Public debate is critical to the American political experience. Organizations and politicians take their message to voters, highlight strengths and weaknesses of the issues and submit their solutions. On election day, we see who the People choose.
Integral to the process, yet seldom mentioned, is for each party to be honest and operate in good faith. They must make arguments and quote statistics they believe to be true. They must not misrepresent their opponents or deceive participants. They may later be found wrong, but they may not intentionally deceive. This post is necessarily one of the longest I’ve written. I thought it better to address each point well than to gloss over one or more dismissively.
Joshua Holland, Progressive author and editor and Senior Writer at Alternet, recently wrote “The 9 Biggest Conservative Lies about Taxes and Public Spending”. It should serve as a model of how not to conduct the public debate necessary to arrive at good decisions for our nation. Holland doesn’t seem interested in debate. At times, he is less than truthful himself while outing Conservatives as liars. And he is mostly wrong. Let’s look at Holland’s points.
Conservative lie #1 – “Cutting Taxes Leads to More Money for the Government“
Holland’s rationale is faulty as he combines unrelated facts to form the foundation of his argument. He sources a piece by Progressive author Perrspective, “Meet the New GOP Alchemists”, to undergird his position.But it merely reveals his error.
“…Republican alchemists continue to insist that cutting taxes increases government revenue and thereby reduces the deficit.” The argument is that if deficits exist after a tax cut, then cuts don’t increase revenues. But this requires one to adopt the view that if government receives a billion dollars this year and yet runs a deficit, the problem was with revenues. Nowhere is spending factored in to the equation. In truth, revenues are not the key component in deficits, spending is. For example, if governments only spend the money they actually receive, there are no deficits! Yet, it is quite possible to have incredibly large revenues and still run deficits if spending is increased as well.
Perrspective dismisses John Boehner’s words from June, 2010, “It’s not the marginal tax rates … [that] … led to the budget deficit. The revenue problem we have today is a result of what happened in the economic collapse some 18 months ago.” Perrspective insists the 2010 deficits result from Bush Tax Cuts, ignoring the TARPs, the housing crisis and Obama’s deficit spending.
Holland wants more than just “tax cuts don’t increase revenues”. He wants a cause and effect between tax cuts from a decade ago and deficits. That’s a logical fallacy known as “post hoc ergo propter hoc”. If he gets it, then tax cuts cause deficits, not surpluses. If Holland demonstrated the only cause for deficits is falling revenues, he has a case. Holland demonizes Tax Cuts, not Spending Increases, because it promotes his agenda, not because it’s true. Yet there isn’t even complete agreement among Progressives as to the relationship between the two. The WaPo piece Holland quotes to support lie #9 also observes of the Bush tax cuts, “Although the cuts were large and drove revenue down sharply, they are not the main cause of the sizable deficit that exists today.”
To be fair, “lie” #1 wasn’t tax cuts cause deficits. It was tax cuts don’t increase revenues. But the cuts Holland focuses on are only the Bush Tax Cuts specifically. He then extends his findings to all tax cuts generally. This seems effective as Bush’s Tax Cuts admittedly are not the strongest argument that cuts lead to revenues. It fails since there are other clearer instances of cuts raising revenues.
But Holland’s accusation is absolute. It’s not that Conservatives are sometimes wrong or right only now and then depending on circumstances to avow that tax cuts boost revenues; it’s that Conservatives are lying to say so. If that’s true, then no tax cut can ever have increased revenues. To debunk Holland takes only a single exception and Holland himself provides it. In “lie” #2, his last paragraph notes, “…go back to the Kennedy era, when cutting the top rate did spur growth and bring more money into the government’s coffers.” Holland can’t have it both ways.
Conservative lie #2 – “Art Laffer’s Famous Curve Supports lie #1”
Art Laffer argues there is a tax rate so high as to cause taxpayers to avoid paying it and revenues will fall. Exactly where that is on the rate scale is not clear. Holland quotes economists suggesting it may be in the 50% to 70% range. Holland disproves his own contention and admits Laffer’s observation is not a lie right after saying it is.
That Laffer’s Curve doesn’t kick in until taxes are high doesn’t make the notion high taxes reduce revenues a lie. It is merely one of many argument illustrating people will do what they can to reduce their taxes.
That Americans in all tax brackets try to pay as little tax as possible is seen each April 15th. It also drives the government’s own tax credit carrots. Laffer need not explain all tax avoidance behavior to be relevant. Conservatives are right. People fight to keep more of their money for all sorts of reasons, including because rates are high. It’s their money, after all.
Conservative lie #3 – Taxes on the Rich Keep ‘Wealth Producers’ from ‘Creating Jobs’
Once again, Holland tries to blend two very different arguments into one. The lie was supposed to be about taxing the Rich. His argument is about taxing businesses. The wealthy and the businesses they typically own or control are two different taxpayers. We’ll tackle businesses here and the Rich in #4.
Businesses with current costs under control, including hiring and CEO salaries, can still be unsure what impact tax increases will have on their business resulting in them adopting a “wait and see” posture.
Tell a business it will have a cost increase and it will have an immediate impact. It will ask, “How do I deal with the added expense?” Just as with government when its costs go up, increasing costs to a business is dealt with in one of two ways or a combination of the two. It can cut costs or raise prices.
Holland simplistically assumes a business booming now automatically hires workers simply because it is booming. While it can be true, it is a false premise since businesses boom for many reasons. Not all of them result in additional hiring.
For example, if Company A keeps costs in line and can undersell Company B with poor cost controls, Company A may hire new workers. Both companies face the same tax challenge and A is better at controlling costs so A’s boom remains and they add staff.
But if A’s increased costs reduce profits enough, it may not justify a new hire. The potential benefits don’t outweigh the risks. They may opt to simply stay where they are. They’ll still do better than B and the boom will continue without adding staff.
Of course, A could raise prices to offset the new costs. But in the real world, that can lead to an object lesson on the Laffer Curve’s validity. When prices rise, sometimes people don’t buy or don’t buy as much. Bye-bye boom. A booming business which bets wrong can bust and lose all its jobs, new and old.
Faced with cost increases, businesses often sit on cash to see how things shake out. This is particularly true of increased taxes. Business must understand the reality of what is happening, not merely accede to government’s assurances of what will happen. Taxes are political decisions which add counterfeit pressures to the market. Expanding the workforce is a Market decision and it has to be correct. Blending the two factors is not easy and “Better safe than sorry!” is often the choice. Increasing taxes negatively impacts hiring.
Conservative lie #4 – Tax Cuts for Upper Earners Spur Job Growth
This is related to but very different from “lie” #3. #3 applied to businesses. #4 applies to individuals.
I dealt with this notion a week ago. The short version is wealthy people definitely create jobs with their wealth. Consider that in just 1999, 4 men; Bill Gates, Andrew Carnegie, John Rockefeller and Henry Ford were responsible for 21 million jobs in this country, 16.5% of all the jobs there were.
It is the wealthy, and arguably mostly the wealthy, who create vast numbers of jobs. Behind them are the “wealthy wannabes” who understand wealth is created by serving their fellows well; small business owners who aspire to join the elite ranks one day.
Whether by saving and investing, personal spending or business expansion, the wealthy use their money to create jobs. The best thing we can do for Job Creation is let them keep more of it. The second best thing we can do is let the non-wealthy keep more of their money, too.
Conservative lie #5 – Only Half of American Families Pay Taxes
It is difficult to even dignify this point with a response because it is so patently either a lie itself or evidence of such ignorance that Mr Holland should be ashamed to put his name on it. This one point alone is grounds to cast suspicion on the validity of everything that Mr. Holland might ever say again.
Holland accuses Conservatives of saying only 50% of Americans pay taxes. He says it’s a lie since everyone pays state and local taxes and sales tax.
What we really say is the bottom 50% of wage earners in America don’t pay any federal income tax (actually the bottom third pay nothing, the bottom half pay about 3%), a demonstrably true statement. Moving on …
Conservative lie #6 – Americans Are Taxed to Death
Holland sources a graph of the tax burden of 30 of the most developed nations for 2008. America’s rate of 26.9% of GDP ranks us 26th lowest. So, what’s the big deal with a measly ol’ 26.9%? He wants us to be happy with our low comparative tax rate. But this is America and we do things differently here! At least we used to.
The UK, France and Canada have higher rates. Their rates are high because they give their citizens so much. It is precisely the Socialism v Capitalism debate currently raging in US politics. Holland is fine with a turn to Socialism and taxing others to accomplish that. Conservatives are not.
Greece, Portugal and Spain have higher rates, too. In 2010, these countries are riddled with debt and insolvent despite high taxes. These nations defaulting on their obligations could bring down the EU and perhaps reach out to damage or destroy America. Which is precisely the point.
High taxes should never be a fix for irresponsible spending on social programs or deficit based stimulus. Suggesting we emulate these nations is insane. The US at the bottom of the list means we might yet escape their fate. Their higher taxes are not keeping their countries happy and healthy and may, in fact, contribute to their deaths since Conservatives and Laffer are right, higher taxes lead to reduced revenues. These nations are literally being taxed to death. Holland wants us to be more like them.
Conservatives do say we are being taxed to death. But it isn’t a lie. If Progressives win the debate, we will either cease to exist due to irresponsible spending policy or because what we become is no longer America. Either way, America is dead. And high taxes will be near the top of the factor list.
Conservative lie #7 – We’re Being Killed by Runaway Government Spending
This is little more than a reprise of #6. Holland sources a Progressive group’s report on America’s ranking among the same countries in #6 above, but for spending and for 2004-2007. His argument is that we spend less than most countries on the list on “public spending” and they are just fine.
Illustrative of what they mean by “public spending is the statement, “Of equal importance is how much a government spends, and particularly how effectively it puts the revenues it collects through taxes back into the economy.” Unasked is the question, why is government collecting a penny more than it needs to operate itself and not leaving the rest to its rightful owners to put into the economy?
Why do Conservatives complain so much about government spending? See my answer for #6.
Conservative lie #8 – Conservatives Favor Low Taxes and Limited Government
Holland’s use of “the Right,” “Republicans,” and “Conservatives” interchangeably suggests he doesn’t see or understand the difference between them. Does he also believe the Left, Democrats and Progressives are identical?
Conservatives don’t contend the whole of the GOP favors low taxes and limited government. We are just as mad at Bush and, more recently, those voting us a 35% estate tax and another year of unemployment as we are with Reid, Pelosi and Obama.
The best Holland could say is Conservatives know they are more likely to get an acceptable deal from the GOP than from Democrats. Not that the GOP will always deliver; just that the Donkeys are unlikely ever to deliver. Bush did a lot of good to go along with his lot of bad while Obama and Progressives just did a lot of very bad.
Holland’s own arguments bears this out. He says Reagan and Bush are tax cutters and notes government spending and size grew under both administrations. He ignores that both men dealt with strong Democrats and weak Republicans in Congress which spent the surpluses generated by their tax cuts. Were there Conservatives in those congresses? Of course. Were there moderate Republicans in those congresses? Yes. We saw it last week in the Lame Duck debacle. In a minority role in the GOP caucus, Conservatives are hard pressed to halt the Progressive destruction visited on America by Democrats and some Republicans. But that doesn’t mean we agree with it.
Portraying Conservatives as the moral equivalent of Republicans is, yet again, deceptive and untrue. Holland knows this. Or he should.
Conservative lie #9 – Taxes on Top Earners Are Actually Taxes on ‘Small Businesses’
Of the 9 statements, I’m inclined to grant Holland is correct in his notion that taxing the wealthy is unlikely to tax small business. I’m less inclined to call Conservatives liars if they say it. Perhaps they’re caught up in the mantra of the moment as the Left was with “gravitas” and “negotiating with hostage takers.”
In addition, there are some problems inherent in this particular debate. From his sources I conclude Holland defines “top earners” as those making over $170,000 per year. That includes a lot of small business owners. Less clear is exactly what is meant by both “small business” and “small business income.”
Holland dismisses multiple income streams as relevant if the earner makes a lot of money from one of them; a media personality with a million dollar network salary and $25,000 in income from speaking engagements. Why is a stand alone small business made irrelevant simply because it’s owner is also wealthy? That $25K is real small business income. The impact of taxes on the people who work for and service it are quite real. That doesn’t change because the owner is wealthy apart from its profits.
Holland’s sources are also dismissive of small profits noting derisively that GOP claims of tax increases hurting small business include as small businesses entities showing even $1 in profit . How preposterous. Conventional wisdom shows most small businesses fail. Virtually all those failures stem from no profit or not enough profit? Many businesses operate at a loss for a year or more before making a profit to be taxed at any rate? Businesses exist to generate profits. And they may expend hundreds of thousands of dollars to generate that measly $1 profit and get their heads finally above water. Only Progressives despise profits for not being large rather than celebrate them for being at all.
The bottom line appears to be that Mr. Holland is making things up as he goes along in order to further the narrative that he desires as opposed to the one based in reality. He is preaching to a Progressive choir and uninformed and lazy Moderate and Indie voters who will recognize the kernel of truth in his statements “Conservatives say …” and miss or ignore the error which follows.
The pity is that articles such as Holland’s take time to research and write. Had he put together a fair representation of Conservative thought, we could have entered into a debate on the ideology and resulting policy from each side of the spectrum. Win, lose or draw, both sides would have been better for it and citizens would have had a valuable resource. Instead, for reasons known only to himself, he chose to present Conservatives in a light that can only be seen as intentionally bad; misrepresenting both their views and their values. Doing so does his own cause no favors and irreparably damages his own credibility. It’s what can happen when men are held responsible for the consequences of their actions. But that’s another post ...