| Number 482 | June 21, 2011 |
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This Week: Prevailing Wisdom and Taxes |
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Greetings, No room for much of an editor's note this week. So, er, um... Happy Summer Solstice! Nygaard |
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"Quote" of the Week: "An Additional $281.2 Billion in Revenue". "If the top 400 [individuals] of 2007 paid as much of their incomes in personal income tax as the top 400 of 1955, the federal treasury would have collected $47.7 billion more in revenue from just these 400 taxpayers. "In 2007, if the top 0.1 percent of taxpayers—Americans with incomes that averaged $7,126,395—had paid total federal taxes at the same rate as the top 0.1 percent paid these taxes in 1960, the federal treasury would have collected an additional $281.2 billion in revenue." From a study called "Shifting Responsibility: How 50 Years of Tax Cuts Benefited the Wealthiest Americans." Released on April 12, 2010 by the group Wealth for the Common Good. |
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In the last issue of the Notes I talked about the People's Budget, released in April by the Congressional Progressive Caucus. I quoted economist Jeffrey Sachs saying that the People's Budget "is truly a centrist initiative, at the broad center of the U.S. political spectrum." The reason, he says, is that among the major budget proposals in Washington at the moment, the People's Budget most closely reflects the wishes of the people of the United States. I'd like to take a little look at how the People's Budget is perceived and reported, and how it relates to what we know of the wishes of the people. I'll be relying quite a bit on public opinion surveys, oddly. It's odd because I believe public opinion surveys, as we know them, are a seriously flawed means of gauging public opinion. Still, I'll be relying on them because they do tell us something, and what they tell us is easily available and should be taken into account when reporting on the issues of the day. Let's start off with this question: What is the primary problem facing the country right now? If one relies on elected officials and the media who quote them so faithfully, one might think that the top priority, at every level of government, is budget deficits. If so, it will be surprising to learn that the public does not agree. The public's position—in survey after survey—is that the primary problem facing the country is the lack of jobs. The deficit isn't even close. When a CBS News Poll earlier this month asked "What do you think is the most important problem facing this country today?" five times as many said "Economy/Jobs" as said "Budget deficit/National debt" (48 percent vs 10 percent.) That was an open-ended question, where the pollsters did not offer a list of options; people had to come up with things on their own: They came up with Jobs. When offered a list of issues that "the president and Congress should focus on right now," Fox News found last month that 50 percent said "Economy and jobs" and 22 percent said "Deficit and government spending." In a CBS News/New York Times Poll in January, the deficit didn't even make second place. In that poll, 43 percent said that "job creation ... is the most important thing for Congress to concentrate on right now" (from a list), followed by "Health care" (18 percent) and then the deficit (14 percent). (The idea that the deficit may be largely caused by our insane health care "system" was not mentioned in the survey question. Another missed opportunity!) To see if I'm making any of this up, visit the website PollingReport.com The Wisdom That Prevaileth One of the flaws in public opinion polls is that the questions they ask typically reflect Prevailing Wisdom, which has a specific meaning in this political culture. The "wisdom" that "prevails" in the U.S. political/intellectual culture is that which is spoken by powerful people and the media who report on their utterances. The wisdom that resides in the population at large is often quite different, as we can see when we consider the polls I just mentioned. While the public tells all the major polling groups that the top issue facing the country is jobs, jobs, jobs, those polls almost never follow up by asking the public what the government might or should do about it. That is, they do not use the polls to explain and explore the thinking of the majority of people who want something done about jobs. Instead, polls have been consistently asking about the "prevailing" issue—the deficit—and whether we should raise taxes or cut spending in order to address it. And, again, the idea that cutting spending might eliminate jobs is not typically raised in the course of gathering opinions on deficits. So that is the information we have and, limited though it is, it does yield some interesting clues about the people's wishes. For example, here's a question from a Reuters/Ipsos Poll from May 5-9 that goes like this: "There are a number of different solutions being discussed for reducing this deficit. These are cutting existing programs, raising taxes, or some combination of the two. Which approach do you think is best?" A majority (52 percent) said they favored a combination of both. An ABC News poll in April found that 59 percent favor such a combination. In my own state of Minnesota, there is currently a standoff between the Democratic governor and the Republican-led legislature about how to address the large budget deficit facing this state. A Star Tribune Minnesota Poll surveyed people in early May on what to do about it. Here's the question they asked: "Do you think the state's 5 billion budget deficit should be balanced primarily through a reduction in services or through a combination of tax increases and service reductions?" Note that the obvious third option—primarily through an increase in taxes—was not mentioned. That's no doubt because the pollsters believe that it is not "politically possible" to address the state deficit primarily through tax increases. And, since they make it basically impossible for the public to register their opinion on it, it does indeed become less possible. After all, how many people are going to pick an item that is not on the list and call their legislator to push for it? This is just one way that policy options come to be "off the table"—they are simply not allowed into the public mind. Republicans, who control my state legislature, say they cannot accept any tax increases at all in the effort to balance the budget. This position is supported by perhaps one-quarter of poll respondents, yet these people were voted into office. Where's the polling on that discrepancy? Minnesota's Governor wants to resolve the deficit with a mix of tax increases on the highest-income Minnesotans and some serious cuts in spending. This mix of spending cuts and tax increases is supported by a clear majority of Minnesotans (63 percent in the Minnesota Poll above), and USAmericans (roughly 60 percent) in recent polls. How about the idea of taxing, specifically, rich people? About three-quarters of the US public (72 percent) supports "Raising taxes on Americans with incomes over 250 thousand dollars a year... in order to reduce the national debt." (ABC News/Washington Post Poll from April 2011) Here, again, those who listen to political leaders and the media who report their comments might think that increasing taxes is a really bad idea. And here, again, the public disagrees. Here's the good news: The further the Prevailing Wisdom strays from the wishes of the people, the more ripe is the time for presenting an alternative program, one which can form the basis for a real movement for change. The existence of such a large chasm between the people and our leaders is what makes room for the Tea Party and their cockeyed "alternative." But there's lots more room in that breach. Let's get in and do our part to see if we can make a different wisdom—one based on sharing and cooperation instead of selfishness and competition—the wisdom that will ultimately prevail. |
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On April 29th the Christian Science Monitor ran an opinion piece entitled "The 'People's Budget' and High Tax Rates." The author was Howard Gleckman, a resident fellow at the ultra-mainstream Urban Institute, where the list of his areas of expertise includes "tax and fiscal policy." Gleckman, articulating the Prevailing Wisdom, says that "the tax increases in [the People's Budget] are breathtaking." Why? Because "It would restore pre-2001 income tax rates for those making between $200,000 and $1 million and create five new brackets for higher earners, topping out at 49 percent for those making $1 billion or more." Gleckman then tells us that "The problem with these very high tax rates, of course, is that the wealthy will find ways to avoid them." Of course. While there is no doubt that the wealthy will always use some of their wealth to hire people to help them avoid paying taxes, it's also true that higher tax rates will increase revenue for the federal and state governments that collect the taxes. For example, according to the group Wealth for the Common Good, "America's highest income-earners—the top 400—have seen the share of their income they pay in federal income tax alone plummet from 51.2 percent in 1955 [when the top tax rate was 91 percent] to 16.6 percent in 2007, the most recent year with top 400 statistics available [when the top tax rate was 35 percent]." History does tell us something, after all. Let's consider for a moment that remark about "breathtaking" tax increases. Yesterday's Conservatives Become Today's Radicals Back when I was a baby, in the 1950s, marginal tax rates on the highest incomes were never lower than 91 percent. They came down a bit in 1964, but never went below 70 percent until Ronald Reagan came into office in the 80s. Since the end of Reagan's presidency, the top rate has never gone above 40 percent. (These numbers, by the way, come from the Tax Policy Center, of which Howard "Breathtaking Increases" Gleckman is a staff member. He should read his group's studies.) One of the arguments against tax increases that we often hear is that higher taxes stifle economic growth. That doesn't seem to be the case in recent decades. Consider some of these facts: [WARNING: Lots of numbers coming up; it won't last long, bear with me.] From 1962 to 1964, when the top U.S. income tax rate was 91 percent, the U.S. economy grew at a rate of 5.2 percent. Then the top rate dropped to a (measly) 77 percent until 1981, during which time the economy grew at an average rate of 3.61 percent. Skip ahead to the years 2000-2002, when the top tax rate comes down to 40 percent, and the growth rate is also down, to 1.91 percent. Then the tax rate drops to 35 percent in 2002, and since then the economy has grown at a 1.79 percent annual rate. To put it simply: Back in 1962, when the top tax rate was two-and-a-half times what it is now, the economy grew at a rate almost three times as fast as it has in the past decade. The same basic pattern holds true for every decade since WWII, basically. Back to Gleckman: How can a proposed top tax rate of 49 percent be called "breathtaking" when we have had tax rates—in my lifetime—far higher than that, and the country's economy performed better then than it has with lower rates? Something other than economics must make it "breathtaking." I think that what's breathtaking is the fact that the idea of increasing taxes on the very rich is being considered at all. After all, that idea is not a part of the Prevailing Wisdom. Some people seem to think that higher taxes = Socialism. (It does, to a degree, and many people seem to want more Socialism, which will have to be a subject for another Nygaard Notes.) I'm not saying that higher tax rates bring higher growth. But it should be pretty hard to make the case that higher tax rates bring lower growth. And higher tax rates right now might allow us to undertake some much-needed public initiatives. Would only a Socialist propose such a thing? President Dwight Eisenhower, a conservative Republican, held office through much of the 1950s, presiding over an economy in which tax rates were almost double what is now considered "breathtaking." And the 1950s gave us relatively enormous public spending projects, including the interstate highway system and the GI Bill (begun in the 1940s). Not only did these projects provide tons of jobs, but they supported large increases in productivity that increased the wealth of all of us. And so yesterday's conservatives become today's liberals, or perhaps radicals. Republican Eisenhower, were he to be transplanted into 2011 America, would probably be invited to join the Congressional Progressive Caucus. If they didn't consider him too radical. I'm not one to long for the "good old days." The 1950s, after all, were a time of horrible injustice, McCarthyism, Jim Crow racism, the so-called Korean War, the institutionalization of the Cold War, and more. And I'm not sure that the building of the interstate highway system was a good thing, really. (If we had it to do over, couldn't be build a really great public transit infrastructure?) The point is that, with higher tax rates, the nation was able to embark on major spending projects that did change the nation in significant ways. And these things were undertaken at a time when the nation, overall, was far less wealthy than it is now. (In 1950 the US had public debt of $257 billion which was 94 percent of the economy, far higher than any recent year.) We're wealthier now, but our wealth is concentrated more at the top than it ever has been. That means that, for most of us, times are tough. And when times are tough the tendency is to hunker down and wait for things to get better. But the more we do that the more likely it is that a great opportunity will pass us by. Every crisis holds within it an opportunity. Today's crisis offers the opportunity to build a movement capable of challenging the current unequal and inhumane social order. The potential for building such a movement may be as great today as they have been since the Great Depression. It's time to present a credible alternative explanation for, and response to, the current crisis, and to convince ourselves that we can carry it out. It can start with a demand to tax the rich. And it can lead as far as our vision can take us. |
