Friday, October 05, 2007

First trade, now taxes? 

After ranting yesterday about Republicans abandoning free trade, now they seem to be getting advice that the tax message won't work either. Or at least, not the way Republicans normally talk about them:
Most voters are unpersuaded by the Republican message that the Bush tax cuts were a resounding success that pumped the economy back to life. Worse, the key independent voters are actually repelled by that message. "It crashes like the Hindenburg," says Richard Thau, who has been monitoring swing voter sentiments across the nation. Why? Because politicians who boast about the rosy economy seem out of touch, even delusional, given the rising costs of gasoline, health insurance and college tuition.
None of the three products there are sold in free markets, of course, and you could cite that as a reason for why their prices are going up, but they're different stories and as a campaign focus probably snoozeville. Conservative bloggers will lament and argue that the economy has added lots of jobs; liberal bloggers respond, with some merit, that the expansion this time has not added as many jobs as previous expansions.

Of course there's no way of knowing how bad things would have been without the tax cuts, but the slow pace this time, combined with some rather hyperbolic rhetoric over what tax cuts would do, make them a loser.

But, good news! While you might not be able to sell the idea of a tax cut, you can get out the message of the damage from a tax hike.

Pollster David Winston, who's been testing the tax issue for Republicans, agrees with that assessment. When Mr. Winston asked a national sample of registered voters last month, "Do you believe or not believe this statement: Given the cost of living these days, now is not the time to raise taxes," 65% believe now isn't the time to raise taxes, while only 31% believe it is.

There is another GOP imperative: The anti-tax message must be linked to wasteful government spending. "There's no question that for seven out of 10 American voters, wasteful government spending is one of the largest problems in Washington," says pollster Tony Fabrizio. "For many of these voters it's a bigger issue than taxes." All of the polling consistently finds that voters believe about 40 cents of every dollar spent by Washington is wasted. So this widespread aversion to the way government mishandles money may be the best shield against tax hikes--at all levels of government.

In Mr. Winston's survey, 75% of respondents agreed that, "Taxes should not be increased as long as Congress continues to waste the tax money it already receives." Only 23% did not.

Advantageous to the Republicans, then, is that they are not in charge of Congress currently, so that there's the potential to demonstrate Democratic wastefulness. That is why, here in Minnesota, the "Bike Trail Jim" Oberstar tag may have some impact. Or why my friends who are trying to defeat John Murtha might find a second front useful.

The best news of all?
This is a nation that instinctively gets the supply-side message that putting people to work yields more tax revenues than a strategy of weighing down businesses and workers with tax hikes, which explains this stunning finding: When Mr. Winston's poll asked, "Which approach is more likely to increase federal revenues?" 81% said "increasing economic growth" while only 13% said "increasing taxes."
Both parties will have to deal with this question: Why has the Bush expansion not produced jobs, and why has it always seemed a bit lackluster? When do we get back to the growth? By emphasizing comparative advantage and trade to boost productivity, and low taxes to encourage investment in both physical and human capital, a message of "let go and let's grow" could still find fertile ground in 2008.

It is already happening:
While annual federal spending grew 2.8% in fiscal 2007 over fiscal 2006, year to year, revenue grew 6.7%. Individual income-tax receipts are estimated to be 11.3% higher than last year, and corporate income tax receipts are estimated to be 5% higher. Revenue growth has cooled substantially from the 11.8% fiscal year-to-year increase from 2005 to 2006. Spending growth also slowed.

...�While somewhat lower than estimates issued at the beginning of the year, the 2007 deficit announced today by the Congressional Budget Office is no cause for celebration,� said House Budget Committee Chairman John Spratt (D., S.C.)
Because they still want to let the tax cuts expire. Convincing voters that that would be a tax increase will be crucial in the next campaign for Republicans, and they're playing from behind on that issue right now.

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