- In an interview with 60 Minutes on Sunday, Democratic Congresswoman Alexandria Ocasio-Cortez discussed some so-called radical economic ideas.
- Turns out, they’re not so radical. But her opposition will still find them incredibly threatening.
- That’s because she’s changing a discussion about economics that has gone uncontested for about 40 years, and that in turn could change the way we think about what we really value in the country for the next 40 years.
On Sunday 60 Minutes aired an interview with New York Representative Alexandria Ocasio-Cortez where she discussed her views on our political climate, her rise to Congress, and her policy ideas.
Then something that hasn’t happened in a few years happened. We actually started talking about those ideas – ideas that have little to do with President Donald Trump.
AOC has accomplished something abnormal in the Trump era: Getting cable news networks to talk about policy not directly related to Trump or some legislation on the verge of passing. pic.twitter.com/Odtxjk2EGM
— Max Tani (@maxwelltani) January 7, 2019
If the fact that her ideas were given any space at all space isn’t shocking enough for you, you should check out the ideas themselves. They are a departure from the last 40 years of the way we think of how national budgets and American taxation should work. And they are desperately needed at the moment.
Ocasio-Cortez discussed two ideas, specifically, that would make your generic, center-right “fiscal responsibility” issue voter’s hair stand on end.
- A 70% tax rate on incomes above $US10 million.
- The application of modern monetary theory (MMT) on our budget. According to this theory deficits are ok as long as money is being spent productively (on say, healthcare or infrastructure). The only real danger with running deficits is out of control inflation, which the Federal Reserve can control by raising rates.
Obviously this flies in the face of everything your dad told you about being a prudent American. The rich aren’t supposed to be “punished” for their success with taxation, and the government is supposed to give money back to people instead of “wasting it.” As for deficits, well those will turn America into Weimar Germany, or so it goes.
Ocasio-Cortez is here to tell you all of that we tried that line of thinking and the result was massive inequality and a hampered government. It was just a useful idea that turned into a fever induced by special interest groups bent on minimising money spent on social programs lowering taxes for the rich. They found their foothold in the Reagan administration, and they have been dominating American economic thought ever since – so much so that the popular imagination almost forgot that these are just theories and started accepting them as mathematical fact.
But they’re not.
Quickly, a word from economist John Maynard Keynes: “The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
Strong and wrong
In Spanish there is a saying: “The dog that barks loudest, eats.”
And so it often is in politics. Since the 1970s the loudest voices in economics have come from the right, from followers of economist Milton Friedman who believed that selfishness was the natural state of humanity. You see why he would want a small federal budget and low taxes.
A bunch of Friedman’s disciples made their way into the Reagan administration, and there they started to craft pop culture economics as we know it today. For example, economist Arthur Laffer went in there and pitched what we know today as the Laffer Curve. It contends that lower tax rates can actually lead to higher tax revenue – something that certainly didn’t happen when taxes were lowered last year as 2017 tax receipts came in lower than expected.
But you can still see Laffer on CNN waxing philosophical about economics. He was an advisor to the Trump administration and to former Kansas Governor Sam Brownback, who enacted the massive tax cuts that eventually laid waste to the state’s economy.
Deficit hawks on the right bark loud, too, even though they have almost never practiced what they preach. President Ronald Reagan used deficit spending to fund Star Wars and end the Cold War. The economy slowed after, George Bush Sr. raised taxes. And then we were fine.
Former House Speaker Paul Ryan – a supposed deficit hawk and budget wunderkind – exploded the deficit by passing 2017’s tax cut. And nothing happened.
President George W. Bush exploded the budget after finding it in good shape – and all was well.
In fact, the major economic problems of Bush’s time in office came from the private sector – from the irrational exuberance that led to the tech bubble, and a mortgage crisis that ballooned into a full on global financial meltdown. In the latter instance, the government helped nudge us into the crisis, melding a desire to encourage homeownership with an ideological bent toward deregulation.
United States of Amnesia
Politics nerds talk about something called the Overton Window, it’s the theory that only a limited number of policy ideas can be discussed at a time. It’s a spectrum, and only that which fits within the spectrum can make it into the national conversation.
It seems that Ocasio-Cortez is getting her ideas on the spectrum.
That is why low tax zealots like Grover Norquist, the infamous president of Americans for Tax Reform, are calling Ocasio-Cortez proposal a “war” on tax payers.
Never mind that reasonable economists admit that a 70% tax on income over $US10 million wouldn’t raise much revenue or impact many Americans or hurt the economy at all. As Noah Smith over at Bloomberg writes, economists have theorised that the “optimal top tax rate for incomes higher than $US300,000 – a much lower cutoff than the one proposed by Ocasio-Cortez – should be about 73 per cent.”
So Ocasio-Cortez’s tax plan isn’t radical at all… a dramatic expansion of federal tax revenue would require much more than what Ocasio-Cortez is proposing. It would require an overhaul of the corporate and capital-gains tax systems, higher rates on a much broader range of high earners, and probably wealth taxes as well. It would require a huge amount of political will and a sustained policy-making effort over a number of years.
So why are men like Norquist howling over this proposal? Because they know what Ocasio-Cortez is doing – they did it themselves. Slowly inject an idea into the policy discussion and then push, and push, and push until it seems normal, no matter how radical or ridiculous it may seem.
I mean, these guys convinced us that if the government collected less tax revenue it would somehow end up with more tax revenue. How illogical is that?
Perhaps Ocasio-Cortez’s proposed tax rate wouldn’t do much for the government’s coffers. But consider what it would do to the American imagination. We live in a country where 63% of citizens think that our economy is stilted unfairly toward the rich and special interest groups, according to Pew Research.
Part of that is because of what the loudest voices have said our government should and should not spend money on – because what their values are. Previous administrations have used deficit spending to fund wars (Iraq, Afghanistan) and tax cuts. AOC would have us used deficit spending to fund education, healthcare, and her Green New Deal.
These are things that we’ve heard that we can’t afford for our entire lives. We’ve heard that money in the government’s hands is “wasted.” But how could money that pays for the health and welfare of a country’s own people be a “waste”? It’s not like it’s going anywhere.
In an economy run on consumer spending, anything that lets Americans keep more of their paychecks instead of giving it to say, health insurance companies that just buy back their own stock seems like it would juice the economy, not hurt it.
As more and more Americans feel the deck is stacked against them, they’re going to start listening to these ideas. They know “what” has happened to them – that suddenly taking care of a middle class family is harder and more expensive than it was for their parents – but what Ocasio-Cortez is offering is another reason “why” and another “how” we can fix it. These “whys” and “hows” are terrifying the Republicans who run the right, thus their massive pile-on everything Ocasio-Cortez does.
It was easy to tell Americans to keep taxes low when it seemed that anyone who worked hard enough could get ahead. But what if no matter how hard you work, the system is stacked against you? It’s looking increasingly clear that not everyone can make it to the top bracket – or even move up brackets.
Americans are starting to understand the meaning of privilege – the privilege of being able to support a family or even just a person on minimum wage; the privilege of being able to get an education if you have the brains but not the cash; the privilege of being able to get sick without going broke.
And they’re starting to understand it because slowly, over the last few decades, those privileges have been taken away from them. Perhaps that, not Ocasio-Cortez, is what has broken our decades-long policy fever. She’s just here to suggest another remedy.