Cenk Uygur: We are here to celebrate a dubious anniversary ten years ago today: the first Bush tax cuts were signed into law, starting a decade of pain for the average American taxpayer and huge gains for the richest amongst us. With one stroke of the pen, President Bush set us on a path towards economic injustice, inequality, and bankruptcy. The Bush tax cuts have added $2.6 trillion to the deficit.
Last year just the top 1% of richest Americans got 38% of the benefits of those tax cuts. Through 2007, the last year for which we have numbers, the rich got 65% of the income gains. But wages fell for everybody else. Overall earnings fell 2.3%.
So what happened to trickle down economics? Our wages went down. The income for the rich went way up. And our deficits exploded.
We tell you this today because this fight is long from over. Republicans view this as the winning economic model we must adopt going forward. Are they crazy? They want to cut corporate taxes and slash spending at a time that we need government investment in America more than ever.
One of the problems is that President Obama has been fighting this battle on Republican territory. The only debate we’re having is over how much to cut in spending and how much of a tax break to give to corporate America, which, again, I think is crazy and which is why the President’s poll numbers on the economy, I think, are sinking. A new Washington Post poll shows that 59% of Americans disapprove of his handling of the economy: those were his worse numbers yet.
Obama: “I’m not concerned about a double-dip recession. I am concerned about the fact that the recovery that we are on is not producing jobs as quickly as I want them to happen. We have set a path that will lead us to long-term economic growth, but we’ve still got some enormous work to do”
Now to turn around the economy, President Obama needs to stop fighting on Republican ground and go on the offense. He should stop arguing about how much to cut and start arguing about how best to create jobs.
Alright, now let’s have a conversation about that. Joining me now is MSNBC political analyst, Richard Wolffe and former Bush advisor, Mark McKinnon, who, of course, is co-founder of the No Labels Group. Alright, welcome both. Mark, I am going to start with you. I just don’t get it. Just tell me, what is it, how is it that the last ten years of tax cuts can be such a disaster and the Republicans with a straight face can tell us that the answer is more tax cuts.
Mark McKinnon: Well, let me say, first of all, from a No Labels point of view on the current budget debate, I support our view that everything should be on the table and that everybody should be at the table. But on the issue of the Bush tax cuts, there’s the conventional notion that the fiscal meltdown that we experienced is a result of tax policy, and that wasn’t the case at all. It was the result of housing regulation, which President Bush tried to strengthen and Democrats opposed, and by the way, I supported the Democratic position at the time. I agreed that we should make housing easy but we made it too easy.
But here are the facts on the tax cuts. In 1999 taxes were the highest percentage of GDP that they’ve been since World War II. The recession started in 2001, tax cuts were enacted in 2001, the top rate for taxpayers, the top 1%, was raised. It was raised. The top bracket for lowest income earners was eliminated, meaning five million new people paid no taxes at all. Half of the people in this country don’t pay any federal income taxes.
Then after we got hit by 911, we had 46 straight months of job growth until we had the housing speculation and the bust. So that’s my point of view, and we can disagree about it, but that’s what I believe.
Cenk Uygur: Mark, there’s some things we can disagree on, and there’s some things we cannot disagree on. The collapse did not happen because we had too much regulation on the housing market; we had no regulation. They would go in and make any liar loan that they wanted because they got a higher fee for that, the bankers.
Mark McKinnon: I agree with that. Bush wanted more regulation. The Democrats wanted less.
Cenk Uygur: No, he didn’t. C’mon, I respect you on a lot of fronts here, but that ain’t true. That isn’t even close to true.
Mark McKinnon: The Republicans wanted more regulation.
Cenk Uygur: Bush said, hey, you know what, the SEC should lift all leverage limits. So that allowed them to put unbelievable derivative bets on that housing market. They took away terrible regulations.
Mark McKinnon: They were trying to strengthen the regulations on Fannie and Freddie and Barney Frank and the Democrats fought that. I worked for Fannie, I know, I was there. I thought it was the right policy at the time but I was wrong. The Republicans were right on housing policy.
Cenk Uygur: Okay, Richard, let’s just talk about Obama, because Mark has a fascinating theory about how all those tax cuts somehow were not at fault over these last ten years. But here’s what we know. For example, we lost 1.1 million jobs in that last ten years. 1.1 million jobs! How could President Obama be having this conversation.
I mean, shouldn’t he say, hey, look, I’m not interested in your wacky theories about how we should do more tax cuts for corporations, which you know the President is having a discussion over. I’m not interest in your wacky theories about spending cuts in the middle of a terrible economic situation. Why is he entertaining those thoughts?
Richard Wolffe: Well, for starters, the Federal deficit is unsustainable. So someone has to deal with this at some point and you’ve got to start a conversation now, but you’re right in the short term, the idea of massive spending cuts isn’t going to help job creation; in fact, it’s going to mean you’re cutting jobs. As we saw in the last month alone, if you’re cutting government jobs, the private sector growth is not enough to soak up the difference.
I just want to get back to the kind of debate about tax cuts and job creation. Because the Bush anniversary is actually important here. For starters, I was on the campaign trail in 2000 with my old friend Mark there and the rational for the Bush tax cuts then was that there was $3 trillion of projected surplus. $1 trillion of it was going to go in tax cuts because as then president Bush said, it was the people’s money and not the government’s money.
The problem is that things change very quickly. There was a recession, there was 911, there were wars and the tax cuts stayed in place throughout that period. Job growth was anemic at best; in fact, you could make the case that it was totally insufficient.
So tax cuts alone did not create jobs. They haven’t created jobs in the sense of what the tax cuts were in the Recovery Act or in the last round of the lame duck tax cuts that we just saw at the end of last year. Tax cuts do not do it on its own given the scale of the shock the economy has faced. But clearly you got to deal with deficits moving forward. It’s different, though. Deficits, job creation, they’re not directly connected right now.
Cenk Uygur: So Mark let’s address that point. Even if you think that it was for other reasons that you think that the economy suffered, the idea was that if you do these giant tax cuts, well, then, it’s okay because the economy will pick up. But it didn’t. It didn’t. We lost 1.1 million jobs. You saw the graphy that we put up there where a huge part of our deficit are these tax cuts. We created this giant deficit, etc. So how could more corporate tax cuts, as proposed by the Republicans, possibly be the answer?
Mark McKinnon: As Richard pointed out, there were a lot of external events but there were forty-six months of job growth after those tax cuts. And the real issue, I think we all agree on, is that where we’re really going to get the budget going again is through growth. So we have a debate over what policy is going to stimulate growth the most, but the way we are going to get there, revenue is going to help, and tax cuts are going to help, but it’s growth. So whatever policy stimulates the most growth is what’s going to work. And that’s a legitimate debate to have. But I believe that giving more money and maintaining tax cuts generally speaking, although as I have said, everything’s on the table, is a greater engine for growth.
Cenk Uygur: When you talk about stimulating growth, I don’t know how you do that by cutting spending. But we’re going to have to save that for another conversation when we have you guys both hack on. Richard Wolffe and Mark McKinnon, thank you so much for your time tonight.
Transcribed by the Barefoot Accountant of Accountants CPA Hartford, Connecticut, LLC
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