Republicans played President Obama in the tax deal like mortgage hustlers played homeowners. Focus on the teaser rates, borrow more than you need and trust us to work with you to refinance later when rates jump.
The teasers are the needed extension of unemployment benefits – always extended before with high unemployment – and continued tax cuts for non-rich Americans. The President folded on more tax cuts for millionaires and doubled down with a renovated estate tax set at the lowest rate since 1931. And a cut in the Social Security payroll tax, which Republicans will use to gut Social Security later.
The tax deal will cost most Americans and our economy much more than it gains.
Obama’s tax deal falls for the same trap Republicans have been running since the Reagan administration. Cut taxes to reward the wealthy and purposely run up the debt to cause cutbacks later in programs Republican lawmakers don’t like, which is most everything outside the military and corporate subsidies for Big Oil, Big Pharma and other favored big business using small businesses as poster children.
Handed a budget surplus by the Clinton administration, President Bush slashed taxes – breaking precedent by asking the wealthy to pay less, not more, during wartime – and chopped away at the public services and infrastructure that underpin actual job creation and long-term economic growth. Bush left America in the worst economic crisis since the Great Depression, and falling down the world rankings in wages, living standard, life expectancy, economic mobility, education, infrastructure and global competitiveness. The richest 1 percent of Americans had the greatest share of national income since 1928, which was not coincidentally right before the Great Depression.
Today, the too big to fail banks are bigger and Wall Street continues paying big bonuses for playing heads I win, tails you lose with our money. Wall Street campaign donations flooded to Republicans promising to roll back financial reform. Big businesses are sitting on a record pile of cash and liquid assets while small businesses still get the cold shoulder from banks. Millions of Americans have been foreclosed or are in default. One out of ten Americans are unemployed by the official count, which leaves many uncounted. Our infrastructure – much of it built decades ago when the highest-income taxpayers were more productive and less greedy – is rotting. The promised green jobs of the future are increasingly today’s jobs in Germany, China, Brazil and other countries investing more in their economies.
And now comes the tax deal, offering tax cuts that will be paid for next year and the years after by pay freezes and big budget cuts for the services and infrastructure most Americans and a healthy economy depend on. In a twist on the rightwing strategy long known as “starve the beast,” Senate Republican Leader Mitch McConnell praised the tax deal as “cutting off the spigot.”
People used to talk about robbing Peter to pay Paul. Now it’s more like robbing everyone to pay the richest 1 percent.
In the set up to the real robbery, the bottom 20 percent of Americans will save $396 on average in 2011 from the tax deal, the middle 20 percent will save $1,521 and the richest 1 percent will take the lion’s share, saving $76,949, according to Citizens for Tax Justice. The tax deal cost of $424 billion in 2011 will be added to the national debt.
Enabled by Obama, the Republicans will use the increased debt to set up the ultimate foreclosures: Social Security and Medicare. “President Obama and the Republicans will say that the payroll tax holiday is all about stimulating the economy. But don’t be fooled,” said Nancy Altman, co-director of Social Security Works. “There are many better ways to stimulate the economy with that $120 billion the payroll tax holiday will cost, including simply extending the Making Work Pay Tax Credit … And the other, better forms of stimulus pose no threat to Social Security.”
The payroll tax holiday, which will likely be extended, not ended heading into the next election, poses a grave threat. Scrapping the cap on earnings subject to Social Security taxes – now just $106,800 – eliminates the future Social Security shortfall projected after 2036. Cutting the tax while leaving the cap is a gift to those who want to cut, privatize and destroy Social Security under the pretense of saving it.
Like the bait and switch mortgages still wreaking havoc, the tax deal sets up big losses to come.
Holly Sklar is the director of Business for Shared Prosperity (www.businessforsharedprosperity.org), which produced “The Business Case for Letting High-End Tax Cuts Expire.” Readers can write to her at [email protected]. An earlier version of this article appeared in The Hill.