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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Live by the Tax Issue, Die by the Tax Issue?

The political theory of cutting taxes is that people will feel their taxes have gone down and feel generally better off. Therefore, if you cut taxes they will vote for you.
The devil may be in the details on that one. In a just-released Ipsos-AP poll, 49 percent say their overall tax burden–federal, state and local–has gone up in the last three years. That’s almost four times the number (13 percent) who say their tax burden has gone down over that time period.
And here’s an even more devestating datum: in a new ICR-Money magazine poll, 60 percent say they personally did not benefit from the 2003 tax cut, compared to just 34 percent who say they did.
Much of this has to with the trivial nature of the tax benefits doled out to the middle class, compared to those doled out to the affluent. For the average voter, these benefits were no doubt easy to miss. But I wonder if some of the jaundiced reaction at this point isn’t attributable to finding out, as tax day approached, that you owed Uncle Sam substantially more than you thought you did. That happened to me and a number of other people I know and it reflects the way the withholding schedules were changed last year, in association with the tax cuts, to pump more money into people’s pockets. That worked in the short run but now it means many people have to write some serious checks they weren’t planning on and they’re probably not happy about it.
The ICR-Money survey also shows that the public would prefer reducing the federal deficit to the 2003 tax cut by 50-42. Still more impressive, the public would prefer a job creation program to the 2003 tax cut by a stunning 76-21. That includes 89 percent of Democrats, 83 percent of independents and even 54 percent of Republicans who say they would prefer a job creation program to the tax cut.
These findings lead me to one of my favorite hobby horses: the potential role of government spending in job creation. The public is clearly much more enthusiastic about using government resources–such as might be used to support tax cuts–for job creation than they are about using such resouces for deficit reduction. Yet the Kerry team has been at pains to emphasize their commitment to deficit reduction and has been backing off their commitment to spending programs that might generate jobs.
This seems strange, given these and other poll results, many of which I have reviewed in DR. I understand that Rubinomics, as the economic program associated with the Clinton years has appeal (especially and non-trivially to those Kerry advisors who were intimately involved with it). And I understand that advocating spending on job creation means the Republicans will try to pin the tax-and-spend label on Kerry.
But surely there’s a middle ground here. As Louis Uchitelle argued in an important article in Sunday’s New York Times, it is time to revisit the idea that government should play a more substantial role in job creation.
Uchitelle concludes his article with the following three paragraphs:
Free markets work best when government stays in the background, encouraging the private sector through various supportive measures. President Bill Clinton made that claim and took credit for the full employment that finally reappeared in the late 1990’s. President Bush has staked out roughly the same ground, although the job creation he promises as a result of his tax cuts has not occurred. It will, Mr. Kerry says, if we cancel the most egregious Bush tax cuts and substitute incentives that encourage corporate hiring.
The public wonders. Years of layoffs, wage stagnation, outsourcing and now offshore contracting have made people skeptical. [Barney] Frank plays to that skepticism. So do a few others, the most important being Senator Edward M. Kennedy, a Democratic leader who in recent speeches appears to be trying to push his party back toward New Deal policies. The government job creation in his proposals would be coupled with much-needed public spending.
School and highway construction are examples. “Every billion dollars invested in highway construction produces 47,500 jobs,” the senator said in a speech. He added: “We must create new and meaningful jobs for all Americans. And we must do this by recognizing once again that government – an enlightened government – has an extraordinary responsibility to assist in this task.”

Food for thought.

13 comments on “Live by the Tax Issue, Die by the Tax Issue?

  1. Bonnie PA on

    I don’t think people mind taxes when there’s a belief that a large percentage of the money is well spent. Not all of it–we expect SOME graft and corruption–but some reasonable proportion of it.
    With this Bush, there’s such a strong sense that our taxes are not just being spent to line the pockets of the wealthy, but to actively take away life, liberty, and the persuit of happiness here and around the world.
    When that’s the case, Tax Day is very painful indeed.

  2. Buford P. Stinkleberry on

    Remember that in 93 Clinton proposed a “stimulus package” with specific infrastructure proposals that was along these lines…..the GOP fought it tooth and nail, and mod D’s did not come aboard. It died. Was only about 50 billion.
    These policies are only possible with large Dem majorities in both houses plus the WH.
    Has public opinion changed that much that this is now viable? don’t think so.

  3. Donald from Hawaii on

    Ron Thompson: “If you’re not happy with this website, by all means try something else.”
    You got it. Have fun. Current political polls sounds like a really relevant topic for you all to belabor seven months before the election. See ya.
    P.S.: Please don’t forget call the rest of us ignoramuses when your space shuttle lands.

  4. Maxcat on

    Mimikatz you are right on the money. But let’s not forget that younger people are not the one’s who go out in droves and vote. We all need to encourage everyone to vote this year. If more Americans would vote we could have a real revolution in this country. One that was for the people not the fat cats and their Washington hand puppets.

  5. Mimikatz on

    This is an important point to raise. I have wondered for over a year why the Dems didn’t propose public works or some other sort of job creation program. The post above is correct that it would go over better if tied specifically to important needs–such as (re)building school facilities, putting more cops/firefighters/emergency health workers on the street, transportation safety, etc. Also pollution prevention and energy independence, even highway programs. Kerry could tout specific programs, always saying they are good for job creation. I also agree that tying it to Iraq is good–billions to rebuild Iraq but not one dime for the US of A. It’s true I’m much older than many here, but I can’t see why gov’t stimulated jobs are so demeaned. I’m not talking about make-work or CETA jobs here, but good construction-type or first responder jobs. What’s wrong with that? It builds up our (depleted) social capital while putting money in people’s hands. Maybe it’s because the idea of social capital is foreign to younger people raised on the myths of individualism.

  6. Maxcat on

    Any job creation plan would be much more attractive and productive than the job creation policy that the bush adminstration has working now, that being War.
    I can never undertsand how the people of this nation could oppose a jobs program as a tax and spend liberal idea. What exactly do they think we are doing in Iraq? Spend and don’t tax. Try that with your personal bills and see where it gets you.
    Has anyone ever bothered to ask the question of why we couldn’t have put this kind of money and effort (manpower and $ in Iraq) into our own nation? Is it OK that we spend ourselves into the ground for these people yet our government can’t find it in themselves to create jobs (or help create jobs) for our own citizens?
    Wake up and open your eyes America.

  7. bt on

    Well, I cannot say I am surprised at what may be the lack of enthusiasm, even among folks who hang out at this forum, for the “government job creation” notion put forward in Ruy’s post. This is unfortunately very consistent with my experiences in conversations with people who, like me, are fortunate generally to have decent jobs–including self-described “liberals”.
    Maybe part of the lack of enthusiasm has to do with how the suggestion is framed, where it may sound to some that employment primarily for the sake of employment is the primary goal. A lot of the public seems to object to, or be unenthusiastic about paying for, what it perceives rightly or wrongly as “make work” government jobs programs.
    I’m inclined to think the government jobs approach might go over better if what is offered is a major federal initiative addressing an urgent national need that cannot proceed rapidly enough as a result of private sector efforts alone. The time may be as good as it will ever be to establish a goal of achieving energy independence (or at least independence from, say, Saudi and Iraqi oil supplies) within, say, 10 years, as several folks here had earlier suggested.
    If federal funding of such an initiative is required for us to ramp up much more quickly and give ourselves a real shot at reaching this goal, then surely the creation of many good jobs that would come with that is a subsidiary benefit that most of the public will not object to because they recognize the compelling importance of the goal.
    The response to those who object on the grounds that the private sector is handling this and would handle this better than “the government can” is several-fold. First of all, we document the case that the private sector is not moving nearly as quickly as it could with additional federal funding available. We explain which parts of this challenge are not profitable now and therefore must be either done or subsidized by the government if they are to be surmounted. And we point to the example of the mission to the moon as an example of how government not only can, but has, successfully propelled accomplishment of national goals much more quickly than would have been possible through private sector efforts alone.
    The case for such an initiative easily dovetails with a campaign argument that the current Administration is too hopelessly wedded to special oil interests to have the independence and vision necessary to set, and see through to completion, this urgent national priority.
    Think of how many people about to enter college now might opt for engineering careers tied to developing national energy independence if they believe there will be lots of good jobs available at the end of their studies because this is something the federal government is committed to make happen (even if ends up taking, say, 15 years).
    When Kerry gets asked during the debates what his plans are to deal with jobs issues, part of his response includes projecting the number of new jobs that would be created as part of this energy independence initiative (and perhaps other compelling broad-scale initiatives he may also want to offer). This is a response that is very tangible as policy responses go. It doesn’t require that some economic theory of questionable validity work out as planned.

  8. Buford P. Stinkleberry on

    Going back to the New Deal-style spending to create jobs? Americans suddenly believing that the government should spend more money? I don’t believe it. I’d need to see a dozen polls asking this specific question before I’m convinced this is viable among an electoral majority of the public.
    With this much evidence in now, it seems politically suicidal. It strikes me as a gambit that will excite the relatively few old school liberals at the expense of being way out of touch with the mainstream, as exemplified in the Jackson and Harkin campaigns.

  9. Donald from Hawaii on

    “The political theory of cutting taxes is that people will feel their taxes have gone down and feel generally better off. Therefore, if you cut taxes they will vote for you.”
    The political and military situation in the Middle East is on the verge of a meltdown, John Kerry appears to endorse (??!!?) George Bush’s approval of the Israeli land grab in the West Bank, an Iranian diplomat is shot to death in Baghdad while apparently trying to help mediate the standoff between U.S. forces and Shi’a militia in Najaf, Osama bin Laden taunts us from somewhere in the Hindu Kush Mountains, our military personnel face extended terms of duty in a volatile war zone — and you want to discuss political theory on tax cuts?

  10. David in Burbank on

    Perhaps it is enough that Republicans will say Kerry will increase spending to convince people that voting for Kerry will actually result in Government spending that will result in jobs — without Kerry having to actually say it.
    The argument for spending is too long to withstand soundbite editing AND if Kerry actually tried to say it, the right would be able to expand their attack from the likelyhood of “tax and spend” to an example of it. Kerry is right to not give them that ammunition. Now if Dean or Gore or Clinton (not Kennedy) would point out separately how government spending would create jobs . . . and the Republicans attacked them, well, that would just be more Clinton or Gore or Dean bashing … so long as the message gets out, eh?


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