Who we're talking about, mostly. Two months ago, we were talking about raising taxes on the rich. Now we're talking about keeping them low on the poor. And the politics of that turn out to be totally different.
For one thing, you've got the payroll tax cut, which the administration favors, which is understood as a stimulative measure, and which offers almost no benefit to the wealthy. As Charles Babington reported for the Associated Press, "many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different 'temporary' tax cut" -- the payroll tax cut -- "should end as planned. By their own definition, that amounts to a tax increase."
Then there's the federal income tax. In recent years, Republicans have become increasingly agitated by the fact that as many as half of all Americans don't pay federal income taxes. In an article at Slate, Dave Weigel traces the mounting outrage. For now, this argument is more rhetorical than it is legislative. Unlike the payroll tax cut, which could expire at the end of this year, there's not been a serious proposal from a serious Republican politician to raise taxes on this group. And perhaps there can't be. These are pretty sympathetic groups, and pretty popular policies.
A plurality of the no-income tax club are the elderly. They don't pay taxes because they don't have jobs, they get a bigger standard deduction, and many Social Security benefits don't get taxed. Who is going to be the politician to stand up and propose raising taxes on low-income retirees?
Most of the rest of the folks who don't pay taxes are quite poor. Either the standard deduction wipes out their tax liability, or the standard deduction plus some of the income support we do through the tax code, like the Child Tax Credit and the Earned Income Tax Credit, wipes out their tax liability. What you'll notice about both those policies, of course, is that Republicans both passed and expanded them in recent years, and haven't shown any specific interest in undoing either. (For a full breakdown of why half of Americans don't pay income taxes, head here.)
But if that explains why so many Americans don't pay taxes, it doesn't explain why Republicans are suddenly upset about it. Weigel has one theory: "When the Tea Party started rallying in 2009, it wasn't protesting higher taxes, because federal income taxes were lower, with more loopholes. It was protesting the perception that productive Americans were shelling out for an ever-expanding class of moochers. And Republicans have taken the Tea Party's lead." Babington relays another, at least as relates to the temporary payroll tax cut: "Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy."
My view is that this is a mixture of partisanship, politics and ideology. The partisanship part is Democrats want the payroll tax cut extended, so Republicans don't. The politics bit: Democrats are making Americans angry with poll-tested language arguing that the rich don't pay enough, so Republicans are responding with an argument that the poor are mooching off the middle class. Then there's the underlying ideological framework: Republicans believe, either implicitly or explicitly, that the economy is really driven by well-compensated, wildly productive geniuses at the top, and so the true aim of tax policy is keeping their tax burden low so they have sufficient encouragement to unleash their potential. Democrats believe those folks have so much money that they're no longer primarily driven by monetary concerns and that, either way, the key question for the economy is how to get more demand into it quickly, and for that, tax cuts to the poor are clearly superior, as the poor spend the money they get.
But whichever explanation you go with, the bottom line is the same: we're not really having a discussion about taxes, yea or nay, in this country. We're having a discussion about the distribution of the tax and deficit-reduction burden, and the two sides' opinions on that question are driving their take on taxes.
Five in the morning
1) Supercommittee is already talking, reports Dan Berman: "The 12-member debt committee has already held conference calls and may have a website up by the end of the week, Rep. Fred Upton said Monday. Upton, a supercommittee member, told WNDU in South Bend, Ind., that the debt panel is already hard at work despite being spread about the country during the congressional recess. 'We’ve really started on the phone already, we’ve had lengthy conference calls already,' Upton said. 'We've had a good number of discussions already. Our staffs are working together, and there's a lot of documentation that we can look at already,' said Upton, citing the Simpson-Bowles report and earlier work on the debt by the Gang of Six. Upton said the panel is working on a website that could be done by the end of this week that will allow people to submit ideas; he also pledged the debt committee will have “public hearings” at some point."
2) The White House is unveiling its cuts to regulation, writes Cass Sunstein: "Early this year, President Obama ordered an unprecedentedly ambitious government-wide review of existing federal regulations, emphasizing that we must 'measure, and seek to improve, the actual results of regulatory requirements.' He directed agencies and departments to produce preliminary plans to streamline those requirements and eliminate red tape...Today I can announce that agencies are releasing their final plans, including hundreds of initiatives that will reduce costs, simplify the system, and eliminate redundancy and inconsistency. We have already achieved a great deal. Significant burden-reducing rules have been finalized or publicly proposed by the Department of Labor, the Environmental Protection Agency and the Department of Transportation--and they are expected to save more than $4 billion over the next five years."
3) Rick Perry is backing away from his support for dismantling Social Security, reports Brian Beutler: "Texas Governor-turned-Presidential candidate Rick Perry is already walking away from his brand new controversial political manifesto Fed Up, and in particular its attack on Social Security as an unconstitutional Ponzi scheme. His campaign spokesman told the Wall Street Journal that Fed Up 'is a look back, not a path forward' written 'as a review and critique of 50 years of federal excesses, not in any way as a 2012 campaign blueprint or manifesto.' That's not exactly true. Perry spends most of the book criticizing New Deal, Great Society, and Obama administration policies, among others. But there are plenty of shoulds, coulds, and ought tos -- both explicit or implicit -- scattered throughout the book."
4) Republicans have found a group they want to raise taxes on, reports David Weigel. Poor people: "Huntsman, Perry, Bachmann: All of them are taking a bold stand in favor of cognitive dissonance. The main reason Washington couldn't get a 'grand bargain' on the budget and debt ceiling was that Republicans balked at increasing taxes on anyone. How did we get from there to the notion that it would be a good idea to raise taxes on the 60-odd million people who didn't end up owing the IRS any money last year?...Republican politicians didn't make this argument—until the Obama era. What changed? For decades, the 'lucky ducky' number, the percentage of Americans that pay no taxes, never rose above 30 percent. The Bush tax cuts pushed it over 30 percent, but not too far over. Then, in 2008 and 2009, the economy collapsed. The government responded with, among other things, new tax deductions. The result: The percentage of people paying no income taxes spiked up to 47 percent and stayed there."
5) Paul Ryan is seriously, definitely, no-joke not running for president, reports Rachel Weiner. Here's his statement: “I sincerely appreciate the support from those eager to chart a brighter future for the next generation. While humbled by the encouragement, I have not changed my mind, and therefore I am not seeking our party's nomination for President. I remain hopeful that our party will nominate a candidate committed to a pro-growth agenda of reform that restores the promise and prosperity of our exceptional nation. I remain grateful to those I serve in Southern Wisconsin for the unique opportunity to advance this effort in Congress.”
Music video interlude: The Infinite Jest-inspired, Michael Schur-directed video for The Decemberists' "Calamity Song".
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Still to come: Goldman Sachs' CEO could be facing a criminal investigation; too many choices are hurting Medicare enrollment; the FCC is killing the fairness doctrine; what Gaddafi's fall means for oil prices; and a dog that can do arithmetic.
The Fed bailed out Wall Street to the tune of $1.2 trillion, reports Tim Mak: "The Federal Reserve lent Wall Street firms a staggering $1.2 trillion in a previously unrevealed bank bailout that dwarfs the size of TARP, reports Bloomberg News. The $1.2 trillion -- which Federal Reserve Chairman Ben Bernanke lent to banks and other firms to prevent the economy from collapsing is roughly equivalent to the amount that U.S. homeowners currently owe on 6.5 million underwater mortgages, Bloomberg said. Bloomberg News received the information through Freedom of Information Act requests, litigation and an act of Congress. The $1.2 trillion figure is the compilation of the balance for seven programs instituted by the Fed...One aspect of the bailout sure to exasperate critics of the Federal Reserve is that almost half of the Fed’s top 30 borrowers were European firms."
At age 15, welfare reform isn't working, writes LaDonna Pavetti:: "President Clinton signed the 1996 welfare law 15 years ago today, creating the Temporary Assistance for Needy Families (TANF) block grant to replace the Aid to Families with Dependent Children (AFDC) program...TANF’s early years witnessed unprecedented declines in the number of families receiving cash assistance -- and unprecedented increases in the share of single mothers working, especially those with less than a high school education. But since then, nearly all of the employment gains have disappeared, and TANF caseloads have responded only modestly to increased need during this deep and long downturn... TANF plays a much more limited role in helping families escape poverty or deep poverty (i.e., income below half the poverty line) today than AFDC did."
The European Central Bank is maintaining its bond-buying strategy, reports Howard Schneider: "The European Central Bank continued its efforts hold down the interest rates paid by highly indebted governments in the region, buying $20 billion worth of government bonds over the past week, according to newly released figures. Analysts say the bulk of the money was likely spent on bonds from Italy and Spain, two large economies where rising interest rates earlier this month raised fears about whether they could continue to pay their bills. European countries, already strained by emergency bailouts for Greece, Ireland and Portugal, would be hard-pressed if either Italy and Spain needed to be rescued. Bailouts for either of those nations would tax the financial tools available, possibly cause crippling losses for banks throughout the area, and be politically difficult to engineer."
Retraining for the long-term unemployed can work, writes Annie Lowrey: "Would such a retraining or subsidy program work nationally? Well, one already has. One of the most successful initiatives funded by the 2009 stimulus package was the TANF Emergency Fund, which gave states money to run jobs programs. With the funds, 36 states and the District of Columbia put 240,000 previously unemployed people to work. One county in Tennessee reduced its unemployment rate from 27.3 percent to 18.6 percent in less than a year. Even Gov. Haley Barbour, who rejected billions in stimulus funding for Mississippi, loved it--so much so he has kept the program going. The federal dollars for the TANF Emergency Fund ended last September and other job-creating stimulus funds are drying up...Retraining programs work better if they are on the job rather than in the classroom. They need to be adequately publicized to unemployed workers and businesses in need of labor."
We need less regulation, writes Ramesh Ponnuru: "Senator Ron Johnson, a Republican from Wisconsin, has introduced legislation to declare a moratorium on major new regulations until the unemployment rate drops to 7.7 percent -- that is, until it goes lower than it was when Obama took office...Johnson is, of course, making a partisan point by choosing an unemployment target tied to Obama’s inauguration. His 20 co-sponsors are all Republicans. But the underlying concept is attractive. A permanent ban on new regulation wouldn’t make sense. Ultimately, we need a rational structure where some rules go and others stay. Existing executive orders that require agencies to undertake cost-benefit analyses before issuing regulations should be codified in legislation, and strengthened to require that the analysis be published before the regulation takes effect."
The administration's union policies are hurting jobs, writes Joe Nocera: "In April, the National Labor Relations Board filed a complaint against Boeing, accusing it of opening the South Carolina plant to retaliate against the union, which has a history of striking at contract time. The N.L.R.B.’s proposed solution, believe it or not, is to move all the Dreamliner production back to Puget Sound, leaving those 5,000 workers in South Carolina twiddling their thumbs. Seriously, when has a government agency ever tried to dictate where a company makes its products? I can’t ever remember it happening. Neither can Boeing, which is fighting the complaint. J. Michael Luttig, Boeing’s general counsel, has described the action as 'unprecedented.' He has also said that it was a disservice to a country that is 'in desperate need of economic growth and the concomitant job creation.' He’s right."
American history interlude: A map of US post offices from 1700 to 1900.
Having too many choices is hurting Medicare enrollment, reports Sarah Kliff: "In Medicare Advantage, enrollees were more likely to enroll in a plan as choice increased, but only when choosing between fewer than 15 options. Between 15 and 30 plans, the extra choice doesn’t seem to do much to affect sign up numbers. But when seniors have more than 30 plans to choose from, enrollment drops off sharply...There’s likely a decent number of seniors running up against decision fatigue on Medicare Advantage: The average beneficiary has access to 24 different plans. This a 'slight drop' from previous years, a Kaiser Family Foundation brief notes, and one that gets the program just below that 30-plan threshold where enrollment tends to drop off significantly."
We can cut Medicare without hurting patients, write Ezekiel Emanuel and Jeffrey Liebman: "Medicare is going to be cut. That is inevitable. There is no way to solve the nation’s long-term debt problem without reducing the growth rate of federal health care spending. The only question is whether the cuts will be smart ones. Smart cuts eliminate spending on medical tests, treatments and procedures that don’t work -- or that cost significantly more than other treatments while delivering no better health outcomes. And they can be made without shortchanging patients...Consider colonoscopies. The United States Preventive Services Task Force recommends not doing colonoscopies for most people over 75 because there is no evidence that they save lives in this population. Moreover, the risk of perforating the intestines rises with age. Yet Medicare pays for the procedure regardless of the patient’s age."
The FCC killed the fairness doctrine, reports Brooks Boliek: "The FCC gave the coup de grace to the fairness doctrine Monday as the commission axed more than 80 media industry rules. Earlier this summer FCC Chairman Julius Genachowski agreed to erase the post WWII-era rule, but the action Monday puts the last nail into the coffin for the regulation that sought to ensure discussion over the airwaves of controversial issues did not exclude any particular point of view. A broadcaster that violated the rule risked losing its license. While the commission voted in 1987 to do away with the rule -- a legacy to a time when broadcasting was a much more dominant voice than it is today -- the language implementing it was never removed. The move Monday, once published in the federal register, effectively erases the rule."
The AFL-CIO's launching a "super PAC," reports Sam Hananel: "The AFL-CIO hopes to boost its clout by launching a new political action committee that could raise unlimited amounts of money, part of the federation's goal of building a year-round political organizing structure. Forming a so-called 'super labor PAC' would allow the labor federation to raise money from sympathetic donors both inside and outside union membership and mobilize support beyond its traditional base, instead of ramping up political activities each election cycle. The move would also help steer more of labor's money to state legislative battles, where unions have been battling efforts to curb union rights in states like Wisconsin and Ohio...Labor leaders discussed the plan at the AFL-CIO executive council meetings earlier this month, but officials said the idea remains subject to final approval over the next few weeks."
Most House members aren't holding town halls this summer, reports Felicia Sonmez: "Six in ten House members are not holding any town hall meetings during this summer’s five-week congressional recess, according to the nonpartisan activist organization No Labels. The group surveyed 430 House offices and found that only 174 members plan to hold town halls with their constituents this summer, according to an entry posted on the No Labels Web site Monday afternoon. Nearly 68 percent of House Democrats and 51 percent of House Republicans have no town hall meetings scheduled, the group said...Among the top four House leaders of each party, only Assistant Democratic Leader James Clyburn (S.C.) and House Republican Conference Chairman Jeb Hensarling (Texas) have town hall meetings scheduled."
We need longer, not shorter, school days, write Luis Ubiñas and Chris Gabrieli:The minimum required school day in West Virginia is already about the length of a 'Harry Potter' double feature. In Los Angeles, Philadelphia and Milwaukee, summer school programs are being slashed or eliminated. In Oregon and California this year, students will spend fewer days in the classroom; in rural communities from New Mexico to Idaho, some students will be in school only four days a week...What’s needed is more time in classrooms, not less. Our school calendar, with its six-and-a-half-hour day and 180-day year, was designed for yesterday’s farm economy, not today’s high-tech one. While many middle-class families now invest in tutoring and extra learning time, less-privileged children are left on the sidelines, which only widens gaps in achievement and opportunity."
Adorable animals being smart interlude: A dog that can calculate square roots.
It's unclear how Gaddafi's fall will affect oil prices, reports Brad Plumer: So now that Libya’s rebels have taken Tripoli and the end of major fighting could be in sight, does that mean oil prices are going to fall even further? Earlier this morning, markets showed some early signs of optimism, with Europe’s Brent crude index dropping more than 2 percent. The new Libyan government will need revenues, after all, and presumably it will be eager to start pumping out crude as soon as possible. But energy analysts warn that optimism might be premature. For one, says Julian Lee of the Centre for Global Energy Studies, it’s not clear if fighting has fully subsided, if the rebels have total control of Libya, or what type of new government will arise. 'There is going to be the huge issue of dealing with administrative dislocations that have been caused by six months of fighting,' Lee says...It will also take awhile, Lee notes, to assess the damage done to Libya’s infrastructure."
The environmental effects of more Arctic drilling are unclear, writes Steve Mufson: 'Located north of the Arctic Circle, this prospect has been called “the biggest next opportunity' in U.S. oil exploration by Shell’s president, Marvin Odum. Including leases bought in 2005 and 2008, his company has already wagered about $4 billion preparing. It hopes to drill three wells about 70 miles offshore here next summer. The company faces three daunting issues: Is there a way to drill here without hurting sea life? How can the company build a pipeline that can withstand the ice and shifting shoreline? And if there were a spill, where would the water currents carry the oil? Environmental groups and many Alaska Natives believe that Shell can’t provide satisfactory answers to those questions. They argue that there is a lack of data needed for the type of science-based decisions that the Obama administration has vowed to pursue."
Getting rid of the gas tax is folly, writes Ronald Klain: "While President Barack Obama and most experts are pushing for a greater federal investment in roads and infrastructure to create jobs and strengthen our economy, a growing minority in Washington wants to end the federal gas tax and phase out funding for new construction under the federal roads program. That’s right: A sizable chunk of Republicans, led by Senator Tom Coburn of Oklahoma and Representative Jeff Flake of Arizona, want to abolish the tax that pays for the federal highway program and replace the whole system with one overseen by individual states...Just 'letting the states do it' puts our national transportation system at risk. The idea is so misguided that calling it a Third World transportation system is unfair to the Third World: Developing countries are virtually all striving to build the sort of national infrastructure that the Tea Party wants to unwind in the U.S."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Jessica Sabbah.