PAUL JAY: Welcome to The Real News Network.
I’m Paul Jay in Baltimore. We’re continuing our series of interviews
asking the question is the fiscal cliff a scam? And the man who says so is Professor
James K. Galbraith. He joins us now. He teaches at the LBJ School of Public Affairs at the
University of Texas at Austin, author of The Predator State and Inequality and Instability:
A Study of the World Economy Just Before the Great Crisis. Thanks for joining us again,
James. JAMES K. GALBRAITH: My pleasure. JAY: So point four and point five of your
six reasons have to do with the tax increases that are scheduled to take place at the beginning
of the next year, and we’re told this will be terrible. Do you think so? GALBRAITH: Well, if the tax increases on the
broad middle class were to stay fully in effect for six months or a year, that’s going to
crimp people’s budgets, and so I think that’s something that should be avoided. But if the
decision to restore those lower tax rates happens in mid-January, end of January, mid-February,
the effect will be minimal. I think it probably will not even be perceptible in the data,
’cause people will simply go on spending what they were expecting to spend in anticipation
that the Congress is going to act. And that’s, I think, a very reasonable thing for people
to expect. JAY: So on the upper-end taxpayers that will
get an increase because of the end of the Bush tax cuts, we’re told by the Republicans
(and even some conservative Democrats don’t like this idea) that this will also contribute
towards a continuation of recession, ’cause the rich won’t invest and such. GALBRAITH: There’s no reason to believe that
at all. To begin with, these are restoring the tax rates that existed in the Clinton
period, and there’s no reason to believe they inhibited investment then. On the contrary,
you had a major investment boom in the last years of the Clinton administration. I’m not
saying that restoring the tax rates would reproduce that boom, but they’re not inconsistent
with any level of investment that American business chooses to make at any given time.
That’s clear from the historical evidence. Would there be a significant effect on total
spending as a result of the crimping of upper-end budgets? I think the answer to that is probably
not. First of all, when you’re dealing with very wealthy people, they spend what they’re
going to spend, and then everything else is a residual. If that residual is smaller because
they’re paying a higher tax rate, it’s not going to make a very material difference. Would there be some effect in normal times?
Well, it might put a crimp on, for example, upper-end housing construction, but that’s
not going anywhere anyway. So I don’t really see a credible argument
that allowing the upper end of the Bush tax cuts to expire would have a significant effect,
contractionary effect on the economy at this point. JAY: So the argument that we hear, that more
discretionary income on behalf of the wealthy winds up in more investment, I don’t think
there’s too much argument on the consumer side, but essentially it’s that they’re the
job creators, and they simply won’t create–invest as much in job creation if they can’t make
as much as they can now. GALBRAITH: [inaud.] been the case. We had
much higher marginal tax rates in the ’50s, ’60s, and into the ’70s than we do now, I
mean, dramatically higher, and investment rates were essentially similar to what they
are now. I mean, the reality is that businesses make investment when they see a reasonable
expectation of making profits, and if the share of those profits go to the federal government,
the corporate income tax, the personal income tax, [incompr.] go. But nobody who’s entrepreneurial
is going to be deterred by that, because the alternative is to leave the money on the table,
not to make it at all. So if you have an entrepreneurial culture, a true capitalist economy, as, you
know, many people believe we have (and certainly the conservative argument has always been
that we have), then you’ve got to believe that people will take those profit opportunities
if they exist. That’s, I think–so, to claim that somehow the wealthy business leaders
of the country are so cowed by a 3 percent increase in their marginal tax rate that this
will cause them to–do what, exactly?–not be entrepreneurial anymore is a–the kind
of thing that I think really ought to drive a wedge between the business leadership and
conservative voices who are making that argument. JAY: Right. Well, what–this tax increase
is, as you say, pretty modest. What tax increase would you like to see if it was up to you?
I mean, what–is there a point where it is negative in terms of its impact on the economy?
What should the tax rate on the wealthy be? GALBRAITH: Well, this is a question of, let’s
say, the distribution of wealth, the distribution of power. It’s really not an important question
of the functioning and performance of the economy. Where I would worry about things
is in the lower end, where working families do live hand-to-mouth, and if their incomes
fall, their disposable incomes fall, they have to curtail their consumption. And then,
particularly where they have very high fixed costs–mortgages, car payments–that they’re
trying to meet, then basically their discretionary consumption comes out of what’s left. Now, where do we see that problem? We see
it with the payroll tax. The payroll tax is paid at basically a flat rate by working people,
and for the last several years, we’ve had a reduction in that rate of a couple of percentage
points with significant relief for working families. That payroll tax holiday is also
slated to go away on January 1. The president has said that he doesn’t want to see any increase
in middle class taxes, but he has not said that he wants to see an extension of the payroll
tax holiday. Unfortunately, when that holiday expires, that will be a significant increase
in middle- and working-class taxes, very clearly. Anything up to a-hundred-and-so thousand dollars
gets hit. So if you want to do something that isn’t on the table so far, I would say you
should, first of all, pass the president’s bill, which is to extend the lower rates on
income. Basically, you can make that indefinitely, or you can make it for five or ten years;
and I would put a phase-out, let’s say, over three or four years of that payroll tax holiday,
rather than ending it abruptly on January 1. JAY: But if you go back to the–we’re going
to do–in the last segment, we’re going to get more into what should be done. But just
back to this point of the wealthy, I mean, if tax rates were, as Warren Buffet’s saying,
30, 35 percent, or if they went to 40 or 50 percent on the wealthy, or, you know, if you
took it over $10 million and you went even higher than 50 percent, you’re saying that
the rich may not like that, but it’s not a negative impact on the economy. GALBRAITH: I think you can, you know, press
things too far. But within the ranges that we’re talking about, this is much more politics
than it is economics. And the president has a very strong political case. The American
public agrees with him on this. The Republican Party is faced with all kinds of dilemmas
about whether they can give up this modest increase on the wealthy and still survive
politically. And, you know, that’s really what this discussion is about. We’re not going
to see this in terms of material effects on economic performance. Now, I want to be careful, because some part
of the argument that’s made by progressives–and, of course, I consider myself to be one–is
that we need to get as much money as possible for the federal government. And the reality
is that that is not really what the objective should be. The objective of policy should
be to sustain living standards for the broad American middle class, to protect people in
adversity, which means sustaining Social Security, Medicare, and Medicaid primarily, but also
other programs that do that, and to promote the growth of economic activity, particularly
on lines that solved and addressed actual problems that we have. And the question of the deficit, of the balance
between spending and revenues, is properly seen as an outcome, as the consequence of
dealing with those issues, not as an objective in itself. If it takes a bigger deficit–more
spending and less tax revenues–to accomplish a given set of desirable objectives, then
that’s exactly what we should do. We should not allow ourselves to drift into the notion
that zero–that a balance in the budget is somehow an objectively desirable thing. It
might happen, it might not happen, but it really doesn’t matter to–I mean, it’s not
something which is the–should be the focus of our economic policy-making. Much more important
is to put people back to work, to rebuild the decayed infrastructure of the country,
to deal with our energy and our climate problems, to protect people’s–from foreclosures, to
restructure the financial system. These things are all–should be very much higher on the
list. And in comparison to them, the deficit and the debt are just distractions. JAY: Okay. Please join us for the next and
final part of this series of interviews, “Is the Fiscal Crisis a Scam?” And don’t forget
we’re in our final campaign for this year, fundraising campaign. Every dollar you donate
gets matched. So please click on the Donate button. Thanks for joining us on The Real
News Network.

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47 thoughts on “Will Taxing the Rich Deepen the Recession? – The “Fiscal Cliff” is a Scam”

  1. 90%+ tax on bribe money paid to politicians by lobbyists.
    Wouldn't help the debt (nothing will) but it would put a serious damper on the lobbyists control of the puppet strings.

  2. Agreed. Though I think if the American government was willing to actually make serious cuts to military, foreign aid, many subsidies, especially oil, legalize marijuana nation wide and tax it, it wouldn't take long to climb out of the deficit. Well, mostly. Borrowing money at a debt from the Federal Reserve will keep America in debt, but it could be greatly reduced. But that's fantasy land. Won't happen.

  3. "Curing deficits by raising taxes is equivalent to curing someone's bronchitis by shooting him. The "cure" is far worse than the disease.
    One reason, as many critics have pointed out, raising taxes simply gives the government more money, and so the politicians and bureaucrats are likely to react by raising expenditures still further." – Murray Rothbard.

  4. The rich, like everyone else, has been taxed. This country also has the highest corporate tax in the world.

    Stop blaming the wrong people. POLITICIANS put us in the hole we're in. Duh. Doesn't matter how much tax they bring in, they'll always spend more than what they receive.

  5. The only solution is righteousness and following the commandments. Taxes = slavery. That is NOT righteousness and will never bring anyone joy, prosperity or happiness. Freedom is the only way and then choosing to follow the commandments of God.

  6. Ahhhh. I can't stand the phrase "Tax rates were higher in the 50's 60's" because guess what else what greater, DEDUCTIONS. CAn we make a deal that we get the same deductions, for the same tax hike?

  7. Jesus led the masses into the temple, the capital of the Jewish people, he chased the 1%; "traders" away with a whip & called them "thieves". no forgiveness for the rich or inequality either; "more difficult for a camel to go through the eye of a needle".

    Jesus lived with tax collectors who became his disciples.. He pretty much invented welfare, bread & fish sharing, inclusion.

    pompous Conservative rich & religious chauvinists killed him..
    USA corp religion is right wing propaganda.

  8. You can't serve two masters– nor can you buy your way into the Kingdom; though you can open your heart to your enemy by listening to them.

    "Love is the eternal revolutionary"

  9. Jesus taught modern day superstitious shysters how to scam the superstitious among us. Jesus only gave the poor bullshit platitudes.

  10. by using "we" are saying you're one of rich in this country? Are we suppose to believe the rich use their time to post on a youtube video? roflmao. It seems you may be delusional about your economic social status. LOL

  11. You guys should watch nick hanaour's lecture on who creates welath and jobs.

    Money in the pockets of midle and lower class = spending = economic growth
    The best way to redistribute money from the rich to the poorer (and here I include the midle class) is through salaries but also taxation, welfare etc play a role.

  12. you mean the offense budget? This piece of shit government needs to go back to the day when the DoD was more appropriately called the Dept. of War.

  13. yup… everytime they talk raising the tax on the rich… its really raising thew tax on the middle class…. All the little stores that hire most of the people… they are going to get slammed… We get what we deserve for believe propoganda… just wait till they do away with the mortgage deduction and then when they go after 401 k and IRA's lol

  14. wrong.
    Strict adherence to the Constitution would make lobbying useless, because presenting congressmen with bills you wrote up would go nowhere.

  15. You can learn about economics on the internet, for free, and yet so many of your tards seem to still think keynesian economics and income taxes are the answer.

  16. One step at a time. It took well over 150 years for the gov to get this corrupt and so far away from Constitutional governance. Getting back isn't going to happen over night.

  17. You can't track bribes with any ease. When people are rich enough they have the resources to make "good luck" happen for the individual. It's very often a whole lot more than bank deposits.

  18. You're mistaking the leadership of 5 giant banks and about 100 corporations for "the private sector".

    I haven't seen generalization this screwed up since a cadre of 19 terrorists who happened to be muslim now accounted for all muslims everywhere.

  19. I know it is hard to listen to, but taxing the really rich people is nothing more than something that the really rich just laugh at. The really rich do not own their own home in their name, their car, their jet, almost anything and everything they have is given by the company. If the rich are really smart, they do not even have a steady income of any kind what so ever to tax. If it were to be taxed, the really rich call their lawyers write up a law and hand it to their controlled politician.

  20. a president who would veto any bill with anything unconstitutional would be an abrupt solution. But we're not going to see that from the main stream democrats or republicans. Especially from the republicans now that they changed the rules for primary delegates due to Ron Paul getting so close to fucking over the Romney campaign.

  21. FTLOG, Galbraith, just be specific. The US wants a Sweden like welfare state with Singapore taxation! As we can see with the rising debt, that's not possible. Listen to Stiglitz once in while. Total taxes in Sweden is around 50 percent of gdp per capita and guess what? – their public debt to GDP ratio is 37.4% while ours is around triple that (according to the IMF). As liberals, we do ourselves a disservice if we let the conservatives correctly pin us as fractured movement with no plans.

  22. God is rich, so is Jesus Christ. It isn't a sin to be rich and you are misquoting things a bit. No Jesus isn't for WELFARE. Neither was his church. Neither is his church today. God is about charity, not WELFARE. Helping others and having charity doesn't mean giving them a paycheck every month because they are lazy. That is very destructive. Forced charity is not charity. You can't have CHARITY if it is forced. Are you insane? What is wrong with you suggesting forced "charity" is good??

  23. That's not a very intelligent response to what I've said. Sadly many people like you are going to die. How long do you think the wealthy are going to be your slaves? They will either leave the country and leave you to make your own dang way in life or they will fight and kill all the unrighteous who would even suggest forcing others to give up what they earn. Hard to believe people can be so foolish to think trying to enslave others is a good thing. War will follow.

  24. A financial transaction tax would also help, by decreasing speculation. That's the origin of many perverse objectives in business.

  25. Excuse me? I'm not your slave, do you really think you can get away with stealing money from those that earn it and give it to those of you who don't? My forefathers fought bloody battles to free themselves of people who thought to enslave others. Freedom rill ring. Envy of the possessions of your neighbor is a sin and will have dire consequences. We already pay upwards of 75% taxes in America. After about 50% state & federal then sales tax, property tax, taxes on everything; u want more tax

  26. It's the point. All this taxes taxes BS is ridiculous. Taxes are already as high as 75% of what we make in the USA by time you add up all the different forms of taxes. The last thing we need is more taxes. LESS taxes is what we need or there is going to be war.

  27. Saying that rich in essence don't care about their "residual" income is quite stupid – why did them become rich in the first place?

    The difference between 50s, 60s and NOW is that you have a much wider global market. Wealthy can choose to go invest elsewhere and NOT in United States if investing in United States takes out a bigger chunk from their profits. Places like China, India, Indonesia, Vietnam, etc. will welcome them with open arms and a nice red carpet.

  28. …don't forget to tax those mogul-elites in the entertainment industry and the administrations' rich buddies in Chicago, New York and Marthas' Vineyards to name a few enclave locales…If I had any big-money…I'd be gone from the USA, no shit…off to Monaco where I'd own a villa and an ass-kickin' live-in expedition yacht…& never return

  29. End the Federal reserve: End the tax system– as we know it. The TRUTH about taxes is that they are nothing more than interest paid to the banksters for money that they print up out of thin air. The Constitution states that Congress is responsible for coining our money, interest free. Why are we paying a third party to do that? Financial Mafia?

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