President Obama has proposed to eliminate the massive deficit-busting Bush tax breaks for the top 2 percent of Americans -- while maintaining tax cuts for 95 percent of Americans. He is spot on.
The Bush tax breaks are set to expire at year's end, so there is real pressure on Congress to act. Congress should maintain the cuts for individuals earning $200,000 or less, and families earning $250,000 or less. And it should restore the Clinton-era tax rates to the very rich.
It is the right thing to do economically, politically and morally.
First the economics. When it comes to creating jobs, the last people who need more money in their hands are the wealthiest 2 percent of Americans.
The Republicans charge that eliminating these tax breaks on the rich -- and returning them to Clinton-era levels -- would be a "job-killing tax hike in the midst of a recession." Let's recall that while the Clinton-era tax rates applied to the rich in the 1990's, the economy created more than 22.5 million jobs in less than eight years -- the most jobs ever created under a single administration. Moreover, the Federal deficit had turned into a surplus for as long as the eye could see. The number of private sector jobs created during the Bush years: zero. The Republican position amounts to nothing more than baseless pandering to the greed of their many wealthy donors.
To create more jobs, our economy needs more economic demand. We need people who are willing to go out and buy products and services. Our economic problem is not that we lack enough people who will go out and work to create the products and services we need to have better lives. Our problem is that there is not enough demand to entice businesses to increase their work forces or buy new plants and equipment.
The economy's fundamental problem is a "demand deficit." There is less economic demand for products and services than the ability we have to produce them. Every day that goes by with plants and workers lying idle, we lose the output they would have produced forever -- we squander precious resources that could go to build new homes, or produce more food or invent new sources of energy.
For three decades -- from Ronald Reagan through George W. Bush -- the American right wing peddled the notion that by transferring more money to the wealthiest among us, we would entice them to invest more and that the economy would grow. That was the fundamental premise of "supply side economics." In fact, of course, "supply side economics" was really a rationale for why rich people should be richer still.
The "supply side experiment" turned out to be a colossal failure. For eight years, George W. Bush applied the theory in its purest form: increase tax breaks to the rich, eliminate regulations on Big Oil, insurance companies and Wall Street.
The results are there for everyone to see.
The New York Times reported last year that, "For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring."
In fact, since George Bush and the Republicans in Congress passed two massive tax cuts, we have seen a massive, secular decline in the creation of private sector jobs.
Of course it won't surprise anyone that this decline has been led by the reduction of American manufacturing jobs. There has been a decline of 3.7 percent in overall manufacturing jobs in the United States over the last decade.
Remember that we're talking here about an absolute lack of increase in private sector jobs -- zero increase in actual jobs -- even as the population of the United States has grown. Economists tell us that the economy must create 150,000 new jobs each month just to stay even with population growth.
The failure of the economy to produce any private sector jobs at all would have been even more devastating had it not been for a small but significant growth in public sector jobs at the state, local and federal levels. Of course these are precisely the kind of jobs that the Republicans and Right decry at every opportunity and claim to want to cut. "Everyone knows," they say, "that job growth is really driven only by the private sector." Wrong...maybe in the imaginary worlds of the Heritage Foundation or Cato Institute, but not in the real world of Republican economic policy.
And let's be clear, the Bush tax cuts didn't just produce fewer jobs than advertised. They didn't produce any private sector jobs at all. The whole experiment in handing over money to the wealthiest people in America so they could use it to benefit the rest of us was a colossal -- empirically verifiable -- failure.
Now compare that to the Clinton administration where the rich paid Clinton-era tax rates. Of the total of 22.5 million new jobs, 20.7 million, or 92 percent, were in the private sector.
Turns out that when they were given all of those tax cuts, the top two percent of the population used them to speculate in exotic derivatives, to drive up the prices of high-end real estate, pay exorbitant prices to the designers of $4,000 blouses and $2,000 shoes. There is absolutely no evidence that they made any more investments in new manufacturing plants, or started up any more businesses than they would have had they paid the same tax rates that they did when Ronald Reagan took office and private sector job growth was 3% per year.
No, instead the rich used the Bush Tax Cuts to create the gigantic economic "bubble" that ultimately burst and caused immeasurable hardship and suffering to millions of average Americans and everyday people across the globe.
Most economists agree that the best way to close the "demand deficit" that is at the root of our economic problems is to put money into the hands of people who will spend it -- because they need to. Mark Zandi, Chief Economist for Moody's who was economic adviser to former Republican presidential candidate John McCain, argues that the most efficient way to create immediate growth in demand are investments in food stamps and unemployment benefits. In fact, he estimates that every dollar of spending on unemployment benefits increases overall economic growth by $1.61. That's because people who get unemployment benefits need to spend the money, and the people who receive it from them spend it as well, and so on.
You don't create more demand by giving money to rich people who don't spend it -- or for that matter, to corporations who sit on huge sums of cash. And that is one of our current economic problems. Corporate bank accounts are bulging with cash. And remember, corporate profits have actually gone up in the last quarter -- mostly by cutting back the costs -- and especially cutting jobs.
But that approach is not sustainable over the long run -- even for the corporations. To have sustainable growth, the economy needs consumers with money to spend -- with rising income, not just credit cards in their pockets. Long-term growth requires widely spread prosperity -- not ever-increasing concentration of income at the top of the income pyramid. One of the leading causes of the current economic disaster was the transfer of income from average middle class people to the very rich. Over the eight years of Bush, even when the overall economy grew, the incomes of working Americans actually dropped in real terms by $2,197 per year since 2000.
Eliminating the Bush tax breaks for the very rich would save the taxpayers more than two thirds of a trillion dollars over the next decade. That money would make a substantial dent into the long-term budget deficit. And it could be used to make the desperately needed public sector investments we need to assure long term economic success -- investments in education, infrastructure, health care and new sources of energy.
The politics. If Republicans want to campaign this fall defending tax breaks for the rich -- bring 'em on.
This is an issue that should be used to divide the sheep and the goats. There should be no question that Democrats support continuing tax relief for everyday people and eliminating Bush's outrageous tax breaks for millionaires.
Everyday voters are furious at wealthy special interests -- and especially Wall Street. A huge portion of the Bush tax breaks went to the "geniuses" on Wall Street whose recklessness sunk the economy but even now continue to rake in multi-million dollar bonuses.
Then there is the inheritance tax. In a brilliant stroke, Bush guru Karl Rove managed to get the media to refer to the inheritance tax as the "death tax." Democrats need rebrand the attempt to eliminate or substantially cut the inheritance tax for what it is: an attempt to hand billions of dollars in tax savings to the sons and daughters of multi-millionaires.
By definition the sons and daughters of multi-millionares -- the Paris Hiltons of the world -- are the only people who would benefit by eliminating or cutting the inheritance tax since it only affects muti-millionaires. America is sick of bonuses and perks for multi-millionaires. Nobody wants to use precious tax dollars to provide tax breaks to help Paris Hilton jet around the world and go to more exclusive parties.
Right and Wrong. The elimination of the Bush tax cuts for the rich is good economics and good politics. But this is also about right and wrong.
It is just plain wrong for our government cut back on food programs for children to give Paris Hilton more money to buy another pair of $1,300 Manolo Blahnik shoes.
It's just wrong for Republicans to deny unemployment compensation to victims of the recession because they say we can't afford them, and then turn around and extend billions of tax breaks to multi-millionaires.
It's just wrong for us to lay off teachers -- and deny our children the educations they need to have fulfilling productive lives in order to allow John McCain to add to his collection of seven homes.
It's wrong to propose cutting Social Security payments for seniors who get an average of $13,000 a year in benefits in order to make it easier for one of the "masters of the universe" on Wall Street to fly around the world in his Gulfstream VI private jet.
In the end, good politics and good economics are not about lists of policies and programs -- they are about right and wrong.
People are not "inputs" in the economic process -- their welfare is the goal of economic policy -- and the products and services they create represent the sum total of everything that the economy is about.
And in the end, more than anything else, politics is about whether people believe that candidates are on their side and stand up forcefully for the values they hold dear.
President Obama, House Speaker Nancy Pelosi, and Senate President Harry Reid have all called on Congress to do what's right. Time for every Member of Congress to stand up straight and eliminate the Bush tax cuts for the rich that did so much to harm to our economy, our people and our sense of justice.
Robert Creamer is a long-time political organizer and strategist, and author of the recent book: "Stand Up Straight: How Progressives Can Win," available on Amazon.com.
Follow Robert Creamer on Twitter: www.twitter.com/rbcreamer
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We need to end the problem where if a politican wants to vote against his parties opionion he will lose money for the next election--WHAT IS THAT BLACKMAIL
Ttruth in advertising just like drug companies we are buying a person to represent us we should expect to hear only true non slanderous information.
Sorry I love this country and until we the people stand up and tell them what we want from them nothing is going to change very much., We will stay paralized between two idealogies which have both proven they do not work. We need "change" but in our politicans.
The economy grows because people earn, save, invest, and take risks. The people who are best equipped to do that are both high net worth individuals and high income earners (they are not necessarily the same). If you take money away from that group of people there will be less people employed in the future. If you increase taxes, you penalize wealth generation - that is you penalize the people who are producing wealth. When they produce wealth they hire people and purchase equipment and services.
The Progressive objective is clear: exploit divisive economic and racial envy to accumulate more and more centralized power in the federal government in order to protect an ever growing underclass of "victims". Gosh, and all we have to do is entrust that power in a revolving door mandarin class of elite "political organizers" who have never produced wealth or met a payroll.
Your assertion of divisive economic & racial envy is mis-direction on the part of the conservative take-over of the national narrative.
The problem with government is that it no longer serves people. Sure government is big and wasteful. The solution is to fix that bigness and wastefulness as it is uncovered, and where it exists (take a look at the military expenditures, for a start), not by trying to starve it out by lowering taxes on the rich and cutting social programs designed to uplift the poor. Over the last 30 years of conservative control, the programs that serve to protect the people have been systematically gutted and underfunded, with regulators captured by the industries they were to regulate.
The real revolving door mandarin class of elite "political organizers" are the neo-conservative proponents of unregulated corporate special interests! Your pampered rich class does not do what you say it will. If they did, more people would be benefiting from the economic expansion of the economy. The underclass will not remain victims if government works as it should to ensure that the benefits of the economy go to as many people as possible, instead of further enriching the wealthiest 1% or 2%.
Here's a "how the world works" lesson for you... people and businesses make decisions based on their expected after-tax returns in the FUTURE not what the tax rate is today. Business people (yes even small business) and investors are now in an environment where tax rates will increase more dramatically than they have in years and an Administration that is creating massive amounts of uncertainty in the economy. With 2000+ page healthcare and financial regulation obaminations that passed Congress, there is absolutely no one who understands how the healthcare and financial industries will be impacted. How does anyone (rich or poor) take risks in that environment?
I can see your point on gutting and underfunding spending for the underclass. Combined federal and state means tested welfare spending was over $700 bil in 2008; it's projected to be $900 bil in 2010. Those numbers are astronomical. In 2008, that level of spending equates to giving everyone under the poverty line a check for $18,000 in 2010 dollars. If that's gutted, I can't imagine what "fully funded" means.
This hasn't happened in ten years.
1. Has one or more mindless slogans
2. Attempts to refute an assertion without any grounding or explanation why you disagree
3. Makes a sweeping claim without citing any facts or sources
Gee... and I wonder why I think an Administration of "Progressives" will result in failure and economic misery...
And as long as taxes are being discussed, it's clear that our thirty-year flirtation with supply side has left us with an ever-wealthier oligarchy and an increasingly impoverished 90% of everyone else. It's time to look at increases in marginal rates for the wealthy. they're the only ones who've advanced over the past 30 years, and it's clear that there is a corrosive social effect of having top earners getting three-and four-figure multiples of typical worker salaries.
The author --as with most liberals-- assumes the superiority of government spending to private spending. Unfortunately history teaches that governments are better at spreading poverty than wealth. As for the economic success of the Clinton years, please. Clinton benefited from the end of the cold war and a worldwide economic explosion, led by technology. A freshman economics student could have come out looking like a winner with the hand delt to Mr Clinton. It's no wonder he had plenty of time to lavish on other pursuits.
You refer to the fact that inflation eventually overtakes even the best estimates of what used to define "rich", when that definition must always be a comparison of the levels income/wealth at the current top and bottom.
I am a liberal, and I do not prefer government spending over private spending. I look for government to protect those unable to protect themselves from those whose wealth and power allow them to assume they are the entitled "chosen ones" and not subject to the same laws that apply to the "small" people.
Maybe Clinton was lucky and benefited from fortunate happenstance. How do you explain that the neo-conservative policies of Bush II & Co managed to tank the economy with THEIR policies? Oh, yeah, a lot of bad breaks and unfortunate happenstance. FAIL! THE NEO-CONSERVATIVE PHILOSOPHY IS MORALLY AND ECONOMICALLY BANKRUPT.
• ONE GUY would take 33 ½ of those pies.
• 9 people would take 38 of those pies
• 40 people would get 26 pies
• In the middle class 39 of us would be forced to split 2 ½ pies between us.
• 11 would get crumbs or none at all.
Despite the idea that anyone can make it if they work hard enough, there is very little chance of you or your children rising to the upper middle class
Mostly you are working hard at low wage jobs so the rich can get richer and pay less in taxes, while you pay more.
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http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#
I share your view that we must modify the assessment of what constitutes a good standard of living to give more weight to "quality" over "quantity" of living. It is NOT necessary for business to ALWAYS grow: It is sufficient to make a simple profit, but that profit need not grow every year to provide a successful life.
Some opportunities will expand as others contract. At this point, we must re-define the needs of society, and re-examine our infrastructure (such as transportation and the design of our cities). We must actively control our population growth, and even accept the benefits of a shrinking net population. We do not have the luxury of continuous, unlimited growth.
The planetary resources are already stretched, and we can either use rational means to limit growth gracefully, or natural processes will do it for us, most likely accompanied by massive quantities of death & destruction. All this talk about tax rates and jobs is meaningless when examined from the perspective of the survival of the species. We ARE a part of nature, and we ignore this fact at our own peril. The importance of competing political philosophies pale in the face of the greater imperatives of living within the constraints of the ecological systems supporting the only known biosphere in the universe.