"An era can be said to end when its basic illusions are exhausted." - Arthur Miller

Tuesday, December 07, 2010

Obama Caves on Bush Taxes

To really no surprise of anyone, President Obama did as predicted and once again caved to Republicans on the Bush Tax cuts. The agreement is rather remarkable in the sense it is probably the first time these last years where Republicans may actually vote on a bill they compromised on (this use to be SOP before the Bush era). When Obama caved to Republicans before they all voted no as a block. This happened with health care which was compromised to the point it wasn't much different than the GOP's 1994 health care plan. The bailout which was supposed to have more stimulus spending was compromised to a 40% tax cuts for 98% of the country (which failed to recognize those cuts to no surprise) that every economic expert across the war said would result in a stimulus bill that would have a minimal impact on the economy. Something, two years later we now know was true.

The resulting compromise extends the Bush tax cuts while extending unemployment insurance. The Bush tax cuts will be extended two more years. The estate tax will be altered to protect the first $5 million of an inheritance with 35% tax rate. It used to be the first $2 million before the "Death Tax" moniker made it sound like it affected every American instead of only 1% because most Americans are stupid and can't be bothered to get more information than a made up label. The price tag for this is $10 billion or 2x what Obama's stupid federal employee freeze will "save".

The Earned Income Tax Credit and few others will be extended adding another $40 billion cost. Unemployment insurance, which the GOP voted down, will get a 13 month extension for a cost of $56 billion. Payroll taxes will get a 2% tax cut (so lunch once a pay period on the government, whoopee) which will cost $120 billion. It also has the odd investment spending bill that lets businesses deduct 100% of their investment spending for next two years. Conditional tax cuts work (something the GOP should embrace more but since the rich is their only priority that will never happen), but usually it’s something like 30% if bring a business in, or hire X number of workers. Not sure what a 100% write-off would accomplish. The suggested cost is $200 billion in tax revenue. Overall, this may have an impact of adding $426 billion to the deficit, ironic considering what the GOP campaigned on. Then again, if Americans paid more attention to history and not buzz words, they would know the GOP has never been fiscally responsible. Very hard to be when the goal is to give condition free money to corporations and the rich.

The GOP continue to claim that tax cuts for the rich will fix everything, ignoring the fact that hasn't worked for 10 years now and really 30 years if look at the failure of trickledown economics from 80's on (again unless rich as had 500% growth while everyone else remained stagnant). Unconditional tax cuts do nothing for the economy. The rich don't use it to create jobs or give raises and it has no impact on people's spending. A business either has the sales to support their hiring or they don't. When given to the rich and corporations, it is simply added it to the bottom line and nothing more. Now we are extending that failed economic policy for two more years. So Obama caved and the GOP got their wish for the next two years but at least some very minor stimulus was seeded in.

If Fox News continues its pretty remarkable run and Americans continue to stop using their brains, it is pretty clear the GOP figures they will get control of Congress so can go ahead and make the cuts permanent without regard for the impact it will have on the deficit. Good job Tea Party. Not even one month has passed and already the GOP has tossed you to the side. Next time look at history and recognize the GOP doesn't give two craps about you unless part of the upper 2%. Next time don't vote on the fantasy that you might win the lottery and become rich but on your current practical needs.

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