So, Obama on what’s going to happen to his promise to increase taxes on the wealthy:
"I think we’ve got to take a look and see where the economy is. I mean, the economy is weak right now," Obama said on "This Week" on ABC. "The news with Freddie Mac and Fannie Mae, I think, along with the unemployment numbers, indicates that we’re fragile."
This is an example of why ideas matter. From a Reaganite or Chicago School perspective, what Obama’s saying makes perfect sense. Individuals almost always (always is the key word here) make better decisions of what to do with their money than governments do. Lowering taxes is thus always a good thing, providing basic government services such as police are maintained. During a recession the last thing you want to do is raise taxes.
But if you’re a Keynesian, or a liberal of any variety, this is nonsense. In fact, what the rich did with their money over the last decades was spend it on bubbles like the dotcom bubble, on derivatives and on driving up housing and commodity prices. The majority of their money did not go to "creating new jobs" in the US and it didn’t go to consumption (which, if the US made what they consumed and if there weren’t a supply bottleneck in commodities, might help the US economy.) It went, then, either into secondary securities markets or into derivatives and commodities. The problem with the US economy is not that the rich aren’t rich enough.
So leaving the rich money, not taxing it, won’t do the economy much good because the rich won’t spend it in particularly useful ways. On the other hand, if the government taxed them, 100% of the money they took could be used for, say, a big green economy buildout. Or part of it could be used as relief for the poor, which provides 100% stimulus effect, since money and aid given to people who need relief is spent immediately. If you want to fix the US’s economy, taxing and then spending on what’s needed (to reduce oil dependency) makes sense.
In fact, I wouldn’t even cut taxes on the middle class and poor. Yes, yes, it’s economic heresy, but right now, stimulus (and a tax cut on people who will spend is stimulus) will just go to inflation which is why only relief should be given, not stimulative "tax rebate" checks.
I don’t bring this up to bash Obama. As usual, McCain is even worse than him. But the problem with Obama’s economic philosophy is that fundamentally it’s not a liberal economic philosophy. That statement indicates Obama really believes that taxing rich people (or any people) is bad for the economy. There’s very little reason to believe this (at least not at the taxation levels in the US right now), but Obama believes it nonetheless. His heart is in the right place, he wants to tax the rich more because he doesn’t like inequality, but he doesn’t believe, intellectually, that taxing them is also good for the economy. To Obama, increasing taxes is a bad thing to do, an evil, that may be necessary to get some goods.
This is why ideas, philosophies and theories matter. They determine what decision-makers consider possible and impossible, useful and disastrous. In the 60′s everyone may have been a Keynesian, but today, almost no one is, despite the fact that Chicago School economics has failed every major test it’s ever been put to.
Presidents often learn on the job. Roosevelt got rid of most of his original economic advisers for a new pack when he decided he needed new ideas. Hopefully Obama will have the same intellectual flexibility. But first we’re going to have to do too many of the wrong things, yet again.



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Obama !!!! O yea
Robin Hood?!
Presidents often learn on the job.
I’m hoping that this incorrect response was a knee-jerk, which gets corrected PDQ.
Rachel.
Hey Ian,
I am sure you have read “The Shock Doctrine.” How many Obama advisors are part of the Chicago School or are “Chicago Boys?
You were a supporter of Hillary Clinton, who, among other people, counted Jeffrey Sachs, who is also a Chicago Boy, among her advisors.
I totally agree with you that the Chicago School and Friedman’s theory is false, but doesn’t your support of Clinton run contrary to this particular post?
I am not trying to be a contrarian here, but trying to figure out where you stand on this issue.
Thanks, Ian. And as Noami Klein documents so thoroughly, massive repression and torture are the preferred tools for enforcement of Chicago School policies once the people realize they are being screwed. Looks like we’re seeing the leading edge of that these days…
Historically,
when times get tough, the uber-rich are all about spending some of that cash for the betterment of their country and fellow citizens. /sLinky from your last comment downstairs?????
Our roads are owned by foreign countries…our debt is owned by foreign countries…Americans are, apparently, not the major owners of real estate in the country….Ummmmmm…..
I think we live in a giant “mall” or “marketplace”…an international investment free for all…
I’m not sure we are in Kansas anymore….I’m not sure Kansas is real anymore.
Welcome globalism….only we are the center of the supermarket.
Clinton had less Chicago boys and when I read her actual economic proposals they were to the left of Obama’s. She was better (from a liberal point of view) on economics, though the difference wasn’t all /that/ significant. I supported her for that reason and because she had a universal health care plan (with mandates, which suck, but at least universal.)
Last time I looked at a list of Obama’s economic advisors, it was about 2/3 chicago school. More to the point, everything I’ve read indicates he’s chicago school. By this I don’t mean hard-core Friedmanite, he’s not that and neither are his advisers, but they buy into a “tweak the market” philosophy which makes assumptions I don’t agree with.
We must not say anything against Obama. It’s not enough to say that we’ll support him and vote for him. We must all support his every word. Especially those among us who previously supported Hillary.
With all due respect, can we please try not to give the wingnuts quoteable goodies until AFTER he’s elected? Just sayin’……
Tax reduction carries more weight than the 10 Commandments so he can hardly say otherwise at this point.
And I pray for the green bubble. At least when that pops, there will be some useful artifacts littering the landscape instead of toxic chip board, vinyl siding and sheetrock trash.
To continue, Obama’s big into things like “opt in”, behavioural economics. I actually think those are very smart. But when you need significant change, fast, it doesn’t cut it.
I really don’t think I’m important enough that ads will run quoting “Ian Welsh, Firedoglake blogger”. Let’s put it this way, McCain and Palin won’t learn on the job, because neither of them has shown any ability to learn.
The problem with the US economy is not that the rich aren’t rich enough.
Amen to that!
And yes, Obama was a really bad choice. Thank you Oh full of wisdom democratic leaders for once again doing the opposite of what needed to be done.
.
there’s something else that matters too and that’s the real world. everyone is entitled to a few kooky ideas… but when the evidence is all stacked up against you, it’s time to look for a new theory/hypothesis.
Obama really really wants to be President.
I am not saying that he is without principles or ideas, just that he is foremost a politician who really really wants to be President.
Telling *any* portion of the US population that you are going to raise taxes is a political non-starter.
I actually agree with some of Obama’s detractors about the uncertainty of what he will do once he achieves office.
I am, however ABSOLUTELY CERTAIN that whatever it is, it will be better than the alternative.
He is a very smart guy, but so are all his neighbors in Hyde Park (which houses the ‘Chicago School’)
Well, Obama’s economics might suck, but at least he understands it. I haven’t seen any evidence whatsoever that John McCain has the remotest idea how our economy operates. “Marry rich” seems to be his formula for achieving the American dream.
Worked for him.
Isn’t part of the issue that Friedman’s theories are taught throughout the world in most of the major universities? In other words, it’s sort of like belonging to the Communist Party in China, you’d better belong or otherwise you won’t be taken seriously, despite whether you actually sign on to the Party’s philosophy or not.
i’m more of the view that we should be as honest and open as we possibly can be. imo, we don’t help obama, ourselves or our country by censuring ourselves.
I have often thought that it is very odd that the conventional wisdom says that taxing policy is about economics. It really isn’t. OK, pause, take a breath here. Taxation is about social engineering. You can use it to redistribute wealth to build a more equitable society or you can steer it toward the rich and create a feudal one (the policy that has been followed for the last 30 years). Directing cuts to the lower and middle class may create some inflation but they will still come out ahead. This is a better outcome to my mind than giving the money to the rich who then gamble it away in bubbles that damage the whole economy.
Let’s put it this way, McCain and Palin won’t learn on the job, because neither of them has shown any ability to learn
Ding! (Ringing the bell because of a good tip)
It’s about both.
Ian, you’ve got mail!
Corporate loopholes need to be closed, the Estate tax continued, and, the SS wage tax needs to be raised to at least the $250,000 threshold if not higher…! Oh, and stock dividends need to be taxed at the pre-Bush era rates…! Those actions would go far in reducing the federal debt…
I have no problem paying more taxes if what I get for it is good service for the money. Right now, we are taxed and get nothing but war. They don’t fix the infrastructure, there is no healthcare, etc. You are left to fend for yourself, but they take your money anyway. We are now going to be saddled with the debt from Fannie and Freddie.
We get nothing in return. It is bad business. Bad economics. Bad for the country. Bad for the world.
Hiya CT!…
And let’s end the “offshoring” phenomenon as a viable tax dodge, too.
Aloha, Bro! You been following Woodward’s series…? ;-)
The bottom line is this.
They use the money confiscated from the workers’ paychecks to fund operations that create profit for the corporations, who get tax breaks, who then use the workers to labor to create their profit, and it starts all over again.
This is not democracy.
No, gonna get the book… read his last with great interest.
why should SS taxes stop at any higher income level?
imo, capital gains rates should remain the same for those earning under $250,000 individually, or $500,00 per couple.
Sarah Palin, she’s afraid of the media, intimidated by her police chief but she’ll be ready on day one to stand toe to toe with Vladimir Putin and Mahmoud Ahmadinejad. Yuk, yuk, yuk.
-G
{Per the previous post, a little more on Andy McCain’s banking excursion, as a buried lede in an article whose other point is also kind of interesting.}
Paternal John McCain believes that women are weak and should be shielded like children from anything that he thinks may upset them.
-G
I agree. Tax cuts in themselves don’t create these things or pay for them. Rather it is government directed investment which does. We can choose to invest to build up the country and its people or we can blow it on imperial wars. Since World War II and the creation of the military industrial complex, our politics and economics have been owned by those who believe in investing in war and not the infrastructure of the country and the health and education of its people.
isn’t Austan Goolsbee – the Obama econ advisor who got caught talking to the Canadians about NAFTA one of the Chicago boyz ?
I hear ya! It’s risen to the top of my ‘Must Read’ list…! If the WaPo series is only the teaser… It might put “All The President’s Men” to shame…!
but she’ll be ready on day one to stand toe to toe with Vladimir Putin and Mahmoud Ahmadinejad
Absolutely. Assuming, of course, that prior to any toe-to-toe’ing, they both agree to show proper respect and deference to her.
Telling *any* portion of the US population that you are going to raise taxes is a political non-starter.
But, the issue here is making people part of the American promise, as Obama so eloquently put it. What the GOP and Republicans have done is, despite all the BS about “personal responsibility” is make sure that we actually bear none. When we lower taxes and fight two wars at the same time while not asking for any kind of sacrifice and running more on the proverbial credit card, we are not being responsible in any kind of fashion.
When I talk to small business owners, for example, I tell them that while they might pay $5,000 more in corporate taxes, they would pay $20,000 less in medical costs. It is what you get for said taxes. If you explain succinctly and clearly what this taxation will actually benefit the entire country or even individual people, more taxes does not have to be a political loser.
The Republicans have done such a good job telling everyone how bad and broken government is that it has become a self-fulfilling prophecy. In the case of health care, government actually does a better job than corporations.
Look I am sure there are lots of examples where government does individuals a disservice. In the US of 2008, we have gone so far in the corporate/fascist direction, that I believe that we have gotten to the point that we need to tout the benefits of government for the people and by the people every single chance we get. Yes, it costs money, but the alternative is even worse.
Here’s a page with some graphs to compare the economic performance of Rats and Pukes:
http://tlrii.typepad.com/theli…..al-ec.html
Maybe Obama has decided that if it will get him votes in key states, it’s worth the capitulation? He has said not past 2010. (which is admittedly a change of position)
I certainly don’t know. Maybe he’s looking at donations from folks to get the tv ads before the election…maybe he’s working independents…maybe he’s obsessed with the address…maybe his top advisors are telling him this is the way to go???
joefish has fresh threadiness upstairs
Republican women are weak. Most Democraic women are likely to calmly pull out the Winchester from behind their backs.
Good question! I’m sure the SSA ‘Lock Box’ would benefit mightily from Buffet’s or Gate’s contributions…! ;-)
I read a review today (somewhere – dammit) that openly wondered how Bush can maintain a proper gait with Woodward’s lips so firmly attached to his ass…
Ian,
have you seen this ?
Bush Appoints McCain Advisor to Head Fannie Mae
hey, at some point in the super loftiest of the income brackets, I think the proper question to ask is – “Wow, how many people did you have to crush and/or kill to make *that* kind of money?”
All Obi needs to say is he intends to have a fair tax policy.
despite what little I’ve seen or heard about the book – the naked ambition of one David Petraeus is on full display
OT …
Who picked Palin… McShame didn’t know her… heck nobody knew her… but someone put her name and “bona fides” in front of McShame. Who dunnit?
I also agree with this. Medicare does a much better job than its private counterparts. OTOH we have all seen the results of private contractors like KBR and Blackwater taking on what used to be governmental functions.
Only a very strictly regulated capitalism will work and that will sound too much like socialism for the Press and the Amercan mind.
Wealth is good…. You don’t rain on that parade over here in the USA.
i made up an analogy the other day for the corparations deserve a tax break because of all of the jobs they’re providing crowd—
now that jobs are being shipped overseas, they are like an absentee father, who is paying child support for a child that is no longer in the custody of a parent.
so, the child is no longer in the custody of them, so, no money needs to go to them.
i’ve been wondering that same thing, sander.
these two righteous pinheads of the non-911 variety had over 90 minutes with her before McLiar had his 15
any questions ?
Hopefully Obama will have the same flexibility with regards to his steadfast determination to end the occupation of Iraq: he can “take a look and see how Iraq is doing” are they standing up so we can stand down? and if not, well, we’ll just have to stay a bit longer to help them.
As helpful as we’ve been over there, surely Obama wants to keep helping!
That’s interesting. David Moffett who is slated to run Freddie is from the Carlyle Group and one of their hedge funds went ker-splat in March having overleveraged itself in investments in Fannie and Freddie. I was wondering about Allison’s connections. Thanks.
he was on larry king, and every time larry ‘had a question’ aka ‘interruption to save’ woodaward let him…..
if i had info i wanted heard, i wouldn;t let someone ’save’ me from uttering it.
Oh lovely:
“… We will show that an average house that was worth about $226,000 in 2006 is, once you adjust for inflation, down to a real value of only about $160,000. To put what a $6 trillion loss is into perspective, we will show that when all factors are taken into account, the two year drop in US real estate values is equivalent to wiping out the entire retirement savings of all 78 million Baby Boomers, and annual housing losses are close to the annual GDP of China….
.
Steve Schmidt (= Karl Rove)
Palin was vetted by the Christian conservatives for her bona fides. Palin and George W. Bush are very, very similar, down to the petty manner she handles her subordinates and the manner in which she supposedly governed her State.
The “base” still love Dubya. They are that 30 percent who keep giving him that approval. They have adopted the persecution complex in regard to Mrs. Palin – that is what narrative of the media “going after” her is all about.
That is what is so scary about the Palin pick – McCain is so craven that he won’t go with his own man (Lieberman or Lindsay Graham) but someone that was chosen for him. Bodes well for the future, now doesn’t it.
I hadn’t, no. Blech.
thanks, i knew the name was famiiar.
Ian:
This site is up your alley:
http://theautomaticearth.blogspot.com/
Ideas matter to people who can think. Instead of thinking, McCain reaches into his grab bag of talking points, pulls one out, adds belligerence, and that’s what passes for thinking. We can expect more than that from Obama. But, this Chicago school is in fact a failure.
The rich have huge amounts of investment capital, but they are not satisfied with the rate of interest available from CDs or bank accounts like the rest of us. They want huge returns, with no risk. Chasing those returns creates messes like Long Term Capital Management, Fannie and Freddie, the housing mess and, of course, the federal deficit. One of their favorite investments is politicians. One good thing about the Fannie/Freddie bailout is that the lobbyists are all getting fired.
I see no reason not to tax the rich. As Willie Sutton is supposed to have said when asked about robbing banks, that’s where the money is.
today, the county auditor and her appraisors were on the air here explaining how we didn’t have the uprise in value, so we wouldn’t have the depreciation value here when it comes to appraisal for tax purposes…..
yet, it took my neighbors two years to sell their properties….two of them.
masso, one thing to keep in mind, someone else is handling their money…..very few of them have any idea where their money is….
go after the ones doing it. the ones handling their money.
(disclosure, my dad was a corporate accountant and handles his own money, he has made it clear to me that most people don’t handle their own money.)
so, the lake is doing the one thread an hour thing again? makes it kinda hard to be here, and hard to catch up on threads…..just sayin’…….
the little calendar would make it a lot easier.
I keep hearing Newt’s name mentioned
Actually, one of the few Sundays I watched Fox Noise Sunday about 4-5 months ago, I saw Bill Kristol mentioning Palin. She has been on the radar of the true Believers for quite a while.
If Obama will serve maple syrup with his waffles… I will serve cheese with my whine!
Muchias Gracias for the Post Ian.
OT, but in Michigan John McCain is running 3 ads for every one Obama runs. McCain has been running ads since early June. With all the buzz about Palin it wouldn’t be surprising to see McCain leading in the next Michigan poll. Obama needs to shake things up. To say, “wait until the debates” is misguided. No matter how poorly McCain does the Republican noise machine along with a corporate MSM will declare McCain the winner. Happened with Gore, Kerry and will happen to Obama.
i’m thinkin’ ralph reed. or one of his consorts.
commercials here are obama.
se/central ohio
I vote Obama. Biden, have his bumper stickers and yard signs. I work tp get him elected. We have to move him left. Noone gets a free pass here.
I’m not surprised by this bit of backpedaling. First off, Obama gets much of his financial support from rich folks. They probably don’t appreciate the “soak the rich” talk. Second, Obama’s the Linus Van Pelt of politics these days – there’s no issue so controversial it can’t be run away from.
I’ll vote for the bastard, but the only way to make him change his tune is to move the political center of gravity in the Democratic Party. That means putting efforts into getting more progressive Democrats elected to Congress and elsewhere.
You have to remember, McCain took federal financing. He has only so much money to sepnd. And he is spending it now. Obama can wait until October to hit the air waves hard. He is now doing the personal and small group campaigning. I have never waivered on my commitment to him and his judgements. Take a breather. PLEASE. We all need to get out and help get the votes out and to take people to the polls or be involved in the poll watching.
Well, the question is this: of the posts that went up this evening, which ones shouldn’t I have put up?
Maynard Keynes, Maynard Keynes
Riding through the town
Maynard Keynes, Maynard Keynes
Had economics down
Tried to save mankind
From the market’s fatal pains -
Maynard Keynes, Maynard Keynes
Maynard Keynes!
All that has gone before has failed to keep the American economy the manufacturing center it once was. The undoing of manufacturing capacity comes down to inflationary monetary policies.
Manufacturing capacity is built with capital investment, and requires long-term commitment and a long-term viewpoint.
Inflation over the decades created primarily by war financing has gradually eroded long-term capital investment, and thus the manufacturing capacity.
Contrary to conventional wisdom, wages have naught to do with inflation. Wage increases always follow inflationary activity in the financial markets spurred by inflationary Fed policy. The government always reports the opposite and acts as tho it’s true by punishing wage earners with recessionary monetary policies. With stagflation, we get it coming and going.
Obama could serve Americans well by gaining an understanding of the principal underlying cause of the gutting of the American economy and acting on that knowledge responsibly.
I should add, that inflation has the effect of shortening the investment horizon from long-term, to medium-term, to finally the short-term where there’s absolutely no room left for the long-term investment needed to preserve and promote manufacturing capacity.
Sooooo EPU’d
One subject that should be illuminated is trade and taxes, the disinformation about “free trade” and why that disinformation is used.
http://www.guardian.co.uk/comm…..baleconomy
which is to say, is this the only method excess capital has to wedge its way into other economies, buy their productive assets and dominate their economies. The great fallacy and a central lie of Chicago School of pseudo-economists.
Couldn’t agree with you more. My teacher James Tobin is rolling in his grave. He fought the good fight, but the reactionaries and economic technicians who — and I quote from personal experience — thought Keynes was an intellectual fraud have done a real job on the public, American and European. I think it is symptomatic that we haven’t heard a peep out Bob Lucas and the other Chicago Nobels concerning the massive deficit their boys perpetrated on the American and world economy. Their economic analysis was always a front for something deeper. They don’t like the idea of government redistributing opportunity to poor people, because they believe that people are poor because they deserve to be poor. It’s really that simple, and if we had more time to go into it, that complicated.
There is an inherent contradiction between capitalism which emphasizes the individual’s right to accumulate as much money as he can with not too many scruples about how he does it and the collective good. The underlying idea is to be a “have” in a sea of “have nots.” The ‘have nots” have this fantasy of becoming a “have”. It’s like the lottery. You can’t win if you don’t play, but the odds are so long your chances of winning are almost non-existent. The “have nots”, which make up the great majority, don’t want the dance to stop until they or their progeny have their turn on the floor.
Obama is probably right in fudging what I believe are populist instincts. The country is so crazy, if you don’t acknowledge the madness, you get no where.