - perhaps that should tell us something) started the ball really rolling last summer in the campaign, with his direct confrontation of candidate Obama, and Obama's refreshingly direct answer. "Socialism!", screeched the conservatives. "Redistributionist!" they howled. "Only Reagan's tax cuts brought us prosperity - Obama will destroy the economy!" Really?

Here's a chart that been floating around the 'Net - I don't know it's exact origin so I'm loathe to give possibly inaccurate attribution, but I have checked it for accuracy, and it's pretty much spot on:

Marginal Tax Rates Over Time

Note that the highest marginal rates were in times of war, followed by times generally considered prosperous: the Fifties and Nineties stand out. Reagan's cuts did indeed seem to swell the economy - but some would say it was his spending (on the military, primarily) that was responsible here, and everyone agrees that the cuts and spending combined left us with a deficit that we're still wrestling with.

History itself, therefore, is pretty much prima facie evidence that higher marginal tax rates don't necessarily destroy an economy. But what's interesting about the current brouhaha is that these are not higher rates per se: they're just a rollback of cuts to levels of 2001. Yet from the rhetoric you'd think we were talking 100% confiscation.

A recent piece in Newsweek asks "Is Obama Declaring War on the Rich?:

To hear conservatives tell it, you'd think mobs of shiftless welfare moms were marauding through the streets of Greenwich and Palm Springs, lynching bankers and hedge-fund managers, stringing up shopkeepers, and herding lawyers into internment camps. President Obama and his budgeteers, they say, have declared war on the rich.

Other's on the right have suggested Going Galt like Ayn Rand's characters in Atlas Shrugged : for the rich to drop out of production and leave the government starved for cash. Rand's dropouts were producers: most of the folks whining about doing this today are lawyers, lobbyists and political activists. If they want to drop out, I say let'em go! As a historical footnote: when Rand published her tome, the top marginal tax rate in the US was 91%. Which is a bit higher than Obama's proposed restoration of a 39% top rate.

But the most unfortunate side effect of these squealing right wingers is the ignition of a class mentality - the start of a class war, if you like, right here in America. America has never been immune to such - see this piece by Jim Hightower for a nice bit of ranting on the subject. (Warning: link may be fragile.) However, right now, that's the last thing we need, and the last thing conservatives should want.

Eight long years of a "conservative" in the White House, and 16 years of "conservative" control of Congress have done more to set back the cause of liberty and free markets - my cause - than anything Lenin, Marx or Mao could've done. These folks rigged the game, changed the rules and redistributed wealth - upwards, mind you, with the zeal of any socialist. The economy is a steaming wreck, we have troops deployed in two hot wars and our reputation around the world has sunk to an all time low. The last thing I want, right now, is to be lumped in with a bunch of rich whiners complaining about a few thousand dollars (on an income of a million or more) in taxes. Are these people stupid?

Indiana went blue last election for the first time since 1964. Obama didn't carry many rural counties: but he got close enough to 50% in most of them to put him over the top with his urban base added in. There's anger out here - serious anger. Farmers have watched the wild gyrations in commodities markets caused by Wall Street machinations with dismay - and hits to their bottom line. Prices for inputs have soared while prices for the finished goods produced have stagnated. Down at the "Sit'N'Bull Cafe" the focus of the anger is directed at New York, Wall Street, bankers and government, in that order.

Are increased taxes (of any sort) bad? You betcha. Is a 39% top marginal rate confiscatory? Not by a long shot. But if the Republicans don't shut up, stop whining and get to work rebuilding this economy (along with the rest of us) we may well see a return to the tax rates of that Republican hero, Eisenhower. And those were confiscatory, indeed.

18:44 /Politics | 1 comment | permanent link

China's Way Forward

Fascinating piece by James Fallows on how China's coping with the current economic climate.

Outsiders can rightly criticize the Chinese government if it tries to sneak in new export subsidies or push the RMB’s value back down. But no one can criticize its ambition to increase the rewards for its people’s work. Many Chinese companies will fail or make mistakes under today’s intense pressure. But many are using the moment to prepare for their next advance. The question for Americans to think about is how we are using the same moment.

(link) [The Atlantic]

08:00 /Politics | 0 comments | permanent link