On The Political Season and Tax Proposals

Bloomberg just put out a piece (Clinton Tax Plan Seen Costing 697,000 Jobs) wherein we get these two juicy paragraphs:

“The Democratic presidential nominee’s tax plan, which includes proposals to raise taxes on multimillionaires and impose a “financial risk fee” on banks, would change economic behavior enough to reduce U.S. gross domestic product by 2.6 percent over the long run, according to a study prepared by the Washington-based Tax Foundation. In that slightly smaller economy, wages would be 2.1 percent lower, the report said.

The Clinton campaign disagreed with the analysis and said the Tax Foundation’s methodology was flawed. Clinton’s plan will “result in stronger growth and more jobs, not the opposite,” said Julie Wood, a campaign spokeswoman.”

These polar opposite quotes capture everything that is wrong about politics these days. Nobody cares about the truth. It’s a race to the most eyeballs, no matter the casualty, which more often than not is the truth. The truth is usually somewhere in between. The truth rarely hangs out at the extremes. It is gray, not white or black. It’s messy.

As far as I can see, what we ultimately have here in terms of choices are two approaches to our tax code. One is a known quantity. It proposes raising taxes on those who can “afford” it, in the spirit of “fariness” and moral obligation. It is also an approach that lumps billionaires and people making $150,000/yr together in one big happy caviar-filled mega yacht – as if they share lot lines in South Hampton and spend the afternoon test driving each others’ Lambos. The meme that we’re only going to raise taxes on the super rich is perhaps the greatest political fraud of the last hundred years. They never only raise taxes on the super wealthy because the numbers don’t add up. It’s just math.

The other proposal is the disruptor. This proposition would broaden the tax base and lower revenue, at first. It means the Federal government would have fewer resources, the States would have a wealthier tax base and the private sector would experience an increase in aggregate demand. We are so far removed emotionally from the fundamental fact that this country was founded on the principal of limited government (the currency of which is a combination of legal rights reserved for the States and limitations on the purse we afford the Federal government) that we can’t process the basic fact that money is fungible and the economy is a reflection of who controls the decisions made around allocation of financial resources. Government is an irrational actor, paying almost no attention to the inefficiencies caused by malinvestment. If you grant government a larger role in the allocation of financial resources, you stifle competition, reduce the multiplier effect and slow growth. It’s just logic.

So here we are: an obscene, rude New Yorker who wants to revamp the existing tax code and a career, consummate DC insider who wants it all to stay the same (and who has made hundreds of millions of dollars milking the system). Are we smart enough to process the fact that we have all the evidence we need to conclude that the way things are is not working? Have we become so intellectually warped that we buy into the idea that lowering taxes doesn’t grow the economy more than raising taxes? The war isn’t on the middle class but on the upwardly mobile; the middle class is a casualty of limited growth and a convenient talking point for the political class that seeks first to preserve their power and then to govern, if it doesn’t conflict with their tee-time….