Impressions On The Obama Speech

Okay, I didn’t want to distract myself by blogging, so I saved everything for the end, and I’ll try to organize my thoughts a little.

First, some general impressions: very, very effective.  He pulled it off, and I was on the record as doubting the setting and doubting his ability to rise to the moment.  You would have to be a very cold fish, indeed, not to be moved by the historic nature of the moment.  Much of the speech was quite good; there were some very effective applause lines, and he answered my call for laying out an agenda, as I suspected he would.

Now, to the specifics (I’ll be a little free-form and scattershot here) – I like much of what Obama said: focus on renewables, including nuclear energy? Yep, great idea, and I support it…but biofuels have proven to be a disaster, literally taking food off the table for the world’s poor, and the promise to do away with our dependence on foreign oil in ten years? Pbbbbst…I don’t think so.  Reduce it, yes, do away with it?  Sorry, but NO WE CAN’T…

The health care pledge: similar sentiments.  Great applause line – if you don’t have health care currently, we’ll give you access to the same health care Congress votes itself.  But is that doable?  I highly doubt it.

Obama did meet the Commander-in-Chief problem head on, though…he rightly focused on Afghanistan, and got off two of his better lines on foreign affairs (I’m paraphrasing both from memory):

If John McCain wants to have a debate on who has the temperament and the judgment to be Commander-in-Chief, that’s a debate I’m ready to have.

…and…

John McCain says he will follow Osama bin Laden to the gates of Hell, but he won’t even follow him to the cave that he lives in.

I appreciate the bits on both sides loving America, and the fact that Republicans and Democrats both proceed from a love of country, and that “our soldiers didn’t fight together for Blue America or Red America but for the United States of America”.

Conspicuously absent from Obama’s speech and pre-speech biographical film were his long association with the cause of campaign finance reform.

I may have other thoughts later, but let me sum up for now by saying that it was a job well done, he answered my criticism of no agenda, even if I didn’t agree with all of the agenda, the delivery was fine, for the most part, the occasion was historic, and I’m more convinced than ever that Obama will be the next President.

Oh, and I still won’t vote for him…but there you go…

22 comments to Impressions On The Obama Speech

  • peter

    I thought it was a great speech, so I flipped the channel to see what the pundits would say.

    David Gergen, who is pretty even handed, called it a “masterpiece.”

    Pat Buchanan — who was a speech writer for Nixon — said it was the “best convention speech I have ever seen.”

    Seems to me that Obama hit it out of the park.

  • Jason

    Certainly, a very good, well-crafted political speech, maybe even a masterpiece as Gergen said. The guy is definitely a good speechifier. Yet, every time he mentioned a specific proposal, I cringed as I felt him reaching into my pocket to make me pay for it. Maybe that’s the “change” he’s referring to—the change in my pocket.

  • Well, he certainly promised a lot…and then he promised to give 95% of the working class a tax cut!…but policy differences aside, it’s hard to imagine a better speech, given the speaker and the circumstances. Rhetoric tends to be a little glowing in the heat of the moment, so I don’t know if I’d go as far as ‘masterpiece’…but damn good? Yep, I’d go that far…

  • too many steves

    How many is 95% of the “working class”? Given how little the “working class” pay in taxes today, that’s not much of a promise or threat, is it?

    Great speech, no doubt, and fully expected, but now what?

  • He didn’t say “working class”. He said the the bottom 95% of income earners would see a tax cut. According to the Census Bureau, that’s everyone with an annual household income of less than $177,000/ year.

    (Those earning more than $177K will see their taxes go back up to Clinton-era levels.)

    “Bottom 95%” is a more conventional breakpoint for what constitutes “middle class” than John McCain’s $5 million/year or less.

  • peter

    “I still won’t vote for him”

    Would you vote for Obama if his opponent were George Bush? If no, why would Bush be a better President than Obama? If yes, then what is so different between Bush and McCain that you would pick Obama over Bush but not over McCain?

  • Jacques, thanks for the correction – I didn’t check the transcript, and I couldn’t remember the exact phrase he used.

    Peter, I’ll have to answer you later…no time right now…

  • Given the Obama campaign’s heavy-handed reaction to the ad from AIP, and the directive to its supporters to shut down the voice of Stanley Kurtz, I wouldn’t vote for Obama if he were running against Bernie Sanders. I think I’d probably vote for him if he were running against Stalin, though.

    Sorry, but freedom of speech means far more to me than it apparently does to Barack Obama.

  • too many steves

    So here is the quote from the speech, pulled from the transcript published by the NY Times:

    “I will — listen now — I will cut taxes — cut taxes — for 95 percent of all working families, because, in an economy like this, the last thing we should do is raise taxes on the middle class.”

    I haven’t looked too hard but can’t find a definition of “working families” that matches yours. And “middle class” is not a consistently defined category. Wikipedia (I know, I know) says, “the concept remains largely ambiguous in popular opinion and common language use, contemporary sociologists have put forward several, more or less congruent, theories on the American middle class. Depending on class model used, the middle class may constitute anywhere from 25% to 73% of households.”.

    So, nice rhetorical populist bit by Obama, but rather devoid of specific meaning. Well done sir, well done!

  • Jacques, the $5 million remark was in jest, and that was plainly obvious.

    Also, it’s easy to talk about whatever percentage of people getting tax breaks that you want, especially when you’re lying. Obama’s plan increases the marginal tax rate on nearly every single income group, starting with those making as little as $31,000.

  • Oh, c’mon guys. The details are available, if you care to look. The Center for Tax Policy has analyzed both Obama’s and McCain’s plans. The conclusion is that Chris is wrong. Under Obama’s plan, the bottom 4 quintiles (household incomes below $100,000) will see their taxes fall.

    The top quintile will see their taxes go up, but most of that increase is concentrated in the top 5% (as promised).

    Taxpayers at the very top of the income distribution would be hit hard by the increase in the top two tax rates from 33 and 35 percent to 36 and 39.6 percent as well as the increase in the top tax rate on capital gains and qualified dividends to 25 percent. Upper-income households would also be hurt by Senator Obama’s reinstatement of the limitations on personal exemptions and itemized deductions, which had been phased out by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). In addition, upper-income households ultimately bear the burden of the corporate tax increases that Senator Obama proposes. The TPC follows the Congressional Budget Office (CBO) by assuming that the corporate income tax is fully borne by all capital. Thus we distribute corporate tax changes to individual households based on their share of capital income (interest, dividends, capital gains, and rents). Since the distribution of capital income is highly concentrated at the top of the income scale, the corporate tax is highly progressive. As a result, Senator Obama’s corporate tax increases are borne primarily by households in the top quintile. Finally, even though taxpayers in the 80th through 95th percentiles would be hurt by the individual income tax rate increases and the corporate tax hikes, they would also benefit from Senator Obama’s extension of the AMT “patch”. As a result, on average, taxpayers in that income range would receive average tax cuts of about 2 percent of income.
    Overall, about 81 percent of households would owe less tax whereas only about 11 percent would be hit by a tax increase. Again, outcomes would differ significantly by income. Only 7 percent of households in the middle of the income spectrum would face a tax increase. In contrast, 23 percent of those in the top quintile would pay higher taxes. Within the top quintile, more than 90 percent of those in the top 1 percent would pay more, including virtually all households in the top 0.1 percent.

    (emphasis mine)

    Jacques, the $5 million remark was in jest, and that was plainly obvious.

    He was asked a serious question and, after hemming and hawing, that was the only answer he was willing to offer. Call it a “jest” if you wish, but, as the Center for Tax Policy’s analysis of McCain’s tax proposals makes clear, it is very much indicative of where McCain’s priorities lie.

    Under McCain’s plan, the bottom 80% will receive next-to-nothing. Those earning $62,000-$100,000 will see a 1.2% cut; those in the bottom quintile will see a 0.2% cut (netting them, on average, an extra $19/year). By contrast, the top 0.1% of income earners will see a 3% cut (netting them, on average, an extra $269 thousand/year). In McCain’s world, that’s called “middle class tax relief.”

  • Bob from Ohio

    Remember the Clinton “middle tax cut”?

    Look at the new programs Obama is pushing. He cannot have both massive spending increases and mass tax cuts. There are just not enough rich people.

    He is lying about tax cuts, period. Lying. Lying.

    Should work, it worked for Clinton

  • Remember the Clinton “middle tax cut”?

    Most people would give their eye teeth to return to the punishingly high taxes and dismal economic performance of the Clinton years.

    He is lying about tax cuts, period. Lying. Lying.

    John McCain will cut taxes (even more), and still promises to balance the budget by the end of his first term?

    Who’s lying, again?

  • too many steves

    I love class warfare, can we have gender and age wars too.

    The top quintile in income pay most of the taxes already. Now, they have the most money so if Obama wants to tax them some more that is a good place to get some more money for our Mother the government, I guess. Just don’t call it fair.

    Oh, and it is disingenuous, at best, to refer to everyone below the fifth income percentile as “working families” or “middle class”.

    It’s all horse poop if you ask me… always has been, always will be. A chicken in every pot.

  • I love class warfare, …

    It’s not class warfare when you cut taxes on the top 5% (both in absolute and in relative terms). But it is class warfare when you try to raise them back up to where they were 8 years ago.

    Thanks.

    …so if Obama wants to tax them some more that is a good place to get some more money for our Mother the government,…


    Somebody’s
    gonna have to pay for the $500 billion/year deficit that this Administration has racked up.

    I think it should be those at the bottom of the income spectrum, don’t you?

    Oh, and it is disingenuous, at best, to refer to everyone below the fifth income percentile as “working families” or “middle class”.

    The bottom quintile goes up to $23,357 in income. 40 hours/week, at minimum wage, gets you a gross income of $13,624.

    I’d call people in the bottom quintile (or two) “working class”. But, as Joe Biden points out, nobody in the working class calls themselves “working class.” So I’ll have to defer to others on that point.

  • Ok, leaving class warfare and quintiles and quartiles aside.

    Jacques brings up some good points.

    tms does as well, perhaps more succinctly and less eloquently.

    I often worry about the supposedly “non-partisan” Center for Tax Policy for a couple reasons. First, call me a cynic, but I rarely believe anyone is “non-partisan”. Second, every time I read one of their reports, it comes down against a Republican. Now, perhaps Republicans just universally have bad tax plans, but I kind of doubt it. I suppose it’s also possible that I missed some where they said good things about a Republican tax plan. That’s very likely as I admit I don’t read every document they produce.

    However, Jacques, tms, and the Center for Tax Policy all illustrate the problem here, and I hope that Jacques will agree with me.

    Our tax code is far too complex.

    The reason why there are so many opinions on who is raising taxes and who is lowering them is that no one knows. Not even the politicians who present the ideas know.

    Let’s look at what’s true.
    1) Obama plans to raise the capital gains tax
    2) Obama’s plan raises the marginal tax rate on just about every single income group (very few dispute this, despite Jacque’s criticism of that point earlier)
    3) Obama’s plan includes tax credits that will offset some of these tax rate increases. However, the tax credits do expire in time
    4) Obama’s plan rolls back the Bush tax cuts
    5) Obama has 3 trillion dollars of new spending that he has to pay for somehow.
    6) Obama’s going to raise corporate taxes which will result in either higher costs for the consumer or lower paychecks or less dividends for shareholders (probably all three). This is an indirect tax that you never see, but the end result is the same. Less post-tax disposable income.

    Add that all up, and is it going to mean a tax cut for you? I don’t know. Do you have any capital gains? Are you a two-income family filing jointly? Do the credits apply to you? Were you affected by the Bush tax cuts? Will Obama have to change these plans to pay for his new spending or cut his spending to match the plans? Will his plan cause a further tightening of the economy and therefore reduce tax receipts causing him to phase out some of the credits sooner?

    All of these questions mean that you probably won’t know for sure if you’re getting a tax cut until you fill out your 1040 in 2010. And maybe not even then if you don’t take a close look at your “post-tax income” and very very very few do that.

    I just went to a site that says I’ll get a $4,000 tax cut from the Obama plan. That would be wonderful, but since it didn’t ask me about any of my deductions or my capital gains or about what kind of company I work for and whether I’m likely to be affected by higher corporate taxes, I doubt the veracity of it.

    Note that all my points were directed at Obama’s plan because that’s what we’ve been talking about in this thread. You could come up with a very similar list regarding McCain’s tax plans. In fact, many of the bullet points would be the same.

  • I agree that the tax code is complicated, which makes evaluating the impact of any proposal (Obama’s or McCain’s or anyone else’s) complicated.

    I flipped through the Center for Tax Policy report. They do provide many details about their methodology. So, in principle, one might be able to sit down and reproduce their calculations. I have not done so.

    They do, however, address some of the issues raised by Chris.

    Obama’s plan does raise corporate taxes. But this is not “hidden” in their analysis. Rather, they impute those tax increases to those who own capital (ie, who receive capital gains or dividend income). That is, those tax increases are folded into their statement of the impact of Obama’s plan on (largely) upper-income earners.

    Note that all my points were directed at Obama’s plan because that’s what we’ve been talking about in this thread. You could come up with a very similar list regarding McCain’s tax plans. In fact, many of the bullet points would be the same.

    I, like you, find it somewhat distressing that neither one will bring in the revenues adequate to pay for their promises. But I think it is indisputable that McCain’s plan will blow a bigger hole in the budget than Obama’s.

    This is not something novel about McCain. At least since Reagan, if not much further back, Republican Administrations have consistently racked up larger deficits than their Democratic counterparts and, perhaps not coincidentally, have presided over much slower economic growth.

    And, at the risk of being accused of class warfare, I will point to this study from Princeton economist, Larry Bartels. He concludes

    On average, families at the 95th percentile of the income distribution have experienced identical income growth under Democratic and Republican presidents, while those at the 20th percentile have experienced more than four times as much income growth under Democrats as they have under Republicans. These differences are attributable to partisan differences in unemployment (which has been 30 percent lower under Democratic presidents, on average) and GDP growth (which has been 30 percent higher under Democratic presidents, on average); both unemployment and GDP growth have much stronger effects on income growth at the bottom of the income distribution than at the top.

  • Jacques,
    One quick point.

    Obama’s plan does raise corporate taxes. But this is not “hidden” in their analysis. Rather, they impute those tax increases to those who own capital (ie, who receive capital gains or dividend income). That is, those tax increases are folded into their statement of the impact of Obama’s plan on (largely) upper-income earners.

    The problem with that analysis is that studies have shown that of the three groups that I named who are hit by corporate taxes, consumers, employees, shareholders, shareholders typically come out the best. It’s the consumers and employees who are hit hardest. So, I think their analysis is lacking.

    If you need a link on that I can provide, but I don’t have one handy at the moment.

    As another aside, this is a major gripe I have with both Republicans and Democrats. Anytime someone talks about raising corporate taxes or closing loopholes in the corporate tax code to save you money, they are either:
    1) Lying
    2) Stupid
    3) Think you’re stupid

    Probably all three.

    In the end its always the individual that writes the check, no matter how the taxes are arranged. Now, depending on how you do the corporate taxes, you can change the “regressiveness/progressiveness” of the tax on the individual. So, if that’s your goal, you may be able to claim tax relief for certain groups, but it’s a stretch, to say the least.

  • As for whose plan will cause the debt to balloon more, I’ve read conflicting reports, so I question “indisputable”. Really, it depends quite a bit on how much the economy grows/recedes and even what parts of the economy are affected.

  • The problem with that analysis is that studies have shown that of the three groups that I named who are hit by corporate taxes, consumers, employees, shareholders, shareholders typically come out the best. It’s the consumers and employees who are hit hardest.

    I find that statement baffling.

    Could you provide a reference?

    As another aside, this is a major gripe I have with both Republicans and Democrats. Anytime someone talks about raising corporate taxes or closing loopholes in the corporate tax code to save you money, they are either:
    1) Lying
    2) Stupid
    3) Think you’re stupid

    Closing loopholes is generally a good thing, because loopholes have a distortionate effect on economic behaviour.

    As to raising raising corporate taxes saving “you” money, if we accept, just for the sake of argument, that magical fairies are not going to balance the budget, the government needs to bring in tax revenues from somewhere, to pay for expenditures.

    Where one raises those taxes, comes down to a question of equity and economic efficiency. Corporate Income Taxes simply take a slice of corporate profits which would otherwise, ultimately, be passed on to shareholders. Since many of those shareholders are foreigners, who would otherwise be beyond the reach of Uncle Sam, this is actually a “good deal” for American individual taxpayers, who would otherwise have to shoulder more of the tax burden themselves.

    As for whose plan will cause the debt to balloon more, I’ve read conflicting reports…

    I have yet to see a serious analysis that concludes that McCain’s is the more fiscally-responsible plan. Everything I’ve read says the opposite.

    Reference?

  • Ok, links.

    I misread the WSJ report on the debt. It says Obama $3.3T and McCain $5T. Somehow I read that backwards or remembered it backwards.

    One thing I’m confused about regarding the TPC report is that it says the Obama plan creates over $3.3T in new debt. But TaxProf blog says that includes $900B in revenue that TPC couldn’t verify. I haven’t read the report, so I don’t know how to interpret that. Does that mean that it could be as high as $4.2T if the $900B isn’t there? Or that it could be all the way down at $2.4T if the $900B is there? I wasn’t sure how to interpret that comment at TaxProfBlog. It seemed to me that the fair conclusion is $4.2 given the way he worded it, but without a better understanding of the TPC report, I’m not about to start throwing that number around.

    Here’s the link.

    I still maintain that no one really knows and all of their guesses depend on what they think the economy is going to do and exactly what areas might expand or contract. If you really believe that an economist can make those kinds of projections out 10 years in the future, you have quite a bit more faith in economists than I do.

    Still, McCain’s plan is apparently a loser here. If I thought his plan had any prayer of actually being passed that might worry me more.

    Hopefully Obama’s plan won’t be passed either, but I’m less sanguine about that.

    Anyway, the other point regarding who pays corporate taxes. An excellent analysis here. It’s 40 pages but most of it is reasonably easy to read, and I recommend you read the entire thing, so I won’t bother to pull out any quotes. They do recommend further analysis. I read one more report with similar conclusions, but I’m unable to find a link. I think it was actually in my local newspaper and not online, but I should still be able to find a link somewhere. I’ll let you know if/when I do.

  • Still, McCain’s plan is apparently a loser here. If I thought his plan had any prayer of actually being passed that might worry me more.
    Hopefully Obama’s plan won’t be passed either, but I’m less sanguine about that.

    I am sure that, in either case, what eventually emerges from Congress will differ substantially from the plan proposed by the Presidential candidate.

    I view these plans more as diagnostics of where the candidates’ heads are at — what sort of economic stewardship they intend to provide and whether they intend to be serious about the economic challenges facing our country, or to engage in magical thinking instead.

    An excellent analysis here. It’s 40 pages but most of it is reasonably easy to read, and I recommend you read the entire thing, so I won’t bother to pull out any quotes.

    An interesting read.

    The orthodox view, found in all the economics textbooks, is that corporate taxes fall mainly on shareholders. Of course, there’s bound to be a secondary effect (on wages, on prices, and on the general level of economic activity), but that has always been thought to be rather small.

    The OTA working paper, you link to, discusses three very recent (all from 2007, all as-yet unpublished) studies which find that, contrary to what everyone thought, a large part of the corporate tax burden falls on workers, in the form of lower wages.

    I found a fourth study (also from 2007, also as-yet unpublished) which reaches similar conclusions.

    Personally, I’d wait a bit, before tossing out the orthodox view. At least until these papers have been peer-reviewed, if not until some more followup studies have been done by other economists, to test this new hypothesis.

    Even the author of the OTA working paper seems a bit sceptical. He raises several possible objections. The two most compelling ones are

    Second, an important challenge for any empirical estimates of the response to taxes is to find exogenous changes in tax policy. To evaluate the long-term effects of policy, one needs data on permanent changes in policy and considerable amounts of data before and after these policy changes. Given the relatively modest time horizons in the papers and the relative infrequency of major corporate tax reforms, it is unclear whether the measured effects are capturing the long-run effects of tax policy. Moreover, a common fear in econometric analysis is that the policy is endogenous to the variable of interest. For the relationship between wages and corporate taxes, this fear leads to the concern that governments shift towards higher capital taxation just before the returns to labor fall. Instead of the causality flowing from corporate taxes to wages, lower predicted wages induce higher capital taxation.

    and

    Third, the magnitudes of the results seem quite large based on a priori expectations about corporate tax incidence. In many specifications across the three papers, modest shifts in corporate tax policy lead to substantial changes in labor income. As will be discussed below, some theoretical models would support effects of the magnitudes reported but many parameterizations of theoretical models suggest the estimated effects are implausibly large.

    The “implausibly large” part was also my gut reaction. I’m glad to see that econometric models seem to bear out that gut impression.

    Time will tell whether these guys (and one gal) are correct …

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