President Obama recognizes that some tax increases are going to be necessary to reduce our national debt long-term. I like his Buffett Rule: that people earning over $1 million/year should pay a tax rate of at least 30 percent. I think this is in line with the literature on optimal taxation (like the excellent Peter Diamond and Emmanuel Saez paper), which not only supports the idea of progressive taxation, but always (to my knowledge) concludes that we should have a tax system that is much more progressive than it currently is.
Mitt Romney's tax proposals would significantly raise the national debt, and are fiscally irresponsible. The assumptions made to argue otherwise are questionable at best. Reagan and Bush after him are responsible for running up the national debt unnecessarily during good economic times. The recession that began at the end of Bush's term has caused the national debt to continue to increase under President Obama, but I think the ultimate cause of that was deregulation, and that increase was necessary during an economic catastrophe. Obama supports regulating Wall Street to prevent something similar from happening again. An increase in tax rates on high incomes will reduce the deficit and will not significantly hurt the economy because people with high incomes are more likely to save their money during a recession anyway. Tax cuts on people with low incomes and direct government spending tends to stimulate the economy during a recession, because that money gets spent, and not saved.
Barack Obama is simply more fiscally responsible and has tax proposals that are more in line with the interests of middle-class Americans, rather than the very rich. His proposals make good economic sense.
6 comments:
Bennion, I understand your point, but I don't think it's correct to say that Obama is more fiscally responsible. I agree that under Bush and a democratic congress, things started falling apart. It's very easy to forget that Presidents aren't legislators primarily. That's the job of congress.
Obama hasn't really laid anything out there that would make a significant dent toward reducing the deficit, let alone the debt. Raising taxes on the rich to raise some more revenue is like taking a shovel to dig to the center of the earth. It's not going toake a big enough dent. The only real solution is to reduce spending significantly, which Obama has shown no interest in doing. The deficit has ballooned even bigger than under Bush. If you werebto take 100% of the rich, it would pay for roughly 3 months of spending. Obama isn't asking for a huge increase, but the revenue raised from it would be pointless. In my opinion, it will do more harm than good, especially with chronic high unemployment and MILLIONS of people out of work. The solution is more jobs and raising taxes doesn't promote more jobs.
The final reason why I think he isn't fiscally responsible is because he put forth a budget that not a single soul in the House or Senate was willing to vote for. Zero, zilch, nada. If that is the kind of leadership that this country needs, it makes me wonder if I should even live here any more. That is the most epic failure that I can think of.
It's not so much that Obama has a plan that will fully pay off the deficit, it's more that Romney's plans are less responsible than his.
Without getting too far into the economics, it turns out that spending cuts hurt the economy more than tax cuts (especially for the rich). That's because a tax cut gives money to the rich, who tend to save increases in income, particularly during a recession. Money spent by the government directly increases aggregate demand. Money given to the lower and middle classes tends to get spent more than saved, so it helps the economy, but not as much as direct spending. So to help the economy, while not exploding the national debt, the best solution is to raise taxes on the rich while either increasing spending or cutting taxes on the lower and middle classes. Cutting spending and taxes on the rich decreases aggregate demand without paying down the deficit, which is economically the worst thing you can do.
The reason the deficit has ballooned is because of the recession, not because Obama's budgets were less responsible than Bush's. It was the Bush tax cuts and the wars that were irresponsible.
I think the Republicans in Congress would have stonewalled the President regardless of how much he was willing to compromise. I don't think it's a good idea to give in to their demands for power. They're the ones preventing compromise, not the Democrats.
Neither side of congress wants to compromise, and there are reasons why they shouldn't. We have a multiple party system to encourage the representation of different groups of American with different needs. That's not to say compromise isn't an ideal solution sometimes. Just that It isn't always ideal.
And from my understanding, the economic plans from both sides of the political Spectrum are based on two interpretations of economic growth. Both have valid points as well as inconsistencies. Both interpretations are coupled with insufficient proof that either plan works as claimed. There are success stories and for both sides. But neither is fully proven.
Unknown, you have a good point about compromise not always being the ideal solution. Unfortunately the filibuster makes it more of a necessity than I wish it was.
On economic policies to promote growth, I will only note that most expert economists agree that the stimulus plan was a good idea:
http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_cw5O9LNJL1oz4Xi
First of all both are for a progressive tax. According to economist Mitt Romney's method of lowering rates and closing loopholes is what they would call efficient. That means it doesn't cost as much to get those taxes. Second under both Reagan and Bush there was a democratic house and senate. Where do the finance bills originate from? During Bush 2 we as a whole nation decided to go after the people who caused 9/11. That costs money. The reason we are at trillion plus debts even in a majority republican house is that the senate won't even bring for the proposals from the house. So, we have continuing resolutions. I hope cooled heads will prevail and we will get this debt under control. Its not too late, but we do need to create more jobs before we even think about raising taxes. By the way everyone who makes more than a million does get a 30% plus tax the first time they earn that money and its a 25% tax the second time they earn it. I don't see where Obama is more fiscally responsible the tax structure is very similar. The biggest difference is that the middle and lower classes don't get hit on capital gains tax or tax on investments. All together Obama's plan is more convoluted and less efficient and the additional tax doesn't automatically mean more revenue.
Honestly Mitt Romney has been so unclear about what he will do with the tax code, it's really hard to say. At first I thought he was proposing large tax cuts, but then later he said it's not a tax cut because he'll close deductions, but not which ones. I honestly have no idea what he would do.
I personally think we chose to go to war in Iraq because we were mislead about the evidence for MWDs. I was, at least.
We need to create jobs before we think about paying down the debt.
I'm not sure what you mean by "the first time." Capital gains only count the gains, so you don't pay taxes on the same money every year. All together Obama's plan is reasonable, and I honestly have no idea what Romney's plan is, because I don't know what deductions or loopholes he wants to close or how that would affect different groups of people.
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