What's missing from McMahon's JFK ad
Republican Linda McMahon, like a lot of conservatives this summer, has been calling for the extension of Bush administration tax breaks for wealthy Americans and using the words of JFK to do it.
The McMahon campaign has launched a faux-newsreel ad that cobbles together remarks of President Kennedy in 1962, when he was arguing for a reduction in federal income tax rates to stimulate economic growth. As time runs out on the Bush-era tax cuts, Republicans and Democrats have committed to extending them for middle-income taxpayers and businesses, but Republicans, including McMahon, say the Congress should also extend the marginal rate reductions for the wealthy, to encourage them to spend and hire as the country struggles to regain its economic footing.
And, as the Journal-Inquirer reported this month, McMahon doesn't have to ask economists how valuable those Bush tax breaks were: the cut in dividend taxes included in the package has contributed to $182 million in earnings McMahon and her husband made off their family company, WWE.
There's a gloating tone to the Republicans' use of Kennedy's words to support their position on taxation, not surprisingly. (Think of the way liberals and Democrats embraced Brent Scowcroft, among others, when he publicly derided the younger Bush's invasion of Iraq).
But let's look at what is being left out.
For one thing, the use of Kennedy isn't new. The conservative Club for Growth was making JFK tax mash-ups back in 2004, eventually prompting this excellent response essay from David Greenberg. The long and short: just because Kennedy favored cutting taxes doesn't make him a supply-sider like George W. Bush or Ronald Reagan.
Kennedy's argument, Greenberg says, was that the government needed to be willing to run short-term deficits in order to inject more demand into the economy and promote growth. (That makes him a demand-sider, not a supply-sider who would direct tax breaks at the rich and expect that good fortune to trickle down to the rest of the country.)
If Kennedy's pitch sounds familiar, it's not just because Republicans are currently arguing that lowering tax rates is good for economic recovery. It's also (more so) because running short-term deficits in order to funnel money into the economy was the purpose of the Obama administration's stimulus package, albeit through the medium of government spending as opposed to (anticipated) spending by individuals.
(Meanwhile, as the tax cut fight devolves into the usual partisan bickering and campaign fodder, there is an interesting potential compromise: the economist Nouriel Roubini floated a proposal last week that the tax cuts for the wealthy be allowed to expire, but that the resulting increase in federal income tax collections be redirected to provide a payroll tax cut for employers and workers, which he said would be a direct incentive to companies to start hiring. Perhaps a Connecticut candidate will take a position on that proposal...)
Finally, the Kennedy video leaves out a very important detail. When the president was arguing to lower the top marginal rate in 1962, that rate was a whopping 91 percent - well over double what the top rate would be if it is allowed to reset to pre-Bush levels.
(Check out the marginal rates over the years in this handy table. Note also that Kennedy's tax cut took effect in 1964, dropping the top bracket to 77 percent. He didn't live to see the Congress taking him up on his proposal.)
Now, the McMahon ad doesn't say that allowing the top rate -- which only applies to you if you're going to make more than $373,650 this year -- to rise from 35 percent to 39 percent is equivalent to reimposing a 91 percent rate on those wealthiest taxpayers.
But it doesn't make that charge for the same reason it leaves out the details of what Kennedy was talking about: that president and the current one were trying to solve two very different problems.
Update: This post brought a gently chiding e-mail response from Bill Cibes, the former state lawmaker and budget chief who is remembered, with alternating fondness and scorn, for helping former Gov. Lowell P. Weicker Jr. enact Connecticut's income tax.
Cibes retains a wonkish level of detail obsession about fiscal policy, and had a very valid criticism of my description of the stimulus package above. What I neglected to mention, he said, was that one-third of that $787 billion package actually came in the form of (ta-da!) tax cuts, not direct federal spending.
"Like the Republicans," he wrote, "you seem to forget that more than a third of the ARRA benefit ($288 B of the $787 B) was in the form of TAX reductions, NOT spending. [Not to mention the funding for entitlement support, which largely went to prevent state and local tax increases.]"
The facts bear that out. See this chart of the tax cuts included in the stimulus bill, from the nonpartisan Joint Committee on Taxation.
Also note this analysis from another nonpartisan source, the Congressional Budget Office, which shows lower ranges of expected output multipliers (i.e. what the government will get for the money) from the tax benefits of the stimulus bill than for the direct federal spending, like transfer payments to state and local government and federal purchasing. That link goes to the CBO Blog, with links to the full Aug. 24 report. That report argues that increases in disposable income "are likely to boost purchases more for lower-income than for higher-income households," which would seem like a finding that Democrats who want to hold the line against extending the Bush-era cuts for the wealthiest taxpayers could put to use. If they wanted to talk about the subject at all, and frankly, most of them don't.
But that's all in the law that's already passed, and both political and economic reality seem to argue against the possibility that Congress and Obama could pass a second stimulus spending bill to shock the economy back on course.
At the Atlantic, Daniel Indiviglio says that leaves only one option. You guessed it: even if it costs a few thousand more jobs in a country already struggling with unemployment, he says the only way out is tax cuts.
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