Tax Impacts

Tax Cuts For The Rich, Scraps For The Jobless

Posted on Monday, December 20, 2010

The grotesque deal to extend the grotesque tax cuts for the wealthiest of the wealthy has rendered unmistakable something that should already have been plenty clear: Republicans will spend money like drunken sailors bearing home equity lines of credit when that seems politically expedient. When the politics shift, Republicans will go back to preaching sanctimoniously about runaway government spending, (and never mind the Iraq and Afghanistan wars fought off-balance sheet, and the tax cuts for people whose worries include finding enough paper to accommodate all the deductions on their tax forms).
But hypocrisy is a yawner in Washington, the easiest charge to make stick on almost anyone. Beneath the obvious ugliness of the same people warning about the pitfalls of deficit spending suddenly finding a fresh $900 billion for a tax-avoidance party, a structurally appealing logic is at work. Our political system just made history easier to digest for future generations, because the tax cut extension provides the ideal ending to a long-running storyline: Life getting grander for the super-rich through the trashing of the economy for pretty everyone else.
The Obama administration has told us repeatedly that it had to accept extending tax cuts for the rich as the price for the votes to continue emergency unemployment benefits for people who have been out of work for six months and longer. This trade may be unpalatable policy -- seven-figure tax savings for people with private tennis courts in exchange for $300-a-week unemployment checks for those who now shop at food banks -- but it makes perverse sense.
The tax cuts handed out to the top one percent of American earners early in the George W. Bush administration exacerbated the long trend toward more and more wealth flowing to the top, while the "bottom" 90 percent of the economy got the backwash -- stagnant wages, and rising costs for health care, housing and education. (Robert Reich lays all this out cogently in his recent book, "Aftershock") The result of this quarter-century of regressive redistribution is that fewer and fewer people can afford to buy homes and cars or pay for clothing and medicine and food without slipping deeper into debt.
We now know how that story ends: Our Ponzi scheme of an economy broke down in late 2007, as the financial system absorbed the reality that it had lent out trillions of dollars to people in no position to pay it back. That's when our political leaders should have commenced a serious discussion about how to build a real economy, one centered on producing goods and services of genuine value (instead of credit default swaps and no-money-down mortgages).
But that would have cost serious money. We might have spent half a trillion dollars building out a smart electrical grid that would have enabled the aggressive embrace of wind and solar power, which holds the promise of generating large numbers of manufacturing jobs for the Rust Belt. We could have significantly increased funding for research in the life sciences and other areas of innovation to seed the ground for future job growth in those promising but risky enterprises.
But just as it became most clear that we needed to invest seriously in a new kind of economy -- an old-fashioned economy, really, based on intrinsic value rather than of accounting gimmicks -- seemingly everyone in Washington started freaking out about the deficit. There was no money for anything, the politicians decreed, offering us a future colored by austerity and the sad acceptance of a New Normal featuring elevated unemployment and a New Poor carved out from the group formerly known as the American middle class.
The deficit fear and the championing of austerity all but ensured a long-term need for emergency unemployment benefits. If there is no money to construct a new economy in which people can do what they actually want to do -- go out and work for a living -- then there must at least be a few stray quarters we can scrape off the floor to keep jobless people from landing on the streets.
Say what you will about this sorry tax deal, but do not accuse the political system of lacking an appreciation for symmetry. Congress and the Obama administration have just brokered a deal in which they ordered up more of what put us here (tax cuts for the super-rich) as the way to get the thing that those tax cuts helped necessitate: meager checks for the throngs of people camped out in unemployment offices across the nation.
Peter Goodman Huffington Post

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