Thom Hartmann: So the republicans, John Thune, for example, the senator from South Dakota has said, “If taxes go up on millionaires," keep in mind the democrats are proposing to extend about a thousand dollar a year per person for the average working person, tax cut by reducing the payroll tax, to extend this for another year, and to pay for this, because they try, unlike George W. Bush with his wars and Medicare part D, and all this other stuff, this administration actually pays for things, to pay for this they want to tax anybody on their income an extra 3% roughly income tax after their first million dollars. So on their million and 1th dollar, per year. And John Thune said, if you do that, they’re going to stop hiring people.
So Tamara Keith with Morning Edition on NPR notes that for the second week in the row senate on Thursday voted down proposals to extend the blah de blah de blah. And she quotes John Thune. So she says...
So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to. ...
So next we put a query on Facebook. And several business owners who said they would be affected by the "millionaires surtax" responded.
Ian Yankwitt who owns Tortoise Investment Management said, "It's not in the top 20 things that we think about when we're making a business hire". He says his ultimate marginal tax rate wouldn’t even make it on the agenda. Jason Berger, a multimillionaire, co-owner of CSS International Holdings, global infrastructure contractor, makes more than a million dollars a year. He said...
If my taxes go up, I have slightly less disposable income, yes... It's only fair that I put back into the system that is the entire reason for my success
"He says his Michigan-based company is hiring like crazy and he’d be perfectly willing to pay this surtax."
So why would anybody oppose it? Mark Finklestein is on the line with us. He’s with NewsBusters.org, the conservative website. And Mark, I don’t get it. Why do you think that going, you know when Bill Clinton raised taxes 3% and Newt Gingrich stood on the floor of the house of representatives and not a single republican voted for it and Newt Gingrich prophesied that it would produce a great depression within the year and instead it produced 20 million new jobs and an explosion in economic activity. When we had four decades of 3.2% or higher growth. The only time in the history of the United States when decade to decade GDP growth has been more than 3.2 percent, were all when the top tax rate on millionaires and billionaires was above 74%. As soon as it dropped it went below 3.2%. How can you do anything other than look at the math and say gee we ought to roll back the Reagan tax cuts?
Mark Finklestein: You know Thom, you, I often hear you saying that you and other progressives love science and love the scientific method but you’re sounding like the rooster who is trying to take credit for the sunrise because he’s crowed. In other words, it’s not a controlled experiment to say that during a given time we had growth and taxes were higher. It doesn’t prove that higher taxes produce growth. I would say to the contrary, we’d have to see how much higher the growth would have been if taxes had been kept lower and I just find it amusing that, you know, you’re saying that president Obama and democrats want to, you know, pay for things. I truly do not believe that these are suddenly new born, born again deficit hawks. These are folks who simply want to get hold of more money out of the private sector and get it into government hands, that’s what it’s really about.
Thom Hartmann: Mark, you are mischaracterizing what I’m saying. I’m not suggesting that higher taxes produce growth. Although I am willing to make that argument. What I explicitly just said was that during times of high taxes, we had growth. I don’t think that there’s an absolute connection between the two, other than that if you have tax rates on people who earn over a million dollars, below 50%, then what you tend to see is bubble economies emerge. Not just in the United States but all over the world, and there are dozens of examples of this and this is very well documented in the literature of economics. And that when you have tax rates above 50% after the first million dollars that you tend not to see bubble economies because you don’t have so much hot money. You don’t have cheap money, where people are looking for high, fast returns, high risk returns, you know, flowing around in the economy. And you certainly have seen that in the United States. You had a 91% tax rate in 1920. Harding came into office in 1921 and dropped it down to 25% and over the next nine years you had an explosive bubble economy from 1921 to 1929. That bubble popped in ’29 and it took us a decade to get out of that. Again, you had, and similarly…
Mark Finklestein: Thom if you want to let me get in a word edgewise here. If you want to talk about bubble economies, the one that has caused the present crisis is the one that was created by direct government intervention through the, you know the Fanny Mae’s and the Freddy Mac’s and the various government intrusion into the markets that pumped out all of these trillions…
Thom Hartmann: The entire…
Mark Finklestein: Wait a sec, let me just finish.
Thom Hartmann: Mark, you’re wrong. Your numbers are wrong though.
Mark Finklestein: Pumping trillions of dollars into the real estate market, inflated prices irrationally, leant money to people who couldn’t handle it. And inevitably…
Thom Hartmann: Mark, what was the size of the total subprime market?
Mark Finklestein: Say again?
Thom Hartmann: How many dollars, what was the size of the total subprime market in the United States that you’re saying was responsible for the crash? How big was it?
Mark Finklestein: Hundreds of billions.
Thom Hartmann: I’ll tell you. It was 1.7 trillion.
Mark Finklestein: Okay there you go.
Thom Hartmann: That’s one thousand 700 trillion dollars.
Mark Finklestein: Right.
Thom Hartmann: Okay. And the Fed put 7.7 trillion into the system. Now what was the size of the gray market in CDOs CDSs and other derivitatives before 1990 versus 2008 when it crashed? Before 1990 it was zero.
Mark Finklestein: Of course I don’t have that figure on the tip of my tongue but Thom…
Thom Hartmann: Before 1998 it was zero because they were illegal. When they crashed in 2008 it was 800 trillion dollars. An 800 trillion dollar crash that is now down to 600 trillion dollars has nothing to do with 1.7 trillion dollars in subprime mortgages. The subprime mortgages are not what crashed the economy.
Mark Finklestein: Thom, this is something we discussed last time that here is an area that we agree that government should not be in the business of corporate welfare, that you know there is…
Thom Hartmann: Government should be in the business of regulating banks. When we stopped regulating them in 1998 all this happened.
Mark Finklestein: No. Above all government should be in the business of telling everybody, from banks to investors to depositors that if you make foolish or risky or irresponsible loans or investments, you are the one that is gong to be on the hook and big mama government is not going to come along to help you out. And that, it will be the force of the market much more than any government regulation that will result in people making responsible decisions.
Thom Hartmann: You know, Mark if we were talking about manufacturing widgets, I would agree with you. But what you’re talking about, when you’re talking about the banking system, is you’re talking about the livelihood of millions of Americans. What you’re talking about is a result of this deregulation of the banksters and this destruction of the banking system is that people are committing suicide, people are getting divorces, child abuse and spouse abuse is up, mental illness is up, people are dying, people are homeless. This is all the result of the fact that Phil Gramm, in large part, but it was the tail end of the Clinton administration to make it bipartisan, but it was largely a republican effort, deregulated the banks, you know, by doing away with Glass-Steagall, with Gramm-Leach-Bliley. And this, if it wasn’t the banking system, I’d agree with you but this is something that affects peoples lives.
Mark Finklestein: I would say it is the end result of big government intervention that began with things like the FDIC and if again, from day one…
Thom Hartmann: The FDIC was created in 1935, it prevented a disaster.
Mark Finklestein: Exactly, exactly. And that is the point that if people understood from day one that there is no such thing as…
Thom Hartmann: The FDIC only protects people up to 150 thousand dollars. How could that possibly have anything to do with a 600 trillion dollar black market?
Mark Finklestein: I’m saying that that was the beginning of this whole slippery slope that led to greater and greater government involvement in the markets and ultimately created this huge bubble that burst.
Thom Hartmann: That’s nonsense, Mark. We never, before 1935 the United States had literally never gone more than 15 years without a major national banking panic. Since, from 1935 until Phil Gramm got his legislation through in ’99, we did not have a single major national banking panic. Not one. 50 years. And then he deregulated and then boom within a decade we were back to the exact same cycles we were in before we had regulated banks.
Mark Finklestein: But again, I’m sure you would agree that it was government intervention that led to the housing bubble and ultimate collapse.
Thom Hartmann: No, it had nothing to do with it. It was the lack of government regulation in my opinion. I get it that your opinion is the other way around. And people can read about it at NewsBusters.org. Mark Finklestein. Mark thanks for being with us.
Mark Finklestein: Okay thank you.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.