Newsweek’s Joe Klein reminds us how memories get muddled. Ronald Reagan, the man conservatives love to love, in fact recognized that his early tax cuts were a mistake and that he actually raised taxes two years after being elected.
[S]ince deficits do matter — and since Reagan’s so-called supply-side cuts blasted an enormous hole in the budget — the President had to come back in 1982 with the largest peacetime tax increase in American history: the Tax Equity and Fiscal Responsibility Act, which raised $37.5 billion, or 1% of gross domestic product (GDP), per year. He also signed a $3.3 billion gasoline-tax increase. The next year, he signed another whopping tax hike, designed to save Social Security.
But still the Reagan deficits got out of hand and Presidents Bush I and Clinton raised taxes, and as Klein put it, “Somehow the economy not only survived, it prospered.”
I thought about this after reading Tom Friedman’s Friday column in the New York Times. He argues that President Obama has lacked an overall theme to his change agenda.
He has not tied all his programs into a single narrative that shows the links between his health care, banking, economic, climate, energy, education and foreign policies. Such a narrative would enable each issue and each constituency to reinforce the other and evoke the kind of popular excitement that got him elected.
Without it, though, the president’s eloquence, his unique ability to inspire people to get out of their seats and work for him, has been muted or lost in a thicket of technocratic details. His daring but discrete policies are starting to feel like a work plan that we have to slog through, and endlessly compromise over, just to finish for finishing’s sake — not because they are all building blocks of a great national project.
What is that project? What is that narrative? Quite simply it is nation-building at home. It is nation-building in America.
“Nation building” is not a winning phrase for the president, in my opinion. It makes us sound like a third-world country (even if we are becoming one).
But he does need a larger message. My guess is it’s not that he can’t outline one; he’s afraid to articulate it. We have not raised federal taxes in this country since 1993. That alone is not a reason to. But since then we have skewed the tax system so badly that not only have income disparities grown, but we are losing ground – in healthcare, education, infrastructure.
As I grew up in the 50s and 60s, life was pretty good in this country. Most folks felt a better life was around the corner. Not anymore. We are not necessarily the greatest land of opportunity.
Actually, some other advanced economies offer more opportunity than ours does. For example, recent research shows that in the Nordic countries and in the United Kingdom, children born into a lower-income family have a greater chance than those in the United States of forming a substantially higher-income family by the time they’re adults.
If you are born into a middle-class family in the United States, you have a roughly even chance of moving up or down the ladder by the time you are an adult. But the story for low-income Americans is quite different; going from rags to riches in a generation is rare. Instead, if you are born poor, you are likely to stay that way. Only 35 percent of children in a family in the bottom fifth of the income scale will achieve middle-class status or better by the time they are adults; in contrast, 76 percent of children from the top fifth will be middle-class or higher as adults.
…As a result of economic growth, each generation can usually count on having a higher income, in inflation-adjusted dollars, than the previous one. For example, men born in the 1960s were earning more in the 1990s than their fathers’ generation did at a similar age, and their families’ incomes were higher as well. But that kind of steady progress appears to have stalled. Today, men in their 30s earn 12 percent less than the previous generation did at the same age.
The main reason today’s families have modestly higher overall income than prior generations is simple: More members of the household are working. Women have joined the labor force in a big way, and their earnings have increased as well. But with so many families now having two earners, continued progress along this path will be difficult unless wages for both men and women rise more quickly.
My mother didn’t work when I was growing up, Neither did most of the women in our middle class neighborhood.
We will never go back to those good ol’ days. But Joe Klein argues, we needn’t go that far back to the future.
An antitax fetishism has overwhelmed both parties. Along the way, despite the melodramatic rhetoric, the actual rate of federal taxation has wobbled a bit, from a high of 20.9% of GDP in 2000 to a recession-driven low of 17.7% last year, but averages out to just under 19% from 1980 to today. If the not-so-onerous Clinton tax rates are restored when the economy recovers, the federal Treasury would be enriched by nearly $300 billion per year.
Why does this matter now? Because we are in the midst of a debate over how to fund a health-care-reform plan — and the idea of raising taxes, even just a little bit, to pay for it is causing heart failure among our legislators. They are looking for somewhere between $30 billion and $35 billion per year. If the bill isn’t properly funded — if working-class families don’t receive large enough tax credits to help pay for their newly mandated health insurance, if they’re forced to pay thousands of dollars in new out-of-pocket expenses — Republicans will use "socialized" health care as a bludgeon against Democrats in 2010 and 2012.
…It is a national scandal that we’re nowhere close to having a reasonable discussion about taxes. A Reagan-size increase probably would be unwise right now, given the shaky economy. But the conversation will become unavoidable next year, when the Bush tax cuts expire. A restoration of the Clinton rates would go a long way toward paying down the Bush deficits and the assorted Bush-Obama federal bailouts and creating some breathing space if health reform costs more than expected. One hopes that Democrats, and fiscally responsible Republicans, will locate the backbone between now and then to do the right thing.
No, Obama’s big theme isn’t I’m going to raise taxes. But in defense of higher taxes he needs to make a red,white and blue argument for fairness, something we’ve lost in the past 30 years. Ronald Reagan made it OK to be greedy. It seems with the populist anger against the obscenely wealthy, now is a good time to make that larger argument for justice, a fair, living wage for a fair day’s work, and a level playing field that rewards work and frugality. Once the recession eases, we need to raise taxes not only on the super rich, but the well-to-do also, many of whom will be considered middle class ($100,000 and up). I would gladly pay them if I thought we’d have true healthcare reform, better transportation systems and a vibrant middle class, which is what makes this country great.
It is the common good argument, one that Obama hesitates to make, being perhaps afraid of the rich white men on Fox News
and on talk radio. He’s begun to fight back against right-wing extremists. Now he needs to make the case to the rest of us.