Wednesday, April 27, 2011

Patriotic Millionaires mix it up with Orrin Hatch

I am a "member" of a "group" called Patriotic Millionaires for Fiscal Strength. The reason I put the words in scare quotes is that nothing binds us together except for the fact that we've all signed a letter to the powers that be in Washington urging them to raise taxes on the rich (which is us) in order to reduce the budget deficit. This apparently got the attention of Senator Orrin Hatch who felt the need to lecture us about the fact that we can make voluntary contributions to the government:

For those that are interested in making voluntary contributions to pay down the national debt, the process is both easy and advantageous. Federal law authorizes the Secretary of the Treasury to accept conditional gifts to the United Stales for the purposes of reducing the public debt. Individuals can go to ihe website where they are able to make a tax deductible charitable contribution to pay down the public debt.

I'm proud to have been the principal drafter of a response to Senator Hatch. I reproduce it here in its entirety:

Dear Senator Hatch:

Thank you for your letter of April 20. With all due respect, you appear to be laboring under a number of misapprehensions. On behalf of the "so‐called" (your words) Patriotic Millionaires we would like to take this opportunity to set the record straight.

First, we are well aware that making voluntary contributions to reduce the deficit is an option that is open to us. That you seem to think reminding us of this is a constructive contribution to this serious debate indicates that you have missed the point. In our democracy, individual citizens do not get to pick and choose what government spending to pay for. You and your colleagues over the past decade have voted for vast outlays that many of us as individuals might not agree with. Nonetheless, we recognize our responsibility as citizens to pay for these expenditures, which were authorized by our elected representatives, and are therefore ultimately our collective responsibility. That is an intrinsic part of living in a democracy: you don't get to opt out.

But letting people opt out is precisely what you are suggesting with your proposal of paying down our debt with voluntary contributions. In World War II, when we faced great challenges as a nation, we didn't ask for voluntary contributions to pay for the war, or ask only those who supported the war to contribute. We had high taxes during the war, and high taxes to pay down the debt, afterward. Today, we benefit from that fiscal discipline. But we are undoing those benefits to society by cutting taxes on the wealthy at the same time we face enormous expenses and are carrying enormous debt. We need all of the above to address this problem, just as we have done in the past.

During World War II, we even resorted to rationing to share the burden of war more equally. Who is paying the burden of war, today? Our less privileged, who fight and die in disproportionate numbers, and our future generations, who will bear the burden of the debt. We think that is shameful.

We are ready to step up to the plate with a willingness to sacrifice for the greater good but we are not willing to make that sacrifice in vain, which it surely would be if we followed the course that you suggest. You even point this out yourself in your letter when you note that "the Bureau of Public Debt recorded only $3.1 million in gifts in 2010." We have been more fortunate than most people, but we are a very small group. If there were even the remotest chance of making a noticeable dent in the problem by acting alone we would have done it already. But we are a few dozen people in a nation of over 300 million facing a debt measured in the tens of trillions. To suggest that we try to tackle this problem by making individual contributions is, frankly, insulting. It is like suggesting to someone expressing a desire to serve their country by bearing arms that they buy a rifle and a plane ticket to Afghanistan. Some problems are too big to be solved except through collective effort and shared sacrifice, and this is one of them.

Second, you write: "this debt crisis is not caused because we tax too little. It is caused because our nation spends too much." This is quibbling over semantics. Deficits result when spending exceeds receipts. Whether that happens because spending is too high or receipts are too low is a matter of perspective and priorities.

In 1977 when you first became a Senator, the U.S. National Debt was approximately $700 billion – that’s with a B ‐ or 36% of then‐GDP. At the end of 2008, before Barack Obama came to the White House, the National Debt ballooned to almost $10 trillion – that’s with a T ‐ and about 70% of 2008 GDP (OMB). While there are different opinions as to how this happened, the National debt did not creep up on us suddenly. The spending that led to such debt resulted from the collective actions of Senators and House Representatives, including you.

It is true that government spending levels are at historic highs, but it is also true that tax rates (and hence receipts) are at historic lows in terms of percentage of GDP. It is the combination of these two factors that has taken us from surplus to near‐catastrophic deficits in a mere decade.

Third, you cite Kevin Williamson's argument that "a public school administrator earning $130,000 married to a pharmacist earning $125,000 a year is rhetorically lumped together with millionaires and billionaires." That may be, but it is Williamson doing the rhetorical lumping, not us. We have urged the President to raise taxes only on people earning over $1 million a year, so Williamson's argument is a complete non‐sequitur. But even under the most aggressive plan currently on the table, Williamson's hypothetical couple would pay zero additional taxes, as deductions and exemptions would reduce their taxable income to well below $250,000.

Finally, we would like to remind you of two historical points. The first is that the Constitution of the United States of America was established for the express purpose of "promot[ing] the general welfare" and not just the welfare of the rich and powerful. Over the last ten years we, the signatories of the PM letter, have done very well, in no small measure because we benefited from public education, government services, a civil society, and world‐class infrastructure, all provided by the government. However, our good fortune has not been shared by the vast majority of our fellow citizens and since our success has been supported by the general public, we feel an obligation to pay back.

The second historical point is that we have faced a crisis like this before. In the early 1990's we successfully addressed a similar crisis through a combination of tax increases and spending cuts. As a result, in 2000 we were not debating how to address a debt crisis, but rather how best to dispose of a budget surplus. It is also worth noting, as a matter of historical fact, that we reached this happy state of affairs through a bipartisan effort involving a Democratic president and a Republican Congress. This makes us fundamentally optimistic that the problem we face today is surmountable.

You close by expressing concern about raising taxes on us "during a vulnerable economic recovery." It is precisely because we do not want this problem solved solely on the backs of the most vulnerable that we have asked the President to call us to our duty. To him and to you we say again: raise our taxes. We can take it.


Anonymous said...

Nice letter. Too bad Mr. Hatch is not bright enough to receive the points. (If he even bothers to read it.) I can only hope the Tea Party movement will keep Mr. Hatch from getting the Republican nomination next time like it did with Mr. Bennett. (That's the only use I have for the Tea Party movement.)
Well, then my hope is that the candidate they install in his place is less of a moron than Hatch.

Frank Ch. Eigler said...

One problem here is when the letter uses the first person plural, as in "raise OUR taxes", it is deliberately ambiguous about whom it is referring to. Those actually signatories to the letter are of course able to raise their own taxes. Those who are not signatories, and are in fact opposed to such an approach, are not part of the "our". Your little group should not pretend to speak for all "rich".

Frank Ch. Eigler said...

And for an entertaining alternative view, one that attempts to discredit the "not enough taxes is the problem" view:

Ron said...

I think it's pretty clear from the context that what is meant is: we want taxes raised on a group that we belong to. The hope is that this will have more credibility than wanting taxes raised on a group that we do not belong to because our motivation for asking for this must be something other than direct personal gain.

I'm all for solving the problem by cutting spending. If it were my call, I'd cut defense, homeland security, and the war on drugs, raise the retirement age, add means-testing to social security, and enact single-payer healthcare. But it's not my call, and all of these things are politically untenable. Raising taxes on the rich is at least something that could conceivably be done. It's not the best solution, but a bad solution that can actually be enacted into law is still better than a good solution that can't be. The cost of doing nothing is bankruptcy.

Frank Ch. Eigler said...

"we want taxes raised on a group that we belong to"

But you're doing it again. "we" is you and your club, but the "we belong to" goes beyond the club.

"The hope is that this will have more credibility than wanting taxes raised on a group that we do not belong to"

You do not belong to the group of "wealthy people who believe they've been taxed enough already", and yet you wish to tax them more anyway, so your grasp for greater credibility is iffy.

Ron said...

Are you being intentionally obtuse? We want taxes raised on a group of which we are a small proper subset. As contrasted with: we want taxes raised on a group which is entirely disjoint from us. We want taxes raised in a way that will require our small group (along with others) to pay more. As contrasted with: we want taxes raised in such a way that will require others to pay more, but not us.

Is it really that difficult a concept to grasp?

Frank Ch. Eigler said...

Ron, I'm no trying to be obtuse, I'm merely a skeptic of gestures such as this.

You are a member of many groups of which you are a small proper subset, like "all residents of the US". But you choose a different target group, in order to ride the class envy/guilt cause. Do you see why people may see it that way?

There is also an element of self-interest here. Imagine that you get what you want, and large group X gets taxed more, so you'd need to pay (say) 10% more. Then imagine that you do not get that, and since you are so dedicated to the cause of deficit reduction, you'd be ethically obliged to donate up to 100% to do your part, since you have so much spare money and all. This is at least the appearance of a conflict of interest.

Anonymous said...

I think it strangely appropriate that the captcha word is currently "sucksuc," because I think the comment above does so.