Have Democrats Surrendered to the GOP Revolution?
Yesterday, Senator Hillary Clinton released her plan to help middle class Americans achieve retirement security. The plan would create private, individual “American Retirement Accounts,” to which the federal government would provide up to $1000 annually in matching funds for each middle-income person.
Here’s the rub: Sen. Clinton proposes to “pay for” this initiative by, well, cutting taxes. Has Ms. Clinton embraced trickle-down economic theory? No, but she does appear to have unflinchingly adopted Republicans’ framework for the debate over domestic economic policy.
Indeed, this plan reflects the shocking success Republicans have had in pursuing their radical tax agenda over the past seven years – and highlights the need for true progressive leadership that will break out of the Republicans’ distorted tax framework and reverse President Bush’s “reverse Robin Hood” tax cuts.
Astonishingly, Sen. Clinton’s plan purports to “pay for” this retirement savings initiative by freezing the estate tax at its 2009 levels. In fact, “freezing” the estate tax at 2009 levels would actually amount to another tax cut for the very rich, as estate tax rates are currently set to increase to pre-Bush levels in 2011. That’s right: Congress would have to pass legislation giving the wealthiest 0.3 percent of Americans another tax cut in order to make permanent the 2009 levels, which would totally exempt the first $7 million of a married couple’s estate from the tax. Far from raising the revenue necessary to fund the American Savings Accounts, such a tax move would actually drain something like $456 billion from federal coffers over the decade beginning in 2012. Of course, we’ll have to make up this difference somewhere – either by cutting other programs, raising other taxes, or incurring more debt that future generations will have to shoulder. Why would Sen. Clinton make this choice?
I think you're misrepresenting the fiscal impact of her plan. All it would do is lock in a portion of a tax cut that is already in place and result the loss of an estimated $456 billion in net revenue if the full tax cut were allowed to expire.
The worst part of this plan is that it would provide little incentive to save and would have little impact on the overall retirement saving of most American households. I would put in a thousand dollars just to get some of my taxes back. (Why leave money on the table?) The rest would go to my other personal and employer provided accounts. For a household with lower income, it's virtually useless. If they could save a grand, they probably would anyway. The free federal money is not going to suddenly free up money for savings. She knows that. This is just a way for her to win the votes (and contributions) of wealthy moderates of the Robert Rubin variety while making her look like a populist at the same time.
Hmmm. I seem to recall another Clinton who was good at finessing these sorts of things.
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Empire of Liberty
October 11, 2007 7:12 AM | Reply | Permalink
Empire of Liberty
While you are right that this just freezes an existing tax cut in place (that would otherwise expire), I'd not underestimate what that means. Clinton, as Batement writes, is claiming to get revenue from an action that would reduce revenue. That makes her dishonest.
As for your second paragraph, I again agree for the most part. But as you suggest, only people who can afford to save the full grand get the full grand, and even then, the gift is really to Wall Street, who gets to charge fees on that tiny investment and also gets another sucker to cushion real investors.
If it were only an empty gesture to the middle class, as you suggest, it wouldn't be horrible. But it's more than that; it's a lie about what's really involved (extending Bush's tax cuts) and it's a gift to investment banks who can treat these poor investors like chattle.
~ Josh Hilgart
October 11, 2007 11:34 AM | Reply | Permalink
Good points all. Regarding her source of revenue, I suppose she gets the revenue by dedicating the small gain from a creeping increase (i.e., whatever the rate increase is between now and 2009) in the estate tax to the retirment plan. That money would otherwise go into the discretionary pot where it could be used for transportation, health care, Iraq, or whatever. The tricky problem is that Congress probably already has that projected revenue spent.
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Empire of Liberty
October 12, 2007 4:13 AM | Reply | Permalink
Your title makes me want to rant. I am beginning to go beyond just being tired of the "DINO" rhetoricals in the liberal blogosphere, I am starting to actively dislike them. Either you like a Democratic politician's proposals and plans or you don't, there really is no productive reason that I can see to constantly label the ones you don't like as a Republican plot. I've noticed that this tactic has started to work counterproductively on moi--if someone tries to blast something a Democratic party member proposes as Republican, I am suddenly more interested in reading up on what it actually is. That doesn't mean I will end up agreeing with the proposal, but it makes me suspect smear tactics, and I react to that with more skepticism towards the accuser over the accused.
October 12, 2007 4:44 AM | Reply | Permalink
Dear artappraiser,
I'm confused. Did Bateman get her facts wrong?
If her facts are right, I am pretty sure that Republicans like a reduced estate tax and Democratic voters like it where it was before Bush. That would make her observations correct too.
It would seem from your post that you don't care whether Bateman is right. Your position appears to be that no one should ever compare a politician with a "D" after their name to a politician with an "R" after their name – even if it's apt.
You are welcome to that position, artappraiser, and all the seriousness it deserves.
October 12, 2007 5:48 AM | Reply | Permalink
I think the whole thing sucks. Our tax code is
a mess, you need a professional tea-leaf reader
to coach you through that entire racket, I
think 'the government' should refrain from
trying to take more than 30% of anyone's income,
and that that should be no more than 10% if
you're within 50k of the poverty line.
Hillary can take her tax magic and cram it,
the country's 9 trillion in the red, and no sign
of real honest spending cuts as yet. Gotta
stop digging...
October 12, 2007 6:55 PM | Reply | Permalink