Evan Bayh: Raising taxes will lower consumer demand

I just happened to catch this live and was pleasantly suprised to hear the exchange about extending the Bush tax cuts. What was suggested by Senator Bayh is the reasonable and long term way to look at our economy and for the most part it mirrors the way the Republicans have always understood the benefit of tax cuts.  Why he's getting the attention I suppose is because he's a Democrat and as such is the provider of a new and innovative way of thinking about what builds our economy. It's those who provide jobs, stupid!. Large or small private business is what provides the livelihood for all Americans to prosper at the same time help sustain this lagging economy. Raising taxes, especially on the most wealthy is a bad idea.  Instead we should encourage them to thrive and secure a return on their investment! I'm all for the Left taking any good ideas that the Right might harbor. Let's Just Get UR DONE! 

On the Wednesday edition of her self-titled MSNBC show, Andrea Mitchell actually hit a Democratic Senator from the left on tax cuts. Democratic Indiana Senator Evan Bayh appeared on Andrea Mitchell Reports to offer his support to extending the Bush tax cuts as a way to stimulate the economy but a skeptical Mitchell pressed: "Senator, given the deficit and the wealth of the upper class, and the fact that they sit on their money and put it into savings, why give them this tax break?" Bayh went on to tell the NBC correspondent that raising taxes "will lower consumer demand at a time we want people putting more money into the economy" and pointed out "the people you're referring to, in those upper brackets, are the ones that make decision about hiring and making investments."

The undeterred Mitchell responded with the Obama administration line that "you should extend the tax cuts for the middle class but not for people making more than $250,000 a year." Bayh, delivering a basic economics lesson, reminded Mitchell that while "middle class taxpayers are using the extra money to pay down debt, credit card bills, mortgages, things like that…It's the people in the upper brackets who continue to spend at a higher rate, propping up consumer demand" and insisted "If we want people to hire more individuals, if we want them to make business investments, raising burdens on them probably doesn't improve their optimism, confidence and discourages rather than encourages them to do those kinds of things." However, Bayh did relent when he offered to Mitchell that eventually the tax rates "are probably going to have to go up but it ought to be as part of a comprehensive deficit reduction package."

The following exchange was aired on the August 4 edition of MSNBC's Andrea Mitchell Reports:


ANDREA MITCHELL: July's official unemployment numbers due out Friday but an independent study says that the U.S. economy added only 42,000 private sector jobs last month. That is sluggish. That sluggish growth and the overall weak economy has Republicans and even some Democrats rallying against letting any of the Bush tax cuts expire, including the ones for the upper class. And joining us now Democratic Senator Evan Bayh, one of those Democrats that serves on the Banking and Small Business committees . Senator, given the deficit and the wealth of the upper class, and the fact that they sit on their money and put it into savings, why give them this tax break?

SEN. EVAN BAYH: Well, a couple of things, Andrea. First, as you noted, the economy is very weak right now. And raising taxes will lower consumer demand at a time we want people putting more money into the economy. Secondly, the people you're referring to, in those upper brackets, are the ones that make decisions about hiring and about making investments. We want them to do more of that, and so raising burdens on them during a time like this is just not the right thing to do. Now once the economy has a head of momentum under it, a self-sustaining recovery, we're adding jobs, not the forty-some thousand you mentioned, but more than 100,000 – 200,000 every month then we can pivot and look at deficit reduction. Because in the long run I share that, the concern about that. But right now we want to emphasize growth and getting the economy moving and then pivot and get the deficit down.

MITCHELL: Well what do you say to the White House and their position is that you should extend the tax cuts for the middle class but not for people making more than $250,000 a year.

BAYH: Well, a couple of things. There's some evidence that's come out recently that middle class taxpayers are using the extra money to pay down debt, credit card bills, mortgages, things like that. That's a good thing to do but it doesn't stimulate the economy. It's the people in the upper brackets who continue to spend at a higher rate, propping up consumer demand. And then there's the point that I mentioned. If we want people to hire more individuals, if we want them to make business investments, raising burdens on them probably doesn't improve their optimism, confidence and discourages rather than encourages them to do those kinds of things. And the final point that I make, Andrea is, eventually those rates are probably going to have to go up but it ought to be as part of a comprehensive deficit reduction package combined with spending enforceable spending restraint. To just go out and raise taxes with no spending restraint, particularly during a recession, it's just not the right time to do that.

MITCHELL: Well at this stage, as you're leaving the Senate. You don't have to worry about the political fallout in, in the midterm elections, but are your colleagues going to go along, your Democratic colleagues, go along with extending the tax breaks for the, for the rich?

BAYH: No, the vast majority of them won't. I suspect that there will be three or four or five of us who have qualms about that. But I won't identify the member but someone who you would quickly recognize as a very liberal member of the caucus yesterday was speaking up about she happened to believe that raising taxes on anyone making less than $8 million a year, at this moment, was not the right thing to do. So even some of the more liberal

MITCHELL: Eight million?!

BAYH: No, no $1 million. I'm sorry, $1 million.

MITCHELL: Okay.

BAYH: I should enunciate more clearly. $1 million a year was not the right thing to do. So this debate has a ways to go. We need to do two things in sequence. Number one, err on the side of more stimulus for the economy, getting it moving. That means not raising taxes right now when it's very sluggish as you pointed out. And then a real focus on deficit reduction starting with spending restraint. And then if we have to raise revenue, which in all likelihood we probably will, focusing on the people who are in the position to help us do that best but not now.

MITCHELL: Evan Bayh from the Senate. Thank you very much.

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8 Comments (+add yours?)

  1. ken
    Aug 04, 2010 @ 16:51:00

    that the government raises taxes in bad times to help the economy,and in good times to help the country amazes me,i want a con job like this…

    Reply

  2. Syrin from Wasilla
    Aug 04, 2010 @ 17:02:00

    Well, it amazes me that the answer to the tax question is so simple. Give people more of their money back and they WILL spend it!
    Give big business who provide jobs, tax incentives!

    Reply

  3. Inside_Passage
    Aug 16, 2010 @ 23:56:00

    That makes the rather large assumption that when they do spend it, they'll spent it here in the USA. Why should we give tax cuts to people who are simply going to use the increased revenue to expand their corporations overseas and then jack all the jobs to some foreign country?That's paying them to screw us over.

    Reply

  4. Syrin from Wasilla
    Aug 17, 2010 @ 16:29:00

    If the business environment in the US was conducive to the expandtion of corporations, the'd prefer to stay here. That's another thing..Do these corporations not have the economic freedom to pursue the best investment? If it's overseas, it's because America, like Alaska on the state level are 'Closed for Business'

    Reply

  5. Inside_Passage
    Aug 17, 2010 @ 20:12:00

    You have to realize that "conductive to expansion of corporations" means blowing labor law straight into the stone age and allowing them to pay American workers less than the pennies a day they can shell out to some foreign worker to do the same thing. That's the only way we can compete with the foreign market short of completely subsidizing corporations to the point where the taxpayer is simply paying these people to employ them.

    Reply

  6. Syrin from Wasilla
    Aug 17, 2010 @ 20:52:00

    Do you really think that it's that bad? When I said "conductive to expansion of corporations" Having for the most part the oil industry in mind. I think it would be to our advantage to use the largest demand of our gdp and create REAL jobs in not only the energy industry but, the support business, too. Not to mention taxes and tarriffs and royalites from our own resource, instead of the loss of jobs overseas and billions of dollars going to out enemies.

    Reply

  7. Inside_Passage
    Aug 18, 2010 @ 01:22:00

    When I talk about jobs going to other countries, I'm talking about the increasing problem of outsourcing in general. There are exceptions to the rule, such as the oil industry, and I believe that exception tends to stem from the fact that there's no way to truly "outsource" labour that takes place on our own soil, short of creating a loophole that would result in a massive outcry against the oil industry. Basically, because they have to come -here- to drill the oil on American land or waters, they can't take advantage of cheaper labour that stems from the jurisdiction of poorer countries. Even if they could do the work, you can't toss some 10 year old out to work an oil rig for pennies a day, because of the child labour laws here.

    Reply

  8. ken
    Aug 18, 2010 @ 09:24:00

    the real problem is we've been led to believe that we are the worlds caretaker,were not and other countrys are laughing about how easy it is to con the u.s.a. ,its not the jobs,its not the products that we buy its the outright money given away to other countrys,the government and the companys in this country are forced into giving away pieces of this country by ''well'' meaning people in this country and just about every other country,we are buying minerals and ores from other countrys that we could get right here,we are buying products that we could make just as cheap right here,and we are supporting other countrys that hate us,if you can't help yourself,you can't help anyone else,a handup is better then a handout,there are at least a dozen countrys in the world today where aid is their biggest source of revenue,these people are now forever depending on others they have no ability or desire to produce or create anything..

    Reply

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