Some leading Democrats have been proposing that the Afghanistan war, like Health Care, should be deficit-neutral.
The tax applies to all Americans earning $30,000 or more (although there are exemptions for “anyone who has served in Iraq or Afghanistan since the 2001 terrorist attacks as well as families who have lost an immediate relative in the fighting”). It’s called the “share the sacrifice act.”
I’m basically in favor of this. There’s a weird double-standard in politics in which Republican priorities — war, tax cuts, Bush’s prescription drug subsidy, and so on — are never paid for (in eight years, I don’t think a single major Bush policy was ever paid for), while Democratic priorities are expected to be deficit neutral.
Will Republicans and blue dogs — the so-called “Deficit Hawks,” nearly all of whom have voted again and again to increase the deficit to pay for wars and tax cuts — support this measure? Or if they’re not willing to pay for the war, will they call for complete US withdrawal as soon as possible? I suspect the answers will be “no” and “no,” alas.
Of the many genuinely brainless and irresponsible things Republicans and blue dogs believe, the childish belief that we can endlessly cut taxes while increasing our spending may be the most harmful. (Well, that and their belief that it’s okay to do nothing to address climate change).
Hm. $30,000 or above? Whatever happened to “soak the rich”? Or is killing support for destroying the Taliban more imporant than paying for the effort to do so? Can you name another scenario that the left has floated for for raising taxes in order to pay for something that has included raising the taxes of the middle class (in fact, does an income of $30,000 even qualify for “middle class”)?
I do agree that raising expenditures while reducing income is not the way to go. Of course, that should also be applied to the current Administration’s proposals as well, but it’s fair to criticize previous Administrations for doing the same.
I have to agree with the idea. If more people felt the impact of these wars and the stupid decisions that are made about them, maybe the anti-war movement would gain some traction.
On the eve of the Iraq invasion, I remember some war protesters were trying to get momentum going for a $1 a gallon tax on gasoline to share the cost of the war. Surprise surprise, it never got anywhere.
Also a good tactic to highlight the inconsistencies of the blue dog/Republican positions, but anyone who pays attention already knows that. So not sure how many people it’d actually wake up.
even if I were to argue from a democratic point of view, raising taxes during a recession is dangerous, and even if we are technically out of the recession now we risk a double dip. ive heard krugman say many times that fdr made a grave mistake by rising taxes and trying to balance the budget until fortunately the great public works program called wwII essentially got us out of the depression.
if you go read krugman’s blog now you’ll see he’s arguing for a second stimulus (b/c of the jobs numbers) and that the deficit hawks are full of it since you have to look at debt as a % of the GDP, in which case we’re fine.
Manju — the policy delays the actual implementation of the tax by a year or two for that reason.
I think the real argument is that there is a (laffer) curve, and thus lowering taxation may actually increase tax revenues, since it has a stimulative effect.
that would make more sense but do you really want ot lock the prez into a fiscal policy? We didn’t balance the stimulus with more futre taxes did we?
plus, the way things are looking we may make a profit on tarp. our Goldman sach bailout gave us a 25% rate of return i and see the govt is ready to exercise warrants for other banks. with banks recovering and the taxpayer having some skin in the game, that should give us some money for war.
I think the real argument is that there is a (laffer) curve, and thus lowering taxation may actually increase tax revenues,
Is there a laffer curve? That is, is there any real life evidence that the laffer curve ever works in real life? Any example of a government managing to increase revenue by decreasing taxes anywhere?
BTW in principle I think that this tax could be a good idea, in practice I’d probably go for a tax resistance position if it passed.
Sure, but I think it’s worth trying to test this argument against reality. If the evidence does not actually back it up (as I believe it does not), then the people making that argument need to cut it out.
—Myca
This assumes that the level of taxation is higher than the level that would give maximum revenue (as well as assuming that the laffer curve is a valid fit).
If we assumed that we were below the optimum point, than raising taxes raises revenue. Without evidence for where we are on the curve (and that the curve is a good model), it’s pointless to use it to argue policy.
I don’t think the theory of the laffer curve is really in dispute, rather its application (where we actually are on the laffer curve). Keynes himself wrote that increasing taxation can lower revenue and vice versa. I saw recently that MA (i think) taxed cosmetic surgery 6% only to lose revenue due to less cosmetic procedures done in the state. the federal tax on yachts (during carter i think) almost destroyed the yacht industry resulting in less revenue for the federal govt. the Kennedy and Reagan tax cuts resulted in more tax revenue.
conservatives stupidly used the laffer curve recently when arguing for tax cuts to get us out of this recession. i think its fairly safe to say govt spending is far more stimulative than tax cuts. this is an economic fact in as far as there are economic facts. the problem is, this fact runs up against another fact: govt run enterprises are less efficient than private ones.
so i think conservatives are right to focus on the tax cuts and supply side, since in doesn’t create an entrenched and inefficient govt entity. but in emergencies situations, like we had in the credit crunch, Keynes it is.
I don’t know about Kennedy, but it’s simply not true that the Reagan tax cuts resulted in more tax revenue. It seems to be true that revenue may have increased due to Reagan’s cutting of the top bracket tax rate from 80% down to around 50%; but overall, revenues dropped under Reagan. (Conservatives often hide this fact by ignoring inflation, per capita adjustments, and the business cycle.)
Recommended links: 1 2 3.
As for an elective plastic surgery tax, you don’t include any supporting references, but even if it’s true it was a revenue loser in Massachusetts, that doesn’t mean a similar Federal tax would do the same. In Massachusetts, it’s extremely easy and inexpensive to decide to avoid the tax by having the surgery done an hour’s drive away in Connecticut. The expense and difficulty of having surgery done outside the country are considerably higher.
I don’t know if you can say that definitively. Thes things are debatable. here’s laffer himself (who is no ideologue on the matter) assesing Reagan:
In August 1981, President Reagan signed into law the Economic Recovery Tax Act (ERTA, also known as the Kemp-Roth Tax Cut). The ERTA slashed marginal earned income tax rates by 25 percent across the board over a three-year period. The highest marginal tax rate on unearned income dropped to 50 percent from 70 percent (as a result of the Broadhead Amendment), and the tax rate on capital gains also fell immediately from 28 percent to 20 percent. Five percentage points of the 25 percent cut went into effect on October 1, 1981. An additional 10 percentage points of the cut then went into effect on July 1, 1982. The final 10 percentage points of the cut began on July 1, 1983.
Looking at the cumulative effects of the ERTA in terms of tax (calendar) years, the tax cut reduced tax rates by 1.25 percent through the entirety of 1981, 10 percent through 1982, 20 percent through 1983, and the full 25 percent through 1984.
A provision of ERTA also ensured that tax brackets were indexed for inflation beginning in 1985.
To properly discern the effects of the tax-rate cuts on the economy, I use the starting date of January 1, 1983–when the bulk of the cuts were already in place. However, a case could be made for a starting date of January 1, 1984–when the full cut was in effect.
These across-the-board marginal tax-rate cuts resulted in higher incentives to work, produce, and invest, and the economy responded (See Table 7). Between 1978 and 1982, the economy grew at a 0.9 percent annual rate in real terms, but from 1983 to 1986 this annual growth rate increased to 4.8 percent.
Prior to the tax cut, the economy was choking on high inflation, high interest rates, and high unemployment. All three of these economic bellwethers dropped sharply after the tax cuts. The unemployment rate, which peaked at 9.7 percent in 1982, began a steady decline, reaching 7.0 percent by 1986 and 5.3 percent when Reagan left office in January 1989.
Inflation-adjusted revenue growth dramatically improved. Over the four years prior to 1983, federal income tax revenue declined at an average rate of 2.8 percent per year, and total government income tax revenue declined at an annual rate of 2.6 percent. Between 1983 and 1986, federal income tax revenue increased by 2.7 percent annually, and total government income tax revenue increased by 3.5 percent annually.
The most controversial portion of Reagan’s tax revolution was reducing the highest marginal income tax rate from 70 percent (when he took office in 1981) to 28 percent in 1988. However, Internal Revenue Service data reveal that tax collections from the wealthy, as measured by personal income taxes paid by top percentile earners, increased between 1980 and 1988–despite significantly lower tax rates (See Table 8).
This is one of those weird moments where I find myself in some kind of agreement with RonF. $30,000? Seriously? What happened to a $100,000 or $200,000 lower cap? You expect people struggling on $30K — and, yes, even single child-less people struggle on that income, especially if they live in the city — to pay for a war that benefits the corporations and military-industrial complex that oppress them?
This is utterly symbolic, much like Charlie Rangel’s call to re-institute the draft — i.e., forcing people to kill and to risk getting killed for wars that serve no purpose. I’m not surprised he’s behind this move, too. This is not a serious proposal, it’s a protest against the double standard Ampersand rightly notes regarding expenditures for war versus expenditures for things our society actually needs. I appreciate the rhetorical aspect, but it’s undercut by the practical implications. It will simply play as “The Democrats are out to raise the taxes on the middle class and the working poor” — the very rhetoric the GOP has been parroting since the dawn of time. Meanwhile, the actual point of the proposal will get lost.
Mind you, I am all for taxing the crap out of corporations, investors and others who profit from sending working people to fight and die in their wars. In fact, I’d rather we not fight those stupid wars in the first place. Anyone in Congress brave enough to propose that?
Update: As if to prove my point, The PalinDrone is on the rhetoric: http://twitter.com/SarahPalinUSA/status/6041464263
*shrug* The actual tax increase, for folks earning $30,000 to $100,000, would be 1% of your tax liability before this tax. So if someone is paying $3000 in taxes a year, this bill would increase their tax to $3030. I think families earning $30,000 a year can stand that hit.
There is a belief among many democrats that we should give up on the idea that anyone who isn’t rich should ever face any tax increase, ever. I don’t agree. I think that’s bad policy, and I also think it’s wrong politically. We should resist letting our political agenda and policy outlook be based entirely on how Sarah Palin will spin it.
I agree with you in principal, Barry, because ideally our government would spend tax revenues on programs that benefit our society as a whole, like robust education and health care – and roads and fire departments, etc. But this here real world has ginormous tax breaks for corporations counted as individuals, and individuals hiding moolah in off-shore accounts, lobbyists from K Street bribing Congress, and a foreign policy establishment that on a good day is Wilsonian in ideology (i.e., benevolent imperialist) — to name only a few of the many ways taxes are misused and abused by capitalists.
Presumably, the intent of this tax is to make the war less popular by explicitly showing the public its cost. But this is a tactic that both parties can use. If this goes through, expect to see the Republicans do something similar with several categories of spending. I look forward to having a tax bill imposing a “welfare spending tax”, or a “environmental protection tax.”
… or insisting that the health care bill be paid for?
I mean, I agree that two can play the game, certainly, but when you say:
I disagree that that’s the purpose. I think the purpose is more to promote the idea that wars have costs, just like spending on social programs, and that if we’re going to have a massive public freak-out over the amount the (self-sustaining) health care bill will cost, we ought to have at least a similarly sized freak-out over the amount the (non-self-sustaining) war costs.
Seriously. Although most of the analysis of this I’ve read has discussed the idea that the war will be less popular if we have to pay for it, most of it hasn’t embraced that as the primary reason for the bill, but rather a recognition that it’s not just Democratic programs that cost money.
—Myca
To get to the merits of “deficit vs tax finance for the wars” —
There’s an important difference between a war and health spending. Which is that wars, generally, are short and end within some modest number of years, and so it makes sense to spread out the payment over time. Health spending is a recurring expense, and so pushing the expenses forward isn’t helpful.
You’re going to point out that the current wars in Afghanistan and Iraq have been going on for most of a decade. But “a decade” is a very short period compared to a major domestic program like a government-run health care system. When was the last time that we dismantled a domestic program as large as the public option is likely to be?
My sense is that the current wars will be over within another 1-5 years. I expect a public option, if enacted, to last 10-50 years. So a fiscal measure that makes sense for one doesn’t really make sense for the other.
correct me if i’m wrong, but doesn’t krugman himself repeat ad nauseum that (at least prior to the stimulus/bailout) for all intensive purposes the federal budget is defense/medicare/soscial security. if your not willing to cut any of the 3, and no one really is, then your not serious about debt reduction.
of the 3, the medicare and social sec are the runaway problems with our aging population while defense spending is temporary, not so much structural. i think this is agreed upon by serious thinkers. the last huge increase structurally was bush’s unfunded medicare pt d, which after the bill passed, it was revealed would be like gazillions more than expected. the dems of course went along for the unfunded ride, in fact wanted more oif it. there is some debate over how pyramid schmish social security is (there is fund but the fund consists of debt, ie govt owes itself money) but the rest of what i wrote is pretty much fact unless you read the most partisan talking heads.
so the whole premise of this discussion seems off. dem babys(soc sec and medicare) are the timebombs no? the other stuff, wars and stimulus spending, are traditionally done on deficit spending because they’re temporary. not so much of a problem.
I don’t buy that social security is a timebomb. Most of the analysis I’ve seen indicates that small adjustments will be enough to keep it fully funded until after we’re done dealing with the baby boomers.
Medicare is certainly a problem, which is part of why I’m in favor of a large, single, collectively bargaining heath care entity to negotiate lower prices … since it seems that a large part of the issue is that we pay more for individual procedures than other countries. But hey, conservatives oppose that, soooo….
Sure, wars (though, Notacookie, you’ve sat in my living room and explained to me that you saw no theoretical end to the wars, and that that wasn’t a problem.) can be temporary, but our defense budget is certainly not.
The 2009 Defense Department budget was 515.4 billion, plus the 145.2 billion for the GWOT = 660.6 billion … which trumps both Social Security (644 billion) and Medicare (408 billion). Furthermore, if there are conservative arguments on how to make the DoD budget more efficient (as there are pragmatic liberal arguments on making medicare more efficient, for example), I am not aware of them. This may well mean that I’m a dumbass (it’s been known to happen), but I suspect that the arguments aren’t widespread or generally accepted in conservative circles.
If we’re going to talk about cutting stuff, such discussions must include defense spending to be meaningful. It’s just too large a chunk of the budget to do otherwise.
—Myca
I agree with this. I didn’t mean to imply that cost was irrelevant for military operations.
I also agree with this. That said, I haven’t seen a lot of particularly persuasive analysis about detailed cost-reduction steps coming from anybody. I think it’s much harder to have a good discussion about defense spending than about health care. Most people have at least a basic sense how health care works, and what the big problems are today. I think for defense spending, a lot of the relevant facts are classified, impossible to quantify, or simply technical and obscure. So the public discussion is much less rewarding.
My personal sense, for what it’s worth, is that the way we do defense procurement is badly broken, and that it will be very hard to fix. From system concept to fielded weapons often takes 15 to 20 years, and that’s not only longer than the planning horizons of most politicians and DoD managers, it’s often longer than their *careers*. So there’s a very basic incentive problem that I don’t know how to fix.
One additional note. You say:
My understanding is that there’s already provisions in law to reduce payments to physicians for service. And there is a broad consensus in the Democratic party that they would be catastrophic if enacted. Hence the so-called “Medicare fix” or “doc fix”. http://thehill.com/homenews/house/68695-house-passes-medicare-doc-fix-243-183
Military procurement is badly broken, as noted. In general, though, military spending is like social spending – you can cut it as much as you want. Just pick the things you don’t want to buy anymore.
its still discretionary like the other departments. it can be raised or lowered depending on political will. soc sec/medicare, etc are more like interest on the national debt, you can’t not pay it without creating a legitimacy crises, a violation of the social contract. that’s why they are filed under mandatory spending, and i suppose that why dems are asked to figure out a way to pay for it, which is what this post is complaining about.
in the 2010 budget, soc sec (695b) med and medicaid (743b) both exceed defense (663b, which includes overseas operations; i don’t think gwot is used anymore) and add 571b for unemployment/welfare which is also mandatory (as i think they are considered part of the payroll taxes of either soc sec or medicare)
Raise the taxes on the Red States. They elected Shrub and co.