Tax Cuts, As We All Know, Increase Revenues??

One of the most difficult tradeoffs policymakers have to make is in the level of taxes to collect vs. the level of services to provide. High taxes are generally politically unpopular, though if accompanied by a strong mix of valued government services, they are often considered to be worth the price. In contrast, a government that collects relatively little in taxes may be popular among its citizens come tax time, but the meager level of government services that comes with low taxes is rarely celebrated. Of course, since the federal government is free to run a deficit, sometimes this tradeoff can be delayed, as current spending can be paid for with higher taxes (or significantly reduced spending) at a much later date. Nonetheless, the tradeoff can never be avoided entirely. None of this is controversial.

Enter John McCain. According to Senator McCain,

“tax cuts, starting with Kennedy, as we all know, increase
revenues”.

If true, the Senator from Arizona has found a way around one of the most dreaded problems facing our lawmakers. No longer must we weigh the pros and cons of higher taxes vs. better services. No, in McCain’s world, lower taxes and better services are a natural pair. In fact, according to McCain, the tradeoff between taxes and services that policymakers have wrestled with for centuries is not only unnecessary, but also nonexistent:

“historically, when you raise people’s taxes, guess what, revenue goes down”. - Senator John McCain

Lower taxes aren’t just the easy way to get more revenue - they’re actually the only way!

The Laffer Hypothesis: Show Me The Money?

If only it were that easy. What McCain is referring to is the infamous “Laffer Curve”, or “Laffer Hypothesis”. Under this hypothesis, it is asserted that U.S. tax rates are so high that investment and overall economic activity has been greatly stifled. So stifled, in fact, that since individuals and businesses are paying so much of what they earn to the government, the incentives to take risks and work hard have been effectively removed from the economy – as a result, markedly less taxable economic activity is being than would otherwise be the case. With less taxable activity, there is less tax revenue. Under these extreme circumstances, lowering tax rates should actually boost economic activity to the degree that tax revenues will increase.

Unfortunately for McCain, the evidence against the Laffer Hypothesis is staggering, and few if any serious economists believe the hypothesis to be applicable to the U.S. tax code in its current state. The Department of the Treasury authoritatively showed this to be the case in this 2006 report. That report shows that in each of the four years following the 1981 and 2001 tax cuts, revenue markedly declined. In contrast, following the 1993 tax increases, revenue increased. Simple as that. It seems that the tradeoff does in fact exist: if you want more money to go to funding government services, you’re going to have to pay more in taxes. This really shouldn’t be all that surprising.

Not Just No Revenue … No Growth, Either!

While the Treasury report just cited is more than enough to refute the Laffer Hypothesis on its own, there is also a wealth of literature examining the hypothesis’ premises. Specifically, that literature looks at the merits of what is known as “supply-side economics”, or the school of thought that cutting taxes for businesses and wealthy investors (the “suppliers”, as opposed to the “consumers” in the economy) will markedly improve economic growth. In the American political landscape, this rationale for tax cuts has been equally if not more important than the issue of what will happen to government revenues.

Unfortunately, however, this rationale has been proven to have little if any merit. Ironically, not only have so-called “pro-growth” and “pro-investment” tax cuts been demonstrated to be incapable of raising revenues, they have also been shown (at least in their most recent manifestations) to be incapable of promoting growth or investment. The Center for American Progress (CAP) and the Economic Policy Institute (EPI) recently teamed up to add to the body of literature on this point with their report, “Take a Walk on the Supply Side: Tax Cuts on Profits, Savings, and the Wealthy Fail to Spur Economic Growth“.

In their report, CAP and EPI find that investment growth, as well as overall economic growth, were much stronger in the years following the 1993 federal tax hike, than in the years following the 1981 and 2001 tax cuts. Numerous other indicators suggest a similar finding: median household income, wages, employment growth, and of course, the federal budget, were all in much better shape following the 1993 tax hike than during either of the periods that followed “pro-growth” tax cuts.

Of course, tax policy isn’t the only determinant of economic performance. But if the supply-side argument has any merit, we shouldn’t have seen the economy surge so dramatically following “anti-growth” tax hikes, and fizzle in an equally dramatic fashion in the wake of “pro-growth” tax cuts. At the very least, we would have expected these opposing sets of tax policies to have brought these three periods closer into line with each other. Simply put, when the supply-siders got their chance in 1981 and 2001, they failed to produce results, and dug the nation deep into debt.

Backed by the Politicians, Refuted by the Experts

But aside from all the empirical evidence regarding the Laffer Hypothesis (the CAP/EPI report, as well as another EPI Report from Harvard Economist Jeffrey Frankel already cover that ground more than adequately), the other important point for today’s debate is what to make of various politicians’ inexplicable belief in this thoroughly disproved hypothesis. The allure of putting more money into the taxpayer’s pocket (via tax cuts) while at the same time putting more money into the government’s coffers (through increased economic activity and the associated higher tax revenues) is apparently irresistible, as evidenced by the following quotes taken from Frankel’s paper:

“The increase in revenues should be financed not by new and higher taxes, but by lower tax rates that would produce more money for the government by stimulating higher earnings by corporations and workers”
- President Ronald Reagan

“Some in Washington say we had to choose between cutting taxes and cutting the deficit. That was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring. That’s what’s happened”
- President George W. Bush

“The deficit would have been bigger without the [2001] tax relief package”
- President George W. Bush

“It’s time for everyone to admit that sensible tax cuts increase economic growth, and add to the federal treasury”
- Vice President Cheney

More quotes of a similar vein can be found in Frankel’s paper. Also contained in that piece are valuable quotes directly from each of these administrations’ chairmen of the President’s Council of Economic Advisers. The statements of these highly trained economists reflect a remarkably different opinion on the Laffer Hypothesis:

“The height of supply-side hyperbole was the ‘Laffer curve’ proposition that the tax cut would actually increase tax revenue because it would unleash an enormously depressed supply of effort . [this has been] proven to be wrong”
- Martin Feldstein, chairman of the Council of Economic Advisers under President Reagan

“Although the economy grows in response to tax reductions, it is unlikely to grow so much that lost tax revenue is completely recovered by the higher level of economic activity”
- Glenn Hubbard, chairman of the Council of Economic Advisers under President George W. Bush

“Subsequent history failed to confirm Laffer’s conjecture that lower tax rates would raise more tax revenue. When Reagan cut taxes after he was elected, the result was less tax revenue, not more”
- Greg Manikew, chairman of the Council of Economic Advisers under President George W. Bush

The conflict between these two sets of quotes reflects deep divisions between the politicians and the experts with which they surround themselves. John McCain fits this pattern perfectly. Since McCain is not President (at least not yet), he does not have his own Council of Economic Advisers to refute his wild claims regarding tax cuts. He does, however, have Douglas Holtz-Eakin as his Senior Policy Adviser. Holtz-Eakin is a Princeton-trained economist and former head of the Congressional Budget Office. He also is on record as explicitly rejecting the Laffer Hypothesis.

But McCain isn’t taking Holtz-Eakin’s word for it. Aside from the quotes from John McCain cited earlier, further deference to the Laffer Hypothesis from the McCain camp has been evidenced by the candidate’s choice of Arthur Laffer, the chief proponent of the Laffer Hypothesis, as one of the campaign’s special economic advisers.

This whole asinine situation brings to mind McCain’s previous admission that “the issue of economics is something that I’ve never really understood as well as I should”. Perhaps, given his inadequacies in the subject area, he would be better off deferring to those who do understand it. More “pro-growth” tax cuts targeted to the most fortunate members of society, like McCain’s, are the exact opposite of what is needed.

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Ask TaxMama Issue 488 - Ethics vs Power and Confidence

Dear Family,

Don’t you love to start the day with someone telling you – “You were right!”? That’s what happened yesterday, when Andrew came to work. Naturally, I know that I am often right (and sometimes wrong) – but what was I right about this time?

Ah yes, it was all over the news – Obama re-taking the oath of office.

Clearly, during the Inauguration ceremonies, it was somewhat mangled. Chief Justice John Roberts re-administered the oath, simply as a cautionary measure.(Right after the swearing in, I happened to say – well, that’s going to have to be corrected – very soon. I didn’t expect it to turn into a media spectacle. But that does make sense.)

I was wondering about the documents President Obama had signed, and the Cabinet members he’d had sworn in, etc. before the oath. But if you read the MSN article above, the administration and legal advisors didn’t think that much caution was necessary. But we all know, someday, someone will be unhappy with something and sue that something that was done or signed or decided before the re-taken oath isn’t valid. Sigh. Makes me tired. But I bet that will happen.

We had a bit of excitement this week as the confirmation hearings were going on. This hubbub over proposed Secretary of the Treasury really has the tax professional community in an uproar. At first, I thought his tax errors were simply an oversight. But, reading the documents that the Committee has gathered about Geithner’s tax history (i.e. things he SIGNED), and his own comments that he understood his responsbilities, but made a mistake. Read my – Accountingweb.com blog

But once I saw the documents, it became quite clear that this was a serious breach of ethics. And he just brushes it all aside. Essentially, his bold, strong, confident position vis-a-vis the Senate Committee panel is, forget it. Let’s move on to more important things. Whew! This fellow will be overseeing the IRS?

Oh, don’t worry, Geithner WILL get confirmed. He will be the new Treasury Secretary. After all, people like Paul Volker, Barack Obama and many legislators and others insist that he’s the only man who can do this job at this time.

There is this Fox News article by Glenn Beck that touches on this in an amusing and sarcastic fashion.

But that’s not what I want. I really wish that someone would spell out for me WHY? What are his special skills, or his brilliant vision that make him the ONLY Man? I am not being sarcastic. I’d just like to see an outline of his accomplishments and skills that make him so uniquely qualified. He’s going to be the one overseeing my professional ethics and career – and your tax liability and collections. I’d just like to feel more enthusiastic about him. Wouldn’t you?

In the meantime, everyone’s hard at work in Washington, DC.

In IRS News today, there’s an outline of the Economic Recovery Package from the House Ways and Means Committee; we get guidelines for bartering, and learn how to let IRS know when you move.
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Today’s Money Funny we look at someone who felt the need to change his profession due to the recession…and other career considerations.
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In TaxQuips this week, we get a lesson about old laws on the books in some states about cohabitation; we learn (for federal purposes) whether a boyfriend can claim his girlfriend on his tax return; we deal with an interesting twist to the Stimulus Rebate situation; get into quite a heated discussion about s corporation ‘draws’; and learn that even after many years, and many miles, far away states can reach out and garnish your paycheck for unpaid taxes. Or may they?
http://taxquips.com/index.php?cat=TaxQuips

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As always, we love your feedback, opinions and ideas.
You are what makes all this fun – and interesting!

Please use the Comments link online.
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It is About Credit Markets, Not Just Stimulus

Washington has kicked off a perfectly predictable donnybrook over stimulus. Democrats, who spent the past eight years bashing George Bush for turning a Clinton-era surplus into a big deficit, are now defending what will be nearly  $1 trillion in new tax cuts and spending. Republicans, who presided over decades of deficits, suddenly are worried about the debt we are leaving to our grandchildren.

Yet, this entire squabble may be missing the point. If Washington is going to help dig the economy out of its very deep hole, it must do more than just stimulate demand. It must also restore the health of the credit markets.

That is not to say that designing a good stimulus bill is not important. It is. But we need to recognize the limits of what all this government spending and tax cutting can do.

For now, Washington is falling back on recipes that have been tried many times before with only limited success. On the tax side, proposals such as allowing businesses to write-off capital costs more quickly, or giving cash payments to workers, have been tried repeatedly in past recessions. As a new TPC report card shows, there are no magic bullets here. While some pieces of the tax stimulus working its way through Congress will be better than others at jump-starting the economy, none will have a major impact.

The same goes for spending. A new CBO report concludes it will take years for the proposed new outlays to work through the economy. For instance, CBO figures only about one-third of $30 billion in proposed highway money could be spent within the next 20 months.

My sense is that, at best, the stimulus package will keep things from getting worse. Necessary, as they say, but not sufficient for recovery. The IMF recently published an interesting paper that noted the importance of both stimulus and credit market reform, even as it called for massive efforts to boost demand. Christy Romer, a key adviser to President Obama and a highly respected economic historian, has argued that New Deal fiscal policy did almost nothing to end the Great Depression.   

Think of stimulus as a life preserver. It may keep the economy from drowning, but won’t do much to get us back on a course of sustained economic growth.

It will be up to the Fed and the much-maligned TARP (and its costly progeny) to accomplish that. The problem, of course, is that when it comes to fixing the credit markets, we are sailing in unchartered waters. Do we create a “bad bank” that will offload toxic loans from troubled financial institutions?  Do we nationalize some brand-name banks? In desperation, we find ourselves looking to the experiences of Sweden or Japan for answers that are not obvious.

After a lot of arguing, we’ll enact a nearly $1 trillion stimulus. It will help, though much of the money will inevitably be wasted. But keep your eyes on what the Fed and the Obama Administration do to get the credit markets working again. That, more than tax cuts and spending, will be key to how quickly the economy gets back on track. 

 

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Do we pay income tax to the state we live in or the one we work in?

Make the Tax Cuts Work

New York Times, January 23, 2008 - Since 2001, official Washington’s answer to every policy question has been the same. What should we do with a big surplus? Tax cuts. How do we beat back global terrorism? Tax cuts. Increase energy independence? Rebuild New Orleans? Expand health insurance coverage? Tax cuts, tax cuts, tax cuts. Now comes another question to which taxes have long been at least part of the answer. How do we stimulate the economy to prevent or shorten a recession?

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Breaking News: Higher Energy Prices Will Cut Demand

Nice to see Tom Friedman on the energy tax bandwagon. As he wrote in his Dec. 27 New York Times column, “I’ve wracked my brain trying to think of ways to retool America around clean-power technologies without a price signal—i.e., a tax—and there are no effective ones.”

Friedman needs to give his cranium a holiday break. Policymakers have been searching for this magic bullet for years, without success. They’ve tried government-mandated (CAFE) auto mileage standards, tax credits for the use of everything from hybrid cars to low-E windows, massive government subsidies for production of alternative fuels and sincere pep-talks from sweater-clad Presidents. Nothing has worked. Take a look at this chart from the Energy Information Agency:

As it shows, the only break in the steady growth of fossil energy use over the past half-century came with the oil price shocks of the 1970s and 80s. Friedman has discovered a pretty basic rule of economics: If you want people to buy less of something, raise the price.

For another example, take a look at some charts Diane Rogers over at Economistmom.com put together that show what happens, at least in the short run, when gasoline prices change dramatically. We’ve run a nice little natural experiment and the results are fascinating. When gasoline prices exploded last summer, demand plunged. You might say that $4-a-barrel gasoline focused the mind. Then, as prices plummeted over the past few months, consumption again rebounded, even with the economy in the tank.

It is a bit more evidence that consumers of energy will change behavior in response to price. Most economists think it takes a while for people to react, but react they do. CBO figures a sustained price increase of 10 percent will eventually cut consumption by about 4 percent. Others think the long-run response may be even stronger.

Sooner or later, however, if you use a tax to push up the price of energy, people will buy more fuel-efficient cars, appliances, and even homes. They may even think twice about buying that oversized mini-mansion 40 miles from work.

So far, Barack Obama’s transition team has been troublingly mum about raising energy taxes, even though he embraced a tax-like cap and trade program for fossil fuels during the campaign. Aides have dropped broad hints about a new round of big new government subsidies to develop alternative fuels and using a chunk of stimulus money to pay for mass transit. And, of course, Washington has made $25 billion available to automakers for energy R&D and pressed them to make new fuel-efficient cars in return for the additional bailout money they just got.

Giving away money to encourage green behavior is the easy stuff. But it will take more than that. I know, we are in a recession and can’t raise taxes right away. But with gas prices again south of $2.00 a gallon, it is folly to think many consumers will eschew a gasoline-powered $20,000 car for a $40,000 electric ride. Consumers are not dumb, and forcing automakers to build those cars in the absence of demand is madness. So is talking about energy independence without raising the price of fossil fuel.

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TaxVox’s Lump of Coal Award: The Ten Worst Ideas of 2008

It was quite a year. Taxpayers are now shareholders in most major U.S. banks, a massive insurance conglomerate, and three failing car companies. After years of debating whether the government was implicitly or explicitly guaranteeing Fannie Mae and Freddie Mac debt, Washington settled the argument by buying the mortgage giants. I know George Bush liked to talk about an ownership society, but I never imagined this is what he had in mind.

And, of course, it was an election year. Thus, the opportunities for dumbness increased exponentially. Campaign promises veered from the improbable to the unworkable to the truly bizarre. With so many bad ideas to choose from, picking the lowlights was not easy. Nonetheless, here is TaxVox’s list of the 10 dumbest fiscal policy ideas of 2008.

10. Barack Obama’s plan to exempt seniors making $50,000 or less from tax. Most already pay nothing. Besides, anybody know why a 65-year-old should get a tax preference over a twenty-something making the same income? Senior discounts should be left to restaurants and movie theaters.

9. Hillary Clinton’s and John McCain’s summer gas tax holiday. Tell me again how we are going to end global warming? Obama gets extra credit for passing on this one.

8. Obama’s windfall profits tax for oil companies. Unfortunately, he couldn’t resist this bad idea.

7. The TARP. A $750 billion blank check. And after giving hundreds of billions to banks, Treasury neglected to make them lend the money to anyone. Polishing their balance sheets may help in the long-run, but hello….

6. Patching, but not fixing, the AMT. It may be a Golden Goody, but this failure of political leadership still smells. We used to worry about the cost of true reform, but that was so 2007.

5. Treasury unilaterally letting banks buy the tax losses of the financial institutions they acquire. The Wells Fargo rule is not only a terrible policy, but Treasury probably had no legal authority to adopt it. Otherwise, a heckuva good idea, as the current president might say.

4. Obama’s proposal to raise Social Security taxes on high-income earners—two years after the end of his second term. A new chapter in Profiles in Courage.

3. The Democrats definition of Middle Class: Obama says anyone making $250,000 or less belongs. Has anyone told him the median income is $61,500? Senator Barbara Mikulski (D-Md), wants to give a tax break to the same folks who borrow up to $49,000 to buy an American-made car. Cadillac owners unite! You have nothing to lose but your On-Star.

2. Extending the Bush Tax Cuts. Did I miss the day Congress etched these on stone tablets? McCain vowed to make them permanent. Obama said he’d repeal many of these breaks, but then assumed they’d last forever—a budget gimmick intended to make his own trillion-dollar promises seem less costly.

1. And the TPC Lump of Coal Award for the single worst idea of 2008: Fred Thompson’s plan to allow people to pick their own tax system. Choice is nice, but this puppy would cut government revenues by $7 trillion over 10 years. McCain and other Republicans all tinkered with this absurd idea, but we’ll give Thompson credit for being the first to raise it in the Presidential campaign. Happy 2009 to all.

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Obama’s Loose Change

CBO says the deficit will reach $1.2 trillion this year. President-elect Obama says the red ink will continue to flow at this rate or faster “for years to come” unless policymakers “make a change in the way Washington does business.”

Obama is right, of course. And his words echo the message he used so successfully throughout the campaign. Change, he promised, that you can believe in. The problem is that the stimulus bill Obama is preparing mimics exactly the sort of cynical business Washington has been doing for decades.

It has become a drearily familiar formula: Democrats want to increase spending. Republicans want to cut taxes. So they compromise–by doing both. And arithmetic being what it is, the deficit explodes.

We may, in fact, be about to create the mirror image of what happened during the Bush Administration. In 2001, an ambitious new president rolled into Washington faced with a slowing economy, and armed with an aggressive new economic agenda and a promise to change the tone in the Capital. George Bush, of course, wanted to cut taxes. The then out-of-power Democrats wanted to spend more.

What happened? Democrats bowed to big tax cuts, and, according to CBO, revenues as a share of GDP fell from 20.9 percent in 2000 to 16.3 percent by the end of Bush’s first term. Despite his tough talk about bloated government, the President abandoned efforts to control spending. As a result, outlays ballooned from 18.4 percent of GDP to 20 percent. All the Inside the Beltway players came away winners, and the modest surplus Bush inherited turned into a deficit of 5 percent of GDP.

Oh, and by the way, only about half of that new spending was for the military. The rest went to domestic discretionary programs and entitlements such as Medicare and Medicaid.

Now the roles are reversed—the Democrats are in charge and the GOP is in the minority. And, to be sure, the economy is worse. But the story line is looking eerily familiar.

Obama suggests it will be different this time. He says that budget reform will fix all this—later. Today he appointed a White House aide to seek out waste and abuse. Sadly, we’ve heard all that before too. I await change that I can believe in.

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New Jobs Tax Credit (From the Archives)

Emil Sunley was the Deputy Assistant Secretary for Tax Analysis at Jimmy Carter’s Treasury in 1977. In a 1980 Brookings volume, he recounted the history of this credit, which had morphed into a very complicated and largely ineffective subsidy as it worked its way through the legislative process. It is a cautionary tale for the Obama team and its allies in Congress.

Here is the summary from Sunley’s chapter:

The new jobs tax credit was a product of the legislative process, which has often transformed simple proposals into complex laws. The president’s original proposal was for an optional income tax credit of 4 percent of social security taxes paid by employers. This credit would have had a small anti-inflationary effect in the short run and would have put general revenues into social security through the back door. Congress wanted instead to provide a greater incentive targeted on additional employment, recognizing that the base for any incremental credit must be somewhat arbitrary, as it is not possible to know the number of employees a firm would have had if the credit had not been enacted. The complexity of the jobs credit, which resulted in a number of economic distortions, arose because Congress wanted the credit to be incremental, to do something for the handicapped, and to avoid excessively favorable treatment for new firms that might be competing with old firms. Congress, however, adopted an arbitrary base for its incremental credit. This decision minimized the record-keeping burdens but led to the distortions favoring rapidly growing firms, industries, and regions of the country.

The impact of the credit on jobs was slight. In many firms those who make hiring decisions did not understand the firm’s tax status. In addition, some time passes between the employment decision and the determination of eligibility for the credit.

Because the capital stock is fixed in the short run, to increase employment significantly, demand for output must increase. An incremental tax cut tied to employment will not by itself generate that increase in demand. Moreover, a temporary incremental credit is unlikely to affect significantly the long-run substitution of labor for capital.

The short life of the jobs credit ended when President Carter failed to recommend its extension beyond 1978. Instead he recommended as part of his urban program a targeted jobs credit that was not incremental and was limited to the hiring of disadvantaged young people and the handicapped. Congress generally accepted the president’s recommendations and enacted a targeted jobs credit as part of the Revenue Act of 1978, allowing the former broader jobs credit to expire at the end of 1978 as scheduled.

Source: Henry J. Aaron and Michael J. Boskin, eds., The Economics of Taxation, Washington, DC: Brookings Institution Press, 1980. Reprinted by permission.

The full chapter is available here.

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Obama-nomics: Written on a Word Processor

Barack Obama is channeling Ronald Reagan. Not in policy (his proposed tax cuts are not that big) but in tactics. The question is: Can the president-elect convince Congress to spend well over $1 trillion without leaving any fingerprints.

Having learned from Reagan’s legislative successes—notably the Tax Reform Act of 1986—and from Bill Clinton’s failures—see health reform—it appears Obama will never propose any specific economic stimulus legislation. Instead, he is merely sending Congress ideas, and leaving the dirty work of writing a proposal to the Hill. The New York Times Jackie Calmes did a nice post on this the other day.

But not only is Obama’s stimulus what Jackie called the “the paperless plan,” his proposals themselves seem infinitely flexible. For instance, the Obama people let it be known that a key element of the stimulus would be a tax credit to encourage businesses to hire new workers. But when that idea ran into resistance, Obama, as they say, threw it under the bus.

By this morning, Obama aides put out the word that the jobs credit was A) dead or B) about to be significantly retooled. In its place, perhaps, new energy credits. Energy. Employment. Whatever.

It all reminds me of  Don Regan, who was Reagan’s Treasury Secretary. The morning Treasury rolled out its detailed version of Tax Reform (known back in the day as Treasury  I), Regan was questioned by reporters about some particularly controversial provisions. Not to worry, Regan shrugged, it is all written on a word processor. His clear implication: It was easy enough to rewrite. Btw, for those too young to remember, a word processor was something like a laptop, only it couldn’t get you on the Web.     

Obama is coming to Washington with much the same attitude. He’s being even more clever when it comes to the exceedingly unpopular TARP. The incoming president wants Congress to authorize the second $350 billion of this bank bailout money, but instead of asking for the funds himself, he let George Bush do the heavy lifting on his behalf. Poor Bush, I’m sure, would rather be packing. 

Don’t get me wrong. I had real doubts about the jobs credit. But the are serious economists who do not. It would have been nice if Congress, say, held a hearing to hear both sides of the argument.

Similarly, there is nothing wrong with a proposal as complex as the stimulus getting tweaked along the way. And, as Reagan showed, a certain amount of flexibility makes for excellent legislative politics. 

But sooner or later, Obama, who voted present so often in the Illinois legislature, is going to have to get his hands dirty and take responsibility for unpopular, but necessary initiatives. That, after all, is why they let you stay in the big white house and use the fancy office.

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