President Obama wants to keep the Bush tax cuts for the middle class (anyone making less than $250,000) while letting the Bush tax cuts expire for the wealthy. He should stick to his guns on this if for nothing more than to establish the principle that not all tax cuts or increases are created equal which is what the Republicans would have you believe. The wealthy have gotten the largest share of the benefits from the Bush tax cuts. It's time to redress the situation giving the middle class a break, while not giving one to the upper class who made out like bandits during the Bush years. While middle class wages stagnated and the middle class lost ground, the rich surged ahead adding millions to their portfolios. The Bush tax cuts, which were unpaid for, have done significant damage to the government's deficit/debt situation, and letting them all expire would be the best thing as far as the soundness of the government's fiscal situation is concerned. However, keeping the tax cuts for the middle class will have a stimulative effect on the economy; keeping them for the upper class wouldn't.
Keeping the Bush tax cuts for millionaires and billionaires would effectively hand over to them an average of $100,000. each which they don't need, and it wouldn't create more jobs nor would it add significantly to GDP in terms of generating more consumption. In fact the proposed $300 billion tax incentives for business would not create many jobs either. Yesterday on Fareed Zakaria GPS former Obama budget director Peter Orszag said that business would use it to invest in more equipment like computers and software. Hmmm. I wonder why? Could it be that they want to automate and computerize in order to get rid of even more employees? The Obama administration should wise up and realize that the tax incentives that they're proposing will only result in more lost jobs rather than creating new ones. The only way any incentives will create jobs is to target those incentives specifically towards businesses that actually create jobs. In order not to be scammed those jobs should not disappear the minute the business has realized their tax cut. In other words it's not enough to create a job and then get rid of it the day after the business has gotten its tax cut. They need to be long term jobs.
Bush screwed the US government budget by (1) not paying for two wars, (2) not paying for the prescription drug benefit for seniors (which was a giveaway to the pharmaceutical companies) and (3) cutting taxes which resulted in an underfunding of the government and huge deficits with no concomitant job creation. Conservatives are supposedly worried about the deficit only not so when it comes to tax cuts for the wealthy. Then they're not worried at all. If the US government goes under at some time in the future, it will be largely attributable to the three unpaid for Bush budget busters listed above. Why are all the Tea Partiers complaining about the national debt now instead of at the time of the Bush tax cuts which created most of it? Bush doubled the national debt from $5 trillion to $10 trillion. And they want to have their cake and eat it too. They don't want to pay taxes, but they want to decrease the debt? Can't do it except by cutting government programs like social security and Medicare or else cutting the Defense budget which is out of control. The added intelligence bureaucracy since 9/11 takes up 17 million square feet, three times the square footage of the Pentagon itself! The US has approximately 1000 military bases in practically every country of the world. Can you say overextended? Let's try cutting there first. But conservatives don't want to cut the military-industrial complex budget which after all is the biggest jobs program in the US. And they don't want to raise revenues. All they talk about is getting rid of social security, Medicare, unemployment, welfare, public schools and public services like firemen and policemen. Not to worry they say. Just hire a private security guard and send your kids to private schools.
The US is losing out on $100 billion in revenue every year because of all the money parked offshore by the wealthy and corporations. How about recouping that money? A financial transactions tax would bring in even more money while not causing loss of jobs or affecting any kind of stimulative effect to the economy. The financial casino, which is what Wall Street is, gets away with paying less in taxes than middle class wage earners. Just ask them about "carried interest." Obama has to at least draw a line in the sand regarding these issues instead of caving to Republicans who want to create the impression that it's all or nothing when it comes to tax cuts or tax increases. You can cut taxes for the middle class and raise them on the wealthy. You can cut taxes on wage earners while raising them on hedge fund managers and Wall St executives. You can stimulate the economy and raise taxes on the wealthy. You can create demand and raise taxes on those who have so much money that giving them a tax break would not cause them to go out and spend it thereby creating any demand. In other words giving tax breaks to the wealthy will not create any more demand; giving tax breaks to the middle class and the poor will.
Obama needs at least to educate the American people with regard to these principles instead of letting right wing talk radio and Fox news miseducate and mislead them. He needs to draw a line in the sand. Tax cuts for the middle class does not mean that you also have to give a tax cut to the wealthy. Raising taxes on the wealthy does not mean that you also have to raise them on the middle class. One of Obama's mistakes was the first stimulus package which was short on direct investment in the economy and long on tax cuts. It should have been the other way around. And the most stimulative thing he could do would be to create a Works Projects Administration (WPA) style program similar to what FDR did in the 1930s. Between 1935 and 1943, the WPA provided almost eight million jobs. Within ten days after being introduced to Congress the Act authorizing the Civilian Conservation Corps (CCC) was signed on 31 March 1933. By April 5 FDR had signed an executive order establishing the organization, and by April 7 they had their first enrollee. By April 17 they had established their first camp. They need to have this sense of emergency now and create a direct jobs program as expeditiously as FDR did. The problem is there's no political consensus about doing so. But FDR had his enemies too, the "economic royalists" which he railed against. Bring 'em on, FDR said. Obama should explore establishing a WPA and CCC by executive order bypassing Congress and Republican filibusters which have brought democracy to its knees.
Now we hear that there are two months till elections and Obama can't possibly hope to have any effect on the economy despite his proposal for $50 billion in infrastructure spending and $300 billion in targeted tax cuts for business. Nonsense! FDR got the CCC up and running and people employed in less than a month! Obama's big mistake with regard to the economy was to think that in this day and age even in a Great Recesssion, programs like the CCC and WPA, in other words direct government intervention in the economy in order to create jobs, weren't necessary. He has let Republicans convince him that most of what was necessary was tax cuts and giving hundreds of billions of dollars to Wall St banks. This has turned out to be a big mistake. In Obama's defense we don't have a 25% unemployment rate, but that's only because unemployment has been redefined so as not to reflect the true unemployment rate. Each month millions are arbitrarily eliminated from the labor force despite their not having jobs in order to make the unemployment rate lower and the government look better. This has been sold as the fact that these people were no longer looking for work according to the government's definition of "looking for work." Would they take a job if one were offered to them? You bet they would.
What is this nonsense that people shouldn't be counted as unemployed unless they are "looking for work" according to the government's narrow definition? If they are not working, how can they pay their mortgage or pay rent? How can they pay for food or utilities? They can't. So the only people who are truly not looking for work are the homeless, and even most of them would take a job if it were offered to them. The permanently unemployed are bound to be eventually living on the streets or on the charity of family members. So when you hear some government functionary say that there are those who are not counted in the labor force because they are not looking for work, think 'the homeless' because that's the state anyone without a job will eventually find themselves in unless they are lucky enough to be receiving unemployment, welfare or charity from their family. And if the Republicans take over, they will redefine 'unemployment' so that the unemployment rate as defined by them will go back to normal while tens of millions remain unemployed. In absolute numbers there are more unemployed now than during the Great Depression.
The fact of the matter is that inequality in the US has never been greater than it is today except during the Great Depression. The fact is that US businesses are sitting on $2 trillion in cash. They don't need more tax breaks. The fact is that corporations and the wealthy are parking their money offshore thereby avoiding taxes. The fact is that there is a lack of demand because American consumers are tapped out and are trying to pay down their debts instead of buying more trinkets made in China. Others have lost jobs and houses to foreclosure and have no money to spend. What Obama needs to do is to recreate FDR style direct spending programs, and in the interests of fiscal responsibility, he needs to pay for them not by borrowing more money and creating more government debt but by initiating new taxation programs on the rich and on rich Wall St banks which represent 20% of the economy. He also needs to eliminate government subsidies to large and immensely profitable corporations like Exxon Mobil which make tens of billions in profits and still receive government handouts because they can pay lobbyists to make sure that they go on receiving them. If Obama does nothing else in his last two years as President, he can at least use the bully pulpit to make it abundantly clear how Republicans, Tea Partiers, right wing billionaires like the Koch brothers, talk show hosts like Beck and Limbaugh and demagogues like Palin are trying to pull the wool over the eyes of the American people. His job should be to shed light and pull the scales back from American eyes and use executive orders to directly create jobs repairing infrastructure and ameliorating the environment as FDR did with the WPA and CCC.