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 Daring to Utter the T WordPosted on Mar 26, 2009By E.J. Dionne The debate on the budget is phony, the howling on deficits a charade. Few politicians want to acknowledge that if you really are concerned about long-term deficits, you have to support tax increases. That’s why the most significant moment of President Obama’s news conference on Tuesday was not his dodge of a question on AIG, but his defense of the least popular tax increase in his budget: limits on the benefits wealthier taxpayers get for their charitable contributions and mortgage payments. It has been a long time since a president was willing to defend raising taxes. You have to go back to Bill Clinton and his 1993 budget. The consequences for Democrats who voted for that budget—no Republicans did—were grave. Republicans swept the 1994 elections and held on to the House for 12 years. No wonder politicians are so phobic about taxes. Obama himself is only going part of the way on tax increases. He is still arguing that he can fix things with hikes on just the top 5 percent of taxpayers. He’s right that a large share of any increase should hit those who enjoyed the biggest income gains over the last decade. But in the end, no politician (with the possible exception of libertarian Ron Paul) is willing to cut the budget enough to contain the deficit without a general tax increase down the road. Advertisement In an ideal world, Obama would come right out and say we’ll need broad-based tax increases. But that would be suicidal right now. Witness the reaction to his effort to put a 28 percent ceiling on deductions. His proposal would affect only 1.2 percent of taxpayers, yet even that idea is about to die in Congress. Obama’s proposal is based on sound intuition: Do we really believe it’s fair that when a married couple with a taxable income of $50,000 gives $1,000 to charity, they get a tax benefit of $150, while a couple earning $1 million making exactly the same contribution get back $350? Is it fair that the higher-income couple also get a bigger tax advantage on their mortgage payments? The value of the deductions is currently worth more to the higher-income couple because they pay taxes at a higher rate. Obama wouldn’t even close the whole gap. Applied to this example, his 28 percent cap would still let the wealthier couple deduct $280. Yet even this modest effort to raise money to pay for health care reform is falling under a hail of fire from those who say the president wants to hurt private charities. Obama was quite right when he said at his news conference that the effect of this change on charitable giving would be small: Using 2007 figures, the liberal Center on Budget and Policy Priorities found that Obama’s change would reduce charitable contributions only marginally—from $306 billion to $302 billion. Is that too much for nonprofits to give up so the country can cover the costs of health care for the needy? The truth is that the opponents of making any changes in the amount the wealthy can deduct are using solicitude for the private charities to kill the whole plan. Fine, kill it. But then, how else will we pay for health care reform? Obama’s across-the-board limits on itemized deductions would raise $318 billion over 10 years. Does anyone have a less painful way to raise that much money? The larger problem is the emptiness of all the howling over the long-term deficits. Nibbling away at bits of Obama’s proposed budget will do very little about them. Talk of “entitlement reform” is empty unless we have health care reform—and unless we acknowledge that we will never cut Medicare and Social Security enough to close the budget gap. In fact, Social Security is more important than ever now that the value of so many 401(k)s has plummeted. The task of those who genuinely care about deficits is to make the world safe for tax increases. Politicians won’t do this on their own. E.J. Dionne’s e-mail address is postchat(at)aol.com. © 2009, Washington Post Writers Group Elsewhere: . CommentsAre you a Truthdig member yet? Login now, or register with Truthdig. Add Your Comment
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By KDelphi, March 30 at 8:05 pm #
rollzone-“the greatest lives on planet earth”??? WHAT does THAT mean??
Report thisBy rollzone, March 29 at 11:50 pm #
hello. i would like to see full disclosure of all monies collected from tax. i would like to see accountability for every cent spent by congress. i want to know that with taxation: i am getting representation. politicians need to realise that the American people are not going to go away; to establish a new nation. we are living the greatest lives on the planet Earth- lives that our forefathers have died to preserve for us. the politicians are becoming unwelcomed inhabitants.
Report thisBy dihey, March 29 at 5:45 pm #
Since our country seems to be officially “at war”, a totally new tax is necessary. Call it “war tax”. The WT must pay for all military expenditures, including the secret ones. All incomes before deductions must be taxed at a fixed rate with no exceptions. All real property must also be taxed at a fixed rate with no exceptions.
Report thisIn this manner the American public can finally learn what it means financially to wage wars.
By KDelphi, March 27 at 3:40 pm #
Yes! If it comes down to Volker vs Summers, we should most certainly root for Volker! (This speech is by Pres. Obama in February….part of it)
“The Board is headed by Paul Volcker, who by any measure is one of the world’s most experienced and insightful economic minds. He has advised me for many months, and he has helped steer the American economy through many twists and turns. I’m glad that Paul has decided to continue his public service at this critical moment. Assisting Paul and the rest of the Board will be Austan Goolsbee, who has long been one my closest economic advisors, and who will ensure that we are making the best possible use of this unique resource.”
I could live without Goolsbee…..but this was February, and, we havent heard much of Volker…why? Is he being marginalized, as many feared he might be?.
Or, as a couple posters there said:
February 6, 2009 1:58 PM
“SqueakyRat: Why does everything I’ve ever heard about Larry Summers lead me think he’s a Giant Douchebag?
Probably because he is, but more importantly he has repeatedly demonstrated his incompetence.
If there is anything that make me pessimistic about the Obama administration, it’s Summers’s involvement. Can anybody name an economic policy that he was right about?
1. In the early 1990’s he was a major proponent of “shock therapy” for Russia and its former republics. That approach not only destroyed their economies for a decade, but pushed them back to the brink of communism (and in some cases actually got the communists elected).
2. In Clinton’s Treasury Dept. he was part of the troika (along with Rubin and Greenspan) that blocked regulation of CDS’s and so helped lead to our current mess.
3. He’s a protege of Robert Rubin, who played a major role in driving Citibank into the toilet.
3. As SecTreas he was a major proponent of PNTR and WTO membership for China. Both were obviously very premature, and played a major part in our trade deficit and the destruction of our industry.”
Summers should be on a wanted poster, not part of the administration.
I hope thaty they will give some attention to Volker—the Economic Recovery Advisory Board—wtf is it?
Report thisBy KDelphi, March 27 at 3:26 pm #
wildflower—yes, I agree 100% I did almost a year in Europe on a WorkStudy program. I’ve been doing what I can to get the US to realize how screwed we are as far as no social safety net, for years. Every civilized, “free” country on earth has a better social safety net than the uS.
More USAns need to TRAVEL! lol
As Debbs said (paraphrase),. “The American people can have anything they want. The problem is that they dont seem to want anything”.
As in, “No! Please dont give us all health care!” and, “No! PLEEZE dont stop the mkts from ripping us off!”.
I will read the article..thanks (pc is too slow to open more than one pg at a time…old as the hills)
Report thisBy wildflower, March 27 at 2:09 pm #
Re KDelphi: “Now, the Senate has a champion for single payer health care also. Sen Bernie Sanders.”
Speaking of health care and “safety nets,” did you read “How Safety Nets Protects Against Fiscal Collapse“ on Ezra Klein’s blog?
It includes comments made by Laura Tyson, who is a member of the Volker Commission. She “draws an interesting contrast between the impact the economic crisis has on American consumers and European consumers.”
The contrast relates to the “safety net” differences between America and Europe – the European consumers have a “safety net” and Americans do not. As such, Tyson suggests America is much more vulnerable to recession than Europe.
“The economic impact of Lehman’s collapse, she says, was multiplied because it devastated the financial system’s confidence in its own survival.
The analogy holds to our safety net, where consumer reactions to fiscal instability are multiplied because they can’t be certain of their economic survival.”
“A consumer afraid of losing her health care and her child’s college education and her income will pull much further back than a consumer who feels the fundamentals of her existence are secure.”
“As evidence, she brought up every economist’s favorite bugaboo: Japan’s lost decade. It was bad for growth, she argued, but not particularly devastating to individuals. “The Japanese households, in the last decade and a half, they never experienced the economy the way economists experienced it,” she said. “The economist saw the economy as in dire shape. You asked the average Japanese person if they were in dire shape, they didn’t see it that way.”
http://www.prospect.org/csnc/blogs/ezraklein
Report thisBy rollzone, March 27 at 12:45 am #
hello. the culminating absurdity of increasing taxes to support a corrupted healthcare industry while stifling investment from the wealthy to pay down debt at a rate that will majically produce solvency for the banking industry is cartoonism. is this the latest generation example of the home video gaming industry gone amok? or does this administration smoke the be happy? let us return to a 4% federal tax rate to stimulate the homegrown economy from where the present taxes hurt the most. pay off the spent political deficit in due time- i am in no hurry. stop the political action committees. it is time for a tax change. the politicians are provoking me to favor the complete elimination of taxes: alike the first hundred years; whereby we support what we choose by donation.
Report thisBy KDelphi, March 26 at 6:44 pm #
Now, the Senate has a champion for single payer health care also. Sen Bernie Sanders. Go Bernie! Joining Reps Conyers, Kucinich, Kaptur and the CBC as a voice for reason..
http://pnhp.org/PDF_files/American-Health-Security-Act-single-payer.pdf
Report thisBy KDelphi, March 26 at 6:38 pm #
If “charities” could take the place of a social safety net, they would have. I am very suspect of “private non-profts ” these days…have you seen the tax benefits??
Why dont we tax churches? I know, in know. But, if they want to help so much…
Universal health care would stop the number one cause of bankruptcy. Getting rid of the privitization schemes in Medicare and social security, would save these programs.
Deficits should not by an issue, right now. WHERE the money goes, SHOULD be. NO MORE TO WALL ST!
TAX lobbyists?? Why HAVe lobbyists? It is not freedom of speech (its money) not petitioning Congress. It’s money. That is ALL that it is about.It needs to go.
Report thisBy rylly, March 26 at 4:20 pm #
Flash! Tax the lobbyists! All those corporations that can “afford” to come up with millions to buy our law-makers through their lobbyists should be taxed 50% on every dollar.
Report thisWhy we let these bribes go on and on and on and call it lobbying is beyond me.
If the American people want their govt back, tax the thieves that are taking it from US. DUH
And as for the charities that will not get all their former $$ allowance, providing health care to all will naturally diminish the need for as much charity. DUH
By Jess Money, March 26 at 2:31 pm #
(Unregistered commenter)
Sorry, E.J., not swallowing the latest inside-the-Beltway B.S. If we need more tax revenue, fine; here’s where to get it without crushing the middle class (which, depending on where you live) is everybody from $40K to $400K):
First, an AMT on corporations. Forget that phony theoretical 35% corp tax rate; many top corps brag about using various schemes to pay an effective tax rate of only 1%.
Second, the biggest canard used by the really rich and their Congressional crony puppets is this talk about the top 1% of tax payers. Somebody who makes $250K a year is lumped into the same category as Tiger Woods, Warren Buffet, Bill Gates, and the mega-bonus babies of Wall Street. So how about we go back to the traditional, pre-1980 progressive tax rates that had 10-15 brackets with the top marginal rate being 70%? (Or in some years, even more.)
Do those two things and we won’t have to rat-screw the true middle class.
Report thisBy Inherit The Wind, March 26 at 2:12 pm #
7 months ago (August), I was all in favor of increasing taxes to lower the deficit and to tax proportionately wealth rather than income.
What changed? The crash. The very WORST thing we can do now is suck money out of the system to try to balance the budget. This is PRECISELY what was done in 1937 and the result was it re-ignited the Depression, creating the “Depression within the Depression”. Bad idea, especially now as the first hopeful signs are appearing that our desperate measures are working.
E.J. You really got it wrong this time. IOWs, since we are up to our butts in aligators we really don’t want to be worrying about draining the swamp!
Report thisBy Smoove, March 26 at 12:33 pm #
(Unregistered commenter)
“Few politicians want to acknowledge that if you really are concerned about long-term deficits, you have to support tax increases.”
Wow. The media and the ruling class have completely lost touch with the people.
Hey EJ, how about if the gov’t cuts costs??? You know, not spending as much. Ask any American family these days about cutting costs and they will know what I’m talking about.
For starters, bring ALL of our troops back home. This entails ending the war in Iraq AND then closing all oversea military bases.
Domestically, end this ridiculous war on drugs that has been a complete failure in every sense of the word.
Report thisBy Rodger Lemonde, March 26 at 8:59 am #
(Unregistered commenter)
It is time the American people did to business what business has been doing to us for years. Corporation claim the same rights as an individual then dodge all accountability. If they feel the need for more cash they slip in little ‘fees’ and ‘adjustments’so they don’t have to increase prices. The financial giants should be facing another kind of “bail out”. The kind where their attorney comes down to police headquarters with papers to sign.
Report thisGiven the grease they pay to lobby for privileges it is clear that a lot of corporations can afford to pay higher taxes.
By Marshall K, March 26 at 8:30 am #
It’s sadly a part of the American psyche and has been for decades: we want something for nothing. We wanted everything now, so we borrowed our way into it. The greed got so great, it ultimately resulted in the financial crisis we are in now.
Report thisWe still won’t admit to ourselves that we must pay for this foolishness, including all the borrow and spend that our government has done. The credit cards are maxed, folks, time to pay up!