Hatching a Brand New Beast

Nine years of tax breaks authorized by President Bush and a Republican Congress in 2001 and 2003, expressed in terms of the cost of proposals to extend them beyond their present December 31, 2010 expiration date, total $3.7 trillion (Washington Post).

These were the first wartime tax cuts the United States has ever enacted.

Borrowing money to cover both war expenditures and tax breaks is the kind of reckless financing that leaves us “nothing with which to make no down payment.” See my earlier blog.

Alan Greenspan, Chairman of the Federal Reserve Board on whose watch this dangerous borrowing occurred has since acknowledged his mistake and its terrible consequences. Another earlier blog.

Greenspan now calls for a complete repeal of the 2001 and 2003 tax cuts. But beneficiaries of these tax cuts and the politicians that speak for them continue to insist on extending $3.7 trillion in risky tax breaks at a time when the nation is up to its ears in debt, in a deep recession and still at war. They spend tons of money and spread truckloads of lies to buy a Congress in this fall’s mid term elections that will extend $3.7 trillion risky tax breaks that expire December 31, 2010.

Legions of very expensive professional lobbyists orchestrate grass roots agitation, support Congressional obstructionism (approaching 200 filibusters since 2008) and reinforce it all with big business money hoarding. Cash reserves of Georgia’s largest Fortune 500 firms have roughly doubled since 2007 (Atlanta Journal-Constitution).

These tactics paralyze efforts to tame the marauding monster that has devastated our country since 2007. Long term unemployment. Reduced public services in education, road and bridge maintenance, libraries, street lighting, etc. pave “a long unlit road to nowhere” (Paul Krugman) “toward third world status” (Arianna Huffington).

President Obama, like President Roosevelt 87 years ago, is far more forgiving of Republicans than they are of him. Obama currently proposes to leave in place $3 trillion of Bush era tax cuts, canceling only $700 billion of the $3.7 trillion total.

$3 trillion paid for with borrowed money duplicates almost exactly the risky financing that unleashed the present monster, hatching a brand new beast only slightly smaller (81%) than the original.

The Justification is “stimulus,” but that’s a heap of stimulus! $3 trillion to people, who, unlike the poor, have no incentive to spend it. But neither “stimulus” nor “lower taxes” address “where the money is.”

According to James Surowieki writing in the New Yorker, “People who earn a few hundred thousand a year have done much worse than people at the top of the ladder.

“Between 2002 and 2007, for instance, the bottom 99% of incomes grew 1.3% a year in real terms—while the incomes in the top one percent grew ten per cent a year. That one percent accounted for all income growth in those years.”

Instead of tax brackets that obscure the difference between someone earning two hundred thousand a year and someone earning two hundred million, we should refine tax brackets into smaller, fairer and less controversial subclasses. Such revisions could turn the ugliness of the present effort to extend risky 2001-2003 tax breaks into a healing, useful reform.

photo credit, flickr, Limbic, Jonathon Davis

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rtwork: CBS, The Family of Music