Tax Policy/Economics
Alan Lowenthal Responds

LBBJ: You indicated earlier your support for a mix of new tax revenues and . . .

Lowenthal: A balance. A balance between cuts; I think the president talked about $2.4 trillion in cuts and about half of that in additional revenues to let the Bush tax cuts on the highest income earners expire.

LBBJ: This is simply . . .

Lowenthal: Going back to the Clinton level of taxes, where we had the most economic productivity maybe in the history of the nation.

LBBJ: This is really the formula prescribed by Bowles-Simpson. Would you like to see that brought back?

Lowenthal: I would support that. I support the president's proposal . . .

LBBJ: Here's our sticking point. That mix, that balance if you will, of tax revenues and spending cuts, this is basically what Britain implemented earlier this year. We saw them fall into a double-dip recession. Now, obviously . . .

Lowenthal: I don't think that's what caused them to fall into double-dip recession. I think that productivity and other things in Britain can go on, just as the rest of Europe fell into that, without doing that.

LBBJ: So you're not concerned that some of these austerity measures that they've taken . . .

Lowenthal: That's what I said. If you just do austerity measures, and you stop investing in the infrastructure and the educational levels, you run the risk of not creating the conditions to get out of this. All you are doing is to try to hold on, and I think that you need to have a balanced approach. I think that all austerity is not the answer.

LBBJ: Are you concerned that there might be a push to implement something like Bowles-Simpson too quickly? Is it, perhaps, better to hold off on tax increases and spending cuts for, say, another two years?

Lowenthal: No.

LBBJ: We've got this fiscal cliff coming and it doesn't seem like Democrats or Republicans, that anybody, wants what's coming.

Lowenthal: Well, I think it is all coming. I think after the election we are all going to work this out.

LBBJ: So you believe that it has to happen now?

Lowenthal: It will happen. It has to. It will. We are not going to let the United States go down. Both parties. It will happen. It's only to the degree that it will happen. We will have a balanced approach. We will figure out what it is.

LBBJ: The United States, as I'm sure you know, has the highest corporate federal income tax in the world. Do you think lowering this rate could help spur job growth?

Lowenthal: Possibly. I think what the consensus coming around is we need to have an overall look at all of our tax policies. . . . I don't think you can piecemeal anymore. I think that right now what will be on our plate is to come up with a reexamination of the tax structure. I think the differences between the Republicans and the Democrats on that goes back to the fundamental issue that Bush tax cuts on the wealthiest was a trickle-down system. That has never worked.

LBBJ: Do you think Congress, which seems to be so unable to find compromise – they have the lowest approval rating in their history – do you really think that they can tackle tax reform, or is it going to be a game of picking winners or losers?

Lowenthal: I think what we will see in this election is the fascination with the Tea Party will diminish rapidly. Not so much in California, but in other states. I think what you're going to see is, and I'm not saying those are going to become Democrat states, but they are going to become more moderate. Even the more Republican states are going to become more moderate. Mr. [House Speaker John] Boehner has lost control of his own party, and that's what will happen. I think what you will see is that sense of anger and frustration. While certainly having not totally dissipated, that is not the mood of the country now. The mood of the country now is to get things done. Not to stop it all and move away. I think those obstacles will not be reelected and the next Congress will be quite different.

LBBJ: Without some promises of new tax revenues from the GOP, do you think the Democrats have any reason to commit to entitlement reform?

Lowenthal: I think we need and we are having sustainable systems. We need to maintain our commitments. What you're talking about, in terms of entitlement, is primarily Social Security, Medicare and Medicaid, Welfare to Work. I think we've already done radical Welfare to Work reforms. They need some tinkering, but we already have limited time periods under Clinton. We did this at a national level. The work component is part of that. So I think we're not interested in people dying on the streets. We are interested in helping them on a temporary basis to get them back on their feet. That needs to be done. I think that in terms of Social Security and, let's say, Medicare, I think the president has already found in the Medicare program, I think it was $700 billion in terms of reforms. Not one penny came from services to people. Really they have the same – actually the have more – services because of preventative services that were put in because of the Affordable Care Act. Medicare never had a prevention and health treatment for women. Now they do. With that, there's still $700 billion in savings that can be done in terms that will be used. Now, Republicans and Democrats want to use that money differently, but we are all already embarked on reform. We will see it. I don't think reform means to eviscerate the programs. I think it means to reform them and maintain the integrity of them. I think that the Ryan budget goes much too far, and the Republican position is one that is way out of stack with the commitments that the American people expect from Social Security and healthcare, and will not be supported by the American people nor myself.

LBBJ: Is tax policy, do you think, the single best engine to address income inequality in this country?

Lowenthal: I think education is the best form to address it. I think tax policy is certainly one part of it, but I think that for this country, and especially a country that has opened its arms to the world as the most diverse nation on the planet, the best way to deal with income inequality is what this nation has always done and has been strong in, and this is to educate its workforce and to have people have the skills. They are the hope. The young people, especially the diversity of this nation, are the hope of the world and the hope of the future. That's why we need to have a system that works and educate all, and we cannot tolerate failure any longer. That will help us more than anything else.