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Here Comes Obamanomics
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The president will deliver his budget today and with it a new philosophy. Former Clinton budget adviser Matt Miller asks: Can Obama convince Americans it’s a good idea to raise taxes?
Among other transformations, the Current Mess is about to forever alter the metaphors Americans use to make sense of political and economic life. Nowhere is this truer than with the federal budget, which, as President Obama reminded us the other night, represents more than just numbers, but “a vision for America.”
From the Reagan ascension until recently, the most trenchant description of the prevailing vision was “Starve the Beast.” This idea, which originated with Milton Friedman, held that the shrewdest way to restrain the supposed runaway growth of evil (and thus “beastly”) government was to cut taxes perennially. Combined with the fact that politicians had little interest in cutting popular government programs, this starvation would, by design, create big budget deficits.
Americans will, over time, come to realize that the government we want is actually worth paying for.
The hope was that pressure to do something about spiraling debt would eventually force politicians to do the unnatural, and cut spending. Since the Republican desire to sound fiscally conservative turned out to be almost infinitely greater than the Republican desire to be fiscally conservative, the result was an unprecedented increase in the national debt, along with a fancy, Friedman-approved justification for running up more until the courage clicked in.
Like Godot, of course, that courage never arrived. Those of us who worked in Bill Clinton’s budget office thought we did a pretty good job cleaning up the mess we inherited, before the Florida debacle in 2000 gave the GOP a chance to play “Starve the Beast” for a decade more. But Clinton himself, who felt compelled after the GOP blowout in 1994 to declare that “the era of big government is over,” never really slipped the spiritual straitjacket off “Starve the Beast” in the first place.
With President Obama’s first budget we are therefore embarking on an epic new paradigm which deserves its own metaphor. Though it’s a little clunky, for symmetry’s sake we may as well call it “Feed the Beauty.”
In fiscal terms, the failed wager of “Starve the Beast” was that spending would eventually shrink to come in line with lower taxes. The tacit wager of "Feed the Beauty" is that taxes will eventually rise to come in line with higher spending. Why? Because Americans will, over time, come to realize that the government we want is actually worth paying for (as opposed to having our children borrow money from the Chinese to pay for it, the de facto “plan.”) The paradox of this revolution in governing philosophy is that its success relies on the same underlying political dynamic. Instead of fiscal sanity depending on pols doing something the American people won’t like (cutting popular programs), it will now depend on pols doing something the American people won’t like (raising taxes).
Now, to be sure, beyond the expiration of the Bush tax cuts for the top, and some controversial new levies on those making more than $250,000 a year, Obama isn’t coming clean on this yet. But this higher-tax blueprint is plain enough—indeed, it existed long before Obama decided to seek the White House. Yes, the feds are throwing trillions of dollars in various ways at the recession right now. And yes, Obama’s new budget devotes fresh trillions over time to priorities he laid out Tuesday night in energy, health care and education.
But before all that, there was always the big Kahuna: the baby boomers’ retirement. Put aside Obama’s near-term recession fighting and long-term growth initiatives. The fact that we’ll shortly be doubling the number of seniors on Social Security and Medicare already means that taxes will inevitably rise in the decade after this recession is past. Even China won’t lend us enough dough to cover the $50 trillion in unfunded promises in our retirement programs.
By pushing ahead with universal health care, green-energy efforts, fresh funding for cancer cures, and a new drive to boost student achievement, Obama’s strategy is to make sure that broader tax increases on folks below $250,000, when they must inevitably be discussed (in a second term), are buying public goods that renew the economy in ways that benefit all Americans, not just the elderly. By making government beautiful enough to more of us, in other words, we’ll grumble less when it comes time to feed it.
My own sense is that, unlike "Starve the Beast," "Feed the Beauty" will actually work. (If it doesn’t, we’re pretty much out of options). And the good news is that when it comes time to "Feed the Beauty," we won’t become France or Sweden, as conservatives misleadingly allege. Depending on how you count the emergency outlays for the banking system, today America is spending and taxing in the middle 30s as a percentage of GDP. Western Europe and Scandinavia are around 50 percent. In short, there’s plenty of room for us to "Feed the Beauty" and still remain more of a rough-tough “cowboy economy” than some cradle-to-grave nanny state. But those are metaphors for another day.
Matt Miller, a former senior adviser in the Clinton Office of Management and Budget, is a senior fellow at the Center for American Progress, and the author of The Tyranny of Dead Ideas: Letting Go of the Old Ways of Thinking to Unleash a New Prosperity. He hosts “Left, Right & Center,” public radio’s weekly political roundtable, and blogs at mattmilleronline.com.
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Not that I don't like the idea of "feed the beauty" but what about the more conservative approach championed by George Will and others in which government lowers business taxes in order to encourage economic activity? Hypothetically, the increase in growth will generate more revenues than the higher-tax scheme, but this argument doesn't seem to get much attention thanks to Republican's insecurities over taxes.
I'm not so sure our taxes are so high on the laffer curve that lowering them would bring in more revenue--in fact....i'm fairly certain that our taxes are not nearly high enough. lowering them would probably decrease revenue, not increase it.
The top 1% of society in America controls 80% of the wealth. Tax them 90% for all I care. They will still have millions. They are certainly not going to fight a war or build a car, so money is the only thing they are good for producing for society. Call it socialism or class warfare, but nobody who doesn't own a yacht cares.
Feed the Beauty? Depends on one's definition of beauty.
Many people find their own ideas beautiful and scintillating. Makes it hard for them to accept criticism. Just like it's hard for Obama to accept challenges.
You can be assured that any challenges to his vision will be dismissed quite cleverly.
We will be able to see his vision in all its wonder after it has been voted in and posted on-line. In other words, we get to be responsible for making sure his vision is executed as responsibly as possible. We don't get to discuss it before it's enacted, though. No transparency until after he decides what it will be.
Transparency put to good use by Obama.
Our problem is we have leaders with limited vision. Instead of "starving the beast" the plan should have been to kill it. To reform government in a way that eliminates the vast waste it contains. Even the reformers in Congress during Clinton only wanted to limit growth, not cut the waste.
To xbainx, I suggest you read Atlas Shrugged. At 1200 pages, it is an investment, however it will vividly show you what happens when you penalize penalize people who according to you "money is the only thing they are good for producing". When they stop producing money. The beast will die.
If you plan is to tax Peter to pay Paul, you shouldn't be surprised to find that you always have the support of Paul. When the Peter's of the world decide to quit, the Paul's will starve.
flyoverland wrote "I suggest you read Atlas Shrugged. At 1200 pages, it is an investment, however it will vividly show you what happens when you penalize penalize people who according to you "money is the only thing they are good for producing". When they stop producing money. The beast will die. "
Firstly, Atlas Shrugged will show you what MIGHT happen, not precisely what DOES happen.
Secondly, during the buildup of the middle class which started in the 50's the top tax rate was 90%, when Reagan took the reins the rate was 70% (or was it 78%?). I don't remember the wealthy quit "producing money".
The wealthy may have threatened, but there is always someone willing to fill the gap to "produce money". Isn't that what Capitalism is about?
Two quotes to address here:
One -
"Americans will, over time, come to realize that the government we want is actually worth paying for."
That is the biggest load of crap I have ever heard and frankly sounds Marxist.
Two - from xbainx
"Tax them 90% for all I care. They will still have millions."
Spoken like a true socialist. And yes, you define class warfare. They may not fight a war or build a car but they might OWN THE COMPANY THAT DOES! Use your head for Pete's sake. How many people without money have you worked for? The top 50% pay 97% of all taxes. The top 25% pay 86%. The top 1% pay over 40% by themselves. These are the actual IRS numbers.
Why not just do like FDR tried to do - 100% tax over $100,000 (his was $25,000 but I'll allow for inflation). That will teach those rich jerks!
"Feed the beauty?"
Does Miller actually believe what the "beauty" (aka wasteful spending, pork, downright government theft and all the other black holes of disappearing cash created by government bureaucrats, lobbyists and their parasitic groupies) is something at which we should throw more money? That looks good to him?
What a crock! Yep. Journalism died this election cycle. The greatest problem is that the majority of Americans are now in the "gimme" class and they obviously have enough electoral numbers to break the backs of the "working" class.
thewoodman: "Americans will, over time, come to realize that the government we want is actually worth paying for."
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Obama's spending our money...because he's worth it. (Like the L'Oreal commercial).
Thanks for providing the stats. Obama's fomenting a nice little class war. He's turning out to be quite a divider after all.
He's gathering enemies at a rapid speed.
I wonder if taxes should be considered more like a purchase of services. Countries that have no government services or government payment for infrastructure are third world. I've been there and for all the "bitching" about taxes, give me our country and government. I try to vote for representatives that have similar goals in purchases as I. I also know some purchases will not be wise. I've purchased a few items of clothing that never got worn and left a few expensive meals on the plate in a restaurant. I can't pay a teacher myself, or build a highway on my own, or help a family that is destitute by myself , but my government can with combined taxes. It's not all bad.
Today's WSJ editorial vividly illustrates the error of Obama's assumption that the rich will pay for this. If you are middle class, you will pay, big time.
http://online.wsj.com/article/SB123561551065378405.html?mod=djemEditoria lPage
Conservatives... Please stop citing Ayn Rand as evidence of anything. Its a BOOK! Its fiction. It is not empiric data. No more!
flyover==Republcon=Rust Limburger lackey = Reaganomic mimic= Bushy loser== Get a grip==Atlas Shrugged???= A sophomoric fairy tale by an inhumanly cold hearted, out of touch, simplistic moronic rabble rouser. Any one with half a heart and three brain cells would sadly laugh.
Many of us have long since tired of supporting multi-millionaires in the manner to which they are accustomed via the pandering of government--accommodating them at public expense, when they can damned well already afford the best of everything on their own. Instead of continuing to cut their taxes (including capital gains), we should have been raising them. Ours has been a screwed economy--promoting elitism and the creation of a class society--for some time now.
Taking more of the income of some fat cat who owns a major chunk of a corporation certainly isn't the straw that would break the camel's back and prevent that business from continuing to hire and provide jobs.
Reading some of the comments here, it's pretty obvious, as a rule, who's sitting on lots of money and well off--thanks, in many cases, I'd guess, not to the sweat of his brow--but perhaps to Mama's last will and testament.
And thank God that Obama will quit hiding the cost of war from the federal budget--as was done in the Bush years, as if the money just somehow magically appeared from somewhere.
Americans will, over time, come to realize that the government we want is actually worth forcing the rich to paying for. If we continue to increasing taxing the rich, we remove the incentive to become rich and eventually there will be no rich to pay for anything.
On the other hand, if we have equal taxation across the board, Americans might realize the government we want is actually not worth paying for.
Do you like driving on paved roads? Having running water? Sending your children to public schools? Playing in public parks? Having safety and emergency personnel, like police and firefighters?
Then you need to be willing to pay for these luxuries...as that is what they are. You don't want them? Great, move to the thrid world, as mentioned above.
While the government does waste some money, as does private enterprise (what do lavish CEO offices do for the shareholders besides waste profits?), we are afforded a great many luxuries in this country because of public programs.
Boy! The Dems leaving comments above are starting to sound as angry as the Republicans are/were! I guess that's just what you do when you come to power.
Now the argument some people are adopting is that IF we prevent CEO's from getting their "golden parachutes" there will NOT be enough "Wealthy People" for Obama to tax hence causing an increase in the taxes of ALL Americans ...
Clever, right ?
omichael=Bush Dergangement Syndrome=syncophant=socialist.
Didn't you read the Wall Street Journal article posted above? If they take ALL THE TAXABLE INCOME of people making over $500k they still won't have enough to pay for it. The middle class will pay and pay and pay. You call Ayn Rand's prediction a fairy tale and then you believe Obama's? Read Atlas Shrugged. Everything that is happening today is in the book. Banks going out of business because they were required to lend to borrowers who couldn't pay...spaking the rich...regulations to restrict competition...power vested in Czars...and what is coming was also noted in the Wall Street Journal editorial. "Capital is on Strike". See how far this economy gets during this strike. Obama has sucked the ambition right out of the economy.
The last I heard, Obama wasn't planning to raise taxes so the question is a moot one.
And, considering that the previous administration lowered taxes at the same time it increased spending, one could argue that restoring taxes to their former level would not (in the big picture) acually be so much of a tax "increase" as it would be a partial rectification of the fiscal irresponsibility of the previous adminstration.
Re: Atlas Shrugged. The fundamental problem with Ayn Rand's philosophy (which I was really into back in college -- I even read her NONFICTION books) is that it assumes that integrity and hard work are the tools those with power and influence used to obtain their power and influence. Who is John Galt? He is a figment of the imagination.
I voted Obama and I am optimistic about his presidency but I do have a problem with the people here that think that those who paid hundreds of thousands for advanced college degrees and spent years in school (doctors, for example) and now work 10-18 hrs. days, should then have to pay more in taxes. Do we really want to set a standard of taxing hard work? I think not. Not if we want to be a nation that stands for excellence. Taxing hard work only dumbs down a society. Think about it.
I want our country's strong economy back, I want our country's global respect back, I want our country to once again be a leader in quality of life, education, science, technology, innovation, compassion, and creativity instead of greed and corruption. I want to live in a country that is diverse, vibrant, and thriving. If I have to pay higher taxes, or if my children and grandchildren have to pay higher taxes, I consider it a fair price for a better world for them.
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How nice of you to give away your kids and grandkids money. Why not , instead of raising taxes, cut out all of the crap that the government funds? There are literally billions of dollars wasted every year. Why not trim that? And I don't mean police, fire and all of the other things they say have to be cut first. I mean pork. Smoking cessation, Digital TV rebates, a high speed rail from Disney to Vegas and all of the other useless projects.
Contrary to the minority of opinion America is STILL the greatest place in the world. We ARE the worldwide leader in so many things. The one thing I agree with you on is the education of our young people. We don't educate them anymore. We give them useless information and no skills for the real world. I mean how do you graduate high school and not now how to balance a checkbook?!
Government doesn't make this country great, the people do.
Thank you.
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