Why Tax Rates Must Rise for the Top 2%

December 2, 2012
Members of Congress raise their hands

Members of Congress raise their hands (Photo credit: @mjb)

I spent this morning watching the Sunday morning network TV pundits discuss tax pledges and the fiscal cliff that promises to plunge the US in another recession.  This would have been a colossal waste of time if that cliff did not have such serious consequences. This is the first part of a 2 part blog post. The second will deal with how New Media’s popularity in emerging demographic voting blocks is changing the balance of political power. Without taking a position on who is right in the US tax policy battle (it would not matter if I did) the tax rate on the top 2% must increase. Here is why.

I Pledge Allegiance, To A Policy

Schoolchildren and government officials routinely pledge allegiance to the flag of the USA, and to the Republic… When a congressman takes office, he/she also takes a pledge to fulfill the duties of the office. These pledges are traditional methods to publicly proclaim and personally acknowledge intentions.  Until this past election, Congressmen always pledged on a Bible to ensure God was also aware of their pledge. The problem with pledging allegiance to the flag or to the duties of an office arises when these are thought by the pledger to conflict with a previous pledge.

We elect people to represent us.  We don’t elect policies.  The advantage to electing people is that we are placing confidence in more than a set of policy beliefs. We are placing our confidence in the character and intellectual capabilities of an individual who while professing some biased point of view on policy that agrees with our own, can negotiate with other elected viewpoints, adapt his/her positions to unforeseen events, and craft policy to meet changing circumstances. Otherwise, why would we need Congressmen?  The populace could just vote en masse on legislation.  No need for analysis or nuance, no grey areas, just black and white policy commandments.

There’s nothing wrong, and everything right, when candidates declare their policy preferences, and work in good faith to achieve those. Lately, the country appears to be run based on absolute pledges to a policy, not to the nation or the office.  That’s a problem. Congress’ approval rating is at an all time low.  The tax policy pledges made prior to elections have resulted in obstruction, paralysis and competitive disadvantage. School kids don’t pledge allegiance to a tax policy.  What congressmen have been reluctant to admit by way of their legislative actions is that any pledge they’ve made to a policy does not supersede a pledge to the country or office. The date of a lower-grade pledge relative to the date of inauguration should not matter. Naturally, a good congressman wishes to maintain the integrity of their promises.  They also understand the real consequences to their careers when special interest groups, feeling betrayed by good sense and legislating, place a conspicuous scarlet letter on their voting record and mercilessly work all media channels 24×7 to pummel the chances of his/her re-electability. Since this is all constitutional, the special interest group (SIG) known for the tax pledge succeeded in elevating the tax policy issue to a supra-national status.  This worked for them in past election cycles, but now is working against them.  A recent Bloomberg Business Week article highlights the chinks appearing in the tax pledge armour, as more Republicans refrain from signing or adhering to the pledge.

The Tax Pledge Has Limited Conservatives’ Options

Since the days of the “read my lips” pledge, the single policy tax SIG in question has enjoyed increasing power due to the popularity of its position within a commanding segment of the voting populace. Unfortunately for the SIG, and despite redistricting that only served to temporarily affect the power base, the composition of America’s electorate has shifted dramatically. The SIG’s own penultimate elevation of the tax policy question necessarily thrust it into being as the central tenet of the recent Presidential election – supply side versus demand side, Friedman versus Keynes, Romney versus Obama – and the conservative SIG’s side lost. What this means is that President Obama, while showing responsible legislative flexibility by saying he is not wedded to all of his policy detail, now has an obligation to his voters to follow through on at least this central point in his campaign.

By making no higher taxes on the rich such an extreme position, conservatives painted themselves into a corner on that one issue. Any hope of escape from this corner has been closed off even further by the previous legislation known as the “fiscal cliff”.  Congress has kept tax rates from increasing by obstruction.  Regardless of a continuance of the “do nothing” congress, tax rates will now increase January 1. Unless the liberal side forgets that it won the recent election, vote for it or not, tax rates for the wealthiest will now increase. So, there is no way for conservative congressmen to adhere to their no tax increase pledges.  In hindsight, one has to wonder if President Obama was ever really running against Romney, or if he was shrewdly running against the true conservative power broker, Grover Norquist.

Having studied economics, I understand the point that supply siders make when they see this as producing an economic catastrophe, and I see the point that Keynesians make when they rely on historical evidence to the contrary. Regardless of who is right, the larger issue is the first one made in this blog post. Allowing pledges to any policy to lock in congressmen of any party by superseding pledges to the office or the country is absurd.  This is why, in my opinion, tax rates must increase for the top 2%. I believe that the raising of taxes on the top 2%, done either by vote or by abstention, will begin to break the back of single policy SIGs whose actions overreach on influence, unduly constrain elected officials, and result in mediocre government.

The power of the no tax SIG was derived from the constitutionality of its existence, its simple and singular focus, its policy support proportional to the overall voting populace, the wealth that sustained it through donations, and its mastery of the media as either an electoral lubricant or an electoral sledge hammer. The only thing that changed in this election cycle is the proportional popularity among the electorate. Once conservatives come to grips with that reality, I predict we will see conservative media promoting more minority, youth and progressive female community spokespeople on their airwaves to try to change hearts and minds rather than attacking or ignoring alternate perspectives from the safety of an overwhelming voting block. One effective way this has been done for centuries is through religion, and we can expect to see this divide and conquer lever applied again with some success. The alterability of the newly empowered segments of the electorate stands to be seen, but any logical presumption would forecast at the very least a slow and uncertain success rate for the conservatives in coming years.  Some folks in several southern states have seen the writing on the wall, and quickly passed figurative resolutions for secession.

A Possible New Future for Supra-National Single Policy SIGs

We are deliberating on very powerful constituencies that will not go whimpering into obsolescence. It won’t be long before the newly re-elected President is viewed as a lame duck and obstruction resumes under a new gaggle of political rhetoric. It is also doubtful that the wisest constitutional scholar could find a way to reconcile the first amendment right to expression with a ban on SIGs that seek policy pledges from candidates. So absent that, how can the country return to the days of negotiated compromise amongst its legislators? Once again, we return to what has changed – the policy support proportional to the overall voting populace. To answer a question with a question, why is Grover Norquist the only one able to create a powerful legislative SIG around a single policy question?

Demographics being what they are, we can now unequivocally state that the Latin American proportion of the US voting electorate has come of age and come to power. It is safe to say that for the next 50 years no politician in a state with any not insignificant degree of diversity can be elected by taking a position that unfairly disadvantages Hispanics. Immigration reform is a given now.  All it would take is for one national Latino American figure to emerge with his/her own two sentence pledge that states that a candidate will not pass any legislation that does not promote Latinos’ economic advancement, and you will see a new formally consolidated power base emerge. The existence of another single policy voting block based on economic benefits for its members, its very existence alone, will in and of itself serve to reduce the first SIG’s predominance. The same threat to re-electability can be carried out by exposing pledge-breakers on Hispanic radio and TV, and most importantly on social media, to frighten politicians, embolden the group and consolidate its voting block power in order to maintain the pledge.  In other words, the same thing the single policy tax SIG now does. How difficult would it be? As you’ll see in part 2 of the blog post, New Media popularity counts in order to create support. I have no idea where Shakira stands on issues, but as an example, young, Latin and female Shakira has 19 million Twitter followers. The Republican Speaker of the House only has 386 thousand. Lawmakers would then need to adhere to two unconditional economic pledges, in order to sustain their political careers.  So, will two wrongs make a right?

Why stop there?  Why don’t senior citizens form a policy SIG around the single policy question of reducing Social Security and Medicare benefits? I am surprised that the AARP are not more effective at this.  They have the basics, but appear to fall short on the media end. What about forming a single policy SIG around the college age voting population’s need for low cost college loans and grants?  Students prefer to get their news and communicate via social media anyway and would likely be less affected by efforts to sway them on traditional media. A bright student could create a definitive pledge and become very powerful virtually overnight. With enough of these single policy pledges, elected officials will not be able to turn left or right for fear of tripping over prior policy pledges. They will be reduced to voting only on the most basic and universal legislation like national celebrations and parades. (OK, an exaggeration here) At some point, congressmen will have to re-adjust their priorities on pledges and begin to govern as reasonable representatives and not just as policy whores. (sorry) Again, the very existence of more of these pledges will serve to diminish and demote any and all policy pledges to their proper level: a politician’s known policy bias and not a be all and end all governing commandment. Does it really have to come to this?

I’ll publish the second part to this blog, dealing with New Media’s effects on politics and the emerging demographic voting blocks, later this week.