Navigating the Roller Coaster Ride that is American Politics
Bloomberg released a poll today that says Hillary Clinton is the most popular national political figure in America. Two-thirds of Americans hold a favorable view of Secretary Clinton, that's the highest approval rating of any national figure. Add to that, 1/3 of Americans think the country would be better off had Hillary won in 2008. The poll suggests that there's quite a bit of buyer's remorse on the part of liberals and independents. 
Disgraced former Democratic Congressman Anthony Weiner resigned over a personal scandal involving lewd photos he sent of himself to several young women over Twitter. A special election was held in the New York 9th Congressional district to replace him and despite the huge Democratic majority of voters in the district, Republican Bob Turner won with 54% of the vote. Political analysts believe that Turner's surprise win could foreshadow a referendum on Democrats and President Obama in 2012.
President Obama's "American Jobs Act" is essentially Stimulus 2.0. He's asking for roughly $450 Billion to be used for infrastructure projects (plus the Infrastructure 'Bank'), tax cuts, extensions of unemployment benefits, and local government aid. The emphasis hasn't changed much - like the American Recovery and Reinvestment Act before it (Stimulus 1.0), over half of the proposal is dedicated to tax cuts.
The only thing to take from last nights Republican debate is this: Watching Mitt Romney and Rick Perry insult each other was A LOT of fun!!! Mitt challenged Rick's record in Texas, his comments about the Social Security "Ponzi Scheme" and a host of other things. Rick attacked Mitt on 'RomneyCare", the quality of his business experience, and the lack of substance during his time as Massachusetts Governor. A funny moment: When Rick was touting that he had created 1 million jobs in Texas as Governor, Mitt reminded him that he had advantages like a state with no income tax and large oil and natural gas reserves. Mitt said crediting Rick with all of that would be similar to saying Al Gore 'invented' the internet. 
Marcus Siegel, a partner in Locke Lord Strategies,and former executive director of the Democratic National Committee from 1974 to 1977, wrote a fantastic Op-Ed for the Washington Post about improving the political discourse in this country by changing our 2-Party Primary system. It is a fascinating read, and does not come across as partisan at all!
As constant as the Wind, political sex scandals are always happening. There was a bit of a lull after the Anthony Weiner scandal, but summer is nearly over and we needed a new one. This one comes from our friends in Puerto Rico.
Ed Hornic from CNN wrote a little blurb about how all of the early polling for the Republican Presidential nomination is pretty much useless, since pre-primary polling is almost always wrong. Right now, the world (i.e., the media) is all about Governor Rick Perry, who has catapulted to GOP front-runner in the most recent Gallup Poll. However, if you look at polling taken around the same time before the primaries for both parties, who was leading in the polls doesn't match up with who ended up winning the nomination.
I'm using the image of Rick Perry being touted as a potential front-runner for the Republican nominee to illustrate a point: Our Presidential Selection process is broken. Not to disparage Gov. Perry - he has a decent record in Texas and seems to be a genuinely nice person. However, on a political level, the idea of a Perry Presidency is hilarious. Another Texas Governor - a good ol' boy with a drawl in his voice - pandering to social conservatives and winking sympathetically at the majority of the electorate. Does this not look familiar?
America’s economy is struggling. The jobs picture is bleak. The stock market is in chaos. What is Washington’s prescription: a vacation?
The House & Senate went on vacation shortly after the debt ceiling crisis was averted. Now, President Obama is taking some R&R. What the White House dubs as a “Working Vacation”, it appears that our elected officials have exhausted themselves so much that they are taking a break from work – until after Labor Day.
In the mean time, our Nation’s unemployment rate hovers around 9.2%. Economic output is down overall. European debt issues and uncertainty in the U.S. have caused wild gesticulations in the stock market. There is a lack of confidence in our elected officials. CNN’s latest polling shows that a majority of Americans will not re-elect their current congressional representatives – the first time that has happened since the question was first asked 20 years ago. I would guess that this extended vacation won’t help.
I do not want to complain too much about Congress and The White House taking a break. It is common for the legislature and executive branch to take vacations. If people recall the summer of 2009, when Congress took its vacation there were all those town hall meetings of people screaming about the President’s Health Care Plan. These vacations generally give our elected officials the chance to meet with their constituents at home. However, this doesn’t appear to be THAT type of vacation.
As the country teetered near the brink of default, Congress and the President battled it out over spending cuts. What emerged is a half-hearted plan that may help limit the growth of our debt, but won’t do ANYTHING to pay down the existing debt. Interest on our existing debt is the single largest expense of the Federal Government – more than defense, Social Security, Medicare/Medicaid, or anything else. Congress is taking a break because it achieved something that doesn’t solve the problem?
However, there appears to be some news from The White House. President Obama will be making a speech after Labor Day to unveil his plan for job creation and fixing the current economic picture. From the parts that have been leaked to the press, it appears to be a hodgepodge of things the President has already requested: an Infrastructure Bank, extensions of unemployment benefits, job-training assistance, payroll tax holidays for workers and businesses – things that were negotiated away in last minute budget deals with Republicans in the House.
While I applaud the President for not giving up on these ideas, it seems to me to be “Too Little, Too Late.” Not to mention, politically impossible.
An Infrastructure Bank is an idea that has been tossed around for a while. In theory, it would be an extension of what was started in the Stimulus bill – money set aside for rebuilding America’s infrastructure with an emphasis on things that can be started right away. The Bank would be funded by closing some loopholes in the Federal Tax Code, thus not adding to the deficit. An initial $50 Billion dollar investment would get the ball rolling, with continual funding of $30-70 Billion a year as the taxes collected from the loophole closures fluctuate over time.
Not a bad idea, but the political will to close enough loopholes to raise $50 Billion a year doesn’t exist on the Republican side of the aisle. This would amount to a 50 Billion dollar tax increase – something I believe will not garner ANY Republican support.
The President is also expected to push for another extension of unemployment benefits. The Republicans will only agree to an extension if it is accompanied by cuts of equal or greater value. Depending on how long of an extension the President pushes for, it could cost anywhere between $10-70 Billion. It isn’t clear where the Republicans would request the cuts to be made, but I would guess they would go after the budgets for the new Consumer Protections Bureau (which they openly hate) or Medicare and Medicaid (which they openly want to end).
A payroll tax holiday is something the Republicans would be willing to support. However, the President will more than likely request that the holiday be paid for by increasing revenues elsewhere in the tax code, specifically ending some corporate deductions that are wildly popular with the oil and natural gas industries. Republicans have and will continue to block any attempts at raising revenue through corporate taxes, and therefore this idea will likely be dead on arrival.
There may be more to the President’s plan than has currently come to light. However, given the current political climate, it is doubtful that the President’s plan will become law – at least not in its current form. The gridlock that plagues Washington is constant, but over the past few election cycles we’ve seen an almost cult-like atmosphere of ideological entrenchment.
I’m all for party loyalty, but not at the expense of the well-being of our Nation. Republicans are going to have to accept that taxes will have to go up. Democrats have to accept that entitlement programs need to be reformed. The two sides of our political spectrum need to meet in the middle, instead of pulling and pulling until the “middle” is closer to their side.
The random and unnecessary partisan bickering over false crises has distracted too long from our larger problems. People need jobs. We need to grow the economy. We need to deal with our long term structural debt. These are the issues we need to focus on as a Nation, and our leaders need to work diligently in order to address them.
After Labor Day, any additional vacation time will not be tolerated until we have a plan.
I missed the Republican Debate last night, but I am going to watch it today and give my take on it. In the mean time, pundits from all sides are posting their re-caps of the debate. I came across this one from Todd Graham. He is the director of Debate at Southern Illinois University, Carbondale. He has coached his teams to national championships, and has been honored with the Ross K. Smith national debate coach of the year award. He wrote a short blurb about how he thought the recent debate was "fun."
CNN has released a poll taken in the wake of the debt ceiling debate. Apparently, a majority of Americans now believe that their congressional representatives should NOT be re-elected. This is the first time a majority of Americans have felt that way about their specific congresspeople since the question was first asked 20 years ago. It also shows that the GOP and the Tea Party have fallen out of favor with a majority of the American Public, while the Democrats have managed to maintain their standing - now 14 points higher than any other group. If you're a statistics geek, like me, you'll enjoy reading the poll!
Liberals are always talking about how the wealthy need to pay their “fair share” of income taxes in this country. I consider myself to be a liberal, but this argument is a stretch, to say the least. The wealthy DO, in fact, pay their fair share. Those in the upper echelon of income earners pay a substantially larger chunk of income in taxes than the rest of us. As of 2010, the top 5% of wage earners in this country pay 40% of the income taxes collected in this country. The average multi-millionaire pays nearly $1.5 million in income taxes each year – more than 150 times the amount the average American pays. And, this is counting all of those sweet deductions that the wealthy get to take advantage of.
That being said, I still believe that the wealthiest among us should pay more in taxes because they can afford to. For me, it isn’t about the percentage of income that is a deciding factor – it is the actual available income, after taking into account real life expenses.
For an example, we’ll look at the 2010 federal income tax and compare a family of four making $60,000 a year and another family of four making $2,000,000 a year.
The middle class family, at $60,000 a year in joint income (Schedule Y-1), will be in the 15% bracket. They will pay a total of $8,165 in federal income taxes. Not an insurmountable amount, but that is only part of the overall financial burden. According to the Department of Housing & Urban Development (HUD), the average middle-class American family spends roughly 35% of pre-tax earnings on housing (rent or mortgage, insurance, utilities, etc). That means our middle class family will be spending $21,000 on housing costs for the year. That lowers their available income to $39,000 a year. Add to that the $8,165 in federal income taxes, their total available funds drop to $30,835. Of this amount, roughly 28% (according to the Department of Commerce) - will go to the “other” taxes, state, local, property taxes, sales taxes, etc. – that’s $8,634. Now, the middle class family has $22,201 left. Factor in food, car payments, 2 dependent children, trying to save for the children’s college education and for the parents’ retirement, and you’re looking at a pretty tight financial situation.
The wealthy family, at $2,000,000 a year in joint income (Schedule Y-1), will be in the 35% bracket. They will pay a total of $765,582 in federal income taxes. That is A LOT of money, but considering the total income, they are still sitting pretty with over $1.2 million dollars which makes the next part VERY disappointing. HUD estimates that the average total housing costs for people who make over $1,000,000 in this country hovers between 1-8% of pre-tax earnings, generally because folks with this much money can buy their homes outright. No mortgage payment = lower overall costs. We’ll slap this family with the 8% number and they’ll be paying $160,000 in housing expenses. They’re still over $1,000,000 in available funds. Also, the average in “other taxes” the Dept. of Commerce says those who make over $1,000,000 pay out of their remaining total: 5%. Our wealthy family has $1,074,418 after federal taxes and housing costs. Subtract 5% of that – which is $53,721 – and they are left with $1,020,697 for everything else.
Now, this is a very simplistic comparison, and doesn’t take into account the multitude of federal tax breaks and incentives both families are able to take advantage of. My point with this comparison is to explain how the current tax system is easier for the wealthy to handle than it is for the middle class.
There is a lot of discussion in Washington about reforming America’s tax code. Many have argued that, in exchange for the elimination of most tax incentives and loopholes, we would be able to lower the overall tax rate to 25% or less, only use 3 tiers, and still generate more revenue. I believe that could work, and make the system fairer overall.
I would institute a 3-tiered tax rate that started at the poverty level, plus 25% (as of 2010, that would be $13,952 for individuals or $27,195 for a family of four). Anyone at that level or lower would pay no federal income tax. From that level to $100,000 for individuals or $250,000 for a family, an income tax of 10% would be levied. From $100,001 for individuals or $250,001 for a family to $1,000,000 for individuals or $2,500,000 for a family, an income tax of 17.5% would be levied. And for all income over $1,000,001 for individuals or $2,500,001 for a family, an income tax of 25% would be levied.
No deductions would exist for the top bracket and the upper half of the middle bracket. The lowest bracket and the lower half of the middle bracket would be allowed to make some deductions, especially for big ticket items like college, mortgage interest, etc. Also, things like capital gains and estate inheritance would be rolled into general income – without any special tax. So, if Aunt Mildred dies and leaves you $10,000 or you cash out $300,000 in stock options – simply add that amount to your year’s earnings and whatever bracket you land in, that’s what you’ll pay. To me, this seems like a much more predictable and fair way to levy taxes than our current system.
Of course, there are a host of things to consider. And, this issue is so complex that it needs and fully deserves a long, thoughtful, and thorough debate in Congress and with the American public. Both sides have legitimate ideas about the tax code, and both sides should be granted the right for their ideas to be discussed and debated.
Taxes are a burden, but a necessary one. The more we can do to make the system fairer and more effective, the better off we will be as a nation.
