Obama's Tax Plan Would Increase Equality

After the American Century

President Obama has been forced to spend much of his first month in office dealing with Bush's mistakes, particularly economic mistakes. With the submission of a new budget proposal, however, he has begun to present his own vision. He does not want to spend all his time being a fireman putting out Republican fires. Rather, he wants to redesign the economic fabric so that the economy is stronger and more resilient.

In the short term, Obama is spending lavishly to try to escape the mess Bush created. That is the gigantic budget one reads about. But longer term Obama wants to return to the tax system of that most dangerous radical, Dwight D. Eisenhower. During Ike's presidency (1953-1961) taxes on the wealthiest Americans were high, and although adjusted they remained so during the 1960s as well.

During these years the real income of the middle class (in other words their income once adjusting for inflation), rose steadily. After the weak economy of the 1970s, however, Ronald Reagan pushed through dramatic reductions in the tax rate on the wealthy, which began a sizable redistribution of wealth that has lasted for almost thirty years. I lay out the basics of this change in Contemporary American Society (161-166). Just before Reagan lowered taxes on the wealthiest Americans, the top fifth of all US citizens received 43.7% of all income, while the bottom fifth got just 4.3%. In other words, the top fifth made ten times as much as the bottom fifth. By 2005 the poorest fifth had sunk to just 3.4%, while the top fifth received 51.3%. The top fifth made fifteen times as much as the bottom fifth.

What about the middle 60%, the second, third, and fourth fifth? During the same 25 years all of them, the entire middle class, lost out to the wealthiest fifth. In short, between 1980 and 2005, fully 80% of all Americans saw their share in the nation's wealth drop.

With the collapse of the Reagan-Bush economy and its favoritism for the rich, it is time for a new tax code. Something radical. Something that Dwight D. Eisenhower and Harry Truman each supported. That something is familiar to anyone in Scandinavia, and is called progressive taxation. The object of public policy is not to take money from the poor and middle class and give it to the rich, but to give all classes an equal chance to increase their stake in society.

Expect to hear howls of protest from the Republicans and cries of socialism and fears of big government, and the usual rhetoric of the right. For Obama wants to reverse the Reagan revolution. He wants not just to end the Bush tax cuts that threw the budget into deficit years ago, but also to raise taxes on the top fifth of society, in order to pay for the sweeping changes he wants in energy policy, education, and medical care. Over the next decade, Obama wants to get almost $1 trillion in new taxes from the wealthiest Americans. In case you want to know, they are defined as people with incomes of more than $250,000 a year. (More than 1.4oo,000 DK).

Obama is also hoping to save some money through cuts to the Defense Department, partly from winding down the engagement in Iraq and partly through cutting spending on programs that have outlived their usefulness with the end of the Cold War. I wish him luck but am not too optimistic about this phase of his plans. One would have thought that the fall of communism might have reduced defense spending drastically. Back in c. 1990 there was lots of talk of a "peace dividend." There was talk of spending more money on infrastructure, notably decaying bridges and roads. But there was not much of a peace dividend then, and Obama's first defense budget is larger, not smaller, for the two year period of 2009 & 2010, weighing in at a gigantic $1.3 trillion.

Realistically, Obama is more likely to move in the direction of fiscal responsibility via higher taxes on the rich. He will probably be accused of class warfare, but he is trying to end the pillaging of the poor that began under Ronald Reagan. Obama is rejecting "trickle down" economics. He wants the US government to take more responsibility for health and education, and to give Americans back the growth and equality they had in the prosperous 1950s and 1960s. No doubt he will be called a radical and a socialist for trying to do this. Few sensible people ever mistook Dwight D. Eisenhower a socialist.

For a Nobel Prize-winning economist's positive evaluation of the Obama budget, click here.

Was McCain the Bomber Pilot a Hero? Republicans and Vietnam

After the American Century

The Republican Party has never come to terms with the Vietnam War, as the McCain candidacy underscores. For as Ronald Reagan once put it, Vietnam was a "noble cause," to considerable right-wing applause. Standing at the then new Vietnam Veterans War Memorial, he declared, "who can doubt that the cause for which our men fought was just?" I can. What Reagan said was pseudo-patriotic nonsense. Which part of the Vietnam War was noble? Was it noble to pretend that the Vietnamese War was about communism, when it began as a nationalist uprising against the French colonial power? Was it noble to concoct a "domino theory" to justify the war, when area specialists at the time knew that it was not true? (Indeed, once the US lost the war, other nations did not "fall" into communism.) Was it noble to overthrow Diem and then support an unpopular South Vietnamese military regime? Was it noble to spray chemical defoliants, notably Agent Orange over large parts of the nation, poisoning both the habitat and US soldiers on the ground? Was dropping napalm on civilians noble? Was support for a wealthy landowning class against landless peasants a noble democratic aim? Was it noble to round up South Vietnamese into compounds and force them to live there rather than in their ancestral villages? Was it noble to be allied with a regime that at times shot prisoners, that was known to mistreat its prisoners, and even to throw them alive out of airplanes? Was it noble to bomb North Vietnam, attacking not only military targets but cities as well, killing thousands of civilians?

Let us focus on that last question, because the future Republican candidate John McCain was flying over North Vietnam in 1967. What was he doing there when he was shot down? People focus on McCain in a prisoner of war camp, but forget to ask why he was there, or whether the US war in Vietnam made any sense. Yes, he was shot down. Yes, he was mistreated. Yes, he suffered. But the Democrats have been reluctant to ask the real question: What was McCain's role in that unjust war, which was condemned by most European nations? Did he drop agent orange on agricultural lands? Did he drop napalm on villages? Did he bomb women and children? And just as importantly, what does McCain think of the Vietnam War today? Does he agree with Reagan's absurd idea that the war was a noble cause? Does he think that massive strategic bombing was a successful tactic? A morally defensible tactic? A good tactic in future wars? If so, then why did the US lose that war? Why did the US lose the hearts and minds of the Vietnamese people? Has McCain, have the Republicans, any new ideas, or will they keep trying the same failed military "solutions"?

What does McCain think of the "shock and awe" bombing of Iraq? Does the United States want a president who jokes about bombing Iran, by intoning a Beach Boys tune as he warbles, "Bomb, Bomb, Bomb, Bomb, Bomb Iran?" This might sound like a joke, but the threat of strategic bombing is the essense of McCain's foreign policy. There is nothing heroic or noble about dominating the air space over a nation, whether Vietnam or Iraq or Iran, and carpeting it with deadly bombs. That is why McCain is a dangerous choice for president, just as the Republicans are a dangerous party to entrust with foreign policy.

After eight years of George Bush, where in the world is the US in a sronger foreign policy position than it was in 2000? Not in Europe. Not in the Middle East. Not in China. Not in Latin America. Where is it more popular than in 2000? It is hard to make a case for many places. John McCain has a millitaristic conception of foreign affairs, and he is accompanied by a vice-presidential nominee who thinks the Iraq War is a holy mission.

Vietnam was not a noble cause, but an enormous mistake. McCain and the Republicans have never understood it, and remain prisoners of a distorted sense of history. That is why they are unfit to hold power.

Republicans and Democrats: changing regional support

After the American Century

The Republicans have changed a great deal in the twentieth century. Back in 1901 they were led by Teddy Roosevelt, and he won reelection in 1904 with scarcely any support in the South. That was solidly Democratic, and remained so until the 1960s. Then in 1964 Barry Goldwater did poorly in the general election, but won several states in the Deep South. Richard Nixon took note, and made a concerted effort to win in that region, where Republicans had been anathema since the Civil War. The Republicans long were despised below the Mason-Dixon line, as the party of Lincoln and Reconstruction.

The sea-change that followed Nixon's 1968 triumph in the South was astonishing. It was as if two men who had been wrestling furiously until they emerged from their struggle wearing each other's clothing. The Republicans ended up switching regions, as it were, and today the so-called "red states" they tend to win are mostly the old slave states. Lincoln would be astonished to find that his home state of Illinois is solidly behind Obama, the Democrat, while his party is very strong in Mississippi and Georgia. Likewise, the Democrats are now strong in the North where they seldom could win electoral votes for generations after the Civil War.

By meeting in Minneapolis, the Republicans are trying to keep their brand national. At the party's birth in the 1850s it was strong in the Middle West, and stood for free labor against the slave South. But it has not been the party of affirmative action or the equal rights amendment. In my childhood, Republicans often called themselves "the party of Lincoln." One hears this seldom now. Where Black Americans once overwhelmingly voted Republican, they now vote almost entirely Democratic, often over 90%. Women likewise tend to vote more for Democrats, but by less dramatic margins. In 1992, had only men been allowed to vote, George Bush would have been reelected. Had only whites been allowed to vote, Bush also would have won. Blacks and women made Clinton president.

So the party that abolished slavery lost its Black support, moved its center of power from North to South, and embraced religious conservatism. Yet it also remained the party of businessmen. Ronald Reagan was able to remain popular with these somewhat contradictory constituencies, and he also kept the Republicans strong in California. Today, the Republicans are weak there, as well as in New York, however, and they tend to be stronger with businessmen in older, heavy industries than in the high-tech and computer areas.

Is the party still national, or has eight years with George Bush cemented its Southern identity? Certainly, it seems unlikely to win much in the Northeast or the West Coast. Holding the convention in St. Paul is designed to keep its brand visible. Indeed, the hope is that they might win Minnesota. Neither McCain nor Palin has Southern roots or a drawl, and clearly the GOP thinks it can be viable in many Midwestern and Western states. At the same time, Obama is attempting to compete in every state, hoping to break or weaken the Republican hold on such places as Nevada, Montana, North Dakota, Indiana, North Carolina, and Virgina, and keen to win back Florida, if possible.

Will the 2008 election be a watershed event like that in 1968? Probably not. But it may begin a process of realignment, as both parties try to win in new areas. Conceivably, if Obama does very well, the Republicans could lose much of their western base, and be reduced to a regional, southern core. Alternately, if McCain does very well, the Democrats might be reduced to the party of the Northeast and the West Coast, with little in between.

If the two parties remain roughly in their present positions, however, things will hardly be so neatly regional. The New York Times electoral map currently suggests that if the election were held tomorrow there would be 251 electoral votes for Obama, 229 for McCain, and 60 too close to call. Real Clear Politics thinks twice as many electoral votes are up in the air, a total of 125. Both agree, however, that six states are balanced on a knife edge and could go either way: Michigan, Ohio, Colorado, New Mexico, Nevada, and New Hampshire. Not surprisingly, on Labor Day, Obama was in one of the largest of these: Michigan.

Obama and McCain on Energy

After the American Century

John McCain and Barack Obama have both announced energy programs. McCain says that he is more "green" than Bush on the issue of global warming, but is this proclaimed difference really visible? To the casual observer, McCain and Obama might look similar on this issue. Both want to reduce US emissions of methane and CO2. By 2050 McCain says he will bring them down to just 40% of the 1990 level; Obama expects to reduce them ever further, to a mere 20%. These promises deal with the situation 42 years from now. Conceivably Obama might still be alive at that time, but such projections are not too meaningful by themselves.

A bit more concretely, both candidates like the idea of trading CO2 credits. This is not a new idea, and has been pushed by American representatives at climate meetings for years. The idea of turning pollution into a market, where the "right" to pollute is bought and sold appeals to US politicians because it makes the environment a part of business. Rather than set limits and then fine people for exceeding them, the notion is that corporations and cities will cut back on pollution if they get paid to do it. However, McCain wants to give away the initial quotas, at least the first time. Obama wants to sell pollution quotas and used the 150 billion dollars generated that way to support research into alternative energies and the like.

In line with this, Obama's goal is, by 2025, to produce 25% of all US electricity from wind, solar, biomass, and other sustainable sources. McCain has not set any definite goal, but claims that he supports alternative energies. In fact, he has a poor voting record in this regard.

With regard to ethanol, it is much the same story. Obama has a definite goal, while McCain "supports" the idea, but has no quota and in fact wants to stop subsidizing ethanol production. In other words, he says one thing but will do another.

Both candidates are realists, and can see that it is impossible to do away with coal-burning plants any time soon, but each wants to see "clean coal technology." Both also accept that atomic power can be an important source of electricity, but Obama is distinctly less enthusiastic about it. McCain sees atomic power as a good way to halt global warming, and admires the French for setting up such a comprehensive atomic power system, which supplies more than 75% of the nation needs.

The greatest differences between them lie in the area of curbing demand and conservation. Obama wants to convert all federal buildings to zero emission facilities and to give homeowners incentives for better insulation. McCain has no plans in this area at all. Likewise, Obama would give credits to utilities that managed to reduce customer demand, so they could profit not form growing the market but from shrinking it. McCain has no such plans.

Overall, Obama has made a greater commitment to alternative energy and to reducing demand. McCain sees nuclear plants as alternative energy, and seems not to understand that the most effective way to reduce oil dependency and CO2 emissions is to reduce energy use itself.

Overall, Obama has the more ambitious plan. McCain apparently thinks the market will solve the problem of global warming with the right incentives and leadership. Obama wants the government to invest directly in alternative energy R&D and set definite goals for conversion from the old system to a new, less polluting one. Where the Bush Administration at first questioned the reality of global warming and never made many efforts to change US energy use, McCain would at least rhetorically change the party line.

The basic McCain program looks quite a bit like that of Gerald Ford in 1975 . He claimed that if the US only would build a lot more nuclear plants and burn more coal, the nation could achieve energy independence by 1986. Obama's plan is more like that of Jimmy Carter, who also stressed alternative energies and greater conservation. Note that the public did not like Carter's plans, as they called for self-sacrifice and "the moral equivalent of war."

In 1980 Ronald Reagan proved far more popular with his energy plans, which basically denied that there was any real shortage. As he put it then: "Those who preside over the worst energy shortage in our history tell us to use less, so that we will run out of oil, gasoline, and natural gas a little more slowly. . . .But conservation is not the sole answer to our energy needs. America must get to work producing more energy. The Republican program for solving economic problems is based on growth and productivity. Large amounts of oil, coal, and natural gas lie beneath our land and off our shores, untouched because the present Administration seems to believe the American people would rather see more regulation, more taxes, and more controls, than more energy." This was irresponsible nonsense, and yet the public embraced this message. Under Reagan the country denied that there ever had been an energy crisis or that it could ever come again. As he declared during a speech in Cleveland, "The truth is America has an abundance of energy. But the policies of this administration consistently discouraged its discovery and production." He promised to "get America producing again" and concluded, "Every available resource we have must be used to free us from OPEC's domination." 28 years later, the Reagan promises of energy abundance ring rather hollow. But don't be too surprised if McCain's rhetoric begins to shift toward the winning Reagan formula. [In fact, McCain and Bush both began to do this two days after this Blog was published. See my posting for 18 June.]