Conservatives Should Be Called Out On Unfair Failed Policies

President Obama’s address today on taxes and deficit reduction draws the broad contours of the economic reform argument exactly as they should be drawn, between a plan that calls for “shared sacrifice” to be actually shared by all rather than imposed on the economically struggling, and the conservative effort to shield millionaires and billionaires from any responsibility for helping reduce the deficit and rebuild the middle class.

In that speech, Obama threw down a challenge that, judging from the early reaction from Republican leaders on Capitol Hill, conservatives aren’t going to be able to meet in a way that satisfies most working-class people.

“It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million. Anybody who says we can’t change the tax code to correct that, anyone who has signed some pledge to protect every single tax loophole so long as they live, they should be called out. They should have to defend that unfairness — explain why somebody who’s making $50 million a year in the financial markets should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that — paying a higher rate. They ought to have to answer for it.”

So far, the defense from the right to Obama’s statement that the need to ask the wealthiest to pay their fair share “is not class warfare; it’s math,” is the same-old same-old. House Speaker John Boehner’s response called the president’s appeal for tax fairness “pitting one group of Americans against another,” and he went on to denounce “this administration’s insistence on raising taxes on job creators.”

Meanwhile, House Budget Committee Chairman Rep. Paul Ryan, R-Wis., threw the kitchen sink of false and misleading conservative talking points at the president’s speech.

Having overseen an unprecedented surge in government spending – from his failed stimulus law, to the creation of new trillion-dollar health entitlements, to double-digit percentage increases in the budgets of many federal agencies – the President has finally admitted that he plans to send the bill for Washington’s reckless spending straight to American businesses and families. A $1.6 trillion tax hike on job creators is never a good idea. But taking more money from private savers and investors, and giving it to the same government bureaucrats who brought us the Solyndra debacle, is an even worse idea – especially in a weak economy.

Note that all of this—the invocation of the “failed” stimulus that didn’t actually fail, the so-called “new trillion-dollar health entitlements” and the tired talk of “reckless spending” augmented by disingenuous Republican efforts to pin the word “debacle” on the Solyndra solar company bankruptcy—is a distraction from the main point Obama was making: that cutting our way to economic recovery is not working. The admittedly not-strong-enough economic growth and job creation the nation saw when the Recovery Act was at its peak in 2009 and 2010 has now ground to a near halt in the shadow of the fiscal 2011 budget-cut deal.

What’s more, the other element in the conservative economic mantra—low taxes for the wealthy, even lower than those paid by the middle class—has failed catastrophically. Lane Kenworthy, political science professor at the University of Arizona, last week pointed out what happened to the labor market in the decade after 2001, which happens to be the time when the Bush administration pushed a series of tax cuts through a compliant Congress: “During the growth phase of the business cycle, from 2002 to 2007, the number of people employed increased less rapidly than in previous upturns. … The employment-to-population ratio gained no ground over the 2002-07 upturn. … In working-age households in the bottom quartile of the income distribution, average employment hours failed to rise at all. … In the 2001 recession, posted job openings as a share of the labor force fell to their lowest level in more than half a century. Then, as the economy picked up steam, posted openings didn’t budge. The lack of increase was a sharp departure from previous upturns.”

Instead of investment in jobs, Kenworthy notes, the 2000s saw investments designed to boost short-term stock prices and executive compensation. Meanwhile, the federal deficit skyrocketed even as the the middle class continued to shrink and the infrastructure the economy needs to function efficiently began to decay.

In short, the real “failed stimulus” is the conservative tax-cutting, small-government ideology that dominated economic policy in the eight years before the Obama administration and which has hobbled the Obama administration’s efforts to turn the economy around. (Richard Eskow promises to have more on this in a future post.)

Meanwhile, we have a tax code in which, as The Huffington Posts’ Alexander Eichler pointed out in August, “of the 235,413 taxpayers who earned $1 million or more in 2009, 1,470 of them paid no taxes.” That’s right; not even an alternative minimum tax. None.

Seth Hanlon, director of fiscal reform at the Center for American Progress, wrote that “as a percentage of their incomes, millionaires are now paying about one-quarter less of their income to federal taxes than they did in the mid-1990s.” He goes on to observe:

If millionaires were simply paying the same level of federal income taxes as they were in the mid-1990s, the federal government would have collected an additional $65 billion in revenues in 2009. That amount of revenue over 10 years, $650 billion, exceeds the cuts to domestic discretionary programs in the budget deal. Those $600 billion in cuts will result in reduced investment in infrastructure, education, housing, public health, food and drug safety, medical research, law enforcement, and other important areas.

The fear among progressives going into this morning’s speech was that Obama would fail to draw the clear contrast between conservatives seeking to continue the failed policy of coddling millionaires and billionaires, while asking working-class people to suffer more through low wages, higher costs and a government less equipped to help them up the economic ladder. Instead, the jobs speech Obama made last week and the deficit-reduction speech he made today paints the broad outlines of the progressive alternative: strategic investments now to grow the economy and get people back to work quickly, while asking those at the very top to pay their fair share toward that effort. Obama did not undermine that message by conflating the issue of Social Security’s long-term solvency with the totally unrelated federal deficit issue, nor did he keep on the table a politically horrific and policy-wise untenable proposal to raise the Medicare eligibility age to 67.

Progressives, including us, will continue to argue over some of the details, sometimes passionately—including when we come together for the “Take Back the American Dream” conference next month. But in the meantime let’s give the president credit where it’s due, and use this opportunity to clarify the difference between a positive framework for change and the continuing economic devastation guaranteed by allowing congressional conservatives to define the limits of economic policy,


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