In Defense of Obamanomics

[babylonsister]

http://online.wsj.com/article/SB123655553728965955.html

In Defense of Obamanomics
History shows that the president's tax plans are consistent with strong economic growth.

By LAURA D'ANDREA TYSON



If leadership is defined as recognizing a crisis, addressing its challenges, and setting new directions while remaining true to one's values, then Barack Obama is already demonstrating his strengths as a leader. He has inherited an economic crisis worse than any the nation has experienced since the Great Depression. Within fewer than 50 days in office he has signed a historic stimulus package to bolster demand and create 3.5 million jobs. Governors, business leaders and economists from both the left and the right have applauded the stimulus. Friday's distressing employment numbers indicate that much more may be needed.
David Gothard

President Obama has also proposed a 10-year budget that is faithful to the progressive vision he articulated during his campaign. His budget includes significant investments in health care, energy, the environment and education, and a tax cut for the middle class. It also calls for higher taxes on the top 3% of income earners to finance his priorities and reduce the deficit. Not surprisingly, a budget plan this ambitious is triggering strong and well-organized opposition on numerous fronts.

The opposition begins, predictably, with taxes, so it is important to understand the major tax changes President Obama is proposing and their underlying rationale. President Bush's tax cuts are scheduled to expire at the end of 2010. At that time, assuming the economy has entered a recovery, President Obama's budget will restore the top two marginal income tax rates to their 1990s levels of 36% and 39.6% for individuals earning more than $200,000 and couples earning more than $250,000. These changes will affect only the top 3% of taxpayers, the group that has enjoyed the largest gains in income and wealth over the last decade. In addition, for these taxpayers the tax rate on capital gains will increase to 20%, the lowest rate in the 1990s and the rate President Bush proposed in 2001, and the tax rate on dividends will increase to 20%, a rate lower than the rate of the 1990s and nearly 40% lower than that proposed by President Bush in 2001.

Critics charge that President Obama's tax rates for high-income earners will strangle small business and stifle economic growth. Such claims are misguided or disingenuous. A full 97% of small businesses will see their rates unchanged or enjoy additional tax benefits under the Obama plan. And the strong expansion of the 1900s proves that the tax rates on income, capital gains and dividends in the Obama budget will support rapid economic growth and substantial income gains at the top. Moreover, the higher tax revenues resulting from these rates will reduce the deficit by about $750 billion, bringing it down to an average of 3.9% of GDP over the next 10 years and to 3.1% of GDP by the end of the decade. This compares to an average deficit of 3.6% of GDP between 1982 and 1997, when the Dow Jones Industrial Average increased by 835%.

snip//

The president's budget is progressive and ambitious. It will not, however, explode the size of government as some critics warn. If the economy recovers as projected, over the next decade taxes as a share of GDP at around 19% will be lower than they were during the second half of the 1990s, government spending as a share of GDP at around 22.5% will be about where it was under Reagan, and nondefense discretionary spending at around 3.6% of GDP will fall to its lowest level since that data was first collected in 1962.

The real risk lies in the possibility that the economy's recovery starts later and is much weaker than the economic assumptions in the budget. In this case, by no means remote, President Obama will have to adjust his plans while remaining true to his values. In a very few days in office, he has already demonstrated that he has the leadership skills to rise to the challenge.

[anonymous171]

1. Wow. A defense of Obama's economic policies from the WSJ? nt

[Triana]

3. Yea. That's what I thought - from the WSJ? Wow!

Amazing that WSJ would have anything positive to say about a Democrat or Democratic economic or tax policy.

[babylonsister]

5. Don't get too excited...

but it's good to see this in the wsj.

Ms. Tyson is a professor of business and public policy at the Haas School of Business, University of California, Berkeley. She served as chair of the Council of Economic Advisers and as the National Economic Adviser under President Clinton. She is a member of President Obama's Economic Recovery Advisory Board.

[Captain Hilts]

2. She was an architect of Clinton's budgets. nt

[babylonsister]

4. And? That means what?

She's actually working for the Obama admin now, which might be why this is such a favorable article.

[Captain Hilts]

6. It means she's experienced at writing budgets and knows what she's talking about.

Nothing more. Nothing less. She was a high profile academic before that. People reading the WSJ would know her from any of the those three things - high-profile academia, Clinton Admin, Obama admin.

A lot of folks here are too young to remember 1993.

Why must you be so belligerent?

[babylonsister]

7. Maybe because you said nothing about

what she wrote but brought up the Clintons...again. Why not read the article and comment on that? Your flights of fancy into history happen frequently. If it's not FDR and Eleanor, it's the Clintons. :shrug:

:boring:

[FrenchieCat]

8. Guess some are heeding Buffett when he says that half of the battle is

instilling confidence in the market, and that can only be achieved with unity against this economic war. That if 500 folks would have had something to say on how many and when to land at Normandy, the whole thing might have fallen apart.