A question for conservatives

I understand that conservatives view returning the highest tax brackets to Clinton-Reagan levels as “wealth redistribution.” What I don’t understand is why slashing taxes for the upper-class, which puts more burden on everyone else, isn’t also considered wealth redistribution; i.e. Obama proposes wealth redistribution, but Bush didn’t. I ask this question honestly, assuming there is some attempt at an intellectually honest distinction.

12 Responses to A question for conservatives

  1. theotherneill says:

    Here’s my attempt to answer this:

    The assumption that conservatives make (and that I agree with to some extent) is that trickle-down economics works. Part of the assumption is to believe that if the rich have money, they’re going to spend it, which creates jobs, raises salaries, etc. etc. etc. Another part is to believe that it can’t be wealth redistribution if the wealthy are really helping the poor out by spending. Yet another part is that the poor really aren’t burdened more because some statistics show that though there is a lower tax rate for the rich but the rate of government programs supportted by the rich’s taxes goes up since there were more rich people and/or rich people’s money to tax. The final part of the assumption is that government programs don’t work so well because rich people have less money to spend and only the rich spending more can help us…hence Obama wanting to help the poor is wealth redistribution but Bush wasn’t redistributing wealth.

    I hope that answers the question. What I really hope for is a crackdown on corrupt business practices from the Obama administration. That’s what Bush failed to do…and it’s why we’re in this economic mess.

  2. neal says:

    What evidence do you feel shows trickle-down economics works? I understand the idea of finding some kind of tax-rate / productivity equilibrium, but the first eight years of this decade saw the rich get richer and everyone else get poorer.

    $2 trillion in tax cuts, targeted largely at the wealthiest Americans, led to the massive budget deficits passed on to the current administration; income disparity and wealth consolidation increased, and the tiny real-wage gains of the Bush administration failed to outpace inflation, leaving most Americans poorer than they were in 2001. Trickle-down economics failed to 1. stimulate the economy, 2. lead to greater prosperity for workers / consumers, or 3. increase tax receipts, which would seem to be three of the most important categories in which an economic philosophy could be judged. Under the trickle-down policies of 2001-2009, there was most definitely a redistribution of wealth to the rich from everyone else.

    But getting to your explanation, let’s assume trickle-down economics works; would you say the argument is that “wealth redistribution” is acceptable or at least defensible if it leads to overall greater economic prosperity? And if so, is there then some kind of assumption that Obama’s taxation proposals are made with indifference toward economic health?

  3. theotherneill says:

    While I’m don’t entirely disagree with you, I would say that the last 8 years did not fail because of tax cuts, or maybe tax cuts alone(?). They failed because of government growth which caused bigger deficits, corruption which caused much of the wealth consolidation, and the Iraq war which may or may not have needed to been fought but if it should have been fought Bush should have asked for a tax increase.

    I wouldn’t entirely say that the economy had failed to stimulate, either. Bush’s two terms were bookmarked by two recessions with economic growth in-between. One was mild, and we got out of because of trickle down economics, but I’m sure there has to be something else coupled with it. But trickle down economics combined with massive bailout spending and a lack of prosecution of corrupters is killing our system now. And I guess there’s the point, there are always so many factors that we can’t point to one specifically. Some republicans are saying that FDR’s policies kept us in the depression for years afterward, I think that’s a lot of bull. But they can make it by taking out this factor or that factor. Eliminate the context, and anything looks good or bad.

    As for greater prosperity, I wonder if that has to do with the war, also. But I don’t have facts/figures, just some stories of reservice men/women having to go fight, thus loosing money. Or if this really does show that trickle-down economics doesn’t work. I guess I don’t know enough to make an educated guess…nothing really occurs in a vacuum, after all.

    Now getting to the questions. I think if either trickle-down or taxing the rich works all the time and was easy to point out without the flurry of other circumstances we’d never turn away from either system. I would hate to call trickle-down economics wealth redistribution…as I recall everyone got a tax cut, the poor and middle class did not have their taxes raised.

    As for the second question, there is that assumption because that’s how radio talk show hosts make their money. I don’t think it’s entirely fair…and I would like to see some of the tax proposals Candidate Obama had in mind.

  4. neal says:

    While I don’t dispute there was some growth under Bush, it was the smallest economic growth since WWII, and it didn’t last long either. I disagree that wealth consolidation was due to corruption; if you’re going to cut the taxes for the wealthiest people, it’s only logical that they’re going to get richer. One problem with trickle-down economics is that it presumes the wealthy recipients of the cuts are going to invest their dollars in the US economy, when there’s simply no controls over that (nor do I think there necessarily should be); they’re going to go where the biggest profits are. And so you’re letting revenues go that aren’t going to find their way back. The opposite is true when you operate from the bottom-up; give the lower classes more money to spend, and they’re going to spend it mostly locally, sending the money upward through the economy, allowing businesses to expand and eventually enriching new people (which is the philosophy behind Obama’s lower-class tax cuts).

    I think what’s very important to point out is that Obama’s not proposing any kind of radical taxation of the rich; he’s proposing to return to levels that have been in place in very recent memory, such as during the Clinton administration — also known as the last time the budget was balanced and a period of healthy economic growth. And you’re right that Bush’s tax cuts were broad, but when real wages are falling and the lower classes end up worse than they were, those tax cuts don’t mean much, particularly when the Top 400 richest Americans saw their incomes double under Bush. When the overall economic growth was hovering in the range of minimal to negative, the money that doubled those incomes came from somewhere, or more appropriately, a hundred million or so somewheres. In other words, it was most definitely wealth redistribution.

  5. theotherneill says:

    Which makes some sense. But I still hold that what Mr. Bush did wasn’t wealth redistribution, it was more a trickle down economics experiment gone wrong with corruption and an administration too occupied with two wars to keep tabs on the economy. I still feel that Mr. Bush’s plan might have worked had there not been so much focus on Iraq. Corruption, not tax cuts, got lenders to exploit the poor searching for money and offered mortgages, credit cards, and loans that are almost impossible to repay. How are the poor supposed to get money while drowning in debt?

    Stocks were artificially bolstered by bad forecasts, and in some cases, bad bookkeeping. Corruption and bad policy, not tax cuts, were responsible the crash in the stock market as Mr. Bush’s people wanted the dow to gain at any cost. And now many of us are paying for that one in our retirement accounts.

    Corruption, not tax cuts, got some of the top 400 got richer even when their company performed poorly. GE, GM, Ford, and many more companies are trading well below $10 a share and their CEO’s still stand to gain millions while asking the government for more money. That’s corruption in the system, many of these CEO’s should have been fired by now but their boards are too weak (or scared?) to do it. Even more when the board fired a CEO they let them have the golden parachute. Or how long did it take finally catch Bernie Madoff in a ponzi scheme? All done by corruption, not tax cuts.

    Wages can’t keep up with inflation because the interest rates are too low right now. Oil inflated us quite a bit, also, and we haven’t recovered from skyrocketing delivery fees on almost anything we get although gas has come down in the last few months. Tax cuts didn’t cause inflation, bad foreign and bank policy did. And since inflation is part of the real wage formula…

    Why Mr. Obama is redistributing wealth and Mr. Bush wasn’t called that is very simple, Mr. Obama announces ahead of time that he will while Mr. Bush intended for everyone to get richer but wasn’t watchful enough to make sure the rich played fair. Trickle-down economics is a very tricky thing, one cannot tax the rich but still must maintain good oversight to make it work.

    I think if Mr. Obama will concentrate on the other things Mr. Bush did wrong as far as oversight goes, he will cure the economy quicker than if he restores the taxes to Mr. Clinton’s levels. But I guess the Democrats have to go with what got them both House and Senate as well as the White House. But it’s not all bad. I was hoping Mr. Obama would look at raising the lid on social security taxes. The talk radio guys would have a field day about it, but as a minister who can get his taxes under $1000 yet ends up paying 3-4 times that much in Social Security taxes a year, this guy’s economy would be much better served if more people paid to lower the overall SS rate.

  6. theotherneill says:

    I guess what I meant to say in the second to last paragraph is, “Why Mr. Obama is labelled as redistributing wealth…”

  7. neal says:

    While I appreciate your clarifications, I still can’t help but feel that your defense of trickle-down economics is entirely faith-based. The flaws you described are all a part of that overall philosophy of government taking its hands off and letting the noble wealthy serve society with their altruism and generosity. Deregulation and deunionization leave the greedy to do their worst. You can’t target trickle down economics to only the nice rich people.

    What Obama said in his now infamous Joe the Plumber conversation was that a more fair tax policy would spread the wealth, which is exactly what happens in a healthy and growing economy. The opposition to that is astounding to me. If you’re against spreading the wealth, what are you for? (not you specifically) It seems to me that the opposite of spreading the wealth is consolidating the wealth, or at very least, keeping all the wealth exactly where it is.

    Nate Silver’s chart shows quite clearly how “trickle down” fares in context. This Bush data doesn’t even include 2008. Taxes were higher for the wealthy under Reagan, Bush I and Clinton than they are now, yet even the wealthy grew more then. Simply, the rich do better, as does everyone else, when the lower classes — a.k.a. the consumers — have money to spend.

    “Spreading the wealth” isn’t about revenge, it isn’t about class warfare, it isn’t about punishment; it’s about getting the economy growing again and building prosperity. It’s kind of that “American Dream” thing before Republicans convinced Americans they were paupers who needed to kneel before the princes.

  8. theotherneill says:

    The graph was convicing at first, but I have some questions on it.

    1) What went into the graph? I somehow doubt that Mr. Carter would have been defeated on an election where Mr. Reagan asked “Are you better of now than you were 4 years ago,” had income really grown that much the last two years of his administration.

    2) Does this graph grade purely on each president’s time in office or their economic policies that affected future presidencies? What I mean is this: Mr. Carter and Mr. Reagan both had big economic messes to clean up, does the first bar of negative growth come from Mr. Carter’s decision making or because Mr. Ford left him such a mess? If the former, when we jump to Mr. Clinton’s time, then good for Mr. Clinton and your point is well defended as spreading the wealth did work. If the later, does the first part of growth in Mr. Clinton’s administration come because he made good decisions or because Mr. Reagan’s tax cuts took full effect in the first part of Mr. Clinton’s adminstration like they were scheduled to? Same for Bush ’43…if the graph is entirely based on his decision making rather than from his first full day in office, this shows that trickle down economics is a failure and shouldn’t be defended But if it’s residue from Mr. Clinton’s administration, then maybe spreading the wealth wasn’t so great in the end.

    And this is why we have two parties, I guess. Both sides have room to attribute economic victories and defeats. Some say Mr. Clinton was great because he had good policies, others say he was great because he had a Republican congress that balanced the budget. And some say Mr. Bush was bad because he had bad policies, others say he was bad because he had a Republican congress that grew the government and ran up debts.

  9. neal says:

    1) The graph isn’t based on year, it’s broken down by income bracket. So that wasn’t the last two years of Carter’s term — it’s the top 10% based on income. It comes from this link and was assembled from census data.

    2) I’m guessing your second question would change based on the fact that these bars don’t represent years, but income groups, so I won’t spend time addressing the direct question. But as for your bigger point, inheriting deficits works both ways — it might skew the initial data down, but since this chart is based on change, there’s more room to grow as you work your way back to normal.

    The greater point is that we have two major periods of trickle-down implementation – Reagan / Bush and Bush II. Neither came close to approaching the growth under Clinton, which is why I say the idea that trickle-down economics works best is “faith-based;” it sounds good, but there is at-best ambiguous data to support it, and much support is merely based on fear-tactics about anything else (such as taxing the wealthy). Reagan / Bush saw minor growth in the lower classes, but that was also a period of massive government expansion and huge deficits.

    I think what’s important to remember, though, is that regardless of who you credit for the prosperity under Clinton, conservatives warned that his 1993 tax bill would mean doom and gloom for the economy, and it clearly didn’t. Not even close. Conservatives claim that growth didn’t happen until after the tax cuts of 1997, but the economy was already clearly on an upward trajectory. (chart from Thinkprogress, prior to the current collapse)

  10. Nathan says:

    It doesn’t put any burden on anyone else because the government is too weak to balance the budget. As much as I disliked Clinton, he had the fortitude to do what was necessary and balance the budget. It’s redistribution under Obama because he is taking money from the wealthy and giving it the poor in the forms of tax rebates (for taxes the don’t pay) or more social services, while the wealthy receive none of the benefits. Bush on the other hand, his tax cuts didn’t hurt anyone then because they were not met with offsetting cuts in the budget.

    Besides, how can you call it redistribution under Bush? The money belonged to the rich. They kept it. Under Obama, the money belongs to the rich. The government takes it. Then, they give it to the poor in the form of tax rebates (on taxes they don’t pay) and social services.

    The real question is this: what’s the point? Raising taxes on the rich won’t increase revenue. There is an economist, Kurt Houser who wrote about the fact that no matter what the tax rate, taxes will equal 19.5% of GDP (http://online.wsj.com/article/SB121124460502305693.html).

    Also, this interesting sheet from the Tax Foundation (http://www.taxfoundation.org/news/show/250.html) shows that even with the marginal rates dropping, the rich are making up a larger percentage of taxes paid. So, the other question I have, how much IS my fair share?

  11. neal says:

    You claim that tax increases on the rich don’t increase revenue, yet you also acknowledge that Bush’s tax cuts cost the government revenue. You can’t have it both ways. It’s either a source of revenue or it isn’t. You seem to commend Clinton for balancing the budget, yet that budget balancing was a result of increasing revenue and cutting spending. (It also came after the economy recovered, as there was no push to balance the budget in a recession).

    And to cut it so cleanly, that the rich only give and the poor only take, is deceptive. Even without income taxes, the poorest still pay between 4.3 and 9.9 percent of their income in taxes through social security, medicare and federal excise taxes. (Link to Factcheck.org / Link to CBO report) The rich benefit most when the classes beneath them are healthy and productive. And even if they aren’t using foodstamps or unemployment insurance, the rich are beneficiaries of government services — from highways to no-bid contracts and use of U.S. military to protect private investment. So the argument “The money belongs to A and it’s being given to B” can be used for anyone.

    The income tax rate isn’t the only factor that determines people’s wealth. And when the consumer classes have more of their money to spend, the rich benefit just as much, if not more (see the above charts referencing the “tax and spend” Clinton administration). So again, at the end of the day, when you go through eight years in which productivity rose, corporate profits skyrocketed, the wealthiest got wealthier, but everyone else got poorer, that’s redistribution of wealth.

    EDIT: As a footnote to all of this, I am spooked by the way the Obama admin is dealing (or not dealing) with the bank problem, which undermines a lot of my faith in anything working. This, of course, will be a convenient excuse in the future if bottom-up economics didn’t work in 2009. ;)

  12. theotherneill says:

    I’m not sure it’s necessarily a convinient excuse…or what I mean to say is that it’s a reason, not an excuse if bottom-up economics doesn’t work in 2009. I think in this discussion I’ve learned 3 things.

    1) Both sides have victories and defeats in their arguement. Mr. Clinton did have the greatest growth from Bottom-Up economics, but Mr. Carter left everyone in stagflation with a 70% top rate. Mr. Reagan had moderate growth with Trickle-Down economics, but Mr. Bush’s plan had little growth and ultimately failed.

    2) The concern for conservatives probably should not be how much people are being taxed (as long as it’s not too much, see the Carter top rate above), but should be how much government grows and how well the president and congress can balance the budget. Maybe we shouldn’t freak out if Mr. Obama takes the tax rates to where they were in the 90′s? Mr. Bush may have seen better growth had he done what Republicans are supposed to do. Instead he grew the government and tried to fight two wars without a tax increase. Mr. Reagan tried to lower government spending, but all his work in defense ensured the budget would not be balanced and the National Debt climbed during his and Mr. Bush’s (I) administrations. Mr. Clinton’s bottom-up policies worked because of a balanced budget. Mr. Carter’s bottom-up policies failed with increases in government spending. Maybe it’s not the tax increases that should worry conservatives now, but the amount of spending that is taking place?

    3) The right policies make a difference. If one’s foriegn policy sucks (under Mr. Bush, which shook oil markets, which was the biggest cause of our inflation)…that may effect the economy. It won’t matter if it’s trickle-down or bottom-up economics if Mr. Obama does not have a good banking policy in place, the economy will fail. It’s not a convinient excuse, it’s reality. After all, no one policy succeeds or fails in a vaccuum.

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