The Choice between Obama and McCain (II): Tax Policies
The economy reThe economy re mains the number one issue of the presidential campaign. Although AmericAlthouh America is still a prosperous country, for the first time on record the growth of the economy has and is failing to benefit most American families. Accounting for inflation, most families (the bottom 60% of the income ladder) are making less than in the year 2000. Americans still buy houses and cars, but they buy them partially at least with debt, a debt that in many cases will never be repaid.
During the Republican Convention in Minneapolis, the new VP nominee. Governor Sarah Palin of Alaska, repeated, once again, all McCain’s objections to Obama’s economics. Obviously, Palin’s speech had been written for her by one of the Bush campaign writers: the speech contained all the deceptions and all the lies that are becoming the daily stuff of our media. Both McCain and Palin know very well that they were deceiving the electorate. In fact, precisely that was their very purpose.
Between Obama
Obama has been called a Chicago Liberal Democrat. He spent 12 years at the University of Chicago, the center of modern American conservatism and the home of Milton Friedman, the champion of laissez-faire and supply-side economics against Keynesian emphasis on governmental regulatory policies. From Friedman (and from Reagan!) Obama learned a basic respect for the power of a free market; but he also became increasingly aware of its limitations. Free markets have not prevented the growth of income inequality and environmental pollution. Lack of regulation, not an excess of it, has caused the bubble of predatory lending , the ensuing collapse of the housing industry, and the scary financial crisis of the moment. Obama’s remedy does not center on more regulation, but on what is called “nudging,” one of the tenets of behavioral economics. Economists have always been puzzled by that fact that economic decisions by individuals are often errors that undermine their self-interest. To prevent that from happening what is needed is not always a new regulattion, but a new strategy to change not the decision of robots but the decisions of human beings: to provide them with incentives, information, and rewards.
A good example of “nudging” in Obama’s economics is his controversy with Hillary Clinton during the primaries about the universal coverage of health insurance for Americans. Hillary would simply make it unlawful not to have health insurance; Obama would provide tax credit benefits to make having insurance economically feasible and an irresistibly wise choice. The difference between Hillary and Obama was not a difference in the final goal (as Hillary unfairly argued during the campaign), but about the means to achieve the common goal of universal coverage.
Obama’s economic plan – a plan that he should clearly, vigorously and repeatedly summarize for the American electorate– has two undisputable aims:
1) To transfer the immense tax burden (billions of dollars) from the extremely wealthy (about 3% of the American tax payers) to the middle class and to the poor (about 97% of the American families). For the Republicans to disguise and to lie about this fact is, of course, extremely important. Otherwise, the election of 2008 would end in a landslide victory for the Democrats. That is why McCain, who is now hypocritically shouting for “change in Washington”(he IS Washington!), is and has always been for making Bush’s tax cuts for the very wealthy, a permanent feature of national politics. More about that later.
2) To reverse what us called the Great Partisan Growth Divide. From 1948 to 2007 the Gross National Product grew annually at the rate of 1.64% under 34 different republican administrations, and at the rate of 2.78% under 26 democratic administrations. But that’s only the beginning. As professor Larry M.Bartels (Princeton) has statistically shown, during the same period, income inequality in the United States trended upward under republican presidents and downward under democratic presidents. As a good democrat, Obama wants to bring back the tradition of his party, he wants the poor and the middle class to experience faster income growth than the income growth experienced by the very wealthy. Unfortunately for those of us who are not “very wealthy,” five of the seven administrations since 1980 have been republican. That is why the number of millionaires has increased fast while the number of people living near or under the poverty line has significantly increased. An Obama victory in November would reverse the trend: it would lead to faster economic growth and would significantly shrink the income gap between the very wealthy and the median class and the poor.
To minimize income inequality is the top priority of Obama’ tax code, a code that reflects his eclectic, pragmatic. post-partisan economics. Always a very thoughtful man, Obama’s economics is a careful synthesis of many theories. Unlike President Bush who is a stubborn victim of his own certainties and surrounds himself with people he knows tend to agree with htm (“choose the adviser and you choose the advice,” as Sartre wrote), Obama is attracted to people who challenge his own views, seeking always to synthesize rather than to contradict.
Obama has reached the conclusion that one of the most powerful was of changing the present income inequality in American society is a basic change in the tax code. The very core of that change is the cancellation of the Bush tax cuts of 2001 and 2003, cuts that according to Bush himself were to occur automatically in 2010. McCain is opposed to the cancellation of those cuts; Obama, on the other hand, insists that Bush’s cuts should be cancelled (in 2009?) ONLY for all tax payers with an annual income over $250,000.
Republicans love to repeat –as they always do– that Obama. would increase both taxes and spending. They misrepresent reality in a very deceptive way. Obama would just let expire the unfair and counterproductive tax cuts that Bush made into law in 2001, a law that was passed by Congress on condition that it would expire in 2010, and that costs the Treasury $3.6 trillion a year. I would like to remind the reader that a billion is one thousand millions and a trillion is one thousand billions, at least in the USA. No wonder the republican delegates in Minneapolis (an audience that did not include many members of poor minorities) were quite excited about McCain’s economic plans. McCain’s almost farcical tirades about “change in Washington” advocate some trivial changes, but retain the central elitist political philosophy of Mr. Bush: the blind belief namely that only a massive cut in taxes to the very wealthy would lead to productive new investments and eventually “trickle down” to all the tax payers. These days financial chaos in Wall Street is enough refutation of that version of “supply economics,” It is true that some of the multimillionaires’ wealth does in fact crumble down to the impoverished masses. The problem is how much and when. The only reason in America to be a republican is simply to be very wealthy. Today, Donald Trump endorsed McCain (with not reference whatsoever to Sarah Palin). Nobody doubts that “the Donald” deserves to be republican. Under a possible McCain administration he would save almost three million dollars in the first four years. If you are as rich as Trump, do not hesitate to vote republican!!
Obama’s spendng cuts are also achieved by simply ending as soon as possible the bloody, illegal, unnecessary, revenge-provoking, national security-threatening presence of American occupiers in Iraq, a presence that costs tax-payers ten billion dollars per month.
Let me add a few words about the Bush tax code of 2001. Such code grants to the top 1% of households (CEO.s, movie actors, exceptional football players, and the rest of the American millionaires) about one hundred and ninety times more tax cuts than those received by the middle class. Eliminating such unfair and disproportionate tax cuts, and putting an end to the war in Iraq would provide the Obama administration with much needed resources to make possible the tax credits that would sustain a universal health insurance coverage for Americans, help home owners, and make possible for youngsters of the middle class households to attend the college of their choice without burdening themselves with predatory loans. Of course, all of this is only a blueprint to be submitted to Congress’s scrutiny and approval. But as blueprints go, it looks much more promising than anything the republicans have ever put on the table. It may be rejected by some redneck states with few electoral votes, but if would win “handily” (as Bill Clinton would say) in New York, Boston, Chicago and San Francisco, among other more enlightened American cities.
I offer the readers some numbers to make my point. These numbers do not pretend to be exhaustive, but only a partial but solid evidence of the radical differences between Obama’s and McCain’s tax policies. I emphasize payroll taxes over income taxes because poor and low middle class tax payers do not have many corporate assets, capitals gains, bonds, etc: they just try every month to make it on the basis of their wages.
-Obama’s tax breaks for tax payers who make between $38,000 and $ 66.000 would amount to $1042 less than now. For the same people under McCain’s plans it would be $319 less than now.
-One the other hand, the McCain tax for wealthy tax payers who make more than $2.9 million annually, would be $269,000; the same people under Obama’s tax code would pay $701.805. Against McCain/Palin’s “misinformation” (namely, lies), it’s important to emphasize that such increase affects not “all Americans, but only tax payers on the very top of the income ladder” – Obama would keep the present taxes (under Bush’s 2001 plan) for all the tax payers who make less than $250,00, about 97% of the American population!
But Obama would also give a $500 tax credit per person to all the members of households that make less than $150,00, a tax credit of $1,000 for tax payers that earn between $8,000 and $79,000, a tax credit of 19% of their mortgage up to $800 for people who do not itemize their deductions, and would exempt from any tax all seniors who make less than $50,000. Please, think about that!
-It’s true that McCain would double the exemption for dependents for all tax payer a provision that help minority familes with several children) lower corporate tax rates (that very seldom apply to people with low incomes), and lessen the bite of estate taxes forwealthy people pay on the profit made by selling their real estat).
In a few words:
The Obama tax cuts for the middle class and the poor would be roughly three times larger than those projected by McCain.
The McCain/Palin tax cuts would benefit mostly tax payers that make more than $2.8 million, about 0,1% of the American people!!
Obama’s tax code represents a shift of the tax burden from the middle class and the poor to the very wealthy, a shift that has no equal in American history. Never forget that when you listen to the untruthful spinning of both McCain and Palin, the true disciples of Mr. Bush!
Let’s rush to the voting precints!