I understand the frustration with Manchin’s refusal to provide his specific priorities within a $1.5T bill. Yet I get the impression he doesn’t have strong preferences for one program versus another. Further I don’t think he wants to get the political flack for picking and choosing which programs make the cut.
And I think that is reasonable. Those hard decisions should ultimately reside with party leadership; chiefly, Schumer, Pelosi, and Biden. That is the job of being in a leadership role; making the hard calls that can build a voting block to pass legislation and receiving political flack for their decisions.
I personally blame these three leaders for eschewing their responsibilities. Yet I can understand their concerns about having to anger some political blocks, journalists, and twitterati “thought leaders” by explicitly endorsing certain priorities over others. E.g., stating they want to drop the CTC in favor of addressing climate change and deficit reducation. No matter what they choose they will anger someone and receive a fair amount of loud condemnation.
It’s even possible that these three leaders don’t see the possibility of reconciling these priorities into a package that can garner sufficient votes among congressional Democrats. Any proposed package may be vetoed by Dems that don’t see their hobby horse included. E.g., the SALT assholes. In which case our Democrat leadership finds themselves in the sisyphean task of going through the motions of developing and championing a cornucopia of Dem priorities while knowing no such bill will ever pass.
Yes! Yes! Yes! This should be a no-brainer. That the Democrats are not doing this, that in fact, despite the Trifecta we’re close to the midterms and they *still* haven’t corrected the horrible (an hugely unpopular) GOP tax cuts, show the party has a radical problem. How could they be so incompetent or clueless??
I have two main suspicions: 1. Weak leadership from the WH leaving a vacuum that makes it very difficult to get things done 2. Structural changes in the voter base mean that the Dems are no longer truly incentivized to pursue a classic left-wing economic agenda, not even a very moderate one.
As evidence for no. 2 I’ll point out that until quite recently the left-wing of the party used to be progressive in the original sense: Warren was all about anti-trust, regulation, taxation. Sanders basically the same just in a more populist and less-wonky style. But since Trump took power the Dems lost their North Star. Warren and even Sanders paying homage to woke agenda that they truly ignored (or that simply didn’t exist) until 2016 or later. Heck, Sanders used to be an immigration skeptic - a proud tradition in a labor left - but in the 2020 came out publicly for decriminalizing illegal border crossing !
And Warren nowadays still does some good work, but it seems her no. 1 issue now is student loan debt. What happened to them? I suppose they (naturally enough) fell inlove with their own new found popularity, and then got carried away by a hyper-educated and pretty wealthy base, that is not truly interested in economic-left policies beyond the occasional virtue-signal. Culture wars are far easier on the old pocket.
Practically everyone supports taxing the rich and practically everyone defines "rich" as making roughly 2x what they themselves make.
How do you all define rich? I think HH income above $400K (98th percentile) is clearly rich. I'm sure other would define rich as the top 10%, which equates roughly to HH income above $200K (which, as someone about at this level, doesn't *feel* that rich but I bet few rich people actually feel rich).
Unfortunately, Matt’s facts are a little wrong here. Trump increased standard deductions and reduced tax rates for the poor and middle class. Yes, this also reduced rates for top earners and created lots of pass through deductions for his real estate buddies, but the median American saw a significant tax reduction.
If the Democrats really wanted to stop inflation, they’d do a Clinton-style broad-based tax increase where everyone felt some of the pain. Frankly, raising taxes on the top 1% won’t do anything for inflation. And with the right PR, they could talk about civic duty and bringing the country together vs our enemies.
I love Joe Biden and I think he has been unfairly maligned in many situations (e.g., the withdrawal from Afghanistan) but the one thing I would never have predicted of him or his administration is that his major legislative priority would have failed (so far) because of his inability to negotiate a deal with critical senators.
It seemed like his entire career was heading to the successful passage of BBB or some version of it. And then . . . ?
If there are intense and potentially successful negotiations going on behind the scenes smartly being kept from the prying eyes of the media, then great. But I get the feeling that nothing is happening. WTF?
Also, which taxes would you propose increasing? I could see a case for a measured increase in the capital gains tax rate given how much the stock market has appreciated.
Still, as an admittedly center right guy, it feels like we got ourselves here through a combination of dovish monetary policy and handouts. Reversing both seems fair to me.
I agree that higher taxes on the rich will help us tame inflation, but I believe it operates through a relatively slow mechanism similar to increasing interest rates. The rich already spend a disproportionately small portion of their income on consumption; the majority of their income is saved and invested. Increasing taxes may have some impact on their marginal consumption, but they could also just slightly decrease their savings rate. And if we continue to define rich as income in excess of $400k then we are only addressing a vanishingly small amount of consumption.
Decreasing the savings and investment rate of the rich will aid in slowly decreasing inflation. With less investment in the economy fewer new businesses will be created and thereby fewer new jobs. Similarly, existing businesses will be less able to raise capital to expand operations. Distressed businesses will find themselves unable to restructure their debt with new financing and will instead need to minimize their operations or possibly go out of business. All of this will slow the growth of the economy and loosen up the labor market. Note these mechanisms are the same ones impacted by raising interest rates and increasing the cost of capital.
1. This piece barely mentions, let alone attempts to address, the real political problem with raising taxes on the rich: Kyrsten Sinema, whose twin political goals are 1) getting rich and 2) making sure the rich pay less taxes.
2. I get thinking Schumer erred by keeping his deal with Manchin secret. But Manchin kept that number secret, too. He watched everyone set the table, light the candles, and sit down to eat, THEN he announced the menu was not to his liking and flipped the table over.
This also ignores that Manchin signed onto a parallel-track process for BBB and infrastructure, which progressives insisted upon to prevent Manchin getting what he wanted (just infrastructure) and leaving the rest of the Party with blueballs. Then House moderates convinced Pelosi to vote on infrastructure separately anyway, and after it passed, Manchin starts "negotiating" on BBB, by which I mean making ridiculous counteroffers and suggesting the child tax credit should be cut back because the lazy poors will just spend it on drugs. Manchin didn't draw a line in the sand, publicly, until mid-December. So, yes, he negotiated in bad faith for 6 weeks, wasting everyone's time. He could have gone public with that number at any time; the secrecy is his fault, too, not just Schumer's.
3. The political reform bill Dems were voting on was the compromised political reform bill your folk hero Joe Manchin negotiated. So if it "left most of the threats to American democracy unaddressed", that's who to blame.
What is Democratic leadership even doing right now? What are their priorities? What do they want to achieve?
Where is this party's *ambition*? This is the problem we are having in this country broadly. Contented, satisfied people should not be politicians. If someone was hungry to leave a legacy, they would get stymied on their first attempt at legislation, and instead of throwing up their hands and saying "welp, too bad", they would actually attempt to govern the country in whatever way they could rather than trying to orchestrate a method to ensure that their favored social clique doesn't blame them for political failure and instead blames someone else. Schumer and Pelosi, it appears, have basically two priorities. 1) Deliver hobby-horse issues to their social clique and their staffers' social clique, 2) If 1) is not immediately achievable, be sure that whatever fallout occurs falls on someone else's shoulders.
Democrats need to get it together but not by taxing the rich. They came up with some of the worst targeted stimulus bills in history that barely addressed COVID, didn’t tackle any other long term priorities, sent money to everyone but the rich, and created the first massive inflation in 40 years.
Democrats are going to get slaughtered in the mid-terms because they’ve done exactly the meme of their policies: spend recklessly on short-sighted ideas that actually make their constituents’ lives worse.
I'm one of that tiny minority of people that thinks perennial high deficits are a problem. Like climate change, it's not a problem now, but eventually it's going to blow up. So I've long favored tax hike generally combined with government reform to get more value out of the dollars we do spend. So I'm on board with your argument in general here.
But, a couple things annoy me. First, anyone who claims we should "tax the rich" should be required to define who is "rich." Secondly, I think there needs to be an argument that taxing whoever you think is "rich" will actually reduce demand and therefore inflation. Reduced income by the rich will likely lead to reduced demand for luxury goods, but it's not clear it will do much for meat, gas and used car prices.
In short, any tax proposal depends on the details and advocates need to show their work.
Secondly, I think this is a political fantasy. No politician is going to vote to raise taxes in an election year, particularly politicians that are vulnerable (ie. Democrats).
Here in Colorado, thanks to TABOR, Colorado taxpayers will get a $400 refund ($800 for joint filers) thanks to record receipts. Now, Democrats normally hate TABOR and wish and have tried to get around it many times over the years. But this year, they are moving the payment of this refund forward to before the mid-term elections. Normally people would get this TABOR refund in early 2023, but the Democratically -control legislature and Gov. Polis are moving that up to this September and the ant-TABOR talk is mostly gone except from the most left-wing Democrats who represent the deepest blue areas here.
So while I agree that tax increases should be on the table, our politics is what it is and no politician who is remotely vulnerable is going to commit political seppuku by supporting tax increases this year.
And one other thing to consider is interest payments. You are one of those who previously argued that borrowing is cheap/free, so the federal government should do more of it. While it's great that your position has changed with circumstances, the problem is that our previous borrowing is only cheap and free only as long as interest rates remain low. And they aren't going to remain low.
One thing that I think hasn't been sufficiently addressed is how the inevitable increase in interest payments is going to affect the federal budget once interest payments on the debt start ballooning.
Finally, this:
"Where I fault Manchin — and moderate politicians from both parties more broadly — is that he’s been very passive despite being the pivotal player in American politics. "
misses the fundamental problem which is the lack of regular order in Congress. Leadership has given up on regular order and is trying to run the Congress and Senate like we are in a parliamentary system where the bills are crafted in secret by leaders who present them for a vote without going through the regular order committee process. Plus, Manchin was not passive - he gave a detailed description of what he would support, as you noted, back in June.
3) A Biden tax increase would likely increase them again
I guess this is probably all fine, but it would be nice if increases were targeted at people paying like 20% (capital gains and inheritances, I guess?)
I get the politics on this, and I'm pretty much always on team deficit reduction, but I'm real foggy on the economics. Isn't the problem with taxing the rich that it is more likely to constrain supply than spending? The argument for stimulus is that giving money to low income people is giving money to people that are going to spend that money in ways that generate demand while the richer brackets are more likely to invest. Isn't investment what we want right now? And from an opportunity cost perspective is this really a coherent way to target inflation? Using the tax code seems like a real bank shot to me.
This is a fairly stupid post to be honest. I read through it twice to see if there was a concrete proposal about how to raise taxes on the rich and did not find one. Matt and his readers would do well to read TR Reid's fine book, "A FINE MESS: A Global Quest for a Simpler, Fairer, and More Efficient Tax System." I'm as liberal as anyone reading 'Slow Boring' and have been around this issue for a great many years. I've come down on the side of eliminating all tax preferences including the sacrosanct mortgage interest deduction. Put into place a self-executing VAT and clean up the damn tax code. the more complicated the tax code, the more opportunity for abuse (carried interest not being taxed as income, IRAs being used to shield what should be taxable income, etc. etc.).
A simplified tax code will lead to lower rates which any politician can easily explain.
I understand the frustration with Manchin’s refusal to provide his specific priorities within a $1.5T bill. Yet I get the impression he doesn’t have strong preferences for one program versus another. Further I don’t think he wants to get the political flack for picking and choosing which programs make the cut.
And I think that is reasonable. Those hard decisions should ultimately reside with party leadership; chiefly, Schumer, Pelosi, and Biden. That is the job of being in a leadership role; making the hard calls that can build a voting block to pass legislation and receiving political flack for their decisions.
I personally blame these three leaders for eschewing their responsibilities. Yet I can understand their concerns about having to anger some political blocks, journalists, and twitterati “thought leaders” by explicitly endorsing certain priorities over others. E.g., stating they want to drop the CTC in favor of addressing climate change and deficit reducation. No matter what they choose they will anger someone and receive a fair amount of loud condemnation.
It’s even possible that these three leaders don’t see the possibility of reconciling these priorities into a package that can garner sufficient votes among congressional Democrats. Any proposed package may be vetoed by Dems that don’t see their hobby horse included. E.g., the SALT assholes. In which case our Democrat leadership finds themselves in the sisyphean task of going through the motions of developing and championing a cornucopia of Dem priorities while knowing no such bill will ever pass.
Yes! Yes! Yes! This should be a no-brainer. That the Democrats are not doing this, that in fact, despite the Trifecta we’re close to the midterms and they *still* haven’t corrected the horrible (an hugely unpopular) GOP tax cuts, show the party has a radical problem. How could they be so incompetent or clueless??
I have two main suspicions: 1. Weak leadership from the WH leaving a vacuum that makes it very difficult to get things done 2. Structural changes in the voter base mean that the Dems are no longer truly incentivized to pursue a classic left-wing economic agenda, not even a very moderate one.
As evidence for no. 2 I’ll point out that until quite recently the left-wing of the party used to be progressive in the original sense: Warren was all about anti-trust, regulation, taxation. Sanders basically the same just in a more populist and less-wonky style. But since Trump took power the Dems lost their North Star. Warren and even Sanders paying homage to woke agenda that they truly ignored (or that simply didn’t exist) until 2016 or later. Heck, Sanders used to be an immigration skeptic - a proud tradition in a labor left - but in the 2020 came out publicly for decriminalizing illegal border crossing !
And Warren nowadays still does some good work, but it seems her no. 1 issue now is student loan debt. What happened to them? I suppose they (naturally enough) fell inlove with their own new found popularity, and then got carried away by a hyper-educated and pretty wealthy base, that is not truly interested in economic-left policies beyond the occasional virtue-signal. Culture wars are far easier on the old pocket.
Practically everyone supports taxing the rich and practically everyone defines "rich" as making roughly 2x what they themselves make.
How do you all define rich? I think HH income above $400K (98th percentile) is clearly rich. I'm sure other would define rich as the top 10%, which equates roughly to HH income above $200K (which, as someone about at this level, doesn't *feel* that rich but I bet few rich people actually feel rich).
Unfortunately, Matt’s facts are a little wrong here. Trump increased standard deductions and reduced tax rates for the poor and middle class. Yes, this also reduced rates for top earners and created lots of pass through deductions for his real estate buddies, but the median American saw a significant tax reduction.
If the Democrats really wanted to stop inflation, they’d do a Clinton-style broad-based tax increase where everyone felt some of the pain. Frankly, raising taxes on the top 1% won’t do anything for inflation. And with the right PR, they could talk about civic duty and bringing the country together vs our enemies.
I love Joe Biden and I think he has been unfairly maligned in many situations (e.g., the withdrawal from Afghanistan) but the one thing I would never have predicted of him or his administration is that his major legislative priority would have failed (so far) because of his inability to negotiate a deal with critical senators.
It seemed like his entire career was heading to the successful passage of BBB or some version of it. And then . . . ?
If there are intense and potentially successful negotiations going on behind the scenes smartly being kept from the prying eyes of the media, then great. But I get the feeling that nothing is happening. WTF?
I’d be curious to know who you define as rich.
Also, which taxes would you propose increasing? I could see a case for a measured increase in the capital gains tax rate given how much the stock market has appreciated.
Still, as an admittedly center right guy, it feels like we got ourselves here through a combination of dovish monetary policy and handouts. Reversing both seems fair to me.
I agree that higher taxes on the rich will help us tame inflation, but I believe it operates through a relatively slow mechanism similar to increasing interest rates. The rich already spend a disproportionately small portion of their income on consumption; the majority of their income is saved and invested. Increasing taxes may have some impact on their marginal consumption, but they could also just slightly decrease their savings rate. And if we continue to define rich as income in excess of $400k then we are only addressing a vanishingly small amount of consumption.
Decreasing the savings and investment rate of the rich will aid in slowly decreasing inflation. With less investment in the economy fewer new businesses will be created and thereby fewer new jobs. Similarly, existing businesses will be less able to raise capital to expand operations. Distressed businesses will find themselves unable to restructure their debt with new financing and will instead need to minimize their operations or possibly go out of business. All of this will slow the growth of the economy and loosen up the labor market. Note these mechanisms are the same ones impacted by raising interest rates and increasing the cost of capital.
1. This piece barely mentions, let alone attempts to address, the real political problem with raising taxes on the rich: Kyrsten Sinema, whose twin political goals are 1) getting rich and 2) making sure the rich pay less taxes.
2. I get thinking Schumer erred by keeping his deal with Manchin secret. But Manchin kept that number secret, too. He watched everyone set the table, light the candles, and sit down to eat, THEN he announced the menu was not to his liking and flipped the table over.
This also ignores that Manchin signed onto a parallel-track process for BBB and infrastructure, which progressives insisted upon to prevent Manchin getting what he wanted (just infrastructure) and leaving the rest of the Party with blueballs. Then House moderates convinced Pelosi to vote on infrastructure separately anyway, and after it passed, Manchin starts "negotiating" on BBB, by which I mean making ridiculous counteroffers and suggesting the child tax credit should be cut back because the lazy poors will just spend it on drugs. Manchin didn't draw a line in the sand, publicly, until mid-December. So, yes, he negotiated in bad faith for 6 weeks, wasting everyone's time. He could have gone public with that number at any time; the secrecy is his fault, too, not just Schumer's.
3. The political reform bill Dems were voting on was the compromised political reform bill your folk hero Joe Manchin negotiated. So if it "left most of the threats to American democracy unaddressed", that's who to blame.
What is Democratic leadership even doing right now? What are their priorities? What do they want to achieve?
Where is this party's *ambition*? This is the problem we are having in this country broadly. Contented, satisfied people should not be politicians. If someone was hungry to leave a legacy, they would get stymied on their first attempt at legislation, and instead of throwing up their hands and saying "welp, too bad", they would actually attempt to govern the country in whatever way they could rather than trying to orchestrate a method to ensure that their favored social clique doesn't blame them for political failure and instead blames someone else. Schumer and Pelosi, it appears, have basically two priorities. 1) Deliver hobby-horse issues to their social clique and their staffers' social clique, 2) If 1) is not immediately achievable, be sure that whatever fallout occurs falls on someone else's shoulders.
Democrats need to get it together but not by taxing the rich. They came up with some of the worst targeted stimulus bills in history that barely addressed COVID, didn’t tackle any other long term priorities, sent money to everyone but the rich, and created the first massive inflation in 40 years.
Democrats are going to get slaughtered in the mid-terms because they’ve done exactly the meme of their policies: spend recklessly on short-sighted ideas that actually make their constituents’ lives worse.
I'm one of that tiny minority of people that thinks perennial high deficits are a problem. Like climate change, it's not a problem now, but eventually it's going to blow up. So I've long favored tax hike generally combined with government reform to get more value out of the dollars we do spend. So I'm on board with your argument in general here.
But, a couple things annoy me. First, anyone who claims we should "tax the rich" should be required to define who is "rich." Secondly, I think there needs to be an argument that taxing whoever you think is "rich" will actually reduce demand and therefore inflation. Reduced income by the rich will likely lead to reduced demand for luxury goods, but it's not clear it will do much for meat, gas and used car prices.
In short, any tax proposal depends on the details and advocates need to show their work.
Secondly, I think this is a political fantasy. No politician is going to vote to raise taxes in an election year, particularly politicians that are vulnerable (ie. Democrats).
Here in Colorado, thanks to TABOR, Colorado taxpayers will get a $400 refund ($800 for joint filers) thanks to record receipts. Now, Democrats normally hate TABOR and wish and have tried to get around it many times over the years. But this year, they are moving the payment of this refund forward to before the mid-term elections. Normally people would get this TABOR refund in early 2023, but the Democratically -control legislature and Gov. Polis are moving that up to this September and the ant-TABOR talk is mostly gone except from the most left-wing Democrats who represent the deepest blue areas here.
So while I agree that tax increases should be on the table, our politics is what it is and no politician who is remotely vulnerable is going to commit political seppuku by supporting tax increases this year.
And one other thing to consider is interest payments. You are one of those who previously argued that borrowing is cheap/free, so the federal government should do more of it. While it's great that your position has changed with circumstances, the problem is that our previous borrowing is only cheap and free only as long as interest rates remain low. And they aren't going to remain low.
One thing that I think hasn't been sufficiently addressed is how the inevitable increase in interest payments is going to affect the federal budget once interest payments on the debt start ballooning.
Finally, this:
"Where I fault Manchin — and moderate politicians from both parties more broadly — is that he’s been very passive despite being the pivotal player in American politics. "
misses the fundamental problem which is the lack of regular order in Congress. Leadership has given up on regular order and is trying to run the Congress and Senate like we are in a parliamentary system where the bills are crafted in secret by leaders who present them for a vote without going through the regular order committee process. Plus, Manchin was not passive - he gave a detailed description of what he would support, as you noted, back in June.
It’s frustrating to me that:
1) I pay roughly half my income in taxes
2) Trumps tax cuts actually increased my taxes (by repealing SALT)
3) A Biden tax increase would likely increase them again
I guess this is probably all fine, but it would be nice if increases were targeted at people paying like 20% (capital gains and inheritances, I guess?)
I think that Democrats harvesting most of the campaign contributions from rich people might have something to do with this.
Get rid of 199A
Raise every tax bracket 3%
5% surcharge above $1M AGI
Corp Tax Rate 25% and make 100% bonus depreciation permanent
I get the politics on this, and I'm pretty much always on team deficit reduction, but I'm real foggy on the economics. Isn't the problem with taxing the rich that it is more likely to constrain supply than spending? The argument for stimulus is that giving money to low income people is giving money to people that are going to spend that money in ways that generate demand while the richer brackets are more likely to invest. Isn't investment what we want right now? And from an opportunity cost perspective is this really a coherent way to target inflation? Using the tax code seems like a real bank shot to me.
This is a fairly stupid post to be honest. I read through it twice to see if there was a concrete proposal about how to raise taxes on the rich and did not find one. Matt and his readers would do well to read TR Reid's fine book, "A FINE MESS: A Global Quest for a Simpler, Fairer, and More Efficient Tax System." I'm as liberal as anyone reading 'Slow Boring' and have been around this issue for a great many years. I've come down on the side of eliminating all tax preferences including the sacrosanct mortgage interest deduction. Put into place a self-executing VAT and clean up the damn tax code. the more complicated the tax code, the more opportunity for abuse (carried interest not being taxed as income, IRAs being used to shield what should be taxable income, etc. etc.).
A simplified tax code will lead to lower rates which any politician can easily explain.