Obama years could be our 'lost decade'
E. Thomas McClanahanAfter five years of lousy economic performance, you’d think people would be sick of it by now. Guess not. How else to explain why we’re having a big fight over inequality instead of arguing over how to jump-start growth?
There’s no denying inequality has increased. Median wages haven’t kept up while families in the upper tax brackets have prospered. But even so, getting the economy back on its typical growth path of 3.4 percent a year should be the overriding imperative.
That would do wonders for the immediate problem of too few jobs and too many jobless — not to mention the problem of lagging incomes and insufficient federal revenue.
Sadly, that’s not the topic du jour.
Prosperity harbors a contradiction. Rapid economic growth requires a relatively high degree of inequality, which is more tolerable when the pie tends to grow for all.
In hard times, those who succeed and enrich themselves draw more envy and the political left amps up its obsession with punishing the rich — expressed in the form of taxes that impair the economy’s potential.
The current inequality obsession has gotten so bad some people think we’d be better off running the top tax rate back up to 91 percent, where it was in the 1950s. Those were prosperous times, they say. Businesses were still created. Investment was healthy. And there was less inequality!
The New York Times’ Paul Krugman gave this a try in a recent column, with the added notion that we would also be better off — less inequality! — if organized labor had the same heft it did in the ’50s. As a Nobel laureate, he had to know better.
Today, the economy is weak even with relatively low tax rates. Yet Krugman and his fellow travelers say the solution to our woes is a job market dominated by labor monopolies — unions — and a tax rate that gives upper-income investors and business owners virtually no incentive to earn an additional dollar.
Krugman forgot that the 1950s were a unique period in our history. Much of the developed world’s industrial capital was incinerated in war and was still being rebuilt. Of course the American economy prospered. How could it not?
Moreover, as James Pethokoukis of the American Enterprise Institute recently pointed out, jobs were plentiful in those years in part because the post-war boom came at a time when the size of the labor force was reduced, not only by a Depression-era birth dearth but the loss of potential workers killed or wounded in war.
Krugman would profit from reading a recent column by his Times colleague, Eduardo Porter. It includes several passages that were amazing to find in The Times.
A sample: The U.S. tax system is “one of the most progressive” in the developed world. It does “more to redistribute resources and reduce inequality” than tax codes in other countries. But progressive taxes “make it hard to raise money” because they “encourage people to reduce their tax liability rather than to increase their pretax income.” And: Hitting top earners with high rates “can discourage work and investment.”
Porter was arguing for flatter, European-style taxes like the value-added tax or a carbon tax — levies few people can avoid, which produce revenue like gangbusters. Porter doesn’t think Washington does enough to support low-income families compared with big-government social democracies, which rake in much more revenue.
The European debt crisis, however, highlights the flaws in that model.
It’s true we must have more revenue and the Simpson-Bowles plan, once assumed to be a roadmap for the fiscal cliff talks, would have produced more by carving loopholes from the tax code. But it also would have encouraged growth by rolling back the top rates. Forget it: Obama now insists we dispense with the rollback. To heck with growth: He wants to carve out the loopholes and raise the rates.
If he gets his way, we could face four more years of economic anemia — which means we may someday look back on the Obama years as the Japanese look back on their “lost decade.”
To reach E. Thomas McClanahan, call 816-234-4480 or send email to mcclanahan@kcstar.com. Twitter @ETomKCStar.
Mark Hastert
6 months, 2 weeks ago“The U.S. tax system is “one of the most progressive” in the developed world. It does “more to redistribute resources and reduce inequality” than tax codes in other countries. But progressive taxes “make it hard to raise money” because they “encourage people to reduce their tax liability rather than to increase their pretax income.” And: Hitting top earners with high rates “can discourage work and investment.”
Ah…..er…. just what developed part of the developed world? Top rates: Germany 45%, Italy 45%, Finland 51%, Spain 52%, UK 45%,Japan 40%, Australia 45%!!!!his idea of the developed world must be different than mine. Even Canada is 29% Our millionaires typically pay an effective rate of under 15% due to capital gains. Also, in order to understand tax rates you have to consider that in Europe, Japan, Australia, and elsewhere they have a sizable VAT too! Add to that that most of these countries have strong unions, universal health care, strict environmental laws. Sorry, but our poor little rich folks don’t have it so bad.
Dan Wood
6 months, 2 weeks agoIf you give Romney a million dollars, what is he going to do with it? Go buy himself a new house? Perhaps a new car or pay for his grandkids education? Nope, he’s going to take that money out of the economy and invest it.
If you gave a worker bee a million dollars what are they going to do with it besides quit their job? They’re going to buy a new house, a new car, put some aside for college education, furnish the new house, take a vacataion, do all sorts of things to stimulate the economy.
I’ve never heard a wealthy person say that they weren’t going to earn any more money because taxes are too high.
George Hunsucker
Northland
6 months, 2 weeks agoIt is always funny to see income distributionalist libs in denial. They refuse to look at recent countries and states where wealthy JOBS CREATORS have merely left the premises for better places.
Maybe it will be good if America suffers 4 more years of this insanity and then reinvents itself as that beacon of freedom loving WORKING people want to live in. Today, we are seeing what nonworkers do to a country who just want “stuff”…
Rachel Elaine Hines
6 months, 2 weeks agoYour boy lost, Tom. Deal with it.
George Hunsucker
Northland
6 months, 2 weeks agoOnce more ET nails it…
http://online.wsj.com/article/SB10001424127887324205404578147733746228610.html?mod=WSJOpinionLEADTop
Mark Hastert
6 months, 2 weeks ago” we are seeing what nonworkers do to a country who just want “stuff”…”
….and that includes retirees on Medicare who want their stuff? Are they distributionalists too? Takers? Apparently so. They don’t work, never earned the drug program, the Republicans claim that Medicare is an entitlement program in need of fixing.
Back to my original question. In just what “advanced” countries are the taxes so much lower than here? Even China has a top income tax rate of 45%, a corporate rate of 25% and capital gains can be taxed as high as 60%.
Hmmm, it doesn’t seem to discourage Chinese business investment or anywhere else for that matter. One might think that the problem lies not with tax rates but with American entrepreneurs you’d rather game the system that earn their money.
Sam Woods
6 months, 2 weeks agoThe true lost decade was 2000-2010. 2001-2003 saw the end of the tech bubble and a stock market crash. Stock prices had just recovered in time to bottom out during the end of the housing bubble in 2008. Under Obama, the stock market has increased 58%. Obama has taken us out of recession and on a path of slow, steady growth. Republicans just have to live with it.
I remember when the republicans were the party of no whining.
JR Beillenhouser
6 months, 2 weeks agoAh, selective statistics from libs such as Sam. Obama has not had any growth, he just recovered some of the jobs and stock prices that were going to come back anyway from the crash. There are less jobs than back in 2008 and they will not return given the Obama administration.
The real shame is that I could have been president and done a better job, because I would have allowed the market to come back by itself. He added on extra burdens, taxes, legislation, and regulations. With these, the jobs and the market will never move “forward”.
http://www.forbes.com/sites/peterferrara/2011/05/05/reaganomics-vs-obamanomics-facts-and-figures/
JR Beillenhouser
6 months, 2 weeks agohttp://rt.com/usa/news/us-middle-class-percent-744/
Helluva Job Obama!
Mark Hastert
6 months, 2 weeks ago“He added on extra burdens, taxes, legislation, and regulations.”
OK I’ll call you on this one… Taxes are lower across the board and he’s proposed to keep them low for most of us. Obamcare is going to save money overall and empower more people to get health insurance. (it’s not like Republicans didn’t have a chance to do this on their own) And well, if you think that the banks & Wall Street didn’t need more oversight you’re just plain nuts. Reaganomics was/is and abject failure. Nearly all of the wealth created in the past 30+ years went to a very few who own the right people and gamed the system for their own benefit. Reganism is over, trickle down is over, the Republican party as it’s been configured for three decades is over.
Rush is right. Your America no longer exists.
JR Beillenhouser
6 months, 2 weeks agoOK, I’ll call you on this one…Taxes are not lower across the board. He continued the Bush Tax cuts and now he wants to take them away. These tax rates have been in existence for 10 years, they are tax hikes pure and simple. ObamaCare taxes begin hitting in January. You obviously are not aware of what those taxes are.
And if obamacare is going to start saving us money, why does the Cbo now project the cost of it as muLtiple times higher than originally estimated, and why are health premiums going throUgh thE roof.
As usuaL, thanks for thE laugh Mark. We can alwayS count on you for Supplying the humor.
Mark Hastert
6 months, 2 weeks ago“hitting in January…”
the joke’s on you. and there you have it. No tax increases….yet. It will be the decision of the Republican Party to allow them to expire for 98% of all Americans merely to protect a handful of their wealthiest donors. Incidentally the WERE supposed to be temporary from the beginning ‘cause they were goning to generate so many jobs and so much prosperity. (there’s your punch line)
The CBO projection still concludes that Obamacre will save money vs the status quo. And premiums? Sorry “NEW YORK (CNNMoney)11/14/2012 — The cost of providing health care benefits to employees rose by just 4.1% this year, the smallest increase in 15 years, according to a survey by human resources consultant Mercer.”
Those conservatives, they love their fiction. Rush is right. Your America no longer exists.
George Hunsucker
Northland
6 months, 2 weeks agoFor our resident economic genius regarding new taxes in 2013….
http://www.reuters.com/article/2012/12/03/us-usa-tax-irs-idUSBRE8B21HA20121203
But these aren’t tax increases to this genius…