It’s interesting to me how words are introduced through tragedy and then assimilated into our casual vernacular. The Kennedy assasination brought us the “grassy knoll” to describe an unassuming, small hill with grass that ran parallel to the President’s “motorcade” (another word that entered our popular lexicon). The mention of a “grassy knoll” invariably conjures thoughts of that tragedy, but I’ve heard it used recently to illustrate benign subjects, as in “there is a grassy knoll behind the garage that would be perfect for Winter sledding.”
This past year has ushered in a mother lode of tragic political terms that we may, at first, not understand, but very soon use as if we have been for years. “Deficit spending, debt ceilings and now sequestration” are part of our daily conversation.
Sequester and sequestration are the words of the day. I’m sure that in 10 years parents will talk nonchalantly of “sequestering the children” but right now it is a word that represents tragic consequences regarding federal spending cuts. I don’t need to go into detail in this post about the federal sequestration, suffice to say, that they are cuts that were intended to be so severe that they wouldn’t be allowed to happen when the time came. The time came, and so will the cuts.
The central stumbing block between Democrats and Republicans are over tax reforms and the size of spending cuts to eliminate the deficit and pay down the debt. Republicans feel that eliminating tax loopholes (which would create revenue) is no different than a tax hike, and that is something they will not budge on, while President Obama and Democrats see the mandatory sequester cuts as draconian (even though they were instrumental in proposing the cuts in order to reach a deal regarding the “Debt Ceiling” controversy’ but that’s a different episode of American Political Loggerheads) and they recommend tax reform to close loopholes and the spending gap.
Kennedy comes to mind again as I reflect on the fact that until the latest stalemate between the White House and Congress, before the concept of sequestration came into vogue, Republicans would cite the “Kennedy tax cuts” as fuel for their argument that cutting taxes invariably stimulates the economy. They were the sweet potatoes of neoliberal economic theorists, yet, they might be the most argued and misunderstood legislation in the history of marginal taxation.
An examination of Kennedy’s tax reforms reveal that they were not the supply-side (Trickle Down) cuts that Republicans would like to believe, but were, in fact, “demand-side” theory. They are what the Democrats are proposing again in today’s sequestration battle, but President Obama should also take a page out of the Kennedy play book in terms of closing loopholes (to raise revenue) while cutting tax rates (to shut up the economic neoliberals).
Kennedy proposed the largest tax cut in history, but, his plan also closed loopholes for the wealthy and therefore taxation on the upper class increased in terms of actual revenue. The reason Kennedy’s tax cut was effective was because it was a balance of the right amount at the right time and in the right way. In 1963 the highest rate was over 90% (the lowest marginal rate 20%) and Kennedy proposed a balance of cuts, lowest and highest, which had a great stimulus effect. By stark contrast, Bush (II) did not see growth because the tax base was already so low and the theory of diminishing returns came into play….and continues to reek havoc on our economic structure.
20 years after Kennedy’s reforms, President Reagan, to end a recession, used the concept of cutting taxes to stimulate growth but married it to supply-side theory by eliminating breaks on the bottom bracket in order to make up for the shortfall in tax revenues (and effectively destroyed the presidency of George Bush Sr). This is the elusive reality in the tax argument; what Kennedy’s tax tables and effective tax reforms did was make federal taxation more progressive. The bottom got the greater burden relief, and while the top got the greatest tax rate reduction, they paid more from closed loopholes, and that is what stimulated the economy; it was more Keynsian than Friedman…sian.
(Here is an interesting article from several years ago on this subject: http://www.slate.com/articles/news_and_politics/history_lesson/2004/01/tax_cuts_in_camelot.html)
This is the same reform that we need today to end the dangerous and acidic cuts caused by sequestration. It is the only way where the middle class and the poor don’t carry the lionshare of burden and where those who can afford to help, and who have benefitted the most from unbalanced tax loopholes, could light the way out.
Let’s introduce a new term into our political lexicon to replace the tragic disparity caused by sequestration and see where it goes: Accountability Reforms.