Moneybox
War on the Rich?
The bogus GOP claim that Obama is trying to bleed wealthy Americans.
By Daniel Gross
Posted Thursday, March 5, 2009, at 6:09 PM ET
To hear conservatives tell it, you'd think mobs of shiftless welfare moms were marauding through the streets of Greenwich and Palm Springs, lynching bankers and hedge-fund managers, stringing up shopkeepers, and herding lawyers into internment camps. President Obama and his budgeteers, they say, have declared war on the rich.
On Tuesday, Washington Post columnist (and former Bush speechwriter) Michael Gerson argued in an op-ed that "Obama chose a time of recession to propose a massive increase in progressivity—a 10-year, trillion-dollar haul from the rich, already being punished by the stock market collapse and the housing market decline." The plans are so radical, "there will not be enough wealthy people left to bleed." CNBC's Larry Kudlow wrote that "Obama is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds." Other segments on the financial news network warn of a tax on the rich, a war on the wealthy. My personal favorite was a piece from ABCNews.com, which had to be rewritten and reposted because the original was so poorly done. (The revised version isn't much better.) It quotes a dentist who is contemplating reducing "her income from her current $320,000 to under $250,000 by having her dental hygienist work fewer days and by treating fewer patients. [That way, she] would avoid paying higher taxes on the $70,000 that would be subject to increased taxation if Obama's proposal is signed into law."
It's hard to overstate how absurd these claims are. First, let's talk about the "massive increase in progressivity" that Gerson deplores. It consists largely (but not exclusively) of returning marginal tax rates to their levels of 2001, before Gerson and the epically incompetent Bush administration of which he was a part got their hands on the reins of power. Obama wants to let marginal rates for families with taxable income (not total income, but taxable income) of more than $250,000 revert from 33 percent to 36 percent, and to let the top rate—currently 35 percent on family income above $357,000—revert to 39 percent. (Here are the current tax tables.) There's also talk of capping—not eliminating, but capping—deductions on charitable giving and mortgage interest.
Obama's proposals don't mean the government would steal every penny you make above the $250,000 threshold, or that making more than $250,000 would somehow subject all of your income to higher taxes. Rather, you'd pay 36 cents to the government in income taxes on every dollar over the threshold, rather than 33 cents.
Second, this return to 2001's tax rates was actually part of the Bush tax plan. The Republicans who controlled the White House and the Republicans who controlled the Congress earlier this decade decreed that all the tax cuts they passed would sunset in 2010. They put in this sunset provision to hide the long-term fiscal costs of the cuts. The Bush team and congressional supporters had seven years to manage fiscal affairs in such a way that they would be able to extend the tax cuts in 2010. But they screwed it up. Instead of controlling spending and aligning tax revenues with outlays, the Bush administration and its congressional allies ramped up spending massively—on two wars, on a prescription drug benefit for Medicare, on earmarks, etc. Oh, and along the way, they so miserably mismanaged oversight of Wall Street and the financial sector that it required the passage of a hugely expensive bailout. Even before the passage of the TARP, the prospect of extending all the Bush tax cuts was a nonstarter. Once Bush signed the $700 billion bailout measure into law, extending tax cuts was really a nonstarter. The national debt nearly doubled during the Bush years. So if you want to blame someone for raising taxes back to where they were in 2001, don't blame Obama. Blame Bush, his feckless Office of Management and Budget directors, his economic advisers, and congressional appropriators like Trent Lott and Tom DeLay.
Third, we know from recent experience that marginal tax rates of 36 percent and 39 percent aren't wealth killers. I was around in the 1990s, when tax rates were at that level, and when capital gains and dividend taxes were significantly higher than they are today. And I seem to remember that we had a stock market boom, a broad rise in incomes (with the wealthy benefitting handily), and strong economic growth.
Fourth, we also know from recent experience that lower marginal rates on income taxes, and lower rates on capital gains and dividends, aren't necessarily wealth producers. The Bush years, which had lower marginal rates and capital gains taxes, were a fiasco. In fact, if you tally up the vast destruction of wealth in the late Bush years—caused by foolish hedge funds, investment banks, and other financial services companies, it seems like the wealthy have in fact been waging war on one another.
Finally, there has been a near total absence of discussion of what higher rates will mean in the real world. Say you're a CNBC anchor, or a Washington Post columnist with a seat at the Council on Foreign Relations, or a dentist, and you managed to cobble together $350,000 a year in income. You're doing quite well. If you subtract deductions for state and property taxes, mortgage interest and charitable deductions, and other deductions, the amount on which tax rates are calculated might total $300,000. What would happen if the marginal rate on the portion of your income above $250,000 were to rise from 33 percent to 36 percent? Under the old regime, you'd pay $16,500 in federal taxes on that amount. Under the new one, you'd pay $18,000. The difference is $1,500 per year, or $4.10 per day. Obviously, the numbers rise as you make more. But is $4.10 a day bleeding the rich, a war on the wealthy, a killer of innovation and enterprise? That dentist eager to slash her income from $320,000 to $250,000 would avoid the pain of paying an extra $2,100 in federal taxes. But she'd also deprive herself of an additional $70,000 in income!
Can she, or we, really be that stupid?
Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at moneybox@slate.com.
Sunday, March 8, 2009
Saturday, March 7, 2009
My comment posted on WSJ
My comment is posted on WSJ! Check it out at http://forums.wsj.com/viewtopic.php?t=5392&postdays=0&postorder=asc&topic_view=&start=15 or you can read it below.
Opinion
The Obama Economy, Cont.
Rogelio el Contrario
Guest
Posted: Fri Mar 06, 2009 12:41 pm
Post subject: Re: The Obama Economy, Cont.
Dear Sir:
Your editorial "The Obama Economy, Cont." which apparently is part of a series, is dishonest. As a Conservative I believe in honesty and responsibilty. We Conservatives will not find our way out of this deep hole by lies. Who is responsible for the current state of the economy? You must be kidding to blame Obama. Is it a joke or a lie? We can rightly debate the Obama Administration response to the current disaster, but calling the current economic catastrophy "The Obama Economy" is dishonest and irresponsible. I am ashamed for the WSJ. Once a great journal. Shame.
Most Sincerely,
Rogelio el Contrario
Back to top
scott soulia
Guest
Posted: Fri Mar 06, 2009 3:00 pm
ost subject: Re: The Obama Economy, Cont.
I hear a lot of coaching and catcalls from the peanut gallery, while there are still job openings to be filled in the treasury Dept. Surely some of the so-called "experts" would love to jump into the breach and go to work for the current administration and bring some of thier expertise to bear? Or are all the snipers simply enjoying the show from the safety of the media duckblind? The phrase, "Lead follow or get out of my way" springs to mind, and the last time I checked, the current administration was welcoming any and all comments and suggestions from the sidelines. Surely some of the pundits posess the necessary qualifications to be heard all the way down in Washington. So lets hear some constructive solutions to our economic decline that combine a desire for social equality, with the business acumen that has made America so fortunate for so long.
Back to top
Rajai Atalla
Guest
Posted: Fri Mar 06, 2009 4:06 pm
Post subject: Re: The Obama Economy, Cont.
As I see it the recession we are experiencing is due of lack of availability of credit. This is not very different from the recession of 1981-1982 where the shortage of credit was due a prime rate of 21.5 %. Government policy in both instances injected new money into the markets, albeit in different ways. The manner is irrelevant. In both instances Chrysler was in crisis and needed government help.
Back to top
edcrouch
Posted: Fri Mar 06, 2009 4:46 pm
Post subject: Re: The Obama Economy, Cont.
I have some ideas. Why don't we heap more and more blame on an administration that inherited this mess six and a half weeks ago and oh, while we are at it, let's not give ANY of their efforts to date a chance to work? Let's put forth more of the same ideas that got us here (or no ideas at all), let's complain about the cost of the mess to the American taxpayer, let's object to the government spending money to fix this, let's nit-pick on how the money is supposed to be spent, let's complain that we might have to pay a few thousand bucks more in taxes beginning in two years because the tax breaks we got have actually expired on the timeframe which they were supposed to expire as passed initially by a Republican congress and administration, let's not even try to fix healthcare even though it is the worst and most expensive system in the world, let's not even try to fix the economic, military, geopolitical or pollution problems caused by burning fossil fuels because we imagine that (1) things are fine as they are, or (2) it will be too expensive ( gee -- that sounds very familiar to those of us who lived through Detroit's complaints about how putting catalytic converters on cars would be the end of the US auto industry; only to see the greatest boom in auto profits ever over the ensuing two decades -- go figure), let's not even try to fix our pathetic "free" national education system that results in one of the greatest hidden taxation scams in our country by forcing so many to pay for the public system through real estate taxes and then send kids to private school with after tax dollars so we can have a chance of providing them with a reasonable opportunity to learn how to read and write and a little basic math and science. Let's [expletive] and moan about any remaining welfare layabouts that managed to slide through the tightened net that Bill Clinton put in place to move people off of welfare and into the workforce. Let's keep the minimum wage at an unlivable level while we are at it. Let's stay partisan and argue with ourselves about fringe issues while the US experiences the greatest threat period since the moments before terrorists attacked our country on that fateful September morning. Let's blame the slide in the equity markets on new government policies that have been barely implemented and "sentiment"; but not on jobless reports, GM's possibly imminent demise, AIG burning another $60 bln, the breakthrough of technical trading bottoms, short sellers, continued lack of transparency in the balance sheets of the world's largest banks, the shuttering of hedge funds right and left, scammers and Ponzi schemes, margin calls, and earnings that are expected to drop through the rest of 2009 which just might have a bit to do with the drop in the equity markets too -- ya' think?
How does all that sound?
The endless complaints we are hearing now are very reminiscent to me of the great prognosticators that believed the "surge" would not work in Iraq because those nay sayers could not see beyond the immediate chaos into a brighter future. Give the complaints a rest and put your shoulders to the wheel. Help your country out in its time of need. Show a little patriotism for goodness sake. Lead, follow or get the heck out of the way.
Ed Crouch
Back to top
ARoseIsARose
Guest
Posted: Fri Mar 06, 2009 6:44 pm
Post subject: Re: The Obama Economy, Cont.
Sorry, but your historical parallels are once again quite off the mark, and it is just lazy journalism to call what is going on 'the Obama economy'.
We are not experiencing a 70s-style recession. We are experiencing the aftermath of a long period of Republican policies, during which credit was too readily granted. A period in which people began to believe in permanent prosperity. A period in which too much 'wealth' was on paper rather than in manufacturing. A period in which people bought all sorts of nonessential stuff and borrowed like mad. A period in which there was a lot of securities speculation, unregulated activity, and major fraud. Sound familiar? It should.
The good news is that the views of the Wall Street Journal editorial page are quite in error as to the source of the problems. This is because we are in the middle of a paradigm shift. If you can't think outside the Reaganomics paradigm, then you can't really define the problem or propose solutions.
Fortunately they know this in Washington and they are doing something about it. Fortunately we have an FDR in charge. Combined with that, is the absolutely unparalleled American gift for innovation and creativity. The combination should give everyone loads of confidence, including investors -- but there may be some rough surfing in the short run.
Ann Rosewall
Back to top
Jin Kim
Guest
Posted: Fri Mar 06, 2009 10:01 pm
Post subject: Re: The Obama Economy, Cont.
Difficult to agree with WSJ view. Banks fail and the insurer of their bad investments fails. In the past times of recession, there was no big bank failure. Plus, the well-known industrial giants fail. It never happened before. Thus, the WSJ view that left out these fundamental changes is not only biased but also unsubstantiated.
Back to top
=======================
Opinion
The Obama Economy, Cont.
Rogelio el Contrario
Guest
Posted: Fri Mar 06, 2009 12:41 pm
Post subject: Re: The Obama Economy, Cont.
Dear Sir:
Your editorial "The Obama Economy, Cont." which apparently is part of a series, is dishonest. As a Conservative I believe in honesty and responsibilty. We Conservatives will not find our way out of this deep hole by lies. Who is responsible for the current state of the economy? You must be kidding to blame Obama. Is it a joke or a lie? We can rightly debate the Obama Administration response to the current disaster, but calling the current economic catastrophy "The Obama Economy" is dishonest and irresponsible. I am ashamed for the WSJ. Once a great journal. Shame.
Most Sincerely,
Rogelio el Contrario
Back to top
scott soulia
Guest
Posted: Fri Mar 06, 2009 3:00 pm
ost subject: Re: The Obama Economy, Cont.
I hear a lot of coaching and catcalls from the peanut gallery, while there are still job openings to be filled in the treasury Dept. Surely some of the so-called "experts" would love to jump into the breach and go to work for the current administration and bring some of thier expertise to bear? Or are all the snipers simply enjoying the show from the safety of the media duckblind? The phrase, "Lead follow or get out of my way" springs to mind, and the last time I checked, the current administration was welcoming any and all comments and suggestions from the sidelines. Surely some of the pundits posess the necessary qualifications to be heard all the way down in Washington. So lets hear some constructive solutions to our economic decline that combine a desire for social equality, with the business acumen that has made America so fortunate for so long.
Back to top
Rajai Atalla
Guest
Posted: Fri Mar 06, 2009 4:06 pm
Post subject: Re: The Obama Economy, Cont.
As I see it the recession we are experiencing is due of lack of availability of credit. This is not very different from the recession of 1981-1982 where the shortage of credit was due a prime rate of 21.5 %. Government policy in both instances injected new money into the markets, albeit in different ways. The manner is irrelevant. In both instances Chrysler was in crisis and needed government help.
Back to top
edcrouch
Posted: Fri Mar 06, 2009 4:46 pm
Post subject: Re: The Obama Economy, Cont.
I have some ideas. Why don't we heap more and more blame on an administration that inherited this mess six and a half weeks ago and oh, while we are at it, let's not give ANY of their efforts to date a chance to work? Let's put forth more of the same ideas that got us here (or no ideas at all), let's complain about the cost of the mess to the American taxpayer, let's object to the government spending money to fix this, let's nit-pick on how the money is supposed to be spent, let's complain that we might have to pay a few thousand bucks more in taxes beginning in two years because the tax breaks we got have actually expired on the timeframe which they were supposed to expire as passed initially by a Republican congress and administration, let's not even try to fix healthcare even though it is the worst and most expensive system in the world, let's not even try to fix the economic, military, geopolitical or pollution problems caused by burning fossil fuels because we imagine that (1) things are fine as they are, or (2) it will be too expensive ( gee -- that sounds very familiar to those of us who lived through Detroit's complaints about how putting catalytic converters on cars would be the end of the US auto industry; only to see the greatest boom in auto profits ever over the ensuing two decades -- go figure), let's not even try to fix our pathetic "free" national education system that results in one of the greatest hidden taxation scams in our country by forcing so many to pay for the public system through real estate taxes and then send kids to private school with after tax dollars so we can have a chance of providing them with a reasonable opportunity to learn how to read and write and a little basic math and science. Let's [expletive] and moan about any remaining welfare layabouts that managed to slide through the tightened net that Bill Clinton put in place to move people off of welfare and into the workforce. Let's keep the minimum wage at an unlivable level while we are at it. Let's stay partisan and argue with ourselves about fringe issues while the US experiences the greatest threat period since the moments before terrorists attacked our country on that fateful September morning. Let's blame the slide in the equity markets on new government policies that have been barely implemented and "sentiment"; but not on jobless reports, GM's possibly imminent demise, AIG burning another $60 bln, the breakthrough of technical trading bottoms, short sellers, continued lack of transparency in the balance sheets of the world's largest banks, the shuttering of hedge funds right and left, scammers and Ponzi schemes, margin calls, and earnings that are expected to drop through the rest of 2009 which just might have a bit to do with the drop in the equity markets too -- ya' think?
How does all that sound?
The endless complaints we are hearing now are very reminiscent to me of the great prognosticators that believed the "surge" would not work in Iraq because those nay sayers could not see beyond the immediate chaos into a brighter future. Give the complaints a rest and put your shoulders to the wheel. Help your country out in its time of need. Show a little patriotism for goodness sake. Lead, follow or get the heck out of the way.
Ed Crouch
Back to top
ARoseIsARose
Guest
Posted: Fri Mar 06, 2009 6:44 pm
Post subject: Re: The Obama Economy, Cont.
Sorry, but your historical parallels are once again quite off the mark, and it is just lazy journalism to call what is going on 'the Obama economy'.
We are not experiencing a 70s-style recession. We are experiencing the aftermath of a long period of Republican policies, during which credit was too readily granted. A period in which people began to believe in permanent prosperity. A period in which too much 'wealth' was on paper rather than in manufacturing. A period in which people bought all sorts of nonessential stuff and borrowed like mad. A period in which there was a lot of securities speculation, unregulated activity, and major fraud. Sound familiar? It should.
The good news is that the views of the Wall Street Journal editorial page are quite in error as to the source of the problems. This is because we are in the middle of a paradigm shift. If you can't think outside the Reaganomics paradigm, then you can't really define the problem or propose solutions.
Fortunately they know this in Washington and they are doing something about it. Fortunately we have an FDR in charge. Combined with that, is the absolutely unparalleled American gift for innovation and creativity. The combination should give everyone loads of confidence, including investors -- but there may be some rough surfing in the short run.
Ann Rosewall
Back to top
Jin Kim
Guest
Posted: Fri Mar 06, 2009 10:01 pm
Post subject: Re: The Obama Economy, Cont.
Difficult to agree with WSJ view. Banks fail and the insurer of their bad investments fails. In the past times of recession, there was no big bank failure. Plus, the well-known industrial giants fail. It never happened before. Thus, the WSJ view that left out these fundamental changes is not only biased but also unsubstantiated.
Back to top
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