The Not-So-Straight-Talk Express--Riding Economy Class

Having now seen several good points from Eric defending continued, and, in some cases, increased, deregulation of the economy and increased overall tax cuts, it’s important to highlight several problems with this argument. Alongside some hard facts are some lines straight out of the Republican playbook that they’re hoping you’ll take at face value. First of all, I have to take issue with Eric’s assertion that Obama is practicing “class warfare” to secure the democratic base. (see the first paragraph of “Obama moving right on taxes”, sept. 16th). Based on the figures released by the non-partisan Tax Policy Center, (TPC) Obama is in fact increasing taxes for the wealthiest tax bracket by under 2% of their income, averaging $19,000 more for them. This is done to enable Obama to cut taxes for the vast majority of the rest of taxpayers while still paying for increased services such as healthcare for all U.S. children. (Handily enough, the TPC also compares the candidates’ health care proposals in the same report.)

I fail to see how a slight increase in taxes for those who can easily afford it that enables a more substantial fiscal “safety net” for everyone else constitutes class warfare. This has been a common throwaway conservative line when attacking any increase in taxation of the wealthiest. “Wealthy” is not a dirty word if that’s what you are. If there were any class warfare going on today, I would have to argue that the rich, as always, would win it. Wealth determines all whole host of quality of life issues in America. Let’s compare a child born to parents in the top 10% income bracket vs. one born into the bottom 30%. The wealthy kid will probably receive better health care and go to a better school. Wealthy children can take expensive courses that teach you how to beat the ACT and SAT tests. Poor children are more likely to join the military as a career, and hence to die in whatever the latest war is. People across the spectrum break the law, but money buys better lawyers. The victims of Obama’s “class warfare” have far more choices open to them, and a much better safety net should they get sick or lose their job.

Eric’s insistence that raising the minimum wage is “inflationary in nature” and is merely a “political ploy to garner votes from the working class” (“McCain’s plan more sensible…” paragraph 3) neglects to mention that inflation has been almost constant, with or without a rising minimum wage. I could go on, but this simple chart from the folks at Wikipedia demonstrates two things. 1) Real value of the Federal minimum wage has been falling since the late 1960s, and 2) minimum wage raises have happened AFTER periods of inflation, rather than merely causing them. (Oh, and the disparity of wealth in this country has been reaching heights not seen for decades, which isn't a good sign if you want a vibrant middle class.)


Lest I be accused of class warfare or compared to Chairman Mao, I shall say this: I am against any sort of misguided attempt to punish the wealthy. After all, they are often our most productive citizens. But, to paraphrase Obama when he was interviewed by Bill O’Reilly in late August, the wealthiest citizens can afford a slight increase in taxes, and that it was time to be “good neighbors.”

It should also be pointed out that Eric—like the McCain campaign, attempts to gloss over the fact that Obama’s plan gives more money back to the vast majority of taxpayers than McCain’s does. Almost all of the money McCain boasts about giving back to who Eric simply calls “taxpayers”(paragraph 1 of “McCain’s tax plan more…”sept. 17) is in the nearly 10% tax cut he will give to the wealthiest taxpayers. Why won’t McCain just say that up front, if this is really the fairest and best plan? Instead, McCain has repeatedly—and falsely—claimed that Obama will raise most Americans’ taxes, despite non-partisan analysts assertions to the contrary.

As for Obama’s supposed strangling of small businesses via taxation, that too, is a distortion. For the full breakdown, see this excellent, concise analysis by Factcheck.org. What it essentially establishes, however, is that many small business owners will receive tax credits for providing health insurance for employees. Many others legally file their taxes as individuals, and would therefore only be significantly affected by Obama’s tax increases if they clear over $250,000 a year. Eric claims that the economy would be harmed by raised income taxes in the top bracket, even though they will remain below the level they were during the Clinton years. By the way, if Clinton’s taxes were too high, why were his two terms so great for the economy? That doesn’t seem to make sense, like most of the rest of McCain’s tax plan.

Never mind that economists like Alan Greenspan (a guy who supported the Bush tax cuts) warn that McCain’s plan won’t work, that cutting taxes so much without sufficient spending reductions will be terrible in the long run, and this plan won’t balance the budget, let along made a dent in the deficit. Like so much else of his campaign message, John McCain’s economic statements have cut loose from their moorings in reality and are adrift in a sea of cynicism, negative advertising, and overplayed Alaskan folksiness.

-Ian

McCain's anti-Earmark and pork record

Ian and I are from Chicago. Chicago is infamous for its corruption and Cook County and Illinois have their own issues. Being from a city, county and state wrought with such government largess and waste, why would I settle for someone who will do nothing to stop it at the federal level? And why should you? Obama is a product of the Chicago machine. Thus apt embody many similar aspects as other Chicago politicians. One thing is for sure, he wants to play fast and loose with taxpayer money. Something Congressmen and Senators utilize to dole out money to their constituencies is earmarking. Earmarks are attachments to federal spending bills that are inserted after all debate has concluded and can be added anonymously. John McCain has attacked waste and has been against earmarks and pork barrel spending from his early days in Congress and maintains this stance today. He promises to use the power of his pen to veto any bill that contains earmarks. He boldly states on his website: "as President, John McCain would shine the disinfecting light of public scrutiny on those who abuse the public purse, use the power of the presidency to restore fiscal responsibility, and exercise the veto pen to enforce it" (). Obama makes no such claim to veto earmarked legislation. As a matter of fact, Obama had a long list of pet projects for the fiscal year 2006-2007. In the Fiscal Year 2008, so far, Obama has had 112 projects that totaled $330 million dollars. McCain as had 0 projects totaling, you guessed it, $0 dollars. He is one of only five Senators to do so. If you want someone who will reign in spending and restore fiscal discipline to our federal government, McCain's your man.

Here is the link to the list:


Barack Obama earmark requests

http://www.cnn.com/2008/POLITICS/04/15/obama.earmarks/

-Eric

McCain's plan is more sensible AND more genuine

Ian really set the tone with a thoughtful article that attacks much of the criticism that Republicans face with regards to the economy. I am happy to note that Ian did point out that the Tax Policy Center estimates a McCain Administration would take 1.4 trillion dollars less over ten years from the pockets of taxpayers. As far as Iraq goes, Obama does want to pull troops out on a date that coincides with Prime Minister Nuri al-Maliki's timetable. As a fiscal conservative, I am not opposed to American troop withdrawal if the Iraqis want it. We should honor the Iraqis' sovereignty. With peace becoming more prevalent and the Iraqi's taking more control of their own security, withdrawal doesn't seem that far away even for McCain. But, before I digress too much, we will address Iraq later.
Ian's second point was that Republicans have a terrible record of funding public schools. First, I am assuming he means federal funding for public schools. This being the case, No Child Left Behind has been the punching bag of Democrats who say Bush destroyed public education with the flick of his pen on the bill. As a matter a fact, NCLB was co-Authored by Democratic Rep. George Miller of California and Democratic U.S. Sen. Edward Kennedy of Massachusetts. President Bush signed into law the largest single increase of federal funding for schools in the history of the country. Ian is correct when he says people with good educations are less likely to go to jail or need welfare. However, he is wrong in his insistence that more money solves the problem of education. Strong family situations and involved parents are a much bigger factor than the increase of money.

Concerning minimum wage, I am glad Ian supports high school students working summer and part time jobs to climb the economic ladder. They make up the vast majority of minimum wage earners and most of them are looking for extra spending money, not to pay a mortgage. By the bye, if Democrats are all about having a minimum wage, why stop at the current $6.55 per hour? Why not go to $10 or even $20 an hour? Don't all the workers deserve a better wage than $6.55? The truth is a minimum wage is inflationary in nature. It collectively lowers the value of the dollar because producers will raise the cost of their good or service that they provide to cover the increase in wage they must pay, thus negating any increase that the workers received. It is a simple political ploy to garner votes from the working class who think the government controlling wages will result in greater prosperity for them. And no Ian, the increase in the minimum wage does not qualify as pork barrel spending. McCain has a history of being against earmarks and pork barrel spending, which will be the topic of my next address. So Stay Tuned. Touché Ian with regard to Governor Palin and her pork. I am not a fan of it, Democrat or Republican, and she has been a bit disingenuous with her anti-pork rhetoric. But I don't believe for a moment that McCain's rhetoric is just for the sound bite. He has a history against waste and I believe him when he says he will veto any bill that has earmarks attached to it. With regards to Obama's tax plan I have a response in the works that will be available shortly.

-Eric

Obama moving right on taxes

Senator Obama has been proclaiming vociferously since the primaries that he would roll back the Bush tax cuts on the 'wealthy.' He used class warfare from the Democratic arsenal to secure the far left constituency who make up the majority of primary voters. His mantra was to first repeal all the Bush tax cuts that would be tantamount to a tax increase. Secondly, he would lift the cap on wages that can be subject to a payroll tax. Third, put the top marginal rate up to 39.8% and if that didn't grind the economy to a halt, he would raise taxes on capital gains and to at least 25% from the current 15%. His desire to have Uncle Sam reach ever deeper in our pockets served him well during the primaries, but he has since back-pedaled now that the general election campaign is in full swing. His position shifted and his tax on capital gains went from 25% to 20% perhaps to appeal to moderate voters, or maybe he was starting to realize that high taxes result in lower growth. Either way it is a step in the right direction.

The latest and greatest shift in his tax policy comes on the heels of his sinking poll numbers against Republican challenger John McCain. Obama originally wanted to raise taxes on the wealthy fat cats, which provides fodder for his base bent on wealth redistribution, but the truth of the matter is top individual income earners aren't the only ones to feel the pain if income taxes rise. Entrepreneurs and businessmen who have businesses that file under Subchapter S pay rates on their businesses as if their business was an individual. These businesses are called S Corps and they make up a major part of our small business community that employs the most people in this country. By the bye, raising taxes on small business only serves one purpose: to raise the cost of the product or service being rendered by that business. Businesses don't pay tax increases. They pass the cost on to the consumer, which effectively lowers the purchase power of the dollar that you labor so hard to earn and that is what we should be wary of. It can only serve to lower productivity and reduce demand if we work longer for Uncle Sam and less for ourselves.

Digression finished, since we have established some reasons why raising taxes is bad for the economy, Obama said on ABC's "This Week" to George Stephanopoulos that if the economy is doing poorly in January when he might be taking office, he wouldn't raise taxes that would be detrimental to job growth and our GDP. If Obama isn't just making campaign promises with his finger crossed behind his back, kudos to him for seeing the light on taxes.

-Eric

Wait, Obama is the elitist?

Historically, American elections have usually hinged upon how the economy was doing unless there was a crisis year involving war, terrorism, or the much-vaunted Gay Attack on American Families of 2004 that helped Bush hang on for a second term. If Americans pay attention to the facts and take a good hard look at the Obama and McCain economic plans, then the Republican bid to for the votes of “average Joe” Americans seems all the more strange.
Despite plenty of Republican warnings about Obama being a tax-raising liberal, his economic plan involves an overall tax cut for most Americans. According to the non-partisan Tax Policy Center, the Obama tax plan will cut taxes by $2.9 trillion from 2009-18. True, McCain will reduce taxes by $4.2 trillion over the same period of time, but the cuts benefit most Americans differently. Obama’s plan will involve cuts for middle and low income tax payers. The average middle class family would see about $2,200 in annual savings under an Obama plan, versus $1,400 in the McCain plan. The bottom 40% of taxpayers would be even more dramatically affected, percentage-wise. The McCain plan would cut those taxes by hardly anything, while Obama’s plan would add an extra 6% to low income family finances. The biggest difference would be for the top 1% of taxpayers, who would pay an average of $19,000 more in taxes (1.5% increase) under Obama as opposed to an average of $125,000 less (9.5% decrease) under McCain.

I still haven’t figured out how Obama is the elitist candidate of this election.

By itself, neither candidate’s tax plan will do anything to reduce the federal deficit, which has hit a new peak at $10 trillion as of August. The interest payment alone will cost taxpayers $232 billion in 2008. As a rule, most governments have a bad track record with spending, so I don’t have particularly high hopes for either candidate. For what it’s worth, McCain has promised to balance the budget by 2013, while Obama has promised no more than $400 billion in excess spending by that year.

So far, this one looks good for McCain. The problem is that McCain’s plan is based upon hopes that his tax cuts for the rich will boost the economy at some future date Obama’s plan will raise money by closing tax loopholes, and, among other things, taxing companies that send jobs overseas. As things now stand, the Tax Policy Center estimates that the government will take in $600 billion less over ten years with McCain, as opposed to $800 billion more with Obama. Two problems stick out with the McCain plan for me. One is that the war in Iraq has a $10 billion per month price tag, and with the Arizona’s favorite maverick in the white house, that won’t be changing anytime soon. Obama’s scheduled troop withdrawal promises to lighten that part of federal spending sooner.

Second, the conservative financial approach at large seems horribly short sighted. After all, people who receive a decent education are far less likely to need welfare or go to jail, and the Republicans have a terrible record with funding for public schools. It gets hard to climb the economic ladder if President McCain voted twice against raising the minimum wage in 2007 during his time in the senate. (Obama voted for it.) Is that the pork barrel spending sort of legislation McCain has promised to veto when he’s in the white house? In fact, McCain hasn’t really offered much more than vague promises on the economy. Vowing to reduce pork spending in your nomination speech is about as controversial as promising to be tough on crime or to fight enemies of freedom. How about some specifics? Is anyone vocally pro-pork? One senator’s pork is another Alaska governor’s request for $2 million to study Bering sea crabs. (Yes, in Alaska, the governor has a lot of power over budget request, so this one didn’t just slip by Palin.) But the pork is just a sound byte. The substance is that McCain will give big tax cuts to major corporations, and thanks to his unbridled defence of free trade—environment, human rights, and American job loss be damned— the middle and lower classes will have to be running hard to catch the trickle down from this scheme.

So, which is the responsible plan? The one that severely cuts taxes all across the board, and then hopes for a Hail Mary of prosperity without directing energy towards making the middle class a more viable part of the economy, or the plan that taxes those who can afford it and tries to keep the middle and lower classes from being even more marginalized by the globalizing economy?

-Ian

Welcome to the Purple Nation

Hey all,

Welcome to the Purple Nation, an online debate in blog form between Eric Di Silvestro and Ian Saxine. After a particularly long, thought-provoking discussion that drew a number of listeners, we decided to take our argument to the internet. Until election day, Eric and I will be waging our own political struggle, as he attempts to make a McCainiac out of me, and I try to fill his head with Obama-rama. Although we differ over who we think would make a better president, we do agree on a few important points, above all….

Not enough meaningful, informed debate is going on in this country.

There are genuine reasons to support and oppose both candidates. These reasons have little to do with speculation over whether Sarah Palin’s youngest child was birthed by her teenage daughter, or Barack Obama is secretly a Muslim. There are real issues at stake this year. The candidates are offering two very different plans of action that are worthy of real discussion. The economy, the situation in Iraq, other likely foreign policy trouble spots, energy policy, education, and various social issues are all on the table.

Eric and I will alternate posts on this blog, taking the debate one issue at a time. We’re going to keep these debates to a reasonable length while including enough detail to appeal to that rare, coveted demographic—the undecided voter. Readers are encouraged to suggest future topics. No matter what happens, we promise that this friendly argument will remain classy, rational, and, unlike most writing out there, will try to explain positions without resorting to words like “hope” and “maverick.” Also, unlike so many other commentators out there, we’ll be sticking to substance rather than strategy as much as possible. So if you want to see the latest polls, or which candidate is doing the best with middle-aged Latina Protestant women, you’ll have to look elsewhere. The best place for the latest poll data, by the way, is www.fivethirtyeight.com. They seem to root for Obama, but their site is a composite of hundreds of polls nationwide.

But if you crave an exchange of cold hard facts flying back and forth at the speed of truth, then you’ve come to the right place. Welcome to the Purple Nation.

First post coming out tomorrow: two views of the economy, and why McCain’s view won’t help you, and, crucial to this blogger, why it won’t help me.

-Ian