I know progressives that are upset with Barack Obama because he wants to cut taxes for 95% of Americans. These progressives tell me that Obama is pursuing a Reaganesque tax policy. Here’s the deal. Tax policy is one area where an administration can make some small impact on the performance of the economy. Sometimes the economy needs a little stimulus, which involves increasing people’s disposable income, or income available for investment. Sometimes it involves putting a brake on overexuberant behavior and balancing the books, so we aren’t borrowing money we can’t afford to pay back. The problem with the Republican Party is that they use every occasion to argue for tax cuts. That guarantees that they are right no more than 50% of the time.
Barack Obama recognizes that people and businesses are suffering from a period of tight credit. Under current circumstances, it makes sense to cut taxes. But we’re also experiencing a period of massive deficit spending, so we need to balance the books. We can cut some spending, but we also need to increase revenues. The only way to accomplish both goals at the same time is to cut taxes on most people and raise them on the people that are the most comfortable.
Obama’s tax policy is the right prescription for the times we find ourselves in, but it’s also the right place to be politically. We need to spread the wealth around a little bit precisely because the credit markets are so tight. We need to put more money in people’s hands so they can consume some goods and keep struggling companies in business. We need people to qualify for loans that suddenly have more realistic conditions. But we also have to have more government revenues, so we aren’t financing our operations exclusively through borrowed money.
The Republicans are making a last-ditch argument that a more progressive tax policy is ‘socialist’, but their argument is essentially dishonest. We have been financing our government on borrowed money for the last seven years, and we’ve been borrowing a lot of that money from China and Saudi Arabia. Our kids and grandkids are going to have to pay off those debts, and pay them off with interest. If we are going to put a stop to that, we’re going to have to increase taxes and cut spending. If we don’t raise that revenue from the wealthiest Americans, we’ll have to raise it from people that are already struggling. And that’s not a very politically palatable way to go.
Obama has the right strategy because he combines a sound fiscal policy with a sound political strategy. It would hamper our economic recovery if we raised taxes on struggling consumers and small businesses right now. But Obama proposes the opposite. He wants to raise revenues, but he wants to do it by taxing the top 5% of income earners.
Some progressives don’t like that because they want to raise much more in revenues and they want to avoid teaching people that tax breaks are good policy. But, it’s as wrong to be reflexively for tax cuts as it is to be against them.
Obama has a reasonable, reality-based plan. And the people running against him are telling nothing but lies about his tax plan.
