Why the Obama Tax Deal Confirms the Republican Worldview

[somone]

http://www.huffingtonpost.com/robert-reich/post_1408_b_794177.html

Why the Obama Tax Deal Confirms the Republican Worldview
Robert Reich

Apart from its extraordinary cost and regressive tilt, the tax deal negotiated between the president and the Republicans has another fatal flaw. It confirms the Republican worldview.

Americans want to know what happened to the economy and how to fix it. At least Republicans have a story -- the same one they've been flogging for thirty years. The bad economy is big government's fault and the solution is to shrink government.

Here's the real story. For three decades, an increasing share of the benefits of economic growth have gone to the top 1 percent. Thirty years ago, the top got 9 percent of total income. Now they take in almost a quarter. Meanwhile, the earnings of the typical worker have barely budged. The vast middle class no longer has the purchasing power to keep the economy going. (The rich spend a much lower portion of their incomes.) The crisis was averted before now only because middle-class families found ways to keep spending more than they took in -- by women going into paid work, by working longer hours, and finally by using their homes as collateral to borrow. But when the housing bubble burst, the game was up...

... By agreeing to another round of massive tax cuts for the wealthy, the president confirms the Republican story. Cutting taxes on the rich while freezing discretionary spending (which he's also agreed to do) affirms that the underlying problem is big government, and the solution is to shrink government and expect the extra wealth at the top to trickle down to everyone else. Obama's new tax compromise is not only bad economics; it's also disastrous from the standpoint of educating the public about what has happened and what needs to happen in the future. It reinforces the Republican story and makes mincemeat out of the truthful one Democrats should be telling.

[earthside]

1. "We are all Reaganites, now."

The Obama-Bush-Boehner tax cut 'deal' confirms supply-side economics as the policy of this nation.

[Igel]

2. Can't agree.

The estimate of $140 billion to the wealthiest seems to me to be low. It's $700 b for 10 years, but it strikes me that inflation by itself would be make more of the tax cut fall in later years. (Yes, there's piddling inflation now, but now is less important than later; I cited what Bernanke said earlier this week to people back in 2009--the Fed's increasing the money in circulation and lead to "inflation" if the way banks use money leads to an overall decrease in the money supply, which is precisely what we had with the liquidity crunch in 2008 and continue to see with the revamped lending rules. When this passes, as it almost certainly will within 10 years, *then* the Fed will have its hands full reining in inflation, and I suspect they'll get it wrong.)

I've heard estimates of $900 b for this "deal"; I hope I'm mistaken. Which means that the middle class tax cuts, the payroll tax cut, the unemployment extensions and anything else pitched into the mix constitute 80% of the deal (I figure I'm limited to one significant figure, in case you want to quibble).

Most of this, given what Reich says, isn't for the wealthy; saying it's a tax cut for the wealthy understates things by 80%. It doesn't look motivated by anything that looks like a desire to shrink government. In fact, while everybody keeps pointing out 13 months unemployment vs 2 years tax cuts for the wealthy, it's unclear to me that the amount of tax cuts to the poorest isn't roughly the same as the amount to the wealthiest. In other words, it might actually not be unfair viewed not through the prism of time but that of $.

Just as most of my criticism of Obama is wordy, convoluted, fuzzy, and probably passes unnoticed, so my defense of Obama in this case is also wordy, convoluted, fuzzy, and would probably pass unnoticed. I feel like I'm reading a theological tract when I read such things: There's essential evil, and we must punish ourselves lest we are tempted by it, becoming corrupt, befouled, and tainted.

It's also worth pointing out that I mentioned a liquidity crunch. The wealthy spend a smaller portion of their income than do the non-wealthy; they spend a larger portion of their income on big-ticket manufactured goods, the kind that people like to say we need to produce more of, and historically, before the recession, accounted for a disproportionate (to their percentage of the population) of demand for these goods. They usually account for a bit more of the demand than their income, as a percentage of total income, would suggest because the lower-earning folk need their cash for food and necessities, not usually the kind of stuff that needs manufacturing or is manufactured in the US. Oops. (I.e., Reich's citing correct numbers but wants us to infer a falsehood from his true statements.) The additional money goes to help liquidity, money to be loaned out. The wealthy are holding their investment funds in more liquid forms that can't be loaned out (long-term) to the same extent as slightly less liquid funds. *This* is a problem, but isn't one worth mentioning.

[Fearless]

3. Trickle down economics.

[democracy1st]

4. I've never seen anything like this admin,keeps getting worse!