Barack Obama was talking to a prosperous Ohio plumber the other day about taxes. Obama said, “My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody … I think when you spread the wealth around, it’s good for everybody.”
Obama’s comment about “spreading the wealth around” reverberated with a Wall Street Journal editorial, “Obama’s 95% Illusion,” that emphasized that “Obama’s Tax Plan Is Really a Welfare Plan.” In the blogosphere, many writers reacted by taking the cheap shot and calling Obama a socialist / communist.
Wow. I’ve not been paying enough attention to the details of Obama’s plan to distribute money to low wage earners. Getting more money into the hands of ordinary people sounds great to me. And if the tax system can help us accomplish such a goal, then why would we not do so? I didn’t, until now, realize that Obama’s plan involves sending checks to qualifying citizens who pay no income tax. I like the idea. The important consideration is not whether by some definition this is “socialism,” the question is: Will this action impact our economy to add to the general increase of wealth? The question is: Will this action result in a more fair distribution of wealth?
Obama’s claim to the plumber was that by providing more income to the poor, taxpayers, like the plumber himself, would benefit. The more money that is in the system, the more money that will be available to build up the plumber’s business.
Maybe, the fact that John McCain has not publically attacked this feature of Obama’s tax plan is reflective of the fact that McCain does not want to bring more light or more understanding to what it is that Obama, in fact, is proposing. McCain and his campaign may have wisely concluded that the less voters really understand Obama’ tax plan, the better.
Here is Michael Goldfarb, a spokesperson for John McCain, reacting to Obama’s comments: “If Barack Obama’s goal as President is to ‘spread the wealth around,’ perhaps his unconditional meetings with Hugo Chavez, Raul Castro, and Kim Jong-Il aren’t so crazy — if nothing else they can advise an Obama administration on economic policy. In contrast, John McCain’s goal as president will be to let the American people prosper unburdened by government and ever higher taxes.”
And so, Goldfarb’s answer to how to increase wealth and how to dirtribute it fairly is less government, more freedom in the market, more tax breaks for the wealthy. Thank you very much, Mr. Goldfarb. It is amazing that a “spokesperson,” who I’m assuming is highly paid, could sound so out of touch. Hasn’t reality, just recently, slapped us in the face? We even now are reaping the whirlwind of devastation from an economy “unburdened by government,” the devastation of going into debt by giving massive tax cuts to the most wealthy. What constitutes economic justice, economic fairness, should be at the heart of political debate in a democracy, but Goldfarb’s comments, hitting the same notes that might have worked in 1980, shows how bankrupt / unserious McCain’s ideas are.
The WSJ listed these credits from Obama’s tax plan:
- A $500 tax credit ($1,000 a couple) to “make work pay” that phases out at income of $75,000 for individuals and $150,000 per couple.
- A $4,000 tax credit for college tuition.
- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
- A “savings” tax credit of 50% up to $1,000.
- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
- A child care credit of 50% up to $6,000 of expenses a year.
- A “clean car” tax credit of up to $7,000 on the purchase of certain vehicles.
But the Journal warned: “Here’s the political catch. All but the clean car credit would be ‘refundable,’ which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer — a federal check — from taxpayers to non taxpayers. Once upon a time we called this “welfare,” or in George McGovern’s 1972 campaign a ‘Demogrant.’ Mr. Obama’s genius is to call it a tax cut.
“The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation’s Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.”
I googled “income redistribution” and found an interesting web-site by an author named Robert D. Feinman. He writes,
“We in the US need to decide if we are going to slip into an inefficient oligarchy, risk civil unrest or redirect our resources and wealth into more equitable avenues. No society is perfectly egalitarian, but when we have reached a point where the top one fifth in Manhattan makes $350,000 and the bottom fifth makes $7,000 we are probably near an economic tipping point. How we deal with the coming challenge is up to us.”
Feinman quotes Herbert Stein: “If something cannot go on forever, it will stop.”
In an essay entitled, “Eliminate US Poverty,” Feinman writes, “People have been offering programs to eliminate poverty for 2000 years, yet it persists in the richest country on earth. I claim the reason for poverty is that poor people don’t have enough money, it’s that simple. … Supposed we tried something that has never been done before, guaranteeing a minimal standard of living to everyone. The country is certainly wealthy enough to afford this. The most optimistic poverty programs don’t even approach the amount of money being spent on Iraq, for example. Well there would be objections about those people who don’t “deserve” it. There would, supposedly, be a rise in free loaders. That’s OK too, we can afford some free loaders as well. This can be kept under control by social disapprobation. Just like Humvees are falling out of favor with the rich, because of the visible sight of waste it presents, those not doing their part could be made to feel uncomfortable.
“What would be the benefits? Higher incomes would lower crime, improve health care, create a better educated workforce and produce a reduction in class resentment. Eliminating the expenses of crime control and remedial health care could easily exceed the costs of the program.
“What is preventing this? A distortion of the Judeo-Christian precepts of charity. Rather than helping those less fortunate, a mean-spirited brand of Puritanism underlies much of political policy, and, implicitly or explicitly, seeks to punish or blame the victims.
“How could this be financed? There are any number of ways, equalizing tax collections so that the wealthy pay more, eliminating runaway militarism and using the money for social programs, or taxing corporate earnings more effectively, for example. Let’s assume that we provide, on average, $10,000 to each of the approximately 40 million poor people in the US. This comes to $400 billion per year. For reference this is slightly less than the US military budget.”
McCain wants to cut everyone’s taxes, not just 95% of people’s taxes, and McCain has brought that up multiple times. If I busted my ass to make $300,000 a year (in reality I don’t make enough to pay any income taxes at all) and someone said they were going to tax me more to give some (more) to the guy who doesn’t try to excel at all so he can “buy more stuff,” I’d be highly pissed.
Seriously? You are actually SERIOUS, aren’t you?
“My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody …”
When has ANY economy EVER grown from the bottom up? Just HOW does that work? I’m quite curious as to what fictitious economic principal you believe will cause an economy to grow when money is confiscated from the producers and given to non-producers.
Have you ever been in a “poor person’s” house in the U.S.? With the exception of rural Appalachia and indian reservations, I’ve yet to run into someone in this country who is truly “poor.” Welfare recipients have big screen TV’s and cable TV… just what standard of living are we supposed to provide them, anyway? Where will you draw the line?
What is my children’s incentive to go to college and earn $50,000 a year or more when they could instead sit on their asses at some menial job and earn $30,000 without having the government take any of it? (And indeed, probably get cut a nice check from the government in the end as a bonus for their laziness!)
Do you honestly believe that any society in which 40% of the population supports 60% of the population won’t eventually implode?
Sadly, I think you do believe this. And even more sadly, I fear that you have way too much company.
“But the Journal warned: “Here’s the political catch. All but the clean car credit would be ‘refundable,’ which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer — a federal check — from taxpayers to non taxpayers. Once upon a time we called this “welfare,” or in George McGovern’s 1972 campaign a ‘Demogrant.’ Mr. Obama’s genius is to call it a tax cut.”
Didn’t Nixon propose this, calling it a negative income tax?
The idea of eliminating poverty in the sixties mostly went away under competition with Vietnam war spending and the end of American industrial economic dominance. The dynamic was that there wasn’t enough for everyone.
We now face the issue of what we want to do with the low wage working class, whose low wages made Walmart’s owners among the nations richest people, and the nonworking poor whose large scale incarceration staffs a criminal justice industry. There are of course fewer low wage jobs in America as those jobs have moved to low wages parts of the world. In fact, while the sixties war on poverty was seen as a national issue, there is little doubt that the economy, and the movement of capital seeking cheap labor, are global. And behaviors that enable people to survive slavery and its aftermath, or other oppressive work situations, do not necessarily encourage upward mobility in this economy. Right now we are more interested in separating from the poor rather than resolving their situation.
Ewtotel, your write, “When has ANY economy EVER grown from the bottom up? Just HOW does that work? … I’m quite curious as to what fictitious economic principal you believe will cause an economy to grow when money is confiscated from the producers and given to non-producers.”
I’m not an economist, but one economic idea that seems to have a lot of credibility is the reality that consumer spending drives the economy. If consumers have no money to spend, the economic gears in our country slow down or come to a stop. Then, everyone suffers. The theory behind the recent $600 checks sent to taxpayers was that this infusion of cash into the system would be an “economic stimulus.” If only a few people, say the top 1% or top 5% of the citizenry, are accumulating all, or most, of the wealth, the economy suffers.
The government already redistributes a lot of wealth. For example, I pay property tax to send my neighbors’ kids to our local schools. I need to do the research to make this point convincing, but, the truth is, a lot of wealth redistribution goes toward giving those who are already well to do more government money, more government hand-outs. A lot of wealth redistribution goes to large corporations. How do we get more money into the hands of ordinary people is a huge question. Obviously, raising the minimum wage to $20 per hour is not going to work. Waiting for a purely capitalist system to more evenly distribute wealth is not going to work. The government, right now, has a role to play.
The huge question our democracy must answer is how can our economy be organized so that there is greater economic fairness? How can we work together so that everyone benefits? America is a rich country, but it is operating at a level far below its capacity to produce wealth. Our society needs people to do “menial” jobs, and if everyone had a college degree, it would simply mean that menial jobs would be held by college graduates. Those people doing those menial jobs should have their work appreciated and appropriately rewarded.
Stan, you reminded me, when I was in college, the National Debate Topic dealt with the “negative income tax.” Your comment seems right on target: “Right now we are more interested in separating from the poor rather than resolving their situation.”
It seems obvious that as a society we have a huge consequence facing us unless we come to some workable solution to the growing problem of economic injustice.
Mike, as far as the federal government, income redistribution should not be a subject of debate, The Constitution does not give it such authority. Of course, politicians, both Republican and Democrat have ignored the Constitution for decades, but I just wanted to point that out. There is not a growing problem of economic justice. Here is how someone from a bad background can break free:
1. Work hard in school
2. Don’t have sex until you are married
3. Don’t drink, do drugs, or gamble
4. When you graduate get a job and work hard at it
5. Work to position yourself to get a better job. Instead of going bowling, go to Sinclair
6. Live within your means
7. If you are in a troubled industry, have an escape plan, get retraining.
8. Always accept responsibility for your life
9. When you do get married, be a faithful spouse.
Rick, you make a good point that, in this country, there is a strong connection between one’s behavior / overall character and one’s likelihood to enjoy prosperity. But there are plenty of workers whose behavior and character is admirable, but whose jobs have disappeared. Plenty of workers are trying hard, but remain stuck in their situations, they are the “working poor.”
Our democracy needs to have a goal, and a strategy to meet that goal, that seeks for every American to enjoy a minimum level of economic security. We are far from arriving at that goal at present. And what is troubling is that there seems no clear strategy, even long term, that promises that that goal can ever be reached.
Yes, there are bums and freeloaders that are wanting to benefit in a way that they don’t deserve. Many of these bums and freeloaders are those who are already wealthy, but who want more. The idea that a free market and unfettered capitalism is the strategy by which our democracy can reach its potential is an idea largely discredited. A big question for our democracy is, how should we best organize ourselves to meet our economic potential? We need to find better ideas; we need to develop more profound understandings of economics.
Rick’s #1 may be a major problem if the schools are not good or kids start out behind because they do not have resources at home. #2 and 3 are certainly not the lifestyle for many who are not from poor backgrounds, on college campuses for example. #4 for may not be easy at the low end of the economy. Or it may not matter even if you do what Rick suggests. Same with #5. #6 is nice except that the capitalists have been wanting to finance consumer spending with debt, then beat people over the head when they can’t repay the debt, particularly when their earnings decrease because of job cutbacks, health problems, and otherwise inadequate social safety net (aka redistribution of income). #7 may be easier said than done as higher paying jobs disappear. #8 ignores the fact that people are responsible for some things and not responsible for other things, as we are seeing as corporate greed and abuse of mortgages brings down the economy. #9 is fine, although relationships end for many reasons, including the fact that people change, and it happens in conservative religious environments as much as liberal ones.
Read Ehrenreich’s “Nickled and Dimed” to see how hard working people in domestic work and Walmart, among other places, can’t get ahead despite their hard work because things are not set up for them to do so.
What happened to my last response? In it I recognized there are some who are poor due to no fault of their own. I also stated I did not want to to establish a minimum level of economic security for those who have made choices that directly led to poverty. I also stated I would never accuse Stan of being an optimist. I recognize that people should not be held accountable for things out of their control.
None of that seems offensive, so why was my post pulled?
Rick — sorry about your disappearing comment. It was my mistake. I was clearing off some spam comments and inadvertently included your comment, and somehow couldn’t get it back. That’s the first time I’ve managed to do that. Sorry.
I’m the “anti-tax zealot” Mike Bock wrote about after the DDN forum on the economy. Apparently my opening statement, “I hate paying taxes” triggered that barb. I deserve that because I spoke out of context and Mike fairly interpreted that remark as he did, however understand that by attacking me for saying that, Mike implies that he “loves paying taxes,” and I hardly think he feels that way. In any case, here’s a little background on my affirmation, “I hate paying taxes.” I just recently filed my 2007 return. I always file for the longest extension, number one, because I’m a procrastinator, and number 2, I hate going through the complicated, time-consuming process of “paying my taxes.” It’s the process more than the act of paying my taxes, however, to be sure, I do hate what Congress does with our taxes after they are deposited in the Treasury. That is why I support the FairTax, a fair, simple, revenue neutral way of collecting taxes that actually solves most of the problems that the federal income tax creates.
John Mitchel
reformcongress.com
PS: I hope to see Mike and others at the foreign policy forum Tuesday night.
John Mitchel, thanks for identifying yourself. I went to your web-site and see that you were a primary candidate for the 7th District and that you have written and published a book, “America At The Abyss, A View From the Heartland.” Sounds like you have given a great deal of thought to the problems we are facing in our democracy and how these problems might be solved. Maybe sometime I can write a review of your book and interview about ideas that you express in it.
Your emphasis at the meeting was on asking the panelists about the fair tax. I have read material concerning the “fair tax,” and have had some lively conversation about it with a 97 year old friend who is very enthusiastic about it. You may have noticed that it was brought up to Obama in his six minute conversation with Joe the Plumber. Obama noted that to implement the plan would mean imposing a 40% national sales tax and that he thought such a tax would be unworkable.