Tag Archives: deficits

Winning the Argument on Tax Cuts and Government Spending

By Marc Seltzer; originally published at care2.com on December 5, 2010.

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It’s a funny thing.  Only about two percent of Americans make up the wealthiest two percent of Americans.  How is it then that so many Americans are willing to stand with Republicans in their efforts to lower taxes on the top two percent?

What is it about slogans like “no more taxes,” and “government spending is out of control” that are so appealing to the other ninety-eight percent of Americans?  The 98% don’t really pay all that much in taxes, and they recoup a substantial amount of what they do pay through their use of social programs such as Social Security, Medicare, Veteran’s benefits, welfare, public education, transportation, environmental protection and unemployment insurance, etc.

Liberal commentators often skip over this question and jump into the fray accusing Republicans of greed, manipulation and deception.  Rachel Maddow recently expressed concern that Democrats would compromise on the Bush tax cuts.  She railed against the Republicans’ consistent refusal to compromise and extolled Vermont Senator Bernie Sanders for blasting Republicans for cutting taxes on the wealthy at the same time as they complain about debt and deficits.

SANDERS: “We are now faced with the issue of what we do with the Bush tax cuts of 2001 and 2003, and if you can believe it, we have people here, many of my Republican colleagues who tell us, oh, I am so concerned with debt and deficits, I am terribly concerned with a trillion dollar national debt, terribly concerned, but wait a minute, its very important that we give, over a ten year period, 700 billion in tax breaks to the top 2 percent.”

“We talk about a lot of things on the floor of the Senate, but somehow we forget to talk about the reality of who is winning in this economy and who is losing, and it is very clear to anyone who spends two minutes studying the issue, the people on top are doing extraordinarily well at the same time as the middle class is collapsing and poverty is increasing.”

This is true, so why don’t Americans vote 98-2 in support of taxes and government spending?  Why don’t Democrats have more traction when they argue for raising taxes on the wealthy and spending money on social programs?

Could it be that Americans don’t feel good about taxes and government spending because they really are naturally wary of big government?  Remember that the nation was born of the fundamental principles that power corrupts and authority must be held in check.  Yet the size and scope of government today dwarfs any monarchy or authority that the founding fathers could even have imagined.  The British Empire of old doesn’t hold a candle to present day Washington.

This isn’t to say that Social Security and Medicare shouldn’t be revered and safeguarded.  But costly foreign wars and catastrophic financial mismanagement have caused more than the usual doubt or despair over government.

Anyone who argues in the public arena that taxes must be collected and spending authorized would do well to respect the public’s healthy skepticism. To speak to this concern is to talk about good management practices and improved efficiency; more persons served and better services with lower costs.  This doesn’t have to hide the difficult decisions about balancing budgets and taking care of our fellow citizens.  But it’s not enough to say the rich can afford to pay, or that Republicans want to cut spending on social programs, and think that you’ve won the argument.

Americans know that the breakdown in good government is in part because government’s very size and financial power have turned it into an unwieldy, unaccountable beast.  How the public regains control is not yet known, but those working to preserve the social safety net, should avoid collisions with the public’s genuine desire for government reform.

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Check out my U.S. Supreme Court case law podcasts at supremepodcast.com.

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No Tea Party in Canada

By Marc Seltzer; originally published at care2.com on October 13, 2010
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Democrats seem bewildered by the strength of the Tea Party movement.  Powerful incumbent Senators such as Boxer (CA) and Reid (NV), and numerous House Reps in leadership positions find themselves in difficult contests. Republicans are poised to gain significant numbers in the legislative branch in November’s mid-terms election.

Fighting back, Democrats and their supporters have gone after Tea Party-Republican candidates, focusing on their oddities, inconsistencies, and lack of coherent policies.  Rachel Maddow, among others, has exposed the remarkably poor caliber of some candidates propelled by the Tea Party to victory in the Republican primaries.

Be that as it may, the legitimate complaint of the Tea Party movement has not been effectively dealt with by Democrats.  The root groundswell of anti-government energy comes from fear and anger about deficit spending and debt.

Deficits matter.

In Canada, governments of the past decade worked hard to erase the substantial deficits of the 1990s.  When the 2008 financial crisis arrived, Canada was able to face the recession with sound economic fundamentals.   Increased public spending in 2009 and 2010 again created deficits, but helped Canada recover nearly all the jobs lost in 2008.  Embarking on a new deficit spending program did not faze the public, and Canadian leaders are now talking about returning to surplus budgets in the next 7 years.

There is no tea party movement in Canada.  National health care, yes.  Major tax protests, no.

For all the things wrong with aspects of the Tea Party movement, from blaming the Obama administration for current ills to dredging up misguided social views, the truth is that the U.S. would have braved the recession far more effectively if it had had a budget surplus.

In not addressing this aspect of the financial health of the nation directly from the start, with a coherent long-term plan, the Democrats have allowed the opposition to bundle legitimate disapproval of the government’s budget outlook with generalized anger at banks, unemployment, the Bush administration, Congress, taxes, and government spending.

It’s working for Republicans so far, and if this election looks bleak, imagine Sarah Palin filling a stadium near you in 2012.

(Marc Seltzer has been on paternity leave after the birth of his daughter in June.  Marc can also be heard reviewing U.S. Supreme Court cases at SupremePodcast.com)

Job Creation or Deficit Reduction — How Should We Spend Your Money?

By Marc Seltzer; originally published on December 9, 2009, at care2.com

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Should the unused TARP funds go to support middle class job creation or be used to pay down the deficit?

The question has arisen recently after the Treasury reported that its losses on the 350 billion dollars that Congress provided for the administration’s Troubled Assets Relief Program (TARP) are expected to be much lower than originally predicted.

The President and Democratic leaders are calling for a portion of the remaining funds (as much as $200 billiion) to be used for job creation programs.  The President has outlined several ideas that the administration believes could help bring unemployment rates down faster than at the current rate of economic recovery:

  1. Small business financial assistance and tax breaks
  2. Unemployment benefits, cobra subsidies, and emergency assistence to seniors
  3. Additional infrastructure and incentives for home energy conservation

However, this money could alternatively be used to pay down the deficit and Republicans are calling for committing all of the funds to deficit reduction.

The PBS Newshour recently featured a brief debate between Princeton Professor and Nobel Laureat economist Paul Krugman and columnist and former Treasury official and Reagan administration advisor Bruce Bartlett on whether President Obama should direct unused TARP funds towards creating jobs or paying down the deficit.

Krugman called for action on the basis that the unemployment rate was devastating and unacceptable.  He noted that unemployment was expected to remain far higher than normal in the next two years.  Extended unemployment would cause lasting harm to people who were forced to use up their savings and cause long-term damage to future employment prospects, he argued.

Bartlett cautioned that Congress had appropriated the money specifically to help financial institutions under TARP and that it should not be rerouted without congressional approval.  While he said he was “agnostic” about the President’s ideas for job creation, he did not support action now because Congress had already enacted substantial stimulus legislation.

Paul Krugman:  “And we have what is really an ongoing economic emergency. I mean, this — it’s not just that we’re not creating jobs. The level of unemployment we have got is doing enormous damage. So, I think the president is justified in reaching for whatever mechanism he can.

If — if he can say — you know, it really doesn’t make a difference in terms of the economics, where it’s funded from. If he can say, look, what we’re doing is redirecting funds, and make it happen, then he needs to do it, because, ultimately, what we have is a jobs crisis. Action must be taken. I think the paperwork is relatively less important at this point.”

BRUCE BARTLETT:  “Well, I thought, if we were facing the kind of crisis situation that we were when TARP and the original stimulus were enacted, that would be one thing.  But I don’t think we’re facing that. I think we have — we did enact the stimulus. The money is — there’s a lot of money still to come from that in the pipeline. I think we have only spent about a fourth of it so far.

The unemployment rate is coming down. I think that there’s a case for, let’s wait a little while. Why not wait until after the president submits his budget in February? Why rush to act this minute?”

With high deficits and high unemployment there are strong competing interests for the money.  What do you think is the most important priority at this time?

For a podcast conversation on jobs stimulus between care2.com blogger Jessica Pieklo and myself, follow this link and click on the December 9, 2009, podcast.

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