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President Obama announces $3 trillion deficit plan
U.S. President Barack Obama speaks in the Rose Garden at the White House in Washington on Sept. 19, 2011.
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Kai Ryssdal: It was once more into the Rose Garden for President Obama this morning for his big deficit announcement: $3 trillion or so out of the deficit over the next 10 years, and another $1.5 trillion in new taxes targeting mostly the rich.
At which point a note must be made of the political realities behind the proposed policies. Republicans say they're a non-starter. But we asked Marketplace's Nancy Marshall Genzer to do the due diligence all the same.
Nancy Marshall Genzer: President Obama wants to apply what's become known as the Buffett Rule: Tax people like billionaire Warren Buffett a lot more -- something Buffett himself proposed. The president says everyone, including millionaires and billionaires, has to pay their fair share.
Barack Obama: This is not class warfare. It's math.
OK, Mr. President, let's do the numbers.
Well, we really can't. Three of every thousand taxpayers are millionaires. But the president doesn't say exactly how much more they would pay in taxes. The Buffett Rule doesn't lay out a minimum tax rate for Buffett and his buddies. The president just says the rule is a guiding principle.
Roberton Williams is an economist with the Tax Policy Center. Asked to grade the president's math, Williams gives him an incomplete.
Roberton Williams: And the reason he gets an incomplete is he hasn't completed the answer. He has the outlines of an answer, but not the details necessary to determine exactly what he's saying.
The president did say clearly that he would end the Bush tax cuts for families making more than $250,000 a year. That would bring in $800 billion of the president's proposed $1.5 trillion in new taxes.
Maya MacGuineas heads the Committee for a Responsible Federal Budget.
Maya MacGuineas: The bulk of his new taxes come from letting those Bush tax cuts expire. Now keep in mind, that's actually already the current law.
MacGuineas says the president has to go way beyond that and change the tax code. Warren Buffett has complained that he's taxed at a lower rate than his secretary. That's because he makes most of his money from investments, only taxed at 15 percent. So if we raised the tax rate on investment earnings to say, 25 percent, would that fill in our budget hole? Nope, according to Roberton Williams.
Williams: The bottom line, though, is there's not that much income at the top end to solve our budget problems. We'd have to raise rates very high on high-income folks, and it's unlikely that's going to happen.
Hmm. That leaves the rest of us who aren't millionaires. Williams and MacGuineas say we might have to give up some of our favorite tax deductions. Something the president left out today.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
Having read Mr. Buffett's biography (Snowball), Mr. Buffett readily admits to denying to provide aid to those who send him requests for money. Although Mr. Buffett is railing against the tax loopholes that the rich use, he himself is using them. I seriously doubt that Mr. Buffett is using the standard deduction like so many Americans. Mr. Buffett and his company, Birkshire Hathaway, are also currently fighting a multi-million dollar suit with the IRS which claims the company owes. Mr. Buffett, I appreciate your desire to help redistribute the wealth. But I believe that you should remove the plank for your eye before worrying about the speck in everyone else's.
When Republicans cry "class warfare", I think some historical perspective is needed. Clinton era rates for the highest tax bracket isn't that extreme. The Buffett Rule puts and end to loopholes exploited by man who earn more and $1 million annually.
For visuals on tax rates, see the charts on the link below.
Nancy: I think you're asking the wrong questions.
If a politician paints in broad policy brushstrokes, as Obama is doing at this stage with his tax-the-millionaires principle, it is nearly meaningless to scrutinize his policy for details. Asking a tax policy expert to "grade his math" is not as useful as asking high level policy questions, such as "is it a step in the right direction?"
You could look at a bar graph of contributors to our $14 trillion debt, such as http://www.nytimes.com/interactive/2011/07/28/us/charting-the-american-d..., for example, and make general observations regarding the presidential administrations during which most of the debt was accumulated: $6.1 trillion under George W. Bush, $2.4 trillion so far under Obama, and $1.9 trillion under Reagan. Most of Obama's debt was due to stimulus spending and recession, while most of Bush and Reagan's debt was due to voluntary war, increased defense spending, and voluntary tax cuts. So one could ask: what can we learn from this? Should we cut taxes, or raise taxes?
The statement "there's not that much income at the top end [among the richest] to solve our budget problems" from Mr. Williams deserved scrutiny. You're here allowing your sources to answer the wrong questions, as if the question were "will taxing millionaires solve the entire budget problem?" Wrong question!
You let Mr. Williams's statement "there's not that much income at the top end" go completely unchallenged. I am flabbergasted. Fact-checking the President is reasonable, but the "facts" against which you check have to be accurate. Plug "top 1 percent" into any search engine and start reading. There are many ways to measure income disparity, and by all accounts the top earners are taking in enormous amounts. Call it "income" or "interest" or whatever you want, it's money and they're collecting lots and lots and lots of it. Amounts that 99% of us can't even imagine. (What would *you* do with a million dollars every week?) In the 1950s and 1960s, there was a whole series of progressively-increasing income tax rates, topping out as high as 91% depending on year. Income disparity was the lowest in this century (Reich and others) and the economy was fantastic because there was a healthy middle class that bought stuff. President Obama failed to explain that taxing super-high earners causes them to stimulate the economy by diverting income into charitable contributions and other deductible activities because, like all of us, they don't want to pay it to the government. You should have called him on that. Just because a source says something doesn't make it true. Broadcasting a statement from a source that so obviously has no credibility calls the entire report into question.
If Warren Buffet feels he's not paying enough in taxes, nothing's stopping him from paying more than the government says he owes. But in reality, the quote-"rich" actually pay far more than their fair share, while the truly rich pay little in taxes because they earn so little *income*.
And even if the rich weren't paying their fair share, and we were to raise their tax rate to the sky-high levels liberals salivate over, this would have three effects. First, it would create a serious incentive to *not* earn that kind of money, reducing the tax base. Second, it might bring us a few hundred million dollars closer to balancing the budget each year---when balancing the budget is only the first step we need to take toward paying down the debt. And third, most worryingly, it would put money in the government's pocket, which history has shown legislators and bureaucrats alike tend to spend, even if it's already been allocated to some better purpose. We can't solve our problems by raising taxes, and token budget cuts are hardly enough.
Your opening suggests that the $1.5B in taxes is separate and above the $3B in deficit reduction. Bad work.
Pages 62-64 of the President's proposal give an itemization of the tax reform component of his proposal. Claiming that he hasn't explained because you haven't studied it is bad work, too.
I don't listen to NPR to hear recycled pablum. Do real reporting, or go hang out on television.
Nancy,
You failed where so many before you have already gone.
Your story about Obama's jobs proposal has merit, not to solve the entire budget crisis, but to shine a light on a path to putting people back to work. You mixed the two, and for that you failed, since listeners now believe Obama's plan to raise $800B through tax increases on the rich is supposed to fix the budget shortfall. That's not accurate, and you deserve to know how we feel.
The story may be where will Obama raise the other $700B to offset his $1.5T spending. That's your call.
