Thursday, November 12, 2015

The Killer Question that couldn't be answered

History hasn't been kind to GOP arguments about taxes.

 Senior National Correspondent, The Huffington Post

Tuesday night's Republican debate was devoid of flashy moments. Nobody said anything particularly embarrassing. Nobody said anything particularly memorable. Even Donald Trump failed to stand out.
But the debate did have one moment that may loom large when the voters cast ballots a year from now. It was a question to Carly Fiorina from moderator Gerard Baker, the editor-in-chief of The Wall Street Journal. Here's the critical part: seven years under President Obama, the U.S. has added an average of 107,000 jobs a month. Under President Clinton, the economy added about 240,000 jobs a month. Under George W. Bush, it was only 13,000 a month. If you win the nomination, you'll probably be facing a Democrat named Clinton. How are you going to respond to the claim that Democratic presidents are better at creating jobs than Republicans?
The question was arguably harsher than anything from the infamous CNBC debate that Republicans and their supporters found so offensive. And that’s because it called into question not just a single Republican argument, but a basic premise of the party's case for taking over the White House.

After sharing an anecdote about a voter she had met, Fiorina responded with a generic pitch for smaller government, lower taxes and fewer regulations -- a strategy, she promised, that would boost growth, create jobs and raise wages. It was the same argument that other Republicans made, in different forms, throughout the evening. And it was consistent with their economic policy proposals, which consist primarily of massive tax cuts that would mainly benefit the wealthiest Americans. 
But neither Fiorina nor her counterparts could explain away the premise of Baker's question. After all, George W. Bush reduced taxes on the wealthy, while Clinton and Obama raised them. Bush did his best to roll back Clinton-era regulations; Obama introduced the Affordable Care Act and moved aggressively to reduce carbon emissions. In short, Bush tried the preferred Republican strategy while Clinton and Obama tried the opposite -- yet job growth under Bush was the worst and the numbers aren't even close.
Of course, this correlation between Democratic administrations and stronger employment doesn’t prove that one caused the other. Clinton benefited mightily from the internet boom of the 1990s. But there are other reasons to question the Republicans premise that their strategy -- particularly their focus on large tax cuts for the wealthy -- will deliver the economic results they promise.
Some of it comes from other countries. Historically, the highly taxed countries of Western Europe have performed no worse than their American counterparts. On the contrary, many experts consider the Scandinavian economies, where taxes gobble up more than half of national incomes, a prototype for balancing strong growth with widely shared prosperity.
Partly that's because the taxes finance a generous welfare state that reduces poverty and produces a well-educated workforce, making it easier for the population to thrive in the volatile global economy. As the economist Jeffrey Sachs wrote in a widely cited 2006 Scientific American editorial:

On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance. Poverty rates are much lower there, and national income per working-age population is on average higher. Unemployment rates are roughly the same in both groups, just slightly higher in the Nordic countries. The budget situation is stronger in the Nordic group, with larger surpluses as a share of GDP.
Plenty of academic research backs this up. Analysts at the Congressional Research Service conducted a thorough literature review in 2014 and concluded that "both labor supply and savings and investment are relatively insensitive to tax rates." 
That obviously isn't an argument for raising taxes or regulations frivolously. Some taxes and regulations make sense. Some don't. Timing makes a huge difference, as do the trade-offs and policy nuances. (To take one current example, raising the minimum wage to $12 might not have a big effect on jobs while raising it to $15 might.) And it's not like the Obama-era recovery has been ideal. Job growth has returned but wage growth hasn't. A debate over how to raise living standards makes a lot of sense right now.
But the available evidence from the U.S. and abroad puts the burden of proof on Republicans, who are making the same old arguments on taxes and regulations that they've been making for decades. They need to provide evidence that their solutions will unleash a more robust economy -- one that's good not just for the richest 1 percent, but also for everybody else. That’s not an easy case to make.


  1. what's that that Ronnie said William "Facts are stubborn things". Although he gets the credit this phrase was actually uttered by two famous Americans well before Ronnie's statement. It was first said by John Adams during his defense of British soldiers in December of 1770

    Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.

    John Adams, 'Argument in Defense of the Soldiers in the Boston Massacre Trials,' December 1770
    US diplomat & politician (1735 - 1826)

    It was then repeated by Samuel Clemens (Mark Twain) in the late 1800's

    Facts are stubborn things, but statistics are more pliable.

    Mark Twain
    US humorist, novelist, short story author, & wit (1835 - 1910)

    So I say it yet today William, Facts are stubborn things.

    1. Hate America first crowd, you and Arianna,,,

      move to Sweden ric

    2. I think the feds should raise the minimum wage to $30/hour in your restaurant ric.

    3. Rick,
      When Kennedy signed the tax cut it has a big impact. Why? Because more people paid taxes during the Kennedy years.

      When Bush 2 cut taxes, it fell short. Why is that? Could it be that far fewer people were paying taxes so fewer people benefited?

      Why is it you fail to mention the taxes in the successful countries you mentioned? How much would the US need to collect in taxes to duplicate the success of Sweden Population of Sweeden, 9.5 million people vs. the US 330 million people?

      Currently half of all US spending is for SS/Pensions and healthcare.

    4. I feel like the tax cuts sold to the middle class were one of many deals made with the devil. Hell yeah people want to pay less money. So we cut taxes, lowered the overall number people have to pay income tax at, and interestingly, wages have fallen. I think part of why people paid more taxes under Kennedy also had to do with the fact that comparatively, people at the working class level made good money.

      People in the middle class were essentially bought off. They were bought off with a flood of cheap goods while the dollar was strong. They were bought off to accept big tax cuts that way disproportionately favored the wealthy for essentially twelve pieces of shiny silver. Now that there are no scams left to run, the middle class is going to have to pay more taxes on comparatively less wages than previous generations earned. That's going to be very painful.

    5. Indeed it is going to be painful.

      Either we pay more in taxes or pay more for goods and services as they increase the money supply.

  2. This exchange highlights the problem with raising this topic. When trickle down theory is challenged at any level, there is a predictable eruption along with useless epithets of , "If you don't love America, don't let the door hit you on the ass as you head to Sweden or some other utopia" The point to me is not to try and make the US look like some Nordic country, and I don't think it's Sanders true objective and I don't think it's the goal of whoever wrote this piece. The objective should be to create a genuine growth that benefits everyone. We've cut taxes, we've removed barriers that previously protected American workers from cheap foreign labor and I would say we've lowered regulation too, but i don't want Lou to destroy another computer screen spraying coffee all over it. We've done these things and have little to show for it. Why that happened should be an important question, but we won't have that discussion.

    1. Sweden is a lot nicer than vegas. Check it out.

    2. Max,
      Thanks for saving my laptop, it's brand new.

      How do we get business to invest in the US? We can innovate as much as we want and the innovation is transferred to pick a place and implemented. We can buy a printer cheaper than repairing an old one. I can buy a laptop for less than an upgrade. Same applies for a TV.

      How do you drive business investment in the US when you compete with imports courtesy of the US government?

    3. Sorry Lou, I feel bad that my posts are likely cause of why you are so up on why computer gear is cheap! Well, I think that if we want business to invest in the US, we have to do one of a couple of things. One thing we could do is impede the flow of cheap shit into the country, which of course does not sit well with the free market types. The other thing we can do is remove all barriers and let the standard of living of the American worker fall far enough to make them competitive with people making 30 cents an hour in China.

      We've seen a lot of states offer tax breaks to get a company to come to a particular state, and that's hardly made any state rich near as I can tell. When Illinois wooed Boeing to Chicago, that kinda turned out to be a disaster. I think you drive investment by making this market strong, which means consumer demand. It's inevitable that tax will go up, and those with hourly wages will spend less. Business doesn't want to pay better wages because, well because that would just be silly when they don't have to, and the result is less money circulating in the economy. This is not a government problem to solve. Even in our allegedly chained market, we are still seeing the obvious narrowing of standard of living here versus the rest of the world. At some point, maybe when an hourly worker expects nothing more than sandwich on stale bread, we will finally be in a spot where business will invest here.

    4. BTW William, just about anywhere is nicer than Vegas.

    5. Hey Max.

      Wonder what would it take for business to invest in America???

      Demand. Not likely to happen.
      Regulation: Depends on the business.
      Taxes. Who can tell with that one.

      Having said all that, seems business isn't quite sure which direction America is headed. Perhaps that's the core reason. Stability is everything.


    7. The fact they attacked Paris means they see it as a real threat. There is way more wickedness here than in Paris.

      Lou, yeah, I've heard that stability one before, not from you, but back when Obama was first running and there was wailing and gnashing of teeth over the uncertainty of it. Under Bush, stocks went to shit, under Obama, stocks stuffed the pockets of traders. Demand won't happen when there is little money that actually circulates. Taxes will go up minimally at best on those with wealth. However, I'd venture to say that wages would probably miraculously start to rise if we raised the top rates. Just a hunch.

    8. Business does invest in America and that is a part of the problem. Business invests in automation and robotics so in todays economy many of the things we used to make with 100 employees we now watch robots make with 3 employees to push the button when things go wrong.

  3. As an aside, does anybody but me think, "Oh, boo hoo" when the candidates accuse the moderators of being a bunch of meanies who ask questions they don't "wike"?

    You're running for Prez, you'll be negotiating with Putin, and you're getting ruffled over something some hack asked you during a fake Primary debate?

    Boo hoo ...

    1. I have a problem with 'moderators' using a 'debate' to interview people on specific points that can't be debated by any of the rest of the panel... It is a debate between the candidates and in a real debate, the moderator moderates and is generally pretty invisible except for controlling the exuberance between two or more of the panelists.

      You wanna gotcha someone, ask for an interview, ambush them in a lobby but stick to debatable questions between the panelists in a 'debate'.

    2. This comment has been removed by the author.

    3. The parts of the debates I watched were not debates at all. They were a bunch of people giving their own disjointed opinions. In a debate there is a topic and the debaters argue the pros and cons. These "debates" are opportunities for the "debaters" to give their opinions and then attack their fellow "debaters". So, to me it is perfectly reasonable for the moderators to ask questions based on the candidates own previous remarks, which allows the audience to better understand where they,re coming from. Pfunky, you are right, they ended up being a bunch of cry babies.

    4. "In a debate there is a topic and the debaters argue the pros and cons. These "debates" are opportunities for the "debaters" to give their opinions and then attack their fellow "debaters"."

      Is that not the singular job of the moderator to control discussion, allot time and insure a steady flow of 'debatable' questions?

    5. I think that's a little unrealistic TS when you have 8 candidates on a stage.