Wednesday, October 12, 2011

Math Lesson

Let's be clear. There are three kinds of people in the world: those who are good at math and those who aren't.

Unfortunately, politicians as a rule don't fall into the category of those who are good at it. At least that is the impression most of them give when they open their mouths.

So it was refreshing last month when President Obama invoked mathematics when answering criticism of his proposed so-called "Buffett rule." Said the president, "This is not class warfare; it's math." Nothing quickens my heart more than a political leader invoking the unambiguous certainty of verifiable arithmetic. But, as he usually does when talking about economic matters, the president disappointed. There is nothing at all wrong with the "Buffett rule" or increasing taxes on the super-wealthy and, in fact, it's basically a good idea. They already pay the bulk of the taxes, but they can afford to pay more. And tax rates on individuals in America are at historically low levels. (Taxes on corporations are another matter.) But the problem is that the tax bracket that takes in many wealthy individuals also takes in individuals who are operating businesses and who are not necessarily wealthy themselves.

But in trying to solve the fundamental problem of the government spending much more money than it takes in, neither the "Buffett rule" nor anything in the president's so-called jobs plan does anything about that problem. There's no point arguing over what the role or scope of government should be if a huge portion of the government's spending has to be borrowed in the first place. There's your math, Mr. President. If you take the number of taxpayers who would be affected by the president's proposed taxes on the wealthy and multiply it by the amount of additional tax each would pay, it amounts to what pundits like to call a rounding error in the federal budget. You would raise significantly more money by taking one single dollar from every man, woman and child in the country than you would by confiscating all the income from the super-wealthy. That is because the super-wealthy are such a small group. The Occupy Wall Street protestors keep chanting, with a bit of hyperbole, that the ratio of super-wealthy to everyone else is 99-to-1. No matter how much money you take from that one percent (the proposal actually targets around the top two percent), it's not enough to solve the problem. And, incidentally, if the protestors are truly distressed by the profits of brokers and banks, then the deficit should be their main issue. Look at how much of everyone's tax money goes not to programs that help people but to bankers and brokers servicing the debt.

In fairness, the president did not actually claim that his proposed tax increases would solve the deficit problem. They are meant only to pay for the new stimulus he wants. The president continues to focus on the next few weeks or months instead of on the looming disaster that is threatening the very viability of government.

One politician who does not shy away from mathematics is House Budget Chairman Paul Ryan. He has proposed a very specific plan for aligning federal revenue and spending over several years. There is much to criticize in his plan, but the reason it is easy to criticize is because it is full of specifics. If the president has crunched his own numbers to solve the structural deficit problem, he has not shared them with the public. Instead, he diverts attention from the problem by criticizing the opposition, for not supporting one more stop-gap stimulus proposal that even much of his own party doesn't support--and by talking of raising taxes on the wealthy. The Washington press corps doesn't help much because it is quite willing to follow each distraction the same way a dog follows a tossed ball. It is more interested in figuring out who is "up" and who is "down" in the political battle than dealing with the economic substance.

The reality is that, at some point, some leader is going to have to deliver some very bad news to the American people. The problem with talking about raising taxes on the wealthy is that it gives people who are only causally paying attention the impression that this will solve the problem. It won't. No one can blame the president for not wanting to be a buzz kill with the election season already underway. Assuming he understands the problem, however, he will stand a much better chance at re-election if he can talk about the economic situation in terms that people can understand and demonstrate leadership in confronting it.

Instead, he seems to be pinning his hopes on putting short-term blame on a party that, during his term, has held only one house of Congress for only one year. (He seems to have realized that too much time has gone by to keep blaming the previous administration, although his surrogates continue to do so.) That will be a neat trick if he can pull it off. But even if it does, the country won't be any better off. He seems to be hoping that, if he looks after his re-election, maybe the economy will fix itself.

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