Krugman Calls For Kerry's Tax Plan

[DrFunkenstein]

George W. Bush is like a man who tells you that he's bought you a fancy new TV set for Christmas, but neglects to tell you that he charged it to your credit card, and that while he was at it he also used the card to buy some stuff for himself. Eventually, the bill will come due — and it will be your problem, not his.

Still, those who want to restore fiscal sanity probably need to frame their proposals in a way that neutralizes some of the administration's demagoguery. In particular, they probably shouldn't propose a rollback of all of the Bush tax cuts.

Purists will raise two objections. The first is that an incomplete rollback of the Bush tax cuts won't be enough to restore long-run solvency. In fact, even a full rollback wouldn't be enough. According to my rough calculations, keeping the child credits and the cutout while rolling back the rest would close only about half the fiscal gap. But it would be a lot better than current policy.

The other objection is that the tricks used to sell the Bush tax cuts have made an already messy tax system, full of special breaks for particular classes of taxpayers, even messier. Shouldn't we favor a reform that cleans it up? In principle, the answer is yes. But an ambitious reform plan would be demagogued and portrayed as a tax increase for the middle class. My guess is that we should propose a selective rollback as the first step, with broader reform to follow.

Will someone be able to find the political sweet spot, the combination of fiscal responsibility and electoral smarts that brings the looting to an end? The future of the nation depends on the answer.

http://www.nytimes.com/2003/10/17/opinion/17KRUG.html

John Kerry believes that we should keep the middle class tax cuts that Democrats fought for in 2001 and 2003, which increased the child tax credit, reduced the marriage penalty and lowered tax rates. He strongly disagrees with Democrats who want to repeal these tax cuts, which would cost a typical middle-class family with two children an additional $2000.

John Kerry is committed to balancing the budget. He has put forward a sensible plan that will at least cut the deficit in half in his first term, while investing in economic growth and investing in workers.

Powerful special interest groups make it hard to cut special tax loopholes and pork barrel spending projects. John Kerry supports a Commission that would recommend cuts and require Congress to vote on all recommendations, so no single special interest could fight for pet projects. Under Kerry’s plan, the President would identify wasteful spending items in the budget and submit the list to Congress to vote on in an up-or-down fashion – saving billions of dollars.

http://www.johnkerry.com/news/releases/pr_2003_0828.html

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[quaker bill]

1. Kerry, Gep, and Clark

All call for something similar to Krugman's recommendation.

Note that he does not make this recommendation on economic grounds as much as he does on political grounds.

On pure economics, dumping the entire Bush* tax cut is the best plan.

[Bombtrack]

7. You're wrong about that

Gephardt and Dean both moronically want reenstate all of the taxes, including the democratic parts of them.

And whether it's economically the best plan is extremely arguable.

[JI7]

9. kerry, edwards, clark, and lieberman

i think those are the ones who support progressive tax

[Bombtrack]

11. right, edwards will raise the capital gains tax as well

up past what they had with Clinton on very high income earners

[welshTerrier2]

2. Dean's Position

if i understand Dean correctly, he wants to rollback ALL of bush's tax increase ... i'm afraid he has failed to consider the political implications of his position ...

i don't think Dean's "roll back the entire tax cut" makes for good politics ... i agree with what Krugman had to say about it ... i'm all for balancing the budget but i cannot understand how Dean thinks he's going to sell a "tax increase" to the middle class ...

democrats always need to be wary of the "tax and spend" label ... a complete rollback may be decent policy but it's terrible politics ...

i'm really worried that Dean has badly faltered on this one ... a more responsible approach would have been to talk about phasing out all cuts when the economy starts to recover and americans feel more secure about their employment prospects ... Dean's position will give democrats a major headache for years to come ... i just don't think he can sell it ...

[Eloriel]

3. This is how he sells it -- and it certainly works for me

First, the middle class didn't get much, if any, tax cut. That's an illusion. And Krugman had a column on that -- The Sweet Spot I think it was called.

Second, they are getting higher property taxes, lower services at the state level, higher college tuition, etc., etc. IOW, the taxes are rising elsewhere.

Third, he mentions Clinton tax levels and Clinton prosperity. People are forgetting that NO ONE wanted those damn tax cuts. No one. They polled dreadfully low the entire time Bush was talking them up.

Fourth, he says (rightfully so, IMO) that most people would trade their pitiful-to-nonexistent tax cut for healthcare. They would've traded that BEFORE the tax cuts, and they'll trade it now.

I also think most Americans understand at some level that some of what's being promised by other candidates (viz., you can have your tax cuts AND healthcare), just won't wash. It can't be done.

Finally -- and I don't think Krugman is understanding this -- giving people healthcare will mean far more in their pockets than the lousy tax cuts.

Eloriel

[AP]

5. It's not so much about tax reciepts this year. It's about allocating tax..

burdens in a way that allow the middle class to accumulate wealth and power by reducing the load they have to bear relative to people who are making way more money.

You can't deny that the middle class is bearing a huge burden of financing the nation, while they aren't getting very many of the benefits.

When the middle class's wealth and power begins to expand, the economy will get back on track, and you'll get way more growth and revenue as a result. Anyway, Increase taxes on the super wealthy (individuals AND corporations) before you tax the middle class any more.

Here's Edwards trying to explain this (at about 17 minutes).

http://www2.nhpr.org/audio-graphics/audio/ex-2003-10-14.rm

[Loyal]

8. Some people ALREADY HAVE health care, Eloriel

And if you ask me, I think Lieberman's tax plan is the best, personally, and I don't even support him. He rolls back the Bush tax cut for the top 2 brackets and CUTS TAXES on the middle 2 brackets, the brackets most people in America are in. It's a brilliant plan.

[paulk]

12. I really find this argument disingenuous

The child tax credit was not an illusion for those that got it. Taking it away is a political blunder for Dean.

Saying that people's other taxes will go up because of the tax cut is true - however, eliminating the top end tax cuts will help to amiliorate this. And a middle class tax cut is an accepted way to stimulate a stagnant economy - the money will get spent and sales taxes will once more start to flow into city and state coffers.

Also, I don't think you can make sweeping generalizations about what the American people believe. Remember, they just put a movie actor in charge of the world's fifth largest economy. In a "Democratic" state.

The Republican's will have a field day with Dean's "tax increase" - and it will play well with a lot of people.

[DrFunkenstein]

13. Clinton's Tax Plan Had To Pass Congress (You Know, The Cockroaches)

Addressing your arguments:

#1 and #2: The middle class didn't get much, which is exactly Kerry's point. Let them keep it, spend it, pay off their credit card, whatever - stimulate the sluggish economy. The real cheese comes over $200,000. Get that back and use it to bring down the rise in service costs (Kerry has a plan to direct money to the states).

#3: Clinton's plan had rock solid Democratic support. As Gep eloquently put it, Clinton didn't get a single GOP vote, and the Dems still passed it. Damn those cockroaches!

#4: Kerry has an excellent health care plan, but it puts much more of a premium on cutting costs through innovative ways - prevention, electronic records, smacking the middle men, and especially taking the catastrophic cases out of the pool.

#5: Kerry knows that you can't balance the budget and do all he wants to do. Which is why Kerry - like Krugman - only argues for cutting the deficit in half.

Let me put it this way - you can live like a monk and pay off your mortgage in half the time, but who wants to live in a monastery?

[wtmusic]

4. A rollback to the Clinton years?

Seems a lot of us were doing pretty well back then, and Clinton's tax structure wasn't considered radical then.

Kerry might be able to put us back on sound footing again--it'll just take longer.

[AP]

6. Because the rich have gotten about 10% richer each year since 2001, and th

middle and poor are treading water or sinking, those rates are even more regressive than they were when we had them.

Clinton would have gone to more progressive rates if he could have. I don't know why Dean is aiming so low.

[JI7]

10. yup, clinton tried to get it through

but the republican congress wouldn't allow one without the huge tax cuts and welfare for large corporations and other rich. that's why he wasn't able to get it through. but progressive tax is something clinton has always been for and still is for.

[Donna Zen]

14. Over $200,000

rollback? Is that what Kerry and Lieberman are advocating? That is Clark's position as well, although he speaks of it a moving the cut from the 200,000 club to the states and directly to jobs programs.

I have no problem with rolling back the cuts except--except--

One, it is bad politics because it is too hard to explain and easily misrepresented. Why would anyone from a party labeled "tax and spend" set up easy targets for the lying liars of the GOP?

Two, although the middle and lower class cuts are small, there is some evidence that they are acting as a stimulus. This is a fairly classic economic maneuver to counter act a slow down.

Three, once in office, the entire structure will need to be looked at for loopholes and deficit reduction. Remember, junior never mentioned that once in office he would bankrupt the country inorder to eliminate the social safety net. Hell, he's doing it in front of our eyes, and succeeding in lying about it.

[NewYorkerfromMass]

15. Kerry's just fighting for the middle class (as he ALWAYS has)

It is not pandering. Dean's asking for repeal of THEIR part of the tax cut is a huge mistake, and Bush will KILL him with it in the general.
While Krugman does not endorse Kerry's plan outright, I am sure he would give it the highest rating amongst all the candidate proposals.
SO.... Right on Dr.!

[Code_Name_D]

16. This is why the DLC are their own worst enemy.

When the repugs brought up Bush's tax plan in the house, if contained none of these previsions that we now are arguing against "rolling back." The original plan was entirely a massive give away to the wealthy. The Dems objected to this............. by injecting the child tax credit. And that made the bill palatable enough for it to pass by the dems.

And now those same provisions are working against us. Which Krugman is correct in calling on. But we need to call a spade a spade here. This is a political argument, not an economic one.

For one thing, his logic defending only the partial roll back is some what twisted. "The first is that an incomplete rollback of the Bush tax cuts won't be enough to restore long-run solvency. In fact, even a full rollback wouldn't be enough. According to my rough calculations, keeping the child credits and the cutout while rolling back the rest would close only about half the fiscal gap. But it would be a lot better than current policy." An analogy to this is like arguing weather we should completely cross the bridge, or only cross half way, even though where we are trying to get too is still clear across town.

He is also wrong in assuming that it is politically expedient to only attack the tax cuts given to the wealthy, while leaving the lower income tax cuts in place. The low end of the tax cuts are irrelevant, indeed, they are even straw men. If I was to describe the two sides of this tax bill as two castles, with the child tax cut provision being the castle to the east, and the tax cuts to the wealthy as being the castle to the west. You would find the Republicans manning the castle to the west, leaving the east castle unprotected. The repugs could care less what happens to the east castle, for their interests are all contained in the east one. And their defense of it will be just as determined, weather the dems sent troops into the east one or not. Cutting the upper level taxes while protecting the lower level taxes will be painted as "class warfare," handing the dems a damned-if-you-do, damned-if-you-don't situation. But no doubt Krugman and the other DLC-dems will still be surprised when they get hit with this.

Second:
The other objection is that the tricks used to sell the Bush tax cuts have made an already messy tax system, full of special breaks for particular classes of taxpayers, even messier. Shouldn't we favor a reform that cleans it up? In principle, the answer is yes. But an ambitious reform plan would be demagogued and portrayed as a tax increase for the middle class. My guess is that we should propose a selective rollback as the first step, with broader reform to follow.

Boy, that argument sure sounds convicting, doesn't it. But there is just one problem with this approach. It doesn't work. It reminds me of the joke about the man who lost his keys in the park at night. But looked for them out in the street because that is where their is light from the street lights. Yes, the democrats will be demagogued for "raising taxes." But what Krugman fails to realize that we will be equally demagogued if we try this five years from now. The only differences is that the repugs will be in a far stronger position to attack the dems, five years from now. In the 80's, they started to take away media channels from the Democratic view point, now they are beginning to take away democratic seats. The fact is that we may have already waited too long.

Plus, I think the public can not only handle an ambitious plan, but hunger for it. They want the democrats to FIGHT, not batter or bide our time. An ambitious plan can work if we keep X factors in mind.

1) Precede the attack with a public education campaign, arguing "What it was, what it is, what it could be." This is where Krugman's voice can do the most good. As an economist, he can objectively inform and convince the public that America's prosperity coincides with higher taxation. He can explain why this is, any why tax cuts produce to opposite.

2) Draw up the legislation with very open and transparent wording. The language needs to be in "plane English" and not in "Legalese." The bill also needs to be formatted in a way as to make reading each profession in the bill both assessable and traceable by the public. And keep the public appraised of its progress. There needs to be an online version of the bill, and when amendments are proposed or added, that these changes bee added to the on line version ASAP. This will prevent the repugs from pulling any number of dirty tricks to the bill to either pull its teeth, or to kill it with poison pill provisions, or at least, they wouldn't be able to do these things without tempting the wrath of the public.

3) Stay focused on the spirit of the bill. Let the administrators worry about the details after the bill is made into law. This will make the bill a lot more workable in the short run as many of the problems that would result in the bill, could quickly be corrected by the administrators, rather than set into stone by the law itself. This will help to keep much of that detail minutia out of the bill that will began to make a transparent bill opaque.

4) Plan for defeat. No doubt some one here will tell me that such an initiative will fail. And they would be correct. But I would answer that the Dem's past "successes" in Bush's tax law has proven only to be a Peric victory, with the dems losing more in the long run, than what they have gained in the short run.

The dems could not have stopped the GOP tax cut plan as presented. But if they would have left well enough alone, they would now have a powerful campaign issue to hit the GOP over the head with. Some times the best way to show how dangerous a rabid pit bull is, is to let him lose and do his damage. You can then stand around and say "I told you so." Until then, it really is a mater of whom do you trust. The dems will fail in the first few attempts. But each "lose" can be brought back to the people and used as examples of how bad the prepugs are. It is important to remember that the dems can not even expect to see any legislative victories, until they start winning election. The playing it safe approach is not impressing any one.

PS: I find the threads headline misleading. I have not seen any thing to suggest that Krugman indorses Kerry, or Kerry's plan. This is strictly a fiction put foreword by the thread's author. Some one not to long ago tried to convince me that Krugman endorsed Clark's plan.