Thursday, May 11, 2006

A lost teachable moment

Posted by Craig Westover | 7:32 PM |  

As I noted here (which, thank you very much, the Fraters guys have enshrined on their home page), picking a political candidate is not based on 40 key points of compatibility. That doesn’t just apply to Republicans. Amy Klobuchar isn’t the spawn of Satan because she considers Mark Dayton a “hero.” But they are both very, very wrong on tax cuts.

From the GOP --
Klobuchar “Hero” Mark Dayton Opposes Tax Relief … Again
Dayton Wrong Then, Dayton Wrong Now
The headline is backed-up with what is becoming consistent spin over substance better left to Democrats, but here’s the money quote that should have been expanded into a teachable moment and a positive message for Republicans instead of just a predictable slam on Dayton, Klobuchar and Democrats.
Klobuchar “Hero” Mark Dayton Opposed 2003 Tax Relief:

2003: Dayton Opposed Tax Relief “Scam” “By a one-vote margin, the Senate approved President Bush's $330 billion tax-cut plan Friday -- a package that a liberal like Wellstone surely would have blasted as a giveaway for the rich. … ‘They won't even admit what kind of scam they've pulled off here,’ Dayton charged. ‘They're trying to portray it as beneficial to middle-income families, who will get a very small amount, and the multimillionaires go away with the loot.’” (Tom Webb, “Vote Margin Underscores Absence Of Wellstone,” Pioneer Press, May 24, 2003)
Dayton makes the classic mistake of the seen versus the unseen by comparing the raw dollar amounts of the tax cut benefits to middle-income families and “multimillionaires.” Back to basic economics.

Rich people do not take their tax cut dollars and bury them in the back yard in a coffee can or hide them in their mattresses. They do one of two things: they spend them, or they save or invest them.

If they spend them, the money flows out into the economy -- just as it would if the same amount were returned to a larger base of middle-income earners. The difference is the wealthier one is, the more likely one is to save or invest. Money saved or invested also flows through the economy as others borrow it to make purchases or borrow it to increase their own wealth by reinvesting it in businesses that create value for others. In turn, that creates jobs. Meanwhile, the original recipient of the tax cut has increased his wealth through his investment, which again flows through the economy.

Now grant it, there are many fine points left out of that simplistic analysis, not the least of which is the impact of the tax cuts short term on the budget. However, Democrats like Dayton and Klobuchar do not make that argument, at least not very convincingly. Their first argument is nearly always the short-sighted and economically invalid case that tax cuts favor the wealthiest Americans -- the seen. Republicans fail by not making a better case for the unseen -- the long-term benefits from a healthy economy.