GOP Candidate Economic Plans and Income Inequality

Rick Perry's alternative 20% tax plan came out the same week as the Congressional Budget Office report "Trends in the Distribution of Household Income Between 1979 and 2007".

Of the three current top polling candidates, Cain's 9-9-9 plan does the most to accelerate income inequality. Mitt Romney was criticized by Newt Gingrich for capping capital gains tax exemptions. He responded that the middle-class has had a tough go of things under Barack Obama.

Inequality Chat

Paul Solmon, who I remember entertainingly explained the role arbitrage played in the 1987 Black Friday stock fall, followed his PBS NewsHour series with a Twitter chat on 10/28/11, which is re-organized and somewhat translated into English below. I apologize for deleting comments that Solman did not address but it was helpful for the sake of a coherent Q&A.

Without getting into arguments about whether or not the United States Government taxes too much or spends too little, this independent voter is primarily interested in two issues. How does income inequality affect the ability of the private sector to function?

Question: Why a series on economy inequality?
Solman: I think it's the most important economic issue of our time, has been for years. Can America Dream, US survive inequality like Gilded Age, '20s?

JRRuss67: What happened in mid-70s to cause the gap to widen so much?
Solman: Lots: Globalization (cheap labor) I. Deregulation. Diminished influence of unions. Big boost came from '80s with "tax reform."

Question: Why feature Libertarian Epstein? Don't they get enough air time?
Solman: Maybe, but not from us. I thought he made his case so blatantly, viewers could evaluate it for themselves. Disagree?

tniblett: How have we convinced ourselves that inequality is good for USA?
Solman: Because it's in the interest of the economy's winners to champion the notion that they deserve what they get?

tniblett: True, but why is it in the interest of economy's losers to believe it?
Solman: A puzzle why economy losers believe it. But polls now suggest we increasingly DON'T believe inequality is good for economy.

Question: Doesn't inequality always contribute to inequality or repression?
Solman: No, inequality doesn't ALWAYS contribute to political instability or repression. But it doesn't seem help either one & if wide enough.

tkmalone: How does concentrated wealth affect consumer spending? More money on fewer individual needs, food, houses, cars, etc.?
Solman: Concentrated wealth hurts consumer spending because wealthy save a higher percentage of their income. Much higher.

Question: Why not "income disparity" instead of "inequality," which implies something wrong, INequitable?
Solman: Because "inequality" is a clear and true description? Would you prefer "income asymmetry"? Folks would feel even better.

Question: It seems the corporations have written off consumer demand and are still making profits?
Solman: US corps are selling more and more abroad. That's presumably why the US market has gyrated so because of events in Europe, China.

norrisj: 12th grade economy class here. We are concerned about equal opportunity vs. equal result.
Solman: "Equal opportunity" sounds great. But if only some folks have marketable skills in this economy and others don't, then what? Can those of us with skills that aren't "marketable" opt out of this market in ignorance, deceit and obedience? Aside from unemployment? The grim truth is, choices are to opt out via downshifting (living with folks? At Zucotti Park?) or getting the skills. Opportunity inequality based on marketable ability. Needs to be role for folks with limited ability, be it factory or massage.

policylink: How do the coming racial demographic changes play into this debate? US will be majority people of color by 2042
Solman: I don't know. You'd think poorer minorities would vote for equality policies, wouldn't you?

AFWorkforce: People need choice. Many people feel like they are looking at glass ceiling and shackled to job
Solman: Yes, hard to move if you can't sell your house or are terrified that if you quit your job, you won't find another.

BerylSchewe: How do we widen the chances for equal opportunity without increasing entitlements?
Solman: Why "entitlements"? How about real jobs that need doing, done by sidelined Americans? CCC anyone?

norrisj: What would you propose for equality policy? Income cap? Tax the rich? confiscate?
Solman: Taxing the wealthy seems such an obvious starting point. Top tax rate under Wilson: 77%; FDR: 94%. Today: 35%!

mediacodex From London: Isn't raising opportunities for lower classes more important a focus than on lower inequality?
Solman: Yes, focus on job opportunities for the low downs but can it be done without investing in them? Who will invest but high ups?

bwmcr: How do we begin to showcase that economic policies that increase equality are not socialist, and gaining acceptance.
Solman: FDR was accused of being a socialist and, compared to what had preceded him, perhaps he was.

DgwilsonDave: What about putting fees on fossil fuels and emissions and rebating equally per person?
Solman: Charging the true cost of negative externalities like pollution is basic economics. But wouldn't do much to affect inequality.

bwmcr: How about tax breaks for companies that have more equal pay like Ben and Jerry's? Reward socially-mindedness.
Solman: It would be very difficult to legislate. Got to be easier to tax the wealthy. And if government owns, to pay top dogs less.

tsheely67 Why does such a high percent pay NO federal tax? Wouldn't more stakeholders insist on less waste?
Solman: Interesting point. Flat taxers say simple is better. But you can have simple and progressive both. Check out original tax form.

JohnMesserly: Paul, recall when you did your first story on it?
Solman: For PBS Boston, inequality stories in early '80s. For NewsHour, "Upstairs, Downstairs" in '87. Reported "Hourglass economics" in '89.

Rick Perry's "Cut, Balance and Grow Plan" Alternative 20 Percent Flat Tax

Rick Perry's "Cut, Balance and Grow Plan"

Rick Perry proposed an optional 20% flat tax that preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and increases the standard deduction to $12,500 for individuals and dependents.

The Economist features a selection of evaluations.

An independent voter may agree with Reihan Salam's characterization in National Review that "Rick Perry’s proposal is not a flat tax. Rather, it is an alternative maximum tax or MAXTAX."

It would likely ease compliance costs for top earners but, as Len Burman writes in Forbes, "Millions of middle-income taxpayers will have to figure their taxes two ways to figure out which plan is better for them."

There are also the usual questions raised about how much revenue would be raised, what the deficit impact would be, and what would be cut in order to balance the budget.

Rick Perry, Flat Tax, and Inequality

Rick Perry's "Cut, Balance and Grow Plan"

Rick Perry proposed an optional 20% flat tax that preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and increases the standard deduction to $12,500 for individuals and dependents.

The Economist features a selection of evaluations.

An independent voter may agree with Reihan Salam's characterization in National Review observation that "Rick Perry’s proposal is not a flat tax. Rather, it is an alternative maximum tax or MAXTAX."

It would likely ease compliance costs for top earners but, as Len Burman writes in Forbes, "Millions of middle-income taxpayers will have to figure their taxes two ways to figure out which plan is better for them."

There are also the usual questions raised about how much revenue would be raised, what the deficit impact would be, and what would be cut in order to balance the budget.

It's coincidental that Rick Perry's plan came out the same week as the Congressional Budget Office report "Trends in the Distribution of Household Income Between 1979 and 2007".

Of the three current top polling candidates, Cain's 9-9-9 plan does the most to accelerate income inequality. Mitt Romney was criticized by Newt Gingrich for capping capital gains tax exemptions.

Inequality Chat

As to the implications of inequality, Paul Solmon followed his PBS NewsHour series with a Twitter chat on 10/28/11, which is re-organized and somewhat translated into English below.

Without getting into arguments about whether or not the United States Government taxes too much or spends too little, this independent voter is primarily interested in two issues. How does income inequality affect the ability of the private sector to function?

Question: Why a series on economy inequality?
Solman: I think it's the most important economic issue of our time, has been for years. Can America Dream, US survive inequality like Gilded Age, '20s?

JRRuss67: What happened in mid-70s to cause the gap to widen so much?
Solman: Lots: Globalization (cheap labor) I. Deregulation. Diminished influence of unions. Big boost came from '80s with "tax reform."

Question: Why feature Libertarian Epstein? Don't they get enough air time?
Solman: Maybe, but not from us. I thought he made his case so blatantly, viewers could evaluate it for themselves. Disagree?

tniblett: How have we convinced ourselves that inequality is good for USA?
Solman: Because it's in the interest of the economy's winners to champion the notion that they deserve what they get?

tniblett: True, but why is it in the interest of economy's losers to believe it?
Solman: A puzzle why economy losers believe it. But polls now suggest we increasingly DON'T believe inequality is good for economy.

Question: Doesn't inequality always contribute to inequality or repression?
Solman: No, inequality doesn't ALWAYS contribute to political instability or repression. But it doesn't seem help either one & if wide enough.

tkmalone: How does concentrated wealth affect consumer spending? More money on fewer individual needs, food, houses, cars, etc.?
Solman: Concentrated wealth hurts consumer spending because wealthy save a higher percentage of their income. Much higher.

Question: Why not "income disparity" instead of "inequality," which implies something wrong, INequitable?
Solman: Because "inequality" is a clear and true description? Would you prefer "income asymmetry"? Folks would feel even better.

Question: It seems the corporations have written off consumer demand and are still making profits?
Solman: US corps are selling more and more abroad. That's presumably why the US market has gyrated so because of events in Europe, China.

norrisj: 12th grade economy class here. We are concerned about equal opportunity vs. equal result.
Solman: "Equal opportunity" sounds great. But if only some folks have marketable skills in this economy and others don't, then what? Can those of us with skills that aren't "marketable" opt out of this market in ignorance, deceit and obedience? Aside from unemployment? The grim truth is, choices are to opt out via downshifting (living with folks? At Zucotti Park?) or getting the skills. Opportunity inequality based on marketable ability. Needs to be role for folks with limited ability, be it factory or massage.

policylink: How do the coming racial demographic changes play into this debate? US will be majority people of color by 2042
Solman: I don't know. You'd think poorer minorities would vote for equality policies, wouldn't you?

AFWorkforce: People need choice. Many people feel like they are looking at glass ceiling and shackled to job
Solman: Yes, hard to move if you can't sell your house or are terrified that if you quit your job, you won't find another.

BerylSchewe: How do we widen the chances for equal opportunity without increasing entitlements?
Solman: Why "entitlements"? How about real jobs that need doing, done by sidelined Americans? CCC anyone?

norrisj: What would you propose for equality policy? Income cap? Tax the rich? confiscate?
Solman: Taxing the wealthy seems such an obvious starting point. Top tax rate under Wilson: 77%; FDR: 94%. Today: 35%!

mediacodex From London: Isn't raising opportunities for lower classes more important a focus than on lower inequality?
Solman: Yes, focus on job opportunities for the low downs but can it be done without investing in them? Who will invest but high ups?

bwmcr: How do we begin to showcase that economic policies that increase equality are not socialist, and gaining acceptance.
Solman: FDR was accused of being a socialist and, compared to what had preceded him, perhaps he was.

DgwilsonDave: What about putting fees on fossil fuels and emissions and rebating equally per person?
Solman: Charging the true cost of negative externalities like pollution is basic economics. But wouldn't do much to affect inequality.

bwmcr: How about tax breaks for companies that have more equal pay like Ben and Jerry's? Reward socially-mindedness.
Solman: It would be very difficult to legislate. Got to be easier to tax the wealthy. And if government owns, to pay top dogs less.

tsheely67 Why does such a high percent pay NO federal tax? Wouldn't more stakeholders insist on less waste?
Solman: Interesting point. Flat taxers say simple is better. But you can have simple and progressive both. Check out original tax form.

JohnMesserly: Paul, recall when you did your first story on it?
Solman: For PBS Boston, inequality stories in early '80s. For NewsHour, "Upstairs, Downstairs" in '87. Reported "Hourglass economics" in '89.

Is Jon Huntsman too Reasonable to be a Republican?

Jake Tapper of "ABC News This Week" started off his interview with Republican presidential candidate Jon Huntsman by quoting Tim Pawlenty: “‘What I brought forward I thought was a rational, established, credible, strong record of results, based on experience governing, a two-term governor of a blue state, but I think the audience, so to speak, was looking for something different.’ Isn't Governor Pawlenty describing the same problem you're having on the campaign trail right now?”

Jon Huntsman was making his debut on a Sunday news show during a week when the full-time host, the president, and Congress were on vacation.

After a week when most major news outlets had played Rick Perry’s sound bites about the treasonous Fed chairman Ben Bernanke, the questionable theory of evolution, and the uncertain causes of climate change, Huntsman was able to elbow his way into the ambient light of the media spotlight, not with a bold ill-considered remark but with a tweet.

“To be clear, I believe in evolution and trust scientists on global warming. Call me crazy.”




Interview Transcript | Link to Full Interview

Huntsman's Views On:

Perry’s Scientific Views:
“I think there's a serious problem. The minute that the Republican Party becomes the party -- the anti-science party, we have a huge problem. We lose a whole lot of people that would otherwise allow us to win the election in 2012.

Perry’s Bernanke Treason Statement:
“And every time we have these sideshows take place, finger-pointing and name-calling, it takes us that much further off the ball, which is fixing our core in this country, is getting our economy fixed and creating jobs.”

Michele Bachmann’s Promise of Gas Under $2.00 a Gallon:
“You know, I just -- I just don't know what -- what world that comment would come from, you know? We live in the real world. It's grounded in reality. And gas prices just aren't going to rebound like that.”

Republican Candidates' Refusal of Debt Ceiling Deal:
“You can imagine -- even given the uncertainty of the marketplace the last several days and even the last couple of weeks -- if we had defaulted, the first time in the history of the greatest country that ever was, being 25 percent of the world's GDP and having the largest financial services sector in this world by a long shot, if we had defaulted, Jake, this marketplace would be in absolute turmoil. And people who are already losing enough as it is on their 401(k)s and retirement programs and home valuations, it would have been catastrophic.”

The Media:
Tapper asked why he had raised his hand, along with all the other Republican candidates in response to Bret Baier’s Iowa debate question about refusing to raise even $1 of taxes for $10 of spending cuts.

“Well, I'm just sorry that the debate resorted to a raising of hand as opposed to some discussion about where this country needs to go in terms of overall tax policy.”