As millions of unemployed Americans struggle to make ends meet amidst an economy still in shambles, a note is quietly slid under the door: “Give us $800 billion in tax breaks or your unemployment benefits are history!” In a classic made-for-television cop drama, this is the part where the heroic police captain would emphatically declare, “We don’t negotiate with hostage-takers!”
But that’s not what happened last week. President Obama gave in. Now Congress and the American people are being asked to swallow an poorly conceived tax cut proposal.
Thankfully we have more than one branch to our government – a healthy check to a bad executive decision in this case. The House Democratic Caucus has made its position clear. No deal unless significant improvements are made. Under this lopsided tax giveaway to the richest among us, 64 percent of the total tax package will go to the top fifth of income earners adding hundreds of billions to our national debt. Fully 25 percent of the largess will go to the top 1 percent alone, who will take home an average of $76,000 in tax cuts. Unlike the television cop drama, there’s no exploding ink canister in this bag of unmarked bills.
Let’s be clear. These tax cuts will do little or nothing to stimulate the economy despite the hollow claims of Congressional Republicans and conservative pundits. According to a Moody’s report, making the Bush tax cuts permanent will lead to 30 to 35 cents of economic stimulus for every $1 we give up in federal revenue. That’s a very poor investment. By comparison, revitalizing our nation’s infrastructure or extending unemployment benefits will lead to roughly $1.60 in economic stimulus for each $1 we spend.
Public investments deliver more economic bang-for-the-buck because building a school creates construction jobs and employs teachers in our own back yards. The same can be said for building high-speed rail systems or retrofitting old buildings with green technologies. Those newly employed workers spend that hard-earned money in their communities, leading to even more stimulus. Unemployment benefits are also spent almost immediately to help hard-pressed families make ends meet. Tax breaks on the other hand, especially tax breaks for the very rich, are more likely to be saved or used to pay down debt. Noble as that may be, it won’t jumpstart an ailing economy.
However, the real problem facing our nation is far more profound than the misguided efforts to use tax cuts as a way to stimulate the economy. Congressional Republicans fail to understand that the problem with our economy lies in a middle class that has been beaten down and bankrupted by decades of failed trickle-down policies. Despite all the promises to the contrary, wages for most Americans have been stagnant over the past three decades while incomes at the top have soared.
Income inequality is now at the highest level it has been since 1928, just before the Great Depression. Despite this grim and alarming fact, Congressional Republicans are telling us the problem with our economy is that rich people don’t have enough money. Really? And worse, they’re willing to hold millions of unemployed Americans hostage to leverage even more tax breaks for their Wall Street and big bank allies.
One of the most unexpected concessions was a multi-billion-dollar giveaway to the heirs of vast fortunes by weakening the estate tax far beyond the already feeble 2009 levels. Under 2009 law, a child of a wealthy couple could inherit more, tax free, than the average American earns in four lifetimes, but that’s not good enough for the hard-line Republicans on Capitol Hill. Under the Obama-GOP deal, the estate tax would be weaker than at any time in the last 70 years.
As Congressional Republicans and their well-heeled supporters are poised to grab the sack of unmarked bills, we’re counting on House Democrats to stop them from making a clean get away by fighting for a better deal for all Americans. But, unlike the entertaining television cop drama hostage-standoff, our nation’s future and the strength of its middle class is on the line instead.
Brian Miller is executive director of United for a Fair Economy, a national organization that works to raise awareness of the dangers of extreme inequality, and promote a more broadly shared prosperity.