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LTD: Can all these Joes be wrong II?

by marco Wed Oct 22nd, 2008 at 01:29:19 AM EST

Following up on Bob's Can All These Joes Be Wrong? diary from last Friday, see below for what two more "Joe the Plumbers" (i.e. self-employed USAns who make roundabouts $250,000 a year in adjusted gross income) had to say about Obama's tax plan when they called into yesterday's broadcast of the radio program On Point with Tom Ashbrook, "Issues `08: Taxes and Spending".

In short, they think that Obama's plan will be good for them and for the country because it will:

  1.  Put money in their customers' pockets.

  2.  Incent* small business owners to invest in their businesses, thereby growing them and creating jobs.

I would be curious to hear thoughts as to whether their ways of looking at it make sense.  Are they deluding themselves with blind optimism?

LTD: "Lazy Transcription Diary"

* Sorry, Izzy!  (^_-)


Excerpt from the show:

Chris: Well, I think it's about time that people heard from the real Joe the Plumber.  I'm not Joe, my name is not Joe, and I'm not a plumber.  But I do own a small business with an adjusted gross income of over $250,000 a year.  We are in the service industry.

And I have two choices here:

I can stick with the Republican tax breaks that I've received over the years.

Or, I could choose perhaps even to have my taxes increased a little bit more, and go with Obama's plan, have my taxes increase a little more.

And my choice is very simple, and I actually go with Obama.

The reason is simple:  I right now need my customers to have more money to spend.

I may get taxed a little bit more.  But the reality is that business is down, and more money in the pockets of the people who use my services is going to have a far greater impact on my bottom line.  

Tom Ashbrook (Host): What about the McCain argument that if we take money out of your pocket, you're not going to employ as many people as a small business owner, Chris?

Chris: Yeah, I find that argument completely bogus.  I've never believed in trickle-down economics at all.  I think in reality it actually trickles up.  I think [with] a lot of people in my situation, that money is not trickled down to their employees.  What happens is it's spent on a new edition on the house, or a car or a boat or what have you.  I think it's human nature.  I think this country, we need our government because it protects us, and often forces us to do the right thing.

Tom Ashbrook (Host): Have you calculated what the Obama tax policy might cost you personally and you're okay with it?

Chris: I haven't exactly because as I think one of your spokespersons said before, it's very hard to say exactly what it will be.  I can tell you this in very simple terms:  I was far better off eight years ago than I am today.  Business has been settling down over the last four years.  And you know, in matters such as these, it's always a bit of a hunch because you never know what will be voted into law.  But I'm very sincere about this, and I feel very strongly that my better choice, I will be financially better off under Obama in the end.

Tom Ashbrook (Host): Put money in the pockets of your potential customers.  Chris, thank you very much.  Let's get another small business owner: Mark in Ingham.  Mark, you're on the air.

Mark: Hi, Tom, thank you for taking my call.  Actually, there's a third option that Chris could take.  (I'm also a small business owner, as you said.)

And what that is, is that realistically, if my net income or retained earnings are approaching 250,000, what I'm going to do, and what I think most small business owners will find is the best tact to take, is to take the difference and instead of just paying taxes on it, put it back into the business, where it becomes an expense -- you know, either a capital expense, enough of a capital expense that you can advertise [sic] it.  Put it back into the business which is actually going to stimulate job growth in small business.  You know, I'm going to buy equipment, I'm going to hire a salesman...

I actually think the consequence of Obama's plan, it's actually going to grow businesses and create jobs, rather than stunt business growth.  And I haven't heard this discussed by anybody.

Tom Ashbrook (Host): But Mark, you're figuring, as I hear you, you could do that either under Obama or McCain?

Mark: Well, no.  Specifically, under Obama's plan, what I'm saying is that the consequence of increasing taxes for net earnings or retained earnings of $250,000 or more, you know, once it gets to that, people are going to say, "Well, what am I going to do with this money?  Just pay taxes on it?"  No.  You're going to do something with it that's going to keep your taxes down, and in the case of the Obama plan, keeping your taxes down is going to lead to growing your business, 'cause you're going to put it back into the business, so it doesn't count as retained earnings.

Tom Ashbrook (Host): Mark, we hear your strategy coming through there.  Bill, let me put it to you:  is Mark reading the Obama plan correctly?  Will he have that option, and might that indeed pump business investment and ultimately employment?

William Gale (vice president and director of economic studies at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center): Yeah, I think that both of the last two callers point to the notion that a small increase in tax rates back to levels that existed during one of the most prosperous decades, if not the most we've ever had, is not the death knell of the entrepreneurial sector.  And I think that's accurate.

Display:
Do people need nothing else but tax breaks only? Do they find it easier to fight against overwhelming (multinational and such) competitors than to let the government take care of big inequalities a little?
by das monde on Wed Oct 22nd, 2008 at 03:43:50 AM EST
The stupidity of the US discourse on taxes never stops amazing me... Barack Obama sounds like a hard-core right-wing european guy soemtimes and a standard center-right guy (gee be Solbes is more left-wing thatn that in the discourse, but of course the Spanish government are socailists..or pinkos)...

That's precisely why I do not expect too much from Obama in the international arena (actually nothing)... and while I have always defended that Obama will be basically good for the middle and upper-middle clases of the US and relatively neutral for the poor this kind of general tax discourse (centered.. o so centered but so crazy socalist for the right) makes me doubt...could I be wrong and the US as a local power is even hopeless?

Do not forget, the reason why they call Obama a marxist is to make anything which is not compeltely int he center-rigth of economic policy a crazy wacko proposal.

If this is not changed... The US is going down the tubes...internet-not.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Oct 22nd, 2008 at 12:21:40 PM EST
kcurie: Barack Obama sounds like a hard-core right-wing european guy soemtimes and a standard center-right guy...

...while I have always defended that Obama will be basically good for the middle and upper-middle clases of the US and relatively neutral for the poor

kcurie, can you explain your thinking on this further?  i've been trying to figure it out, but i'm sorry, i cannot understand your line of reasoning.

Truth unfolds in time through a communal process.

by marco on Wed Oct 22nd, 2008 at 06:32:13 PM EST
[ Parent ]
I think the american society structure is such that a typical center-right european governmet will do a lot of good to the middle and upper-middle classes.

A government sponsored health-care system, taxes a little bit higher on the rich and ridicously small taxes for the middle-class will benefit the middle and upper-middle classes.

It will also be good president for them in the sense he is the only one that can be convinced to apply keynesian policies

neutral on the poor is almost clear, "nobody" cares about them in the US, no way the middle class would accept to pay a little bit more taxes to finance a single-pay health-care system plus a full european safety net. And Obama has not the ideology to do, he is a center-right guy.. he can not be any other thing.

My point was that I could be wrong and he could be convinced to take a more hard-right wing path and not fund keynessian projects...then Obama will make no difference for the middle-classes of the US... it will be the same disaster, maybe in low motion.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Thu Oct 23rd, 2008 at 11:25:25 AM EST
[ Parent ]
What is so amazing about McCain's "Joe the Plummer" meme it the degree to which it is based on vacuous sloganeering as opposed to economic analysis.  McCain's approach can't withstand even a first order glance, as the callers demonstrate.  Too bad that this exchange will likely get little additional coverage.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 22nd, 2008 at 02:47:09 PM EST
ARGeezer: Too bad that this exchange will likely get little additional coverage.

I wrote to the Obama campaign about the radio broadcast, telling them they should use it and similar statements from other pro-Obama tax plan small business owners.  I also provided a link to the diary so they can quickly review the comments without having to listen to the audio.

Not expecting much to come out of it, but it was easy enough to try anyway.

Considered putting on DailyKos, but they seem to not like long-quoted diaries over there (at least, according to the rules page.)

Truth unfolds in time through a communal process.

by marco on Wed Oct 22nd, 2008 at 04:49:22 PM EST
[ Parent ]
This is not a quote, it's your own transcript, right?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Oct 22nd, 2008 at 04:59:00 PM EST
[ Parent ]
Yeah, but I thought the point is you're supposed to make it mostly all your own original material.  I'll give it a shot anyway.

Truth unfolds in time through a communal process.
by marco on Wed Oct 22nd, 2008 at 05:46:34 PM EST
[ Parent ]
as Two Joe the Plumbers in favor of Obama's tax plan, with some "original thoughts" elicited by comments here.

Truth unfolds in time through a communal process.
by marco on Wed Oct 22nd, 2008 at 06:29:04 PM EST
[ Parent ]
As far as long goes, many of theirs are much longer.  As far as quoted goes, that is the point.  Do it & let 'em complain if they don't like it.  Not too likely, I think.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 22nd, 2008 at 07:43:24 PM EST
[ Parent ]
I am not sure these specific points make much sense.

The first guy might well be right for his own situation: if his target customer benefits from the Obama plan, then he might as well, at least until other businesses start targetting te same people.

But there are also small businesses with rich customers, and these are hurt at the same rate that the ones with ordinary customers benefit. Unless, of course, Obama cuts more taxes than he will raise. But then companies that deliver to the government are hurt. Unless Obama wants to lend more to keep spending up, in which case future tax payers and companies are hurt. Economics isn't simple, and trickle-up is just as voodoo as trickle-down.

A similar problem for the other guy: why should higher tax rates encourage you to invest in your company? The whole point of investment is that you will get even higher earnings in the future, so at best you postpone the taxes together with your income.

by GreatZamfir on Wed Oct 22nd, 2008 at 05:11:05 PM EST
All those are not exactly the questions I myself had, they were in the same line.  The voice of the person on the street -- especially when they agree with you -- often has the ring of healthy common sense.  However, in matters economic, I always fear that common sense = oversimplification.

GreatZamfir: But there are also small businesses with rich customers, and these are hurt at the same rate that the ones with ordinary customers benefit.

And my first reaction to this was, "So what?  Let them eat bread."

But then I realized, a lot of small businesses that cater to rich customers may nevertheless employ middle and lower income people.  For example, someone who manufactures or installs jacuzzis or just plain old landscapers/gardeners.

A similar problem for the other guy: why should higher tax rates encourage you to invest in your company? The whole point of investment is that you will get even higher earnings in the future, so at best you postpone the taxes together with your income.

My "common sense" answer to this would be that -- like the guy said -- you make reinvestments, discount them from your adjusted gross income as an expense, and avoid paying the higher tax.

Then you say, but isn't the whole point of running my own business to make money for myself?  For many if not most people, probably true.

But even then, is it too naïve to believe that if you are incented to make those investments in your business now (i.e. to avoid having to pay Obama's higher taxes), then in the long run (assuming you made those investments wisely), your business will be even bigger and stronger, and thus you will be in a more secure position to enjoy your earnings, even at a higher tax bracket?

And yet, then I ask myself:  What if I purchase a relatively expensive piece of equipment as my reinvestment, and then suddenly economic conditions take a turn for the worse, and so now I cannot get a return on the investment in that equipment as quickly as I wanted to?  I might be able to sell back the equipment, but taking all things into account, it could very well be at a loss.  In such a scenario, it seems I might indeed have been better off paying the higher tax on my retained earnings rather than putting faith in the long-term pay-offs of reinvestment.

I am not a small business owner, so this is pure speculation.  Would be curious what more experienced people would have to say.

Truth unfolds in time through a communal process.

by marco on Wed Oct 22nd, 2008 at 06:09:51 PM EST
[ Parent ]
The first guy might well be right for his own situation: if his target customer benefits from the Obama plan, then he might as well, at least until other businesses start targetting te same people.
And this is the group that will likely most need help, and helping their customers will most help other business also.  If you want to stimulate the economy, providing money to the already well off is a  proven way not to do it.  They may have no good reason to spend it.  Providing money to those who are stressed will  insure that the money gets spent.

Increasing and extending unemployment insurance will also provide money that will get spent.  It also assists those who have been hurt for reasons having little to do with their own behavior.  If the cost of so doing predominantly comes out of the income and/or assets of the top 5%, that is appropriate, as that group has disproportionately benefited from the activity that has resulted in the current dislocation.

Best of all would be clawbacks on the income and bonuses of the beneficiaries of financialization, but that may not be politically feasible.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 22nd, 2008 at 08:03:12 PM EST
[ Parent ]
There are many moral reasons for more progressive taxation, but that is not really what this particular piece is about. People who fully agree with you on the moral part (including me if I were American) are probably already Democrat supporters.

The target here are people who fear that being too progressive in taxation will hurt the economy somehow, especially small businesses who are perceived as particularly important (and morally deserving) parts of the economy.

From that point of view, I don't think these people's arguments are strong. There are ways how Obama's tax plan may help or hurt the economy, but the mechanisms in this transcription are not among them. It's simply replacing Republican jabbering by Democratic jabbering.
Which I suppose is good if you suport the Obama tax plan for other reasons.

You give two new mechanisms: rich people save more and spend less of a boost in their income, and the countercyclical effect of unemployment benefits. I think the second has been well-observed, but is raising unemployment benefits in Obama's plans?

The first one is more troublesome. I mean, does America really need even lower savings rates? There might be some short term benefit from lowering taxes, but only if they are well timed as countercyclical spending. In general, changes in the tax system are not the best way for Keynesian policies.

by GreatZamfir on Thu Oct 23rd, 2008 at 07:42:02 AM EST
[ Parent ]
is raising unemployment benefits in Obama's plans?
No.  But it should be a part of a second stimulus plan.
does America really need even lower savings rates?
For that part of the savings that comes from the income of the top few percent this question is only relevant for that part of their savings that is spent in ways that benefits the domestic economy.  Investing in projects in foreign countries, converting the savings into foreign currencies and putting it into off-shore banks or buying shares and bonds of foreign countries does little for the domestic economy.  Putting those savings into domestic financial services industries and products has contributed mightily to the current problem.

As important as, if not more important than, the amount of savings is the disposition of those savings.  We could invest in an upgraded, electrified rail transit system for passengers and freight or we could spend an equivalent amount laying out double tracks in the desert, illuminated at night, spelling out "Time For Lunch" in letters only legible from space.  The two endeavors would have vastly different long term effects, even if the invitation is never accepted.  Building yachts and mansions is little better than building the second of the two rail projects.

For thirty eight years we have had rhetoric and policy that combined to place economic decision making in the hands of a tiny, wealthy elite.  By the fruits of their labor shall we know them.  The current situation is much like that described in German dragon myths.  The dragon has a horde of gold and jewels for which it has no use but it is fiercely guarding this treasure.  Wealth has been so concentrated and so disastrously deployed that the only way forward is to seize as much of the wealth as possible and return it to productive uses.

Given the level of sophistication of the general population, at least in the US, realistic proposals for  solutions to our problems along with the steps necessary to implement those problems cannot be discussed in public, given that one of the antagonists in the election is a feudatory of the dragons and the other is beholden to them.  More than just economic and tax policy must change.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 23rd, 2008 at 11:30:59 AM EST
[ Parent ]
Is a contruct, a product of many years of falsehoods and false social constructs.
http://www.deliberatedumbingdown.com/
They have dispensed with this and moved onto "compliance/indoctrination" as primary themes in today's US educational system.

Then there are blacklisted news topics and the websites named after such concepts like, well blacklistednews.com
This is the more mainstream of these places though.
http://www.projectcensored.org/

"Joe" lives in one of those pods from that movie series The Matrix.
http://www.imdb.com/title/tt0133093/

by Lasthorseman on Wed Oct 22nd, 2008 at 07:51:50 PM EST


Truth unfolds in time through a communal process.
by marco on Thu Oct 23rd, 2008 at 05:50:02 AM EST
Slavery, socialism...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 23rd, 2008 at 05:58:46 AM EST
[ Parent ]
... serfdom ...

What a difference eight years makes.

Truth unfolds in time through a communal process.

by marco on Thu Oct 23rd, 2008 at 10:35:34 AM EST
[ Parent ]


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