Bill Clinton's tax-cut comments weren't that bad
President Clinton pauses as he listens to President Obama during a campaign event at the New Amsterdam Theatre June 4, 2012, in New York. / AP Photo
(The New Republic) Republicans have worked themselves into quite a state of giddiness over comments by Bill Clinton (Tuesday night) and Larry Summers (Wednesday morning) that seem to favor extending all the Bush tax cuts when they expire on January 1. As Mitch McConnell told reporters, "Bill Clinton's remarks, and then Larry Summers remarks -- it's pretty obvious that the economy needs the certainty of the extension of the current tax rates for at least a year."
Uh, no, it's not. Even if you take literally Clinton's and Summers' imprecise musings, it's hard to see how you get from their statements to McConnell's. For one thing, neither endorsed McConnell's timetable on the length of a possible extension -- McConnell was just stating the GOP position and implying they supported it. Likewise, neither said anything about how the economy needs an extension of all the tax cuts to avoid perilous uncertainty. That, again, is just GOP agitprop dressed up as an economic theory.
Has Bill Clinton lost his touch?
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Both were simply making the straight-forward Keynesian argument that it's a bad idea to take money out of the economy, whether through spending cuts or tax increases, when you're in a fragile recovery. In Summers' formulation: "The real risk to this economy is on the side of slowdown, certainly not on the side of overheating, and that means we've got to make sure we don't take gasoline out of the tank at the end of this year." Clinton made essentially the same point: "What I think we need to do is find some way to avoid the fiscal cliff to avoid doing anything that would contract the economy now." Nothing here about how tax-rate uncertainty paralyzes consumers and businesses, as McConnell would have it.
A more important question is whether Summers and Clinton believe it's dangerous to let even the upper-income tax cuts expire, or whether they believe only the tax cuts for families making under $250,000 really matter. Summers and Clinton subsequently claimed it was the latter, which is Barack Obama's position. Republicans, like House Speaker John Boehner, are claiming this is a flip-flop, and that Clinton (at least) meant the upper-income tax cuts must also be extended.
But there's no good reason to believe this is the case. Both Summers and Clinton believe that upper-income tax cuts are pretty useless for stimulating the economy (since the affluent can spend just fine without tax cuts). If you don't think a tax cut is stimulative, then there's no reason you'd think letting it expire would damage the economy. The reason the Republicans have either missed this, or have chosen to ignore it, is that their political strategy for enacting tax cuts has always been to lump together stimulative tax cuts for the middle-class with non-stimulative tax cuts for the wealthy while claiming the entire package boosts the economy. But just because Republicans employ this spin, and may even believe it, doesn't mean the rest of us should. (Set aside the Keynesian logic they militantly oppose in other contexts.)
The only shred of cover that Clinton gave McConnell-Boehner et al was when he added: "They will probably have to put everything off until early next year. That's probably the best thing to do right now." There's a hint of a normative judgment here -- the implication that temporarily extending all the tax cuts is a substantively good thing to do. But when you understand the political context, it seems much more likely that Clinton was making a tactical point than a normative one. After all, even if you believe that only the middle-class tax cuts should stay, you know the GOP won't go along with that. Which leaves you with the option of extending all of them or none of them come January 1. Clinton, having decided that extending none would hurt the economy, was voicing a preference for the alternative. But saying you prefer one of two likely outcomes is very different from saying it's the right outcome in some cosmic sense. Indeed, if you listen to the full back-and-forth on this, Clinton says that the point of an extension is to buy time for cutting a longer-term deal, not that the upper-income cuts are worth preserving in and of themselves, even temporarily.
In the end, the big problem with Summers' and Clinton's tax-cut riffs isn't that they endorsed the GOP's economic approach; it's that they subtly undercut Obama's leverage. That is, Obama's best chances for cutting a favorable deal on taxes is either: 1. Convincing Republicans he'll veto anything other than a middle-class-only extension and getting them to negotiate before January; or 2. Actually vetoing something other than a middle-class only extension and forcing the GOP to negotiate for the tax cuts' return. Given that, it's not exactly helpful to have two prominent Democrats say that vetoing tax cuts is a bad idea. But that's a lot different from saying upper-income tax cuts are a good idea on the merits, which is what the GOP is claiming they said.
Noam Scheiber is a senior editor at The New Republic, where he writes about politics and Obama administration economic policy. The opinions expressed in this commentary are solely those of the author.
Combined with Jeb Bush's scolding of members of the GOP, it's actually an encouraging day where debate and dialogue can actually thrive in a democracy!
Bill Clinton wasn't offering a viable solution - which he's completely capable of offering. He was siding with Republicans.
Don't put him on a pedestal for something he's not doing. He has no moral obligation to provide solution's to today's problems since his people chose not to vote for his wife for President ...
But there's no good reason to believe this is the case. Both Summers and Clinton believe that upper-income tax cuts are pretty useless for stimulating the economy (since the affluent can spend just fine without tax cuts). If you don't think a tax cut is stimulative, then there's no reason you'd think letting it expire would damage the economy. The reason the Republicans have either missed this, or have chosen to ignore it, is that their political strategy for enacting tax cuts has always been to lump together stimulative tax cuts for the middle-class with non-stimulative tax cuts for the wealthy while claiming the entire package boosts the economy. But just because Republicans employ this spin, and may even believe it, doesn't mean the rest of us should. (Set aside the Keynesian logic they militantly oppose in other contexts.)
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In the interest of truth and accuracy, I believe these statements are likely inaccurate because it's not that rich people don't spend their money - it's that they don't spend as high a proportion on life necessities like food and rent.
Instead they're more likely to be the landlord who buys the home that people pay them to rent.
Which could potentially cause the housing market to stagnate.
And stocks might also go down if they have less money to invest in the market.
I would imagine Oprah isn't stuffing money in her mattress - it's just been shown that people who only make like $20,000 a year, since they don't have a lot left after buying life's necessities, tend to spend, and spend right away, so the 'multiplier' might be a little higher.
It's not the cause of the recession though - Slick Willy and company gave a whole sector of jobs away to China ... whoever makes the worlds' goods will have the world's growth - that still holds true today. No manufacturing, no economic growth - don't be blaming Oprah for paying less tax than before for the recession ... that's just not factually accurate ...
Larry Summers is a fool, but Bill Clinton would know that expiring tax cuts aren't contractionary per se IF tax cuts rise and spending does too to the same degree - it's redistributive.
Watch your back Barack!!
The corporations keep having the government they run cut their taxes and not have them pay for ANYTHING they do. And then the ignorant Sheeple wonder why we have no money. And they want to make it worse.
This is a truly pathetic and failed country, America. It makes me literally sick.
fitshu, if you have never been married and have no children then you have no idea what it costs to raise a child and or support a spouse, there is a reason for those deductions. If I were single without children my finances would provide far greeater spending power and in some ways are jealous of your freedoms.
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What is the reason for those deductions again? More population? It's an anachronism. Worse that subsidies for oil companies. If you bring kids into this world that you cannot afford to support it's nothing short of child abuse, and and using the tax code to force your neighbor to bail you out has no honor.
And he also knows that the fake "free market" is a fraud and that he was a part of that with the disastrous Corporation written "Free" Trade Agreements.
While Bowles-Simpson tax reform would make the Bush tax cuts permanent (which Republicans want), it would also raise revenue through the tax code to help pay down the deficit (which Democrats want).
What we need in America is a second political party to compete with the Too 1% Party. There are a few decent progressives in the Dems Party that could lead a second party.
How much longer are people going to be happy knowing they are pretty much just all working to enrich the millionaires and billionaires?