Friday, August 10, 2012

If You're Serious About Balancing the Budget....

Robert Samuelson displays many of the foibles typical of his species, the Beltway pundit, and thus his calls for balancing the budget are often predicated upon the belief that in order to prevent fiscal catastrophe we must immediately cut entitlements, even though in the next breath he's willing to commit the same or more money to his own pet issues. The facts take a back seat to conventional wisdom. Such arguments can be frustrating in that they tend to ignore the needs of the people on the receiving end of those benefits and what will happen to them (and future beneficiaries) if spending is cut, lump all entitlement programs together regardless of how and how well they are funded, and disregard the issue of healthcare inflation both in terms of its role in the increased cost of Medicare and in relation to how retirees might get health care if the program is significantly cut. That said, we're talking choices and priorities, and it does appear that Samuelson really would prefer to have a balanced budget and to control the growth of the national debt.

A couple of days ago, Samuelson pointed out that Mitt Romney's "tax plan" makes no sense.
There seems to be a Democratic mole inside Mitt Romney’s campaign. Could it be Romney himself? Well, of course not. But considering the campaign’s behavior, it might just as well be. President Obama and his allies have cast Romney as a wealthy fat cat who’s out of touch with everyday Americans and who would use his presidency to enrich the already rich. To counter this damning image, the last thing you’d expect Romney to do is embrace a tax plan favoring the super-rich.
Actually, you would expect Romney to embrace a tax plan that favors himself and his ultra-rich friends and sponsors. What you would not expect him to do is to be honest about his intentions during the election, or even when pushing the bill. If you look at Romney's actual claims and statements, it's not that he's openly embracing a tax plan that favors the ultra-rich. It's that we know enough about his proposals that we can calclulate the enormous benefit he intends to provide to the rich and the additional tax burden his plan will impose on the middle class. Romney himeself is content to run around the country claiming that his tax plan is about "fairness", that "job creators" deserve tax cuts, and denying that he's going to soak the middle class and run the deficit through the roof.

Really, what we seem to have here is Samuelson recognizing that Romney's political spin is completely at odds with the facts and doing a double-take. Samuelson is so invested in the spin that the facts take him by surprise. And that's not a problem only in relation to Romney. Albeit in a more genteel manner than, say, Ross Douthat, Samuelson gives an approving nod to the Republican party line about the President:
The idea is to present a compelling contrast to Obama, whose low understanding of and meager sympathy for business seem plain and have arguably hobbled economic expansion.
It's not necessary to support the claim that the President has "low understanding" of business, because it's part of Samuelson's conventional wisdom. As with Romney's tax plan he might reconsider his position if hit over the head with enough facts, but he's not going to go out and investigate - that's a reporter's job. As for the "meager sympathy for business", again Samuelson gives no hint of what he means. But when you hear the most vicious complaints and attacks on the President they are often within the context of his desire to return to the Clinton-era tax rates for the wealthiest earners, the possibility of eliminating the privileged status of carried interest - the loophole billionaire hedge fund managers and people like Romney use to pay low capital gains rates on their income instead of paying the same rates as regular wage earners, a small increase in the capital gains tax to pay for the ACA on top of a possible return to Clinton-era tax rates for capital gains (following what used to be a Republican sentiment on different types of income), and his believe that it's appropriate to impose a modest estate tax on gargantuan estates. David Frum believes that part of the supposed angst of the wealthy is that the President recognizes that luck plays a role in the success of businesses and the accumulation of wealth, but I doubt that Samuelson would deny that fact.

Samuelson also repeats his canard that Obama's hypothesized lack of understanding of business has "arguably hobbled economic expansion". In other words, Samuelson is not comfortable endorsing that argument - he sees and offers no factual support for that claim. He is merely repeating it arguendo, without concern for the facts. Some Beltway pundits would explain that they present such unsubstantiated arguments in the interest of balance - the apparent notion that if you're criticizing Romney you have to say something bad about the President or you're being "biased", and if you throw in a criticism you can defend against accusations of bias by respoding, "Hey, I criticized Obama as well." I'm not sure what Samuelson's excuse is, but suffice to say if he can find absolutely no evidence in support of that argument he should stop repeating it.

So at the end of that blast of hot air, what does Samuelson believe Romney should do? What sort of pro-business reforms might Romney embrace to raise additional revenue or be more fair to the middle class? Samuelson has a number of ideas:
  1. Increase the top income tax rate to 30%: "Although the wealthiest 5 percent still pay about 40 percent of federal taxes, it’s questionable whether further reducing their tax burden would bolster the economy.... Romney might have emulated Reagan by proposing a top tax rate of 30 percent....

  2. Raise the capital gains tax to 30%: "In 1986, Ronald Reagan supported eliminating the preferential rate for capital gains, which then remained at 28 percent from 1987 to 1997. The economy did fine."

  3. Eliminate irrational tax breaks, like the one employed by hedge fund managers: "Because low capital gains rates apply (illogically) to hedge fund and private-equity managers, we may have too many hedge and private-equity funds."

Samuelson also sees no need to eliminate the estate tax, pointing out that in 2009 it applied to very few estates ("only 0.6 percent of adult deaths") and that it's abolition is being pushed by Romney and his party primarily because of the need "to satisfy Republican constituencies, which fervently support ending the estate tax and keeping capital gains rates low".

That is to say, Samuelson appears to be embracing every single one of the Obama administration's tax proposals that supposedly shows "low understanding of and meager sympathy for business" - and saying, "That's a good start, but your proposed rate increases are inadequate." Samuelson is happy to jump on the "Obama doesn't understand business" bandwagon, whatever the facts, but can't understand why Romney won't propose a serious or credible budget proposal that doubles down on Obama's supposedly "anti-business" tax policies? Seriously?

What it it about Beltway pundits that leads them to so reliably complain about the need for some form of bipartisan compromise to balance the budget, criticize the White House for not somehow engineering such a compromise, then describe a desired outcome that is pretty much consistent with what the President has already proposed?

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