Apart from its extraordinary cost and regressive tilt, the tax deal negotiated between the president and the Republicans has another fatal flaw. It confirms the Republican worldview. This makes it not only bad economics; but also disastrous from the standpoint of educating the public about what has happened to this country over the last three decades and what needs to happen in the future. It reinforces the Republican story that the economy is in the gutter because of big government and makes mincemeat out of the truthful one Democrats should be telling -- that an increasing share of the benefits of economic growth have gone to the top 1 percent and the vast middle class no longer has the purchasing power to keep the economy going. (As summarized for the HuffingtonPost e-mail newsletter.)Well, let's look at his "facts."
Extraordinary cost: Really? All the figures I've seen on the cost show this may cost about 2.5 percent of the budget. If you gave me a 2.5 percent raise, I wouldn't call it extraordinary. If the deal spurs growth, this won't "cost" us anything, as revenues will increase even under current tax rates. The use of superlatives doesn't change facts.
Regressive tilt: Raising the top tax rate would be regressive. His logic is backwards.
The Republican view is a fatal flaw. Really? Only in his own mind. While I have a lot of criticism of Republican behavior over the last 10 years, their worldview is generally correct, if based on empirical evidence. (I'm not talking far-right, or far-left here. There is a full sprectrum of ideology to consider.) Democrats seem to base their worldview on mostly anecdotal evidence, which can be extrememly skewed, when compared with empirical evidence.
The rest is typical liberal class warfare. Yes, the rich seem to have gotten richer. But have they? A million dollar salary today would equate to about $180,000 in 1970. The median family income has grown 30 percent (adjusted for inflation) since 1970. So where does he figure the middle class has less purchasing power now? If my income is up 30 percent, don't I have more purchasing power?
I don't understand why a CEO, movie star or sports celebrity needs to make millions a year, while the average worker makes something like $40,000 or $50,000. But you aren't going to change this via taxation. It's a free market thing that seems out of whack, but it doesn't make me poorer that Harrison Ford gets $20 million a picture.
I once had the opportunity as a reporter to interview Michael Jordan. He explained it this way: If he could bring in $100 million in revenue for his team, why shouldn't he get paid $5 million a year. He called it star power. He had a point.
To consider consumer spending the holy grail over economic growth ignores certain facts. As reported by Investors Business Daily, during periods of the greatest growth, it's business investment that has proved to be the underlying factor, more so than government or consumer spending. This is another economic myth for those who don't understand economics, which is just about everyone, including the idiots in Washington D.C. who are trying make the rules. Rules that don't work. Spreading the wealth never makes anyone wealthier, only makes everyone poorer. Look at the history of planned economies and you'll see the truth, which will set you free.
Reich is a typical liberal in his worldview. He distorts actual data to give his opinions more weight. Many people believe this tripe. I am not one of them.
The latest tax deal is not perfect. Maybe we should tax millionaires more (Reich thinks 70 percent for income over one million should be done, which he says will pay off all future deficits!), but I think taxing $250,000 family income more is not a good idea. Some millionaires are beginning to step forward and say "I'll contribute more." Good for them (but giving more to private charities would do more good than the government). Also, the 2 percent reduction in payroll tax actually hurts those families making less than $40,000 because it replaces the Make Work Pay deduction.
But this deal is better than no deal. And liberal "facts" aren't facts at all, at least when used by Robert Reich.