Tuesday, August 3, 2010

George Clooney and the Bush tax cuts. . .

Last week, a package arrived from Picador publishing bringing me a book with George Clooney on the cover.  

The American is a reissue of Martin Booth's strange little moralistic thriller previously published as A Very Private Gentleman. George Clooney is on the book's cover because he made the book into a movie that is due for release on September 1.

Any thriller good enough for George Clooney to film (Charlie and I had just watched him in the truly impressive Up in the Air), is good enough for me to read. So I dove into The American and shortly (page 32) came upon this little gem:  
It is better to change the manner in which a man perceives the world than it is to change the world he perceives. Think upon this.
I did think upon it, which got me thinking about how this country's elected officials recently landed us in two seemingly un-winnable wars, as well as a deep economic recession. And yet now we appear to be somehow considering revising our opinion of these past policies into something we should consider giving another run around the track. Martin Booth's little gem of a two-sentence paragraph got me to wondering if we are revising our opinions of the policies themselves, or just having our perceptions revised by political speak.

Take the Bush Tax Cuts (or BTCs as I plan on referring to them from now on).

To extend or not extend, that is the question. The BTCs expire December 31st, which means Congress has a mere 5 months to decide -- not a lot of time in the slow-grinding wheels of American government.


President Bush signs his $1.35 trillion tax cut on June 7, 2001, at the White House.   SOURCE: AP/Ron Edwards

Every Sunday, for fun, The Washington Post offers us a different "Five Myths: A challenge to everything you think you know." Last Sunday,we got  Five Myths about the Bush Tax Cuts by economist William Gale, senior fellow at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center.

Dr. Gale offers what seems to be a pretty balanced take on what the BTCs have done, and might do for the economy, if they are extended, by arguing that the following five assertions about them are bogus.  1) Extending the tax cuts would be a good way to stimulate the economy; 2) Allowing the high-income tax cuts to expire would hurt small businesses; 3) Making the tax cuts permanent will lead to long-term growth; 4) The Bush tax cuts are the main cause of the budget deficit; and 5) Continuing the tax cuts won't doom the long-term fiscal picture; entitlements are the real problem.  

Dr. Gale, of course, has no horse in the midterm election race. He has everything to gain by educating us about good economic policy (he is an economic scholar, after all) and nothing to gain (our votes, for example) by simply changing our perception of bad economic policy. And it does seem that when it comes to extending or not extending the BTCs, one has to be better for the economy than the other.

But our politicians inhabit a parallel universe where what is alleged to be true appears to depend upon what  they think their supporters want to hear. The Democrats pretty much (though not exclusively) want a big part of the BTC's axed (the part they term "tax cuts for the rich") in order to help shrink the deficit; while Republicans pretty much want the BTCs left intact (it's the economy, stupid); saying that we can afford these tax cuts, even though we can't afford to extend unemployment benefits. Why is this? According to Senate Minority Leader Mitch McConnell, "
There's no evidence whatsoever that the Bush tax cuts actually diminished revenue."

Oh dear. Where's the beef? i.e.the truth?

Back to the movies. . . In Field of Dreams, Shoeless Joe Jackson (Ray Liotta) famously whispers to whomever Kevin Kostner plays: "If you build it, they will come."  Might our politicians be hearing a similar voice whispering, if you say it, it is true?
It is better to change the manner in which a man perceives the world than it is to change the world he perceives. Think upon this.
So, you got any thoughts?

2 comments:

  1. Carolyn O'NealAugust 3, 2010 at 10:28 AM

    I think that history will ponder and weep over the sad, Shakespearean irony that is the two George Bush presidencies. George Bush the first lost a second term for winning a war and raising taxes - which paved the way for Bill Clinton's surplus - while George Bush the second won two terms for ruining our country.

    Given this history, Obama does have a thought provoking choice. What is better for the country? What is better for his party? For him? Letting the tax cuts expire, knowing it will cost the democrats dearly this November and again in 2012 but will help eliminate the gut wrenching debt this country faces, or renewing them for personal and party gain. LBJ was right on target when he said signing the civil rights law would cost the democratic party the south of a generation (or more). Lincoln was shot.

    Doing the right thing is difficult as hell and never comes without a price. Not on a personal or political level. Not for President Obama. Not for each of us.

    Carolyn

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  2. The real irony is that so many people are ignorant of economics and history. Three presidents in modern history cut taxes. JFK (yes the democrat JFK stated that tax cuts were necessary at that time to.... stimulate economic growth), Ronald Reagan, and W. Bush. In all three instances, revenues to the Treasury increased significantly. How can this be? Because the real myth is that tax cuts have to be "paid for". They have been repeatedly shown to increase revenue.

    It seems to me that the two sides see the economy as either static or dynamic. If you believe the economy is static, then raising taxes makes sense (i.e., if we raise rates with current activity just as it is, revenues will go up). If you believe the economy is dynamic, then you believe cutting taxes makes sense (if we raise taxes, we will decrease activity and negatively impact revenues). This debate is pointless to argue unless you are not familiar with recent history.

    One final question:
    How come the share of wealth paid by the top income brackets went up with the BTC? The wealthiest Americans pay the highest percentage of the tax bill by a mile and paid a greater share under the Bush tax cuts than at the end of the Clinton era The top 1% of wage earners in 2000 earned 14% of all income and paid 25% of the total tax bill. In 2005 the top 1% of wage earners took in 21% of all income (an increase of 50%), but paid 39% of all taxes (an increase of 56%). This was AFTER the tax cuts.

    The tax issue is simply a means by which politicians can promote class envy for their own election bids. Pitiful and shameful.

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