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The High Cost of Tax Cuts

December 9, 2010

TRUE FACTS:

There seems to be a cognitive disconnect in many people’s minds.  None of us like paying taxes, so proposals for tax cuts are always popular. But–and it’s a big  but— every time you reduce taxes, you increase the debt and the deficit because taxes are the source of government income.  The only possible exception is during boom  times of economic expansion,  when economic growth offsets the lower tax rates, which we sure ain’t in now, are we? It doesn’t look like we are going to be in  again for many  years.

The package Obama & the Republicans now propose, if passed,  will  increase the deficit by between $800 billion and $900 billion dollars. That’s an estimate from the New York Times.  The larger figure, $900 billion is now almost universally accepted as more  accurate.

That is a deficit increase greater than  the bailout of Wall Street, General Motors,  Chrysler,  and the entire stimulus package put together. Please remember that one-third of the cost of the stimulus package was in the form of tax cuts for businesses. They’ve already had  recent tax cuts  and are sitting on record cash reserves they have no intention of using to create jobs. These are facts, not opinions.

Just one component of that package, the extension of  Bush tax cuts for the richest 2% of taxpayers will cost  us about $60 billion dollars a year. Letting them expire  as originally planned would have reduced the deficit  more than eliminating all earmarks, a 10% cut in the size of the federal workforce, an indefinite  pay freeze on all remaining federal employees,  and  a 50% cut in all foreign aid combined  would have.

With that amount we could’ve had a 15% cut in corporate income taxes, or, far better, free college including tuition, room, and board for  half of all full-time college students  in two-year and four-year colleges. We can’t have that because the Powers That Be have decided that additional  tax cuts for the rich are more important.

According to a recent CBS poll only 26% of Americans favor extension of the tax cuts for the rich.  Over 70% oppose them. You would never guess that fact from listening to Obama or the Republican leaders, would you?

The non-partisan Congressional Budget Office estimates that this tax-cut package will reduce unemployment rates by no more than  0.1% next year but perhaps as much as 0.3% in future years. Are you getting this? Maximum benefit projected to be zero-point-three-percent. That’s three-tenths of one percent).  This is what we are sacrificing for. This is the projected “payoff” that justifies the proposed package.  This is “why it makes sense,” supposedly.

As Paul Krugman points out, this proves the so-called “Deficit Hawks” in congress are complete phonies and hypocrites.  Rep. Michelle Bachmann (R-Minn) says we can’t afford to extend unemployment benefits for 13 months. But she has no criticism of all the other, larger, more expensive  components of the package. It’s only aid to the poor that she believes we can’t afford. When it comes to aid to the rich, the sky is the limit.  For Bachmann and her ilk,  taxpayer money is literally no object when it comes to subsidizing the rich she has spent her adult life serving: anything goes!

Once again, the poor, the working class, the (rapidly disappearing) middle class must suffer and sacrifice to make the rich and powerful even more rich and more powerful. How many times must we see this scenario repeated before we “get it”?

Isn’t it obvious that the problem isn’t the existence of government and a public sphere but rather the dominance and control of government & the public sphere  by giant criminal corporations running amok and their well-paid  lackeys? Isn’t it obvious that  Warren  Buffett was right when he said, “It’s class warfare and my class [the billionaires] are winning. We shouldn’t be, but we are.”

Gee, isn’t bi-partisanship wonderful? When the Obama  administration, Republicans, Tea Partiers, and Libertarians come together and they all  agree on a package deal for the American people?

UPDATE #1: Perhaps I should have added the adjective  pious to the word  hypocrite when referring to Michelle Bachmann. She and other members of something called the Congressional Prayer Caucus are whining that Obama doesn’t use the word “God” often enough in his speeches, especially in lecturing foreign leaders on American Exceptionalism, that is,  America’s God-Given Superioriity over their nations.  He doesn’t wear his religion on his sleeve! Horrors!  He, like George Washington,  actually respects the Constituionally-mandated separation of church and state!  How shocking!  How bizarre and abnormal!

UPDATE #2: Please note the tax deal was a negotiation between Obama and the Republican leaders, with the leaders of the president’s own party, the Democrats, excluded. Only after it was a done deal were they told about it and told “take it or leave it!” No wonder his own supporters are disillusioned with his lack of leadership and the fact that Obama seems more interested in appeasing his sworn enemies than in being loyal to the people who put him in office to fight for them and the reform agenda he promised to enact.  He’s acting like the Democrats are the helpless minority party. Once again, the phrase “taking a dive” comes to mind. Or, as one wag said, “he always wants to punt on third down.”  Sometimes it seems to me he wants to punt on first or second down.

  

  

  

  

  

  

  

  

  

  

 

 

 

 

 

 

 

 

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