Lame Canard Session

The stakes are enormous: millions of Americans have lost their meager unemployment benefits; job creation is abysmal; unemployment is increasing; municipal and state governments are in dire need of revenue; the Bush-era tax cuts will expire on December 31st; and obstructionism in Congress is sure to be even worse in the next session.

Our formerly hopeful, now pragmatic President, knowing just how close our economy is to falling off the cliff, has embraced compromise to get help from Senate Republicans to stimulate the economy. The Republicans in the Senate, knowing that a two-year extension of the Bush tax cuts is precisely the issue they will need for the 2012 election, are willing to compromise all principles to throw some scraps at the poor by extending unemployment benefits for a year and a month (past the next holiday season). Both parties are anxious for the one-year cut in payroll taxes that is also in the deal.

So just how bad is the deal?
Allowing the unemployment benefits to expire makes almost no economic sense. The stipend is tiny, but merciful, and it goes immediately back into the economy providing stimulus we badly need. How long it should be extended is debatable, but ending it before we have job growth is the answer.

Allowing the tax cuts to expire will hurt the working poor: the bottom 10% bracket will disappear and go back to 15%, plus the earned income tax credits will expire.

Allowing the tax cuts to expire will hurt the middle class: tax rates will increase 3%; families will lose $500 per child in deductions and some tuition credits; and singles will lose the marriage penalty fix. The House has already passed a bill to extend breaks for the poor and middle class. Should the bill fail to pass the Senate, there may be plenty of support for fixing it next year – especially if the economy continues to flounder.

Allowing the tax cuts to expire will bother the rich: 30 years ago, the top marginal income tax rate was 70%, now it is 35% and would go back up to 38%. Dividends will be again taxed as ordinary income, which it is. The long term capital gains rate, now zero, will go back up to 10%-20% – temporarily cutting the capital gains rate can create an incentive to invest, while cutting the tax rate to zero and keeping it there, does just the opposite. Estate taxes will go back into effect with a $1 million deductible.

The Bush tax cuts were spectacularly effective in increasing the wealth of the richest Americans and turned our surplus to deficit. The next 10-year cost of extending the tax cuts is about $4 trillion,

“…three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending. And we’re not talking about government programs nobody cares about: the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare,” according to Paul Krugman.

But is this just a canard? Hard to know. This lame duck session of Congress is, mercifully, coming to an end soon. It seems likely the Obama-Republican compromise could pass the Senate, but whether the House will betray the same progressive beliefs as our President, is a toss up.

3 thoughts on “Lame Canard Session

  1. Frank Povah

    There are several words to describe what is in the air – lunacy and heartlessness spring to mind, but as an Australian I can only define it as political bastardry.

    Reply
  2. Monica Smith

    Permit me to object to the verbiage. There are no benefits to the unemployed. Any payments they collect are COMPENSATION for the fact that somebody else has messed up or planned poorly. To the extent that employers perceive themselves to benefit by being enabled to reduce the compensation they are contractually obligated to pay people who work for them, they’re exhibiting predatory behavior that should not be rewarded.

    The last decade has demonstrated two things pretty conclusively.
    1) The investor class has become addicted to the notion that, instead of contributing their fair share to the support of the nation, they are not only entitled to a “cut” of every public dollar spent (via dividends on bonds), but that income stream, in addition to being guaranteed, needs to be tax exempt, as well. And, to top it all off, the investor class has determined that it, not our elected and appointed public servants, are entitled to decide which public assets and resources are supported and developed and which not. It’s power over people.

    2) The public officials we elect to represent the public interest and promote the general welfare are quite content to let the investor class — i.e. Wall Street — call the tune for how the nation’s assets and resources are allocated. Indeed, the majority of the enthusiasm for the privatization of public services has originated with public officials who relish the notoriety and adulation of public office, but have no inclination to carry out its obligations. Providing for the “general welfare” is such a downer.

    So, while I am inclined to think that there’s little point in adjusting tax rates to affect people who don’t pay any tax, there was a larger issue — that the investor class has sequestered over three trillion dollars in cash from the economy — which the President should have pointed out as the reason why continued infusions of money into the pockets of working people and the treasuries of the several states are necessary. Never mind drowning. Wall Street has been trying to asphyxiate the economy in order to assert, once and for all, that they control the flow of money and are entitled to use it as a lever to sustain a stratified society with the moneybags at the top.

    Given his experience as a community organizer, I mistakenly assumed that Barack Obama is familiar with how banksters and gangsters operate in communities where the agents of government have turned their backs. I assumed that he’d be familiar with abuse and realize that, since abusers aim to hurt, it isn’t possible for victims to offer resistance, because doing so just amplifies the hurt and does the abuser’s work for him. I assumed, as did a lot of other people, that Barack Obama would know that a silent witness to abuse becomes an enabler and an agent of government who turns his back becomes complicit. Now it is obvious that Barack Obama is nothing like King Solomon. Instead of exposing the faux claimant, Obama would ask her if an arm and a leg is enough.

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    1. Lee Leslie Post author

      Right on. Someday let’s discuss the strange set of ethics that has us debating the extension of worker’s compensation in a land of no safety net for those unfortunate enough to be working hourly, or as a contract employee or in small or undercapitalized entrepreneurship. Or, the set of ethics, which allows our “leaders” to negotiate an across the board 3% tax cut, regardless of the special treatment given to the ownership brackets paying no taxes on dividends or manipulated capital gains while receiving Lexis health care, stock options, golden parachutes and FICA caps.
      Fascinated by the abuse/enabler insights into our President, while I just assumed it was naivete and inexperience, which had him confuse partisan compromise and appeasement. Thank you.

      Reply

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