Paul Krugman: The ultra-rich could help pay for Biden’s ambitious agenda — but the details are 'complicated'

Paul Krugman: The ultra-rich could help pay for Biden’s ambitious agenda — but the details are 'complicated'
Phil Roeder https://creativecommons.org/licenses/by/2.0/

Although President Joe Biden has a very centrist history and was willing to compromise with fiscal conservatives during his decades in the U.S. Senate, he has argued — during his four months in the White House — that the COVID-19 pandemic and the economic suffering it has inflicted make an aggressive economic response necessary. The Biden Administration's most recent budget proposal calls for almost $5 trillion in new spending over the next decade, which begs the question: how are Biden and his allies going to pay for his Build Back Better ambitions? Liberal economist and New York Times columnist Paul Krugman tackles this subject in a June 3 column, stressing that while America's ultra-rich can, in fact, help pay for Biden's programs through their taxes, getting Congress on board is a "complicated" matter.

Krugman notes that Biden has "repeatedly promised not to increase taxes on households making less than $400,000 a year" and that his administration's budget "does indeed propose raising all the additional money via higher receipts from corporations and high-income individuals."

"Is trying to 'build back better' by taxing only the very affluent feasible?," Krugman writes. "Is it wise? Could it be done more effectively? My answer is yes to the first two questions, if you assume — as I think we should — that given the political realities, Biden needs to keep his ambitions fairly modest. The answer to the third is, it's complicated."

Krugman goes on to say that there are "three main critiques of Biden's tax approach, two of which deserve to be taken seriously."

"The unserious critique is the claim that raising taxes on corporations and high incomes would cripple the economy," Krugman explains. "Assertions that prosperity depends on keeping taxes at the top low have been refuted by experience time and time again — most recently, in the failure of the Trump tax cuts to deliver the promised immense investment boom. The only reason the obsession with low taxes for the rich retains any influence is that keeping this zombie shambling around serves the interests of corporations and the wealthy. So, let's not waste time on it."

Krugman adds that a "far more serious critique of" Biden's tax proposals "comes from the left."

"There's a good case that the kind of society progressives want us to become, with a very strong social safety net, can't be paid for just by taxing the rich," Krugman notes. "A country like Denmark, for example, does have a high top tax rate — although it's not that much higher than the effective tax rate facing high-income New Yorkers, who pay state and city as well as federal taxes. But Denmark also has very high middle-class taxation — in particular, a 25% value-added tax, effectively a national sales tax. And the fact that even the Nordic countries feel compelled to raise a lot of money from the middle class suggests that there are limits — much higher than conservatives claim, but limits nonetheless — to how much you can raise just by taxing the rich."

Krugman continues, "So, if you want 'Medicare for All,' Nordic levels of support for child care and families in general, and so on, just raising taxes on the 400K-plus elite won't get you there. And many progressives — myself included — would like us to have these things. It would, however, be incredibly risky politically to try selling members of the U.S. middle class on the idea that paying substantially higher taxes would be worth it because of all the benefits they would receive."

Getting Biden's Build Back Better proposals through Congress and onto his desk for signature is not an easy matter. Democrats have majorities in the U.S. House of Representatives and the U.S. Senate, but they aren't huge majorities. Democrats just barely have a majority in the Senate, and some centrist Democratic senators — namely, Sen. Joe Manchin of West Virginia and Sen. Kyrsten Sinema of Arizona — have been a source of frustration to the progressive wing of the Democratic Party.

Although Krugman doesn't mention either Manchin or Sinema by name in his column, he fears that some Democrats will "water down" Biden's ambitions.

"Tax policy is really hard — partly because you're trying to make rules that can withstand assaults from very well-paid accountants — and there are seriously credible experts on both sides of the detailed tax debates," Krugman writes. "Some of my go-to tax experts are now in the (Biden) Administration! What this means, I suspect, is that while some of the critiques may well be correct, Biden's proposals are appropriate in their general thrust and probably don't have huge flaws in their details. My biggest concern isn't that he'll botch important issues, it is that Democrats in Congress — some of whom are still far too deferential to moneyed interests — will water down the things he's trying to do right."

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