It’s not pretty watching President Obama and the Republican minority collude in giving away billions to the wealthy under the guise of the deceptively named “middle class tax cuts.”
The President has pretty much deep-sixed the effort by a majority of Democrats to keep lower tax rates in place for most Americans, except the very wealthy. Even that effort, by itself, would have given the wealthy five times more money than actual middle class taxpayers would receive, simply because a tax cut on the first $250,000 of income applies to everyone, including every single rich multimillionaire.
The President has shown that he is willing not just to compromise, but to sell the whole store, to get anything resembling a tax cut, regardless of who benefits, how much it accelerates the nation’s wealth gap and the overall impact on our economy. It is a lousy deal, with the edge going to the wealthy and cutting into the middle class.
But the fight is not yet over, and some Democrats appear like they might have a backbone. And with two simple steps, Congress could help solve our short-term deficit issues and get our economy moving again.
Step one: Do nothing and let all the Bush tax cuts expire as now scheduled, so that tax rates return to what they were in 2001. After all, we were told by President Bush that these tax cuts would bring us prosperity, economic growth and jobs. They haven’t delivered any of these — quite the opposite, in fact.
Think back to 1999, before Bush pushed through all these tax cuts. We had a prosperous economy, tremendous job growth and very low unemployment. The middle class was doing OK, while
the wealthy were raking in profits. The Bush tax cuts haven’t taken us anywhere but down.
If we end those tax cuts on earned income, capital gains and wealthy estates, we will gain about $4 trillion in revenue over the next 10 years. That will enable us to create jobs in our local schools and community colleges, fund a jobs program for energy-efficient retrofits and create even more jobs building transit systems that can get you to work on time — regardless of the weather and car traffic. It also will significantly reduce our short-term term deficit.
That is one side of the equation. On the other side is the need for immediate economic activity. We need to encourage people to buy again. Consumption accounts for 70 percent of overall economic activity. And as consumers buy more, businesses hire and invest to produce enough to meet increased demand.
Now, we can’t count on the wealthy to consume more, at least in our state or country. They may buy some stuff, but they also may take a vacation in France — which helps the French economy, but not ours. Or they may decide to invest in a Fortune 500 company, which takes that investment overseas to build another factory in China. That doesn’t help much either.
What does help is when people buy things right here in their own neighborhood — which brings us to step two: Congress immediately should send every household now paying payroll taxes a check for $2,000.
Doing so will push $250 billion into the United States economy, both directly via the checks and indirectly via the economic ripple effects of increased consumption nationwide.
Do the math. For the vast majority of Washington residents, a $2,000 check from the federal government minus the thousand dollars they lose from an increase in tax rates means they pay less in taxes overall. Plus they get an immediate check in the mail – something large enough to actually notice and big enough to actually benefit them.
Could it happen? Well, Washington state is far from the DC beltway but we have Sen. Cantwell and newly re-elected Sen. Murray, and Congressmen Larsen, Inslee, McDermott, Dicks and Smith. They represent us and between them they have a lot of power to wield in this lame duck session.
It is time to ask them to work for us — not for the Republican minority, not for the Democrats who have no spine, not for Wall Street, not for President Obama, not for the wealthy and definitely not for those who brought on this recession.
Our elected representatives and senators owe their allegiance to a difference set of constituents, namely: the great — and lately, disrespected — middle class. Let’s make them do something about it before this Congress closes its doors on history.
John Burbank is executive director of the Economic Opportunity Institute (www.eoionline.org). His e-mail address is email@example.com.