Despite tepid and cautious remarks from a handful of GOP congressional leaders and commentators that they are open to compromise on the Bush tax cuts and revenue raising measures, President Obama will still have a huge fight on his hands getting his tax proposals passed. The hard truth is that the pummeling the GOP got in the election hasn't moved them one inch from their stuck in cement tax orthodoxy that raising taxes on the rich kills jobs and does little to shave down the trillions racked up from the budget deficit.
This is cynical politics not economics. The Congressional Budget Office has released numerous reports, including its most recent, that show that the comparatively marginal tax hikes on the rich will not kill the 700,000 jobs that GOP House leaders say will go down the tubes if the Bush tax cuts aren't extended to the wealthy. The CBO puts the net loss at no more than 200,000 jobs and that's only an estimate. The projected economic drop-off is only a fractional difference between applying the tax cuts solely to those making under $200,000 and those with incomes above that as well. Economists have repeatedly noted that the Bush tax cuts have done more damage to tens of thousands of small businesses by rerouting capital for their business expansion, new employee training and hiring from them to the major corporate beneficiaries of the Bush cuts.
The GOP relentlessly hectors Obama that joblessness rose or stayed steady for 43 out of the 44 months of his first term. But this stands its own argument on the head since the Bush tax cuts were in full play during every one of those months. The tax cuts did not prevent banks, financial houses, corporations and the wealthy from spiriting their trillions in capital and investment gains to safe tax havens in Europe and the Caribbean. The trillions could have created tens of thousands of jobs and provided a major shot in the arm to the economy.
The rich are certainly fabulously rich enough, and don't need the money. Yet, GOP leaders counter with the tired and discredited supply side argument that the tax breaks are not about lining the bulging pockets of the rich, but insuring that the rich have surplus money to create jobs, expand businesses, and buy lots of consumer goods. The line is political pandering to greed. There are too few of the wealthy that benefit from the Bush tax cuts to create the kind of massive consumer demand that creates jobs and grows businesses. There's no evidence that the rich reflexively play the role of good wealthy and corporate citizens and plop their surplus tax break dollars into job creating investments.
The banks got billions from the taxpayer floated bailout, reaped a bonanza from the Bush tax cuts and still nearly crashed the economy. When they recovered, they piled up and hoarded massive amounts of excess capital. They have been repeatedly ripped for being tight fisted in making loans to small and medium sized businesses and to underwater homeowners.
The GOP leaders continually harp that Obama's proposal to raise taxes on the rich will not do much to reduce the deficit. This is disingenuous too. Neither Obama, nor any other reputable economist, has ever said that taxing the rich more will do that. It's only one part of a total revenue enhancement package that includes spending cuts in the military and some domestic programs, and a tax code overhaul. The only part of that package the GOP eagerly backs is the spending cuts sans military spending and tax code changes. But even that is political grandstanding. The GOP's plan to clamp a ceiling on rates and narrow down the tax brackets to two would still protect the rich since corporations would only pay a maximum of slashing rate of 25 percent.
The GOP calculated that the fight over the Bush tax cuts was a sure fire political weapon to unite conservatives, enrage millions of Americans, and expand the ranks of those that oppose Obama's polices and him. The GOP could slur Obama and the Democrats as wildly irresponsible tax and spend, big government devotees, inherently hostile to business. Romney made this the centerpiece of his strategy to snatch back the White House.
Obama's decisive election victory did not change this ploy. Romney told donors in a post election assessment of the campaign that Obama won because he gave away a lot of "big gifts" to women, minorities, and the poor. In other words the GOP's tax and spend, big government pander to special interest groups spin remains alive and well.
Despite the coy soundings from some in the GOP that compromise will be the watchword on the tax proposals, when the showdown comes the GOP will still likely go to the barricades to do all they can to protect their corporate rich benefactors from the tax man. This is bad economics but good and cynical politics.
Earl Ofari Hutchinson is an author and political analyst. He is a frequent political commentator on MSNBC and a weekly co-host of the Al Sharpton Show on American Urban Radio Network. He is the author of How Obama Governed: The Year of Crisis and Challenge. He is an associate editor of New America Media. He is the host of the weekly Hutchinson Report on KPFK-Radio and the Pacifica Network.
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