Gerson Again

I suppose in some sense it's better that it's now The Washington Post's dollars that are going to pay Michael Gerson to lie on George W. Bush's behalf rather than our tax dollars, but the paper should really consider sitting him down and reminding him that while "lying on behalf of George W. Bush" is the key task of a Bush administration aide, a newspaper columnist should be doing something else. I mean, what are we supposed to make of this?

First, Rove argues that Republicans win as activist reformers, in the tradition of Lincoln, McKinley and Theodore Roosevelt. "We were founded as a reformist party," he said in our conversation this week, "not to be against something, but to help the little guy get ahead." The models he cites are 401(k)s and the mortgage interest deduction -- government policies that encouraged individual wealth and ownership. Then Rove spent several minutes describing, with wonkish delight, the momentum and virtues of health savings accounts, a Bush-era innovation allowing individuals to save tax-free for routine medical expenses.

Look, I dunno. It's mean to call people liars. And probably inappropriate. I have no real basis for my beliefs about Gerson's mental state. Maybe he's just ignorant. Maybe he has no idea that all of these programs provide much more assistance to rich people than they do to poor people. Maybe he has absolutely no idea what he's talking about. But that's bad, too. 401(k)s aren't a way to help the little guy get ahead. Neither is the mortgage interest deduction. Neither are Health Savings Accounts. These are all ways to sharply reduce the taxes of rich people.

If Karl Rove ever described these programs "with wonkish delight" as a way to help the little guy get ahead, then the moral of the story is that Rove is a moron, unfamiliar with the basic aspects of public policy. More likely, Rove knew exactly what he was doing and saw promotion of these policies as just the sort of cynical move Gerson denies Rove would ever contemplate -- a way to mislead voters into supporting a political agenda aimed at securing the interests of the rich. But what's Gerson doing? Why is the Post publishing these columns? The White House has its own press operation.

Comments

christ, MY, enough with the waffling.

You got it right in the first paragraph: the guy was a paid liar for the Bush regime, and that is still what he is doing now.

Do he and Rove know very much about policy? No. But they know enough to know that they are spouting mendacious crap that misleads the suckers and pollutes public discourse.

And the WaPo board of editors? Ignorant or outright liars?

I think they know that they are publishing liars and employing liars.

But there has not been enough public push-back to overcome their timid centrist flinch-reflex. Remember, the WaPo and NYT suffered several decades of relentless thuggish pounding from the right-wing ref-workers. Every time they told the truth they were savaged for their liberal bias.

It's going to take some more time to redress that balance. And the best way is for voices like yours to call them out when they are aiding and abetting lying political operatives like Gerson and Rove.

Posted by Count Cant | August 17, 2007 1:43 PM

401(k)s aren't a way to help the little guy get ahead. Neither is the mortgage interest deduction. Neither are Health Savings Accounts. These are all ways to sharply reduce the taxes of rich people.

This seems quite wrong. I won't call Matthew a liar, but he must be aware that lots of middle income people benefit from 401ks, the mortgage interest deduction, etc., right?

Posted by Al | August 17, 2007 1:49 PM

Alternatively, they're using a different definition of "the little guy" than we do. Suppose the little guy is actually the Middle Class because they're the "littlest" of the people who "work hard and pay taxes" (to use an offensive phrase that I've heard a variety of conservative nutjobs use). If you believe that anybody who's willing to work hard and play by the rules can be middle class, and that the lower class is comprised of people who are lazy and unworthy of help because they refuse to help themselves, then the middle class are in fact the littlest guys you need to worry about and 401Ks etc. are indeed helpful to "the little guy."

I certainly don't know for sure that that's what's going on in Rove's and Gersons's tiny little brains, but it's consistent with a very real and very ugly strain of conservative thought.

Posted by Galen | August 17, 2007 1:50 PM

Should we point out, as Kevin Drum does today, that Republicans had nothing to do with enacting either of these tax-reducing benefits?

Posted by Donald A. Coffin O | August 17, 2007 1:52 PM

Also, as Kevin Drum points out, it's at best a stretch to claim that Republicans can take credit for 401(k)s and the mortgage interest deduction.

Posted by hum | August 17, 2007 1:52 PM

Al and Galen are right. Gerson describes 401(k)s and the mortgage interest deduction as "government policies that encouraged individual wealth and ownership." That's an accurate description. They don't help "the little guy" if by "the little guy" you mean "poor people," but they do help "the little guy" if by "the little guy" you mean "the middle class."

Posted by too many steves | August 17, 2007 1:53 PM

"Why is the Post publishing these columns? The White House has its own press operation."
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Your query answers itself, Matt. Yes, the WH does have its own press operation. It's the Washington Post.

Posted by steve duncan | August 17, 2007 2:03 PM

First, as others have noted, the Republicans had little to do with the enactment of either 401(k)s or the mortgage interest deduction. Moreover, both are rather ancient history as public policy innovations, and certainly precede the post-1980 strain of GOP "conservatism."

Second, to the extent that 401(k)s have been foisted upon working people as a substitute for traditional pension plans, they represent a giant step backward for the little guy.

Finally, 401(k) plans and the mortgage interest deduction both disproportionately favor upper income taxpayers.

Posted by Klein's Tiny Left Nut | August 17, 2007 2:08 PM

Re Karl Rove

I suspect that most of the readers of this blog are too young to have heard of a labor organizer named Saul Alinsky. Alinskys' theory was that reforms could be accomplished by, "rubbing raw the sores of discontent." That's exactly the philosophy of Karl Rove, get elected by rubbing raw the sores of discontent. As an example, the discontent of the born again Republican base with the gay agenda is a sore that the Rovites have rubbed raw with great enthusiasm and with considerable success.

Posted by SLC | August 17, 2007 2:10 PM

Counterintuitive like Mike!

I dunno--I think Michael Gerson has lately earned himself a matte-beige sidebar capsule bio in a future textbook history of 21st-Century America (working chapter title: "The George W. Bush Years: The Oughts—And the Ought-Nottas") as the most ludicrous, own-horn-tooting [see Atlantic/Scully], sanctimonious, lying and/or delusional, criminally insane or monumentally manipulated Gilbert & Sullivan Dubya-hugger of our entire era! Gerson's name shall live in...infamy! Huzzah!

Posted by elle loco | August 17, 2007 2:23 PM

"Al and Galen are right. Gerson describes 401(k)s and the mortgage interest deduction as "government policies that encouraged individual wealth and ownership." That's an accurate description"

Of course it is. All the more reason for middle class folks to worry about the influence of liberal bloggers who were born rich, and are clueless about programs that have enabled those in the middle class to build nest eggs. "Evil" companies such as Exxon are full of blue collar employees (oil rig workers, etc.) who retire with high six-figure 401(k) balances. Not enough money to raise children in Manhattan, Yglesias-style, but enough to contribute to a comfortable retirement and have something left over for their children.

Posted by Fred | August 17, 2007 2:26 PM

Al and Too Many Steves

I don't know about 401(k)s, but the mortgage deduction is a "regressive" tax benefit. In 2005, 72 percent of the mortgage tax deductions went to families with household incomes of over $75,000, when the median household income was just over $46,000. If you don't have enough money for a downpayment and closing costs -- and that includes many people in the middle class -- you don't benefit from it at all. Many of the people who do benefit from the deduction don't realize that its existence raised the cost of their house in the first place. Economists from both the left and the right almost unanimously oppose the existence of this deduction. Hell, even the Bush Administration's Advisory Panel on Tax Reform recommended replacing it with a more progressive tax credit. But it will never go away thanks to pressure from the real estate industry and the continuing belief that it actually helps the "little guy."

Posted by fancypants | August 17, 2007 2:28 PM

Matt should resist all temptations to succumb to the leftist blogosphere disease known as KevinDrumitis. Although it infects a very few people, it has profound influence on the way the blog is percieved.

Call Gerson a liar, damnit. Let others do nuance and irony.

Posted by gregor | August 17, 2007 2:36 PM

Matt has a good point that 401ks etc..don't help poor people, but to say they only help rich people is equally as wrong. Lots of middle class people contribute to 401ks, own homes, and use health savings acounts.

Posted by Dave | August 17, 2007 2:42 PM

Four dunno's on this page.

Posted by bjk | August 17, 2007 2:48 PM

The paradigm of the little guy for the republicans has always been the small business owner. He's the little guy because he's beset by burdensome government regulations, feminists, minorities, and foreigners, all of whom somehow end with incredible power to screw him over. Never mind that the small business owner might be making hundreds of thousands of dollars, he and the republicans have gotten into a mindset where he's powerless. Even more amazingly, they seem to get poor whites in Kansas to sympathize.

Posted by Justin | August 17, 2007 2:54 PM

I don't know about 401(k)s, but the mortgage deduction is a "regressive" tax benefit. In 2005, 72 percent of the mortgage tax deductions went to families with household incomes of over $75,000, when the median household income was just over $46,000.

I don't know where you get your numbers, but according to the IRS, they are wrong. According to the IRS, 63% of the aggregate amount of home mortgage deductions went to persons with AGIs under $100,000.

Posted by Al | August 17, 2007 2:56 PM

Yeah, the mortgage interest deduction mostly helps rich people, and I don't really know about HSAs, but 401k plans mostly help middle- and working-class people. The ceiling on 401k contributions means that they're really not useful for wealthy people as a savings instrument. So that does qualify as "helping the little guy".

Of course, then we run into the fact that 401k's are basically a Democratic invention, and the Republicans can basically take no credit for it. So the fact that 401k's help the little guy doesn't change the fact that Gerson's a liar.

Posted by Mr. Noah | August 17, 2007 3:00 PM

Willard: Could we, uh... talk to Colonel Kurtz?

Photojournalist: Hey, man, you don't talk to the Colonel. You listen to him. The man's enlarged my mind. He's a poet-warrior in the classic sense. I mean sometimes he'll... uh... well, you'll say "hello" to him, right? And he'll just walk right by you. He won't even notice you. And suddenly he'll grab you, and he'll throw you in a corner, and he'll say, "do you know that 'if' is the middle word in life? If you can keep your head when all about you are losing theirs and blaming it on you, if you can trust yourself when all men doubt you"... I mean I'm no, I can't... I'm a little man, I'm a little man, he's... he's a great man. I should have been a pair of ragged claws scuttling across floors of silent seas...

Posted by alphie | August 17, 2007 3:09 PM

Fred,

First, Republicans did not create 401(k)s. Second, for most people with median incomes, i.e. $40 - 50,000 a year, it will be very difficult to save enough money to generate a decent retirement income from only a 401(k). The greatest benefits from 401(k) plans go to highly compensated individuals who can take the maximum wage deferral (and I say this as someone who can and does). The average account balance at the end of 2006 was about $62,000, while the median balance was approximately $18,000. These are not really the kind of numbers necessary for a decent retirement.

Posted by Klein's Tiny Left Nut | August 17, 2007 3:12 PM

Al,

When did $75,000 = $100,000? Did Karl teach you The Math?

Posted by keatssycamore | August 17, 2007 3:13 PM

According to the IRS, 63% of the aggregate amount of home mortgage deductions went to persons with AGIs under $100,000.

a) the cutoff he quoted was $75K, not $100K. the data you link to has a $75K data point. why you choose to use $100K as your cutoff is anyone's guess.

b) the $100k and up range accounts for 59% of the amounts for individuals.

c) the $75K and up range accounts for 79% of the individual returns.

Posted by cleek | August 17, 2007 3:14 PM

Al, meet Venn Diagrams. Venn Diagrams, this is Al, famous is song and story.

As for encouraging Yglesias to call Gerson (or whomever) a liar (or whatever), if you think he is (and you know who you are) you risk the law suit. A trivial risk, sure, so why not? Inciting others to do your name calling is wimp stuff.

Posted by Jeffrey Davis | August 17, 2007 3:17 PM

Mr. Noah,

You're kidding me -- you can put $15,500 a year in a 401(k), plus an additional $5,000 a year if you are over 50. How many working class or middle class people can come close to these numbers? Moreover, the pre-tax treatment of the contributions favors those in higher tax brackets. Again, I benefit fully from this policy, so I have no axe to grind, but there is no way this can be sold as primarily a benefit to median income workers.

Posted by Klein's Tiny Left Nut | August 17, 2007 3:19 PM

...
d) Al's data is for 2004. fancypants was referring to 2005.

Posted by cleek | August 17, 2007 3:20 PM

Amen Matthew. While I think most sane people would admit that middle class individuals benefit from 401(k) accounts, I think it obvious that the middle class does not benefit most because they don't have the most available money to invest.

And even if one is lucky enough to max out their 401(k), that just scratches the surface of tax policies that favor the wealthy. Start looking into 1031 investment property exchange rules, the 15% long term capital gains rate (look at the Blackstone deal as an example of how any sophisticated tax persons can structure companies and transactions to minimize taxes). Then there are flowthrough tax entities like LLCs and subschapter S corporations. Couple this all with securities laws exemptions for high net worth investors and deduction on taxes for accounting expenses.

The middle class may get some benefit from certain provisions of the code like 401(k)s (though as noted I doubt the Mortgage deduction nets out to any real money to anyone but the mortgage providers, the developers and the real estate agents). However, it is the wealthy who get the most benefit from our complicated and overly incentive and loophole laden tax structure.

Posted by Tom | August 17, 2007 3:28 PM

I used $100,000 because that seemed to me to be a more appropriate cut off for "the little guy". I mean, who thinks that someone with an AGI of $80,000 is a "big guy"?

But if you want the numbers for $75k, according to the IRS data, 45% of the aggregate amount of home mortgage deductions went to persons with AGIs under $75,000 in 2004.

That still conflicts with fancypants' numbers (for which no soufce was cited).

And I used 2004 numbers because those are the most up-to-date on the IRS website. Where the alleged 2005 numbers come from, I'd like to know.

Also, I don't see what cleek's b & c refer to.

Posted by Al | August 17, 2007 3:34 PM

One of John Dingell's anti-carbon proposals (as an alternative to simply focusing on fuel economy standards) is that we should get rid of the mortgage deduction for houses over a certain amount of square footage.

It's a provocative idea. If you're a middle-class family wanting to buy a home, you'll get that deduction, but if you're a rich guy wanting to live in a John Edwards-style mansion, you don't need a government subsidy to do it. Limiting the mortgage deduction in this manner would encourage people to keep their houses to a reasonable size.

Posted by Steve | August 17, 2007 3:35 PM

Left Nut:

Where did I write that "the Republicans" created the 401(k)? Although Congress added section 401(k) to the tax code in the late '70's, the first 401(k) plan wasn't actually implemented until the early '80's, by a man named Ted Benna, who went on to popularize them. I don't know what his political affiliation is. President Bush did sign the most significant 401(k)-related legislation in 20 years though (EGTRRA), which, among other things, increased the maximum wage deferral amount by 50%+, created Roth 401(k)s, added tax incentives for small employers to add 401(k)s, etc.

"The greatest benefits from 401(k) plans go to highly compensated individuals who can take the maximum wage deferral (and I say this as someone who can and does)."

Congratulations. When I was a salary man, I deferred the maximum amount too. Since there is a maximum deferral amount (currently $15,500 per year), the benefits of this are actually limited for truly highly compensated employees, since the more the make, the the smaller the percentage of their income that $15,500 represents. Also, you seem to have no concept of the complex non-discrimination regulations designed solely to yoke highly compensated employees and non-highly compensated employees together with respect to employer matches. Under these regulations (called "an elegant form of social engineering" by one expert whose name I forget), the benefits that accrue to the highly compensated employees are limited by the participation of the non-highly compensated employees; the big shots can't benefit without the small fry participating too.

"These are not really the kind of numbers necessary for a decent retirement."

Sneaky, sis. Meaningful numbers in this context would be the average balances of 401(k) participants nearing retirement, not all participants.

Posted by Fred | August 17, 2007 3:41 PM

we should get rid of the mortgage deduction for houses over a certain amount of square footage.

I note that there is already somewhat of a limit, in that the maximum amount deductable is $1.1 million. Around my parts, that doesn't buy such a gigantic house, although down in NC that may be difference.

Posted by Al | August 17, 2007 3:42 PM

Ew, Matt--how'd you draw all the flies? Weird....

Posted by elle loco | August 17, 2007 3:59 PM

You're kidding me -- you can put $15,500 a year in a 401(k), plus an additional $5,000 a year if you are over 50. How many working class or middle class people can come close to these numbers? Moreover, the pre-tax treatment of the contributions favors those in higher tax brackets.

There is also a limit on contributions from "Highly Compensated Employees" - people who make over $100k.

How many rich people do you think use 401k's as their main savings vehicle? If you looked at an income distribution of the people who have more than 25% of their savings in 401k's, do you think the median of that distribution would be higher than the U.S. media income? Do you think the distribution of wealth in 401k's is more skewed toward the upper end than the overall wealth distribution of the U.S.? I don't have the numbers, but I doubt that either of those things is true.

Also, the 401k is extremely illiquid, since you have to keep your money in it a long time to get the tax advantages. This would discourage richer people from keeping their money in it.

My dad is middle class, and he has most of his money in a 401k. My uncle is rich and I believe he does not use one...

Posted by Mr. Noah | August 17, 2007 4:08 PM

The basic use of a 401k account is as a substitute for an employer-contribution retirement account. It pushes the administration and responsibility off on the employee. There are plenty of middle class people who use them and who have their long term savings in them. The poor -- the real little guys -- not so much. By definition. They're poor.

Posted by Jeffrey Davis | August 17, 2007 4:17 PM

I used $100,000 because that seemed to me to be a more appropriate cut off for "the little guy". I mean, who thinks that someone with an AGI of $80,000 is a "big guy"?

Man, I hate that you all are making me agree with Al, but there it is. If the argument really turns on whether you are using 75k or 100k as your upper bound, then "it only helps the rich" is just not a terribly strong claim.

How many working class or middle class people can come close to these numbers?

Depends on your lifestyle and where you live, I suppose. But, why do you even have to "max out" to call it a benefit?

Seriously, run a retirement calculator for someone at 50k of income saving at 15% (7500 now, or half the annual allowance), starting at age 30 and ending at 65, with a 7% return and a 3% cola.

Here are the final results, with helpful tips from Bloomberg of what you can do for your shortfall:

Your plan provides $1,358,664 when you retire. This retirement savings may run out at age 97. This is based on retirement expenditures of $122,936 per year. This amount is 90.00% of your last year's income of $136,595. This plan includes $47,612 per year from social security.

To meet your goal, you may wish do one of the following:

Increase contributions to 15.27% of your income.
Increase your rate of return before retirement to 7.10%.
Reduce your required income at retirement to 89% of your final year's income.
Delay your retirement until age 66.

http://www.bloomberg.com/invest/calculators/retire.html

Posted by Brad L | August 17, 2007 4:23 PM

Can we stop with all this nonsense about $100k being the cutoff for the little guy and $1 mil for a house not buying all that much? When the Republicans say they're looking out for the little guy, they want people to believe that they're talking about the guy helping you pick out a faucet at Home Depot, your waitress at Olive Garden, or those poor miners who got killed this week. THEY'RE NOT HELPING THEM to anywhere near the degree that they're helping the rest of us. It's all a bunch of crap and everybody posting on this thread knows it. And come on, "my uncle is rich and I believe he doesn't use one"... News Flash: He's rich. He doesn't need one. As stated above, there are loads of other ways for him to stay that way.

Posted by BlueStreak | August 17, 2007 4:25 PM

Gerson + Krauthammer + Broder + Novak + Applebaum - Robinson - Dionne - Meyerson - Marcus = Worst Crop of Columnists at a Mainstream Newspaper. G, K, B, N, A just are so bad that even R, D, M, and M cannot compensate for them.

Posted by Barack | August 17, 2007 4:25 PM

Can we stop with all this nonsense about $100k being the cutoff for the little guy ... When the Republicans say they're looking out for the little guy, they want people to believe that they're talking about the guy helping you pick out a faucet at Home Depot ...

Ok, this is turning into a semantic game. Who is the little guy?

Do you mean only the working poor and lower income brackets? I mean, to the extent that the 401k plan is not a welfare program, you are right, it doesn't redistribute money to those that have none at all to save. But anyone that can save can start to see a benefit pretty quickly. Obviously, by "little guy" I inferred something more like "average joe" -- certainly including middle class salarymen.

It's pretty squarely a middle class benefit, not a "rich person's" benefit, which is the point that many are trying to make.

Posted by Brad L | August 17, 2007 4:40 PM

Mr. Noah,

The limit on 401 k contributions is as I have said is $15,500 per year, plus the $5,000 catch up contributions for those over 50. The limits on highly compensated employees have no bearing on this.

Brad,

I am not suggesting that a 401(k) can't be a very useful retirement vehicle. My point was that for a person making $50,000 to defer 15% of income as you suggest is difficult. It may be a wise idea, but it is something that very few people in that bracket do.

By and large 401ks work best for people with sufficient wage income to defer the maximum amount, which is to say, the top few percent of wage earners.

In the end, though, the larger point is that Gerson pointing to this a major triumph of Republican social policy is silly.

Posted by Klein's Tiny Left Nut | August 17, 2007 4:57 PM

I note that there is already somewhat of a limit, in that the maximum amount deductable is $1.1 million.

You do realize we are talking about the mortgage interest deduction? If someone is paying $1.1 million a year in interest I don't think they qualify as a "little guy". Even if they are paying only the interest on a $1.1 million mortgage they still don't really qualify no matter where they live.

Posted by Col Bat Guano | August 17, 2007 5:01 PM

Fred,

I missed your response. I fear I am more than familiar with the complex non-discrimination rules as a substantial part of my practice involves employee benefits work. Generally speaking it is not hard for an employer to give enough encouragement for 401k participation by lower comps to avoid running afould of the non-discrimination rules. This, rather than altruism, is generally the motive for the employer match.

You are right that the $15,500 is not a meaningful number for the truly rich. But as someone pointed out, they have other goodies like the 15% tax on capital gains and the like. It is a big benefit to relatively highly paid salarymen like myself, people who make in the low six figures and live in high cost areas, so that they have enough money to defer substantial income, but are not truly wealthy (or frugal) enough to have big stock portfolios or the like. Such people are, however, in fairly high tax brackets, particularly if you live in a high tax state (or DC in my case), and therefore the benefits of this wage deferral are pretty huge.

Posted by Klein's Tiny Left Nut | August 17, 2007 5:10 PM

My point was that for a person making $50,000 to defer 15% of income as you suggest is difficult. It may be a wise idea, but it is something that very few people in that bracket do.

Honestly, I see that more a cultural/consumerist problem than a practical one. Even at 10% (5k), the same guy comes out with a meaningful savings. If they have the foresight to start at 28 instead of 30, and go one or two more years earning, they end up near the same place.

401ks work best for people with sufficient wage income to defer the maximum amount, which is to say, the top few percent of wage earners.

It's true that the more you have, the more this instrument helps, but any savings vehicle works that way. But I still dispute the idea that you have to be even at the high end of middle class to see a real and substantial benefit from this policy.

In the end, though, the larger point is that Gerson pointing to this a major triumph of Republican social policy is silly.

We are in solid agreement on this point :-)

In the end, though, the larger point is that Gerson pointing to this a major triumph of Republican social policy is silly.

Posted by Brad L | August 17, 2007 5:13 PM

You do realize we are talking about the mortgage interest deduction? If someone is paying $1.1 million a year in interest I don't think they qualify as a "little guy".

No, no, no. The rule is that you are only allowed to deduct interest on mortgages of up to $1.1 million (actually $1 million, plus $100k of a home equity loan). Not that you can only deduct $1.1 million of interest.

Posted by Al | August 17, 2007 5:15 PM

BTW, I went back and looked at my post re the $1.1 million limit, and I see it was unclear. My apologies for causing the confusion.

Posted by Al | August 17, 2007 5:19 PM

I used $100,000 because that seemed to me to be a more appropriate cut off for "the little guy". I mean, who thinks that someone with an AGI of $80,000 is a "big guy"?

?? In 2005, 10.7% of individual returns had an AGI that was $100,000 or more, and 18.5% had $75,000 or more. I don't think "little guy" should include people who are in the top fifth. I don't know what the median is, but it seems to be under $30,000 if I'm reading this table right.

http://www.irs.gov/pub/irs-soi/05in11si.xls

Posted by fp | August 17, 2007 6:39 PM

Rich people don't care about deducting mortgage interest.

Posted by DMS | August 17, 2007 7:28 PM

"Rich people don't care about deducting mortgage interest."

yeah, I think MY has this wrong.

I disagree that one can currently deduct mortgage payments. if anything, government policy should encourage one to save money. But this doesn't necessarily benefit only the rich. anybody able to afford a house can receive the benefits, which includes a sizable chunk of lower middle class households.

now its a crime that the poorest in the country, unable to own a home, can't take advantage of this ridiculous deduction (making it regressive).

401k's are fine with me. they encourage everyone level of society to save money, invest in some equity, which is a win-win for all.

Posted by thehova | August 17, 2007 7:40 PM

"We were founded as a reformist party," he said in our conversation this week, "not to be against something, but to help the little guy get ahead."

But this is exactly wrong. The Republicans were founded to oppose slavery. They inherited a lot of the personnel of the Whigs and their reformist ethos but the specific reason for the Republicans as opposed to other reformist parties was to oppose slavery more vigorously.

In one sense this is a minor point -- you could characterise the foundation of the Republicans in a number of ways and today's party is clearly different from the party of the 1850s. But in another sense it illustrates the fundamental point that Karl Rove makes up whatever he feels like saying and it doesn't matter at all to him whether or not it's true.

Posted by william | August 17, 2007 7:52 PM

if your in your lower 20's (or any age), like myself, you might be excited about ROTH IRA'S.

its simply AWESOME.

put 5k of after tax income into a high risk index fund. don't pay any taxs on capital income. and be fairly rich by the time your 60.

everyone can afford 5k a year, if they put their mind to it.

tax breaks for capital gains can benefit everyone if you start saving early enough in life.

Posted by thehova | August 17, 2007 7:52 PM

thehova,

How does it feel to be part of the ownership society? Nice work investing diligently at such a young age. If I were you, I'd go with the traditional IRA instead though, because I wouldn't count on the government keeping its word to not tax distributions from Roth IRAs. Forty years from now, when you've got a seven-figure lump sum in your Roth IRA, lefty bloggers will consider you rich and will demand that you pay your "fair share" to subsidize those who weren't as diligent at saving as you were.

Better to take the tax deduction up front with a traditional, compound your assets tax-deferred, and then resign yourself to paying taxes on the money on the way out. You'll probably end up paying taxes on the distributions anyway.

Posted by Fred | August 17, 2007 11:07 PM

I think it's possible the Post doesn't know why it's publishing these columns. You should consider that.

Posted by Jay Rosen | August 17, 2007 11:22 PM

Fred, I'm concerned about that too. it makes me nervous. if a lot of people take advantage of their Roth IRA's at an early age, the amount of money accumulated might be too tempting to leave untaxed.

It's gonna seriously piss me off if democrats plan to tax my Roth IRA. and that's what really frustrates me about Yglesias and his blanket statements like these.

The Roth IRA provides a great opportunity for young or poor (or both) people like me to invest manageable amounts of money every year (5k), which in the end turns into a solid sum of money. democrats should support this.

its issues like this which might turn me republican in the future.

Posted by thehova | August 17, 2007 11:49 PM

Rove's pet project, the Health Savings Account, is quite clearly meant to divert us from calling for actual health care reform. I had a HSA, and it's is so utterly inadequate as to be a joke. First, you have to have the money to contribute to it, so if you don't have $4K or so free every year, forget it. There's no aid at all, just a tax credit, and even that only if you fit some requirements (have to have a particular kind of health insurance policy with a particular deduction range). And one year of even minor health problems-- like 2 root canals and a pair of glasses lost-- and you could empty the account. An actual health crisis like cancer, well, forget it. You better hope your insurance company pays so that you use only that HSA for part of the deductible (and only part-- it's hardly unusual for a family to have $20K to pay off AFTER their insurance company pays what it's willing to pay).

So Rove's big policy thing (which he didn't even come up with-- some insurance exec did in the 90s) doesn't do much at all, and certainly is no substitute for insurance, and doesn't save all that much money, and does nothing at all to curb the high cost of health care. And that's what he's proud of? 6 years as the big supposed domestic policy guy, and that's all he can brag about, and he didn't even come up with it? And this is the guy the press thinks is such a genius? High school government classes come up with better ideas in class discussions.

"The ownership society"-- nice slogan. Little reality. I have nothing against IRAs, but that's no substitute for social security or company pensions.

Posted by pippen | August 18, 2007 1:24 AM

Leaving aside the issue of mental state, I was surprised to read Gerson's account of health savings accounts as "a Bush-era innovation". When I read this just now, I remembered one of my colleagues at the Council of Economic Advisers (I was there 1995-96) asking what the administration's position on "medical savings accounts". So out of curiosity I just did a little Googling.

Sure enough, I found a link to the Kennedy-Kassebaum bill, which, among other things, created something called "Medical Savings Accounts". These accounts allow account holders to make tax-deductible contributions that can then be used to pay certain medical expenses. (Here's a summary of the bill; general discussion is at Title III, Subtitle A).

Incidentally, and not to pass judgment on the bill's merits, this bill was signed by President Clinton in August of 1996, i.e., during his first term.

Perhpas calling them "health", as opposed to "medical", savings accounts makes these things "a Bush-era innovation". But past that I don't think there's much of a case....

Posted by jonah gelbach | August 18, 2007 6:36 PM