The Politics of Stupidity

Why are we letting irrational policy ideas undermine our influence in the world?

Can a nation remain a superpower if its internal politics are incorrigibly stupid?

Start with taxes. In every other serious democracy, conservative political parties feel at least some obligation to match their tax policies with their spending plans. David Cameron, the new Conservative prime minister in Britain, is a leading example.

He recently offered a rather brutal budget that includes severe cutbacks. I have doubts about some of them, but at least Cameron cared enough about reducing his country's deficit that alongside the cuts, he also proposed an increase in the value-added tax from 17.5 percent to 20 percent. Imagine: a fiscal conservative who really is a fiscal conservative.

That could never happen here because the fairy tale of supply-side economics insists that taxes are always too high, especially on the rich.

This is why Democrats will be fools if they don't try to turn the Republicans' refusal to raise taxes on families earning more than $250,000 a year into an election issue. If Democrats go into a headlong retreat on this, they will have no standing to govern.

The simple truth is that the wealthy in the United States—the people who have made almost all the income gains in recent years—are undertaxed compared with everyone else.

Consider two reports from the Center on Budget and Policy Priorities. One, issued last month, highlighted findings from the Congressional Budget Office showing that "the gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007," the period for which figures are available.

The other, from February, used Internal Revenue Service data to show that "the effective federal income tax rate for the four hundred taxpayers with the very highest incomes has declined by nearly half over the past two decades, even as their pretax incomes have grown five times larger."

The study found that the top four hundred households "paid 16.6 percent of their income in federal individual income taxes in 2007, down from 30 percent in 1995." We are talking here about truly rich people: Using 2007 dollars, it took an adjusted gross income of at least $35 million to get into the top 400 in 1992, and $139 million in 2007.

The notion that when we are fighting two wars, we're not supposed to consider raising taxes on such Americans is one sign of a country that's no longer serious. Why won't foreign policy hawks acknowledge that if they lack the gumption to ask taxpayers to finance the projection of American military power, we won't be able to project it in the long run?

And if we are unwilling to have a full-scale debate over whether nation-building abroad is getting in the way of nation-building at home, we will accomplish neither.

Our discussion of the economic stimulus is another symptom of political irrationality. It's entirely true that the $787 billion recovery package passed last year was not big enough to keep unemployment from rising to over 9 percent.

But this is not actually an argument against the stimulus. On the contrary, studies showing that the stimulus created or saved up to 3 million jobs are very hard to refute. It's much easier to pretend that all this money was wasted, although the evidence is overwhelming that we should have stimulated more.

Then there's the very structure of our government. Does any other democracy have a powerful legislative branch as undemocratic as the U.S. Senate?

When our republic was created, the population ratio between the largest and smallest state was 13-to-1. Now, it's 68-to-1. Because of the abuse of the filibuster, 41 senators representing less than 11 percent of the nation's population can, in principle, block action supported by 59 senators representing more than 89 percent of our population. And you wonder why it's so hard to get anything done in Washington?

I'm a chronic optimist about America. But we are letting stupid politics, irrational ideas on fiscal policy, and an antiquated political structure undermine our power.

We need a new conservatism in our country that is worthy of the name. We need liberals willing to speak out on the threat our daft politics poses to our influence in the world. We need moderates who do more than stick their fingers in the wind to calculate the halfway point between two political poles.

And, yes, we need to reform a Senate that has become an embarrassment to our democratic claims. 

(c) 2010, Washington Post Writers Group

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Why should we even want to pay taxes when the federal government is run so poorly? Take for example the salary of those who are responsible for the Arlington National Cemetery.  Do you think this is an aberration?  I worked for the federal gocvernment for over twenty years. You need to cut federal workers in half - I mean the clerical end, not law enforcement - you know as well as I do that this would put at least a half a million people out of work - how would that look for Obama - thus, stop the hiring of them over the next 10 years - regarding our two wars, what about war bonds - let the people invest in the war through tax free bonds at a good interest rate - you are wrong -there is no need to tax when we are blowing it away on waste.

More sophistry from E.J. Dionne whose economic commentary is always and everywhere risible.

 

E.J. - You know what they say about statistics and damned lies.

 

Why is your basis the "top 400"?  What kind of statistic is that.  OK - the super rich are fewer and richer, but the "merely rich" those making more than $250,000 apparently are more plentiful and are paying a much higher percentage of the bill than they were in 1995.  The bottom line is that you are not going to fix the deficit on the backs of the top 400 families.  Claiming that it is going to help much at all is mere demagouging.  You will note that your own example of "fiscal conservatism" involve a broad based non-progressive VAT. 

 

Your analysis of the "stimulus" is likewise flawed.  Of course spending money had some employment effects.  The question is whether it had a better effect than doing nothing, and for that there is absolutely no evidence at all.  So when the president tells us that the spending will slow unemplyment growth and then it doesn't, it isn't good politics, or even common sense, to say "Did I say 8%?  I meant 10."

 

The bottom line is that lower tax rates, even on the evil rich, stimulates growth, and growth, not higher taxes, generates the most revenue and the most personal prosperity for evryone - including the poor.  This has been true since ancient Rome and the converse is true up to modern Greece.  E. J. - name me one single solitary society that maintained high tax rates and prolonged prosperity.

 

The politics of stupidity is doing what you know won't work because it feels good to do it.

 

@John Walton, with all due respect, and despite your obvious command of the English language, I think you're making Mr. Dionne's point.

Perhaps you could help by responding with specific critiques, based on solid evidence, of where you disagree with Dionne's column and with his conclusions?

@Sean Hannaway, the "top 400" is a statistic that, to my knowledge, was popularized by Malcolm Forbes (no bleeding heart liberal he!) and his magazine.

As for evidence on the employment and economic effects of the "stimulus" bill, Mark Zandi (among other things, economic adviser to John McCain's presidential campaign) just released a study supporting the economic effectiveness of the stimulus bill. 

I agree with you that it "isn't good politics, or even common sense, to say 'Did I say 8%?  I meant 10%'".  That is why many liberal economic experts (Cristina Romer, Paul Krugman) had advocated at stimulus package nearly twice the size of the one that Congress passed.  Zandi's study suggests that without the economic policies of the Obama administration unemployment would be significantly higher than it now is.

Evidence of federal tax rates and revenues over the last 30 years actually shows that lower tax rates yield lower tax collections, and that tax cuts for the wealthiest have the least stimulative effect on the economy as a whole.

As for societies that maintained high tax rates and prolonged prosperity...well, I suppose it depends on how you define high tax rates and how you define prolonged prosperity.  For what it's worth the United States from 1945 - 1975 had higher tax rates and greater economic growth than the United States from 1980 - 2010. 

As for the long-term viability of human societies, every civilization we know of has redistributed wealth in one of two ways:  by taxation or by revolution.  In general, I prefer the former.

Mr Hill - you are blathering philosophy - these economists have "nowledge"- they do not have "understanding" - their mindset does not match the mindset of ordinary people - practically speaking, do you think the government does even an adequate job of spending the money we give them - I would perfer to give the money (tax breaks) to those who create jobs and create wealth for themselves and others rather than to the government which creates government "busy" jobs to keep unemployment down - this country needs a "revolution of thought"

please excuse the  spellings of "knowledge" and "prefer" in last comment (reading glasses needed)

Since the Reagan administration, we've seen a concerted effort by the right-wing to turn the US into a modern feudal state. This has resulted in the extreme economic disparities we have today, and as history shows, no democracy survives such disparities. Conditions are so bad for so many today that millions, thinking about the end of the US as we know it, can only shrug their shoulders and ask, "Well, could things be worse?" Today, we must all work hard (even if we can't) for the purpose of enriching a handful of corporations, while we can't afford the basic needs for our families. Incredibly, we've deteriorated into a country where Americans do, indeed, die as a direct result of poverty.  We've seen a long chain of federal policies that utterly defy logic in any context other than that of creating a feudal nation. While ending aid to those in poverty, billions of dollars of welfare continue to go to the richest.  We've watched the wealth of the nation drain away from the people, into the bank accounts of the very few at the top, and these privileged souls have used their wealth to move our jobs to foreign countries.  We've seen wages plummet, unions crushed, and the voices of ordinary people disregarded.The last I heard, there are at least 6 applicants desperate for work for every job opening, and it isn't possible to sustain a society uinder these conditions.

The only way to fix/save the country would be to pull money out of our three greatest government costs (corporate welfare, war and a prison system that imprisons a greater percentage of the population than any nation on Earth) and use those funds instead to rebuild our country.  We are living with the consequences of decades of neglect, whether talking about our education system or our infrastructure, and we have fallen far behind the modern nations in virtually every respect. If government won't invest in the US and the American people -- and I don't think it will -- then there is no question that we are seeing out the final days of the United States.  By this point, after all We the Ordinary have been through, it's hard to think of anything to say except, "So?"

Incidentally, compared to most modern nations with a far higher quality of life for the average citizen, Americans pay very low taxes, yet you are unlikely to find another country in which the richest citizens endlessly stamp their feet and throw tantrums at the very notion of responsibility.  The thing about America's rich is that if they don't like taxes, they have the means to leave -- and we'll be better off for it.

Luke

 

Forbes Magazine - really???  That makes it a valid stat to evaluate tax policy?  Mark Zandi - THE Mark Zandi of Moody's??  Economic analyst for the same great organization that provided detailed analyses of the banks and investment firms and saw the collapse comming - NOT.  And the genius Paul Krugman- Paul "2009 - the recession is ending - oops 2010 it's not" Krugman?  Paul "the Reagon Tax cuts will destroy the economy" Krugman?  The Nostradamus of American economics?

 

Why don't you actually look at the economic effects of actual tax rate increases and decreases rather than lumping big periods together.

 

The last big changes -

 

1982 - The First Reagan cut - over the next 5 years income tax revenues increased by 43.36% - or 8.67% per year - GDP went up by 37.1% (i.e. revenue increased notably faster than the economy)

 

1987 - Second Regan cut - over the next five years income tax revenue increased by 33.66% or 6.73% per year - GDP increased by 26.5%

 

2003 - Bush cut - income tax revenues increased by 28.52% or 5.7% - and GDP increased by 26.2%

 

Now compare - 1993 - Clinton Tax increase - revenue increased 23.78% or 4.76% per year - while GDP increased at almost the same rate - 24.9%

 

In other words - tax rate cuts do not reduce revenue!  They bare slow the rate of growth for the first few months after they go in effect and revenue then increases at a rate faster than economic growth (which they encourage). Tax increases create a short term blip in revenue growth and then drag the economy.

 

DHFabian - people in these other modern countries just figure out ways to avoid paying their taxes.  I lived in Europe, and the amount of tax cheating and avoidance is on a scale that would scandalize Americans. 

 

DHFabian - better look at the numbers on your "Big Three" the only one in the "Big Three" is defense and it's third.

Medical and social Safety Net" programs count for 34% - Social Security 20% - and then you get to defense - which is a bit less than that.

You assume that the only reason someone would object to an increased tax on familiies earning more than $250k is that we want to favor the rich.  While I sympathize with much of your position, I have a completely different reason for rejecting that sort of tax proposal, and that is that I'm a Californian and cannot stomach a flat-across-the-nation proposal like this. 

With the $250k proposal, one friend of mine who can easily afford to buy a 10-bedroom estate on 40 acres in Iowa will not get this tax increase, while simultaneously some other folks I know who cannot afford to upgrade their 1200 square foot condo in San Francisco to a 1600 square footer, *will* get hit by the tax.  How about making it relative to the median hosehould income in one's county? 

 

Anyone interested in reflecting on Mr. Dionne's column in the light of Church social teaching?

 

For example, it seems to me that allowing the Bush 2001 tax cuts to expire as originally intended would, at a minimum, be defensible on those terms.

 

Your thoughts?

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About the Author

E. J. Dionne Jr. is a syndicated columnist, professor of government at Georgetown University, and a senior fellow at the Brookings Institution. His most recent book is Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent (Bloomsbury Press).