Paul L. Caron

Sunday, April 17, 2011

Mondale: Obama Is Right to Propose Raising Taxes

Washington Post op-ed, As in 1984, We Need the Courage to Raise Taxes, by Walter Mondale:

We will not be able to control our budget deficits without raising taxes. That simple reality has brought us to a moment of truth in American politics. President Obama’s speech Wednesday lived up to that moment, and now Democrats and Republicans in Congress must take a similar stand.

Many have described my 1984 presidential campaign promise to raise taxes as exemplifying the folly of proposing tax hikes during an election. Although the rebounding economy and improving job picture that year probably had more to do with President Ronald Reagan’s reelection than my pledge did, there are certainly political lessons for anyone considering tax increases today. In particular, avoid generalities, and clearly link taxes to addressing concrete national needs.

Taxes reveal who we are as a people and what we value. Polls consistently show that majorities of Americans are willing to pay taxes and even have them increased when the revenues are devoted to their priorities, such as education, health care and deficit reduction. The public’s support is greatest for raising taxes on the affluent, but it extends to hikes tied to popular programs such as Social Security and Medicare. Moreover, Americans are not fans of tax cuts when pitted against other priorities..

I told the truth in 1984. “The American people will have to pay Mr. Reagan’s bills,” I said in my acceptance speech at the Democratic National Convention in San Francisco. “The budget will be squeezed. Taxes will go up. . . . It must be done. Mr. Reagan will raise taxes, and so will I. He won’t tell you. I just did.” I lost the election, but I won the debate. Reagan ended up increasing taxes in 1984, 1985, 1986 and 1987 to mend the budget and tax systems.

Elections since 1984 have demonstrated that favoring higher taxes to pay for specific priorities can be a winning political formula. Bill Clinton and Barack Obama both prevailed with well-executed and honest proposals to raise taxes for concrete purposes that Americans favored. ...

Today, we need Republicans and Democrats to return to that tradition of putting country ahead of politics — to agree to tax increases as part of a package that would also cut spending and reform entitlements in ways that control long-term costs and protect those who depend on them. This is what we have done in the past, and it is what we must do to secure America’s future.

See also Bruce Bartlett (The Fiscal Times), Recent Polls on Taxes and Spending

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We are missing the point and many lessons learned from the entire fiscal crisis, and yet for decades the Democrats have driven the debate into the ditch and the national debt into the stratosphere. The truth shall set you free, hopefully before the Democrats destroy the Republic. Background information is needed to understand how far off base Mondale's statements are. Start with a simple proposition straight out of the Constitution: all spending policies and laws are passed by congress and signed by the president, who is charged with enforcing laws. You may follow the money at

The War on Poverty was passed by LBJ and Democrats with minimal Republican Party support, WoP cost $6.6 trillion (WaPo) over a thirty-year period (avg $220 billion per year), at the end of which the national debt was $6 trillion. WoP was wasteful, ineffective, and corrupt and Reagan tried unsuccessfully to change the law, but never refused to enforce the law. Changing the WoP from welfare to workfare, as proposed by Reagan, was thwarted in the senate, principally but without principle, by Tip O'Neill. At that time, $220 billion was a lot of money.

There were a lot of thing going on in LBJ's Great Society programs at that time such as Medicare, but Medicare had a tangible payoff even if it was bureaucratic and inefficient. There was no such payoff for the War on Poverty: poverty rates went up and down, Black family life was substantially destroyed in the USA, and the women and children who received government money did so only if there was no man in the household, so the men went on the street, often to drugs and crime.

The War on Poverty was a social disaster affecting a significant minority of the population, but the entire population was adversely affected by the Democrats' folly. Referring to the DJIA chart above, observe that when LBJ started taking $220 trillion out of the economy each year for the War on Poverty, the DOW flat-lined for seventeen years. Where did that $220 billion each year come from? It came out of investment capital and represented factories not built, production equipment not purchased, and workers not hired. The result was three recessions during those seventeen years, including the Carter Catastrophe.

Reagan restored investment capital to the economy with his tax cuts and regulation reduction reforms, and the economy took off, reaching world record growth and employment. There is a very simple, profound lesson here but all Democrats and all too many Republicans refuse to learn that lesson: Capital in the hands of investors (the rich, if you must) creates jobs, capital given to politicians for unfunded entitlement programs is pissed away as if it went down a sewer, producing nothing but waste, corruption, and social and economic destruction.

The exact same argument, differing only in minor details, is applicable to the Democrats' Unaffordable Housing Program. My thesis is that LBJ's War on Poverty ($6 trillion), Clinton's Bubble, ($3 trillion), and Carter's and Clinton's Housing Bubble ($5.5 trillion and counting) account for the entire national debt, without which we would not be in this fiscal fix.

The kicker is Mondale's failure to grasp the nature of the Reagan tax cuts and the Reagan tax increases, as described in the WaPo article. Every cent of the Reagan tax cuts went to increasing investment capital and the effect was almost immediately evident and dramatic, and continued for many years. It is true that Reagan subsequently raised taxes by an even larger amount than his initial tax cuts, but almost nothing of the Reagan tax raises took away from investment capital. The Reagan tax increases primarily closed loop holes and shored up Social Security, and, as observed on the DJIQ graph, seems to have had little effect on the remarkable 3.8% growth rate of the Reagan years.

I no longer have hope that any Democrat is capable of understanding these simple facts, but I am disturbed that so many Republicans repeat the Democrats' errors, including for example, Glenn Beck. Come on gang, if you can't think your way through these things, at least follow the music.

Posted by: Pa Deuce | Apr 18, 2011 9:02:02 PM

Here's an interesting article on what the Democrats are painting as the answer to deficits.

Not Tax Cuts, Not Wars, and Not Bailouts
What is really driving America into insolvency.

Your average poorly informed lefty (but I repeat myself) will reliably tell you that our current fiscal straits are the result of three things: 1. Bush’s wars; 2. Bush’s tax cuts for the rich; 3. Bush’s bank bailouts.

THAT IS NOT TRUE, OF COURSE: The main BANK BAILOUTS (ODIOUS AS THEY WERE) HAVE BEEN PAID BACK, OFTEN AT A PROFIT. The money-losing parts (and the likely money-losing parts) are the ones insisted upon by Barack Obama and his Democratic colleagues: the foreclosure-prevention programs, the endless maintenance of Fannie Mae and Freddie Mac, etc….

…Our deficit is running around $1.6 trillion. IF WE TOOK ALL MILITARY SPENDING — NOT JUST THE IRAQ AND AFGHANISTAN WARS, BUT THE WHOLE SHEBANG — AND CUT IT TO $0.00, WE’D SAVE ABOUT $664 BILLION A YEAR. Iraq and Afghanistan will cost
about $170 billion combined in FY2011. ENDING THE BUSH TAX CUTS FOR “THE RICH” — FOR THE $250,000-AND-UP CROWD, IN OBAMA’S FORMULATION — WOULD PUT ON AVERAGE ABOUT ANOTHER $80 BILLION A YEAR INTO TREASURY COFFERS. (CBO estimates the ten-year cost of those tax cuts at $800 billion.) The spending on the wars and the forgone revenue from the Bush tax cuts do not add up to much of that $1.6 trillion deficit: a little less than 16 percent….

A very good article if you are interested in what the cost and savings are that the Democrats pin their hopes on. Eliminating the DOD is $666 billion. Tax cut for the rich gives you another $80 billion. And bail outs aren’t really a cost to add in. Therefore, the Democrats have a $1.65 trillion dollar deficit that they would solve with $250 billion in cuts (make that $746 billion if you eliminated the DOD completely). Obama and the democrats aren’t serious about reducing the deficit.

Posted by: goodspkr | Apr 18, 2011 4:27:55 AM

Grab your pitchforks and torches everyone, and let's head for the castle. They have money, food and shelter. Quick everyone, before the rich turds flee the country! All we have to do is tell them we're raising their taxes so they can pay their fair share, like we do. Cheap bastards need to hand over the loot, or we'll take it by force. (Is this too subtle?)

Posted by: Milwaukee | Apr 17, 2011 10:09:06 PM

Plus it's not true.

Posted by: Steve | Apr 17, 2011 9:25:31 PM

Mondale got his ass kicked not because he promised to raise taxes, but because he was linked to "Cardigan" Carter.
Mondale didn't need to tell people he was going to raise their taxes. Nor was it being "honest" to say so. What idiot doesn't know that a Democrat is going to raise their taxes? It's like promising that the sun will come up in the morning.

Posted by: Diggs | Apr 17, 2011 8:38:05 PM

Hey here is an idea after taxing this horrid 1% how about we make them wear yellow stars on their clothing?

Posted by: bonzo | Apr 17, 2011 4:32:24 PM

I don't think this is the support he needed.

Posted by: mike livingston | Apr 17, 2011 11:03:55 AM

Courage? Not judging by what he is emphasizing. Rallying 99% of the population to raise taxes on the remaining 1%, which does not strike me as requiring much courage. Want courage? How about what he is de-emphasing or ignoring. Broadening the tax base -- the only fiscally reliable way to fund a welfare state and the only way to establish a cost-benefit feedback loop which may ultimately restraint its growth -- would be courageous. So would it be dialing down society's expectations on government entitlements and dialing up its expectations on individual responsibility.

Posted by: MG | Apr 17, 2011 7:53:09 AM