Op-Ed: The Economic Debate We Should Be Having
NEAL CONAN, host:
Senator Bernie Sanders joined us last week to explain his opposition to President Obama's tax compromise with Republicans. The senator spoke on the subject for eight and a half hours on the Senate floor and argued the deal would increase the national debt and the gap between rich and poor Americans.
Washington Post op-ed columnist Michael Gerson wrote last week that Senator Sanders' view is far too simplistic. He also went on to castigate the right as equally shallow. The president signed the compromise into law on Friday.
As you look at it now, how does the tax deal affect you? Our phone number, 800-989-8255. Email, firstname.lastname@example.org. You can also join the conversation on our website. That's at npr.org and click on TALK OF THE NATION. You can find a link there to Michael Garson's column as well. It appeared in The Washington Post. And, of course, Michael Gerson also used to write speeches for President George W. Bush, and he joins us here in Studio 3A.
Nice to have you back on the program.
Mr. MICHAEL GERSON (Columnist, The Washington Post): Great to be with you.
CONAN: And I wonder, before we go to far, you actually think the compromise was a pretty good deal.
Mr. GERSON: I do. It was an achievement. It's mainly a negative achievement in that it avoids a contraction of the economy in January which no one really wanted. And it was, you know, had pretty broad bipartisan support. You don't want to increase taxes at this moment in particular, and most people agreed on that. And so I don't think it accomplishes much, but it avoids this self-inflicted wound.
CONAN: Yet, it also you said was instructive as you looked at the ideological debate on both sides.
Mr. GERSON: Right.
CONAN: And why don't we start with Senator Sanders, who joined us here last week.
Mr. GERSON: Well, it really did provoke an argument about the nature of social equality with Senator Sanders arguing - he's a self-described Democratic socialist. He doesn't, you know, object to that term - that American society is too unequal, and that redistribution is the key to social equality.
I do think that's too simplistic a perspective. If you look at what creates mobility in America that takes people out of poverty and brings them to the next stage, it's not just the distribution of money. It really is a set of skills, social capital and, you know, educational achievement and a lot of other things that are much more complicated than dealing with a top tax rate.
CONAN: Senator Sanders said it is basically absurd to be giving huge tax breaks to the richest people in the country, including many millionaires and billionaires, at the same time that we have a record-breaking deficit of $13.7 trillion. At the same time, we are ignoring many enormous problems facing the country, and he did mention education infrastructure and others.
Mr. GERSON: Well, that's true. But if you look at what's happening here, I mean, the economic theory of this tax break is just essentially trying to create some economic growth coming up in the new year. That was the president's intention. There was argument about the top rates, but it really is irrelevant to this question of social equality. How do you achieve that?
If you look at the Brookings mobility project - a really good project based at Brookings - they look at the three keys to getting people out of poverty, and they talk about it as a high school education or more, waiting till you're married to have children and then a third one which is the - I'm sorry. It's escaping me now, but there's a...
CONAN: I'm quickly skimming through here.
Mr. GERSON: Which - right.
CONAN: And married and work full time.
Mr. GERSON: Yeah, working full time. So, you know, I think a policy - a U.S. policy that focuses on mobility, it actually unites people in a certain way because, you know, clearly the goal here is to take people out of poverty, and what are those standards that allow people to advance in a society. And we have a problem, a mobility problem in America.
CONAN: Yet, the idea of extending these tax breaks for the wealthiest Americans struck not just Senator Sanders but many as unfair.
Mr. GERSON: Well, it was essentially maintaining the rates that we've had for quite a while. And, you know, you can argue about marginal tax rates. I guess my point was that that's not the real debate that most people face.
Right now, people feel like they're not able to get ahead in this economy. How do you help people move particularly from the lower-class families to the middle class? And America has less mobility among that group than nations like Finland and Sweden and others, which you wouldn't expect necessarily. It violates our self image. We're supposed to be a mobile society. If capitalism has inequality and no mobility, then it's just a caste system.
CONAN: And that's where you found some problems with the arguments on the other side of the ideological spectrum.
Mr. GERSON: Right. Well, I think on the right, sometimes the argument is as long as the economy is growing that mobility doesn't matter, you know, inequality doesn't matter. But it matters greatly because if you have social stagnation, if you don't have enough economic mobility, then you do have a class structure that comes out of capitalism. Inequality becomes a class system.
And so I think Republicans need to focus on these same things, about education and family and helping people develop wealth and skills in this economy. That's the hard work, but that's the real work of achieving social equality.
CONAN: There were also those who on it was interesting to see a lot of the arguments reversed, as some of the progressives who would be happy to vote for a stimulus bill objecting to increasing the national debt. And many Republicans who had characterized themselves as deficit hawks voting the other way.
Mr. GERSON: Well, we've really had two stimulus now. One of them are more Democratic-oriented stimulus, which had a lot of pent up spending from the Congress. And another one that was a more Republican-oriented stimulus that, you know, kept tax rates low and refunded a portion of the payroll tax and, you know, Republicans were more comfortable with that.
But pretty much everyone in Washington thought that we needed a stimulus. That was not really a matter of debate. This is not the time at least in the way the president and the Congress agreed to have a contraction of the economy in the coming year in the interest of deficit reduction. That really wouldn't help very much.
CONAN: Let's get some callers in on the conversation. Our guest is Michael Gerson, who is the op-ed columnist for the Washington Post. 800-989-8255. Email us: email@example.com.
Jay is calling us from Pleasanton in California.
JAY (Caller): Good day. I would say this tax cut affects me the same I'm affected when I buy myself a Christmas present with my own credit card. I really like opening it but I know a bill is coming in January.
CONAN: So you fear the deficit is going to be down the road?
JAY: Of course. We're kicking it down the can and we're not going to deal with it in an election year either, and that's what worries me. But I like opening the present, but I know I have to pay for it.
CONAN: All right, Jay. Thanks very much for the call. And Michael Gerson, he's got a point.
Mr. GERSON: He's does have a point. Eventually, you do pay for everything. But the reality here is, I think Congress made the calculation that timing matters, that we're recovering from a tremendous economic downturn, one of the most serious of recent times. And that you need to eventually get spending under control. But right now, you don't want to do it in such a way that it undermines economic growth and tax revenues, actually. We don't know which so they made the calculation that the timing was not right to pursue a major austerity plan.
CONAN: Let's go next to Aaron(ph), Aaron with us from O'Fallon in Illinois.
AARON (Caller): Hi. I wanted to question on the estate tax. I was following it and that seems to be one of the biggest concerns. And I wanted to know that by giving the Republicans the reduced rate of I think it's 35 percent now.
AARON: Well, how much in tax revenue is lost by that?
Mr. GERSON: I don't know the exact figure. I mean, it's a significant amount of money. It is limited in the bill to estates of $5 million or less...
CONAN: The first $5 million is exempted.
Mr. GERSON: ...is exempted. And then the upper rates kick in under those circumstances. But it is a you know, it's a case where Republicans have an ideological objection and have had for a long time to any estate taxes. They really feel like that's unjust form of taxation entirely, taking essentially inherited wealth and having the government redistribute it.
AARON: Yes. OK. Well OK. I was just kind of wondering the actual nominal amount on that.
CONAN: It is I don't have it in my hand either, but it is a significant, though, it's not going to solve the deficit by any stretch of the imagination.
Mr. GERSON: And it's paired they paired it in the plan and the president insisted on this with better treatment of the EITC to you know, for the poor, and tax credits, child tax credits. And it's, you know, mix bag. There's kind of something for everyone in this package. And that's one reason it passed with large majorities.
CONAN: Aaron, thanks very much for the call. Appreciate it.
AARON: All right. Thank you.
CONAN: Bye-bye. And let's see if we can go next to this is Glen(ph) and Glen with us from Tucson.
GLEN (Caller): Hi. How are you doing? Thank you for having me on the show.
GLEN: And my question is about the reduction in the payroll tax until next year. I'm getting close to retirement age and I want to know what the Congress' opinion was of what benefit that does people that are potentially going to be on Social Security. This is essentially going to eliminate long-term growth, you know, the money coming in for Social Security.
CONAN: I think the calculation is that Social Security was going to be find until, I think, 2016. And now, some people fear that may be reduced because of this payroll tax cut. Michael Gerson?
Mr. GERSON: No, I think that's exactly the case. I mean, we have a situation where the American debt problem, our long-term debt problem is in many ways an entitlement problem. It's a problem with Social Security to some extent, but mainly Medicare and Medicaid, which is the largest unfunded commitments in our budget.
And so, you know, providing this kind of holiday was a Republican idea from the first round of stimulus. It's a very efficient way to deliver tax relief. It gives it to people who are going to use it. It's - you know, it's an effective stimulus in lot of ways. I think economists would agree with that. But there's a long-term cost to all of this. And, you know, the stability, our financial stability depends on eventually getting some kind of deal on entitlements. And that is going to be politically very hard.
CONAN: In the short-term, though, I'm not sure that Glen's retirement is immediately threatened.
Mr. GERSON: No, in fact, I think they made the calculation that, you know, neither Social Security or Medicare are in an emergency state right now. The problem is if you don't start to address those issues, they get harder to address in the future.
GLEN: Isn't this the first attack on Social Security, where the Republicans want to give us this and it's going to be, next year let's do it another year because we're in a recession? And then the next thing it's going to be is, we really don't need Social Security, let's put all your money in the stock market.
(Soundbite of laughter)
CONAN: Again, one of Senator Sanders' arguments.
Mr. GERSON: Now, well it could be. But I think the serious Republican approaches on this - you'll find people like Paul Ryan, the new head of the Budget Committee...
CONAN: In the House.
Mr. GERSON: ...in the House coming in. What they want to do is means test Social Security, which would make the system actually more progressive. It would say if you're a millionaire or a billionaire, then you're not going to get the same benefits as everybody else. So the serious Republican plans out on the table right now are means testing, not undermining it for everyone.
CONAN: Michael Gerson, op-ed columnist for The Washington Post. You can find a link to his article, "The economic debate we should be having" at our website. Go to npr.org, click on TALK OF THE NATION. You're listening to TALK OF THE NATION from NPR News.
And I wonder if I could, just having had that phone call, engage you on the trap arguments that we've heard from both sides. Some Democrats say, yes, we've just voted on a whole new round of stimulus and a whole new round of debt. Come the new Congress with Republicans controlling the House of Representatives are going to say, now we must go after deep cuts in Medicaid and Medicare and Social Security, indeed.
Mr. GERSON: Well, the Republican House is going to have deep cuts in their proposed budget. I mean, 20-some percent cuts in discretionary spending, it's going to be...
CONAN: Though those aren't discretionary.
Mr. GERSON: Right. No, that's true. The question is how they engage on entitlement issues. I think Republicans are going to be very hesitant to do that in the next two years. They don't have a president who would support it. It would be a tremendous risk for them. So I think they're kind of laying the groundwork right now, the arguments for eventual entitlement reform, which, you know, are very hard for anyone.
If you look at the options on the table, none of them are easy for either side. But, you know, if we're going to avoid the eventual fate of Greece, I think a lot of people are convinced, a lot of economists are convinced, that we have to reduce those unfunded liabilities.
CONAN: And the Republican trap plan, we voted for something that's raising the debt - that's a problem. And of course, if this stimulus works, well, a lot of people are going to go back to work, the economy is going to be better and President Obama will be re-elected in 2012.
Mr. GERSON: Well, the president's political interests are, in this case, exactly the same as the country's interests, which is a good thing. You know, if the economy turns around, many of his political problems will fade. But the measure of that is really going to be unemployment. I mean, right now, we've had growth in the stock market, we've had growth in corporate profits, but employment has been very stagnant. That's a lagging indicator. But that's going to be the main one that people are concerned about.
CONAN: Let's see if we can get another caller in on the conversation. And let's go to John(ph), and John's with us from Rochester in New York.
JOHN (Caller): Good afternoon.
JOHN: I - my proposal is this. I - not only should we maintain the Bush tax cuts, but I think in the next session of the Congress, we should look at decreasing the tax rates for the upper income levels even farther. I think when they call our tax system of a progressive tax system, where the tax rates for the wealthy are higher, I think is a misnomer. I think it should be called regressive.
If you're paying more in taxes, your rates should be lower. It goes - the economies (unintelligible) prevails, where the more over something that the -you buy in volume, more of a discount you should get. So tax rates should actually be less for the upper income levels, and that'll stimulate economic growth to a great extent.
Now as far as dealing with the budget, I think you've got to go into cutting government spending starting with maybe the Defense, Department of Education, Department of Energy, the bureaucracies that are out there. That's where the problem is.
CONAN: So John, we need inequality? We need fewer taxes on the rich and more on the middle class?
JOHN: Well, a lower tax rate on the rich because I think in the end that will stimulate more growth. I think it's unfair right now. I think the current tax system is regressive.
CONAN: And John, I'm not - we heard your argument. I just want to give Michael Gerson a chance to respond.
Mr. GERSON: Sure. I think there is a number of Republicans out there that are proposing to reduce corporate tax rates, which would seem very counterproductive if you're trying to add jobs. I think there's very few out there that want to see a more aggressive system than we currently have, although there are some advocates of a flat tax in America.
CONAN: And it will be very interesting to see the debate on the defense budget, which John also mentioned.
Mr. GERSON: And the secretary of defense has been preparing for those cuts for over a year now, talking about where they're permissible, where they're not. He's been very smart about positioning with the Congress about where some cuts might come.
CONAN: Washington Post op-ed columnist Michael Gerson, a former speech writer for President Bush. He's currently a fellow at One, an organization that advocates for the fight against extreme poverty and global disease. Kind enough to join us today here in Studio 3A. Appreciate your time, as always.
Mr. GERSON: Great. Thank you.
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