12 December 2010    5 Comments
Killing the Middle Class by a Thousand Tax Cuts

Well, this week our fearless leader and commander-in-bending-over-backwards revealed this little gem: we are going to extend the Bush tax cuts.  Let’s just say that one more time: the Bush tax cuts, just in case you thought these might be a good idea.  For a moment, I am going to try to ignore the weak effort of the Democratic leadership, which still runs the Congress by the way, and cut straight to the point as to why this is a bad idea.

President Obama keeps talking about job-creation when supporting this bill, though this emphasis on growth is misplaced.  Overall growth is not as important as the type of growth.  Consider this: if a tax cut is given to the wealthiest Americans, what kind of growth are we going to have?  Higher sales in luxury goods?  A bigger yacht-building industry?  More first-class seats on airlines?  This tax cut is just going to further shift the American economy towards service professions for the wealthy.  So great, we give a tax cut to the wealthy so that we can work for them.  I think I have a more direct route.  What we really should be developing are industries that millions of people can access—that is where you get the greatest bang for the buck, the greatest multiplier effect.

Even further, the wealthy are less likely to spend their money than middle income earners.  So what will they do then with the windfall tax break?  Well, they’ll invest it of course.  They’ll invest it of course.  They’ll invest it in technology stocks and in the housing industry, and this will make our economy will boom again, right?  Well, I think I know this story already.  There is simply not enough demand to soak up more investment in the U.S., because everybody’s credit was blown during the last investment party.  So where is the money going to go?  It’ll go into luxury goods industries because the wealthy are the only people buying right now, and it will go abroad to places like China, which actually have positive growth rates.  So the tax break will actually send investment money overseas so that American jobs can follow.

The bottom line is that the Bush tax cut is just another shove towards a radically unequal American society, and this shift in the structure of society is far more important than short-term growth.  This type of tax policy has already caused a fundamental shift in the makeup of American society, and if we are dumb enough to continue taking these gambits (we are pretty dumb), it will split American society right down the middle.

Consider what American society used to look like 40 years ago.  In the 1960s, we actually had a middle class that received a good piece of the economic pie.  Fast forward to 2007, and all of a sudden the middle class has become poorer.  And the only people any wealthier for it are the richest income earners.

But perhaps looking at things from 1967 gives a bit of a skewed picture.  Let’s rewind instead to the 1980s.  Here’s how things have changed since then:

Ah, yes, back in the good old golden 1980s, the middle class had likewise already been decimated.  So no change there.  The only thing that has changed since then, is that we have squeezed more of the pie out of the hands of EVERYBODY EXCEPT THE WEALTHY.  Ah sweet capitalism, take from the poor and give to the rich, what a lovely life of liberty.

The sad thing is, the more skewed this picture becomes, the more money the government rakes in taxes, because the wealthy pay a higher rate than the middle class, even after the cuts.  So the richer the rich become, the richer the government becomes.  Since the wealthy are also the biggest campaign donors, why not help them out then?  Forget the middle class, because quite frankly, they can’t get their act together to vote their own interest, and they don’t have much money anyway (and with tax policies like this, things will stay that way).  They’re too busy searching for Obama’s “real” birth certificate to notice that they are being swindled.  So maybe the meek uneducated middle class deserves what is coming to them.

But one last question remains: why would Congress think they can get away with such a one-sided deal?  (Shout-out to Bernie Sanders.)  Well, it all comes down to that good old-fashioned American value: greed.  The tax cuts may give the biggest break to the wealthy, but they give a little bit to everybody.  So perhaps the middle class is just so conditioned to struggling, that they’re only too happy to get what’s offered them.  Throw a dog a bone and he won’t bark, even though you’ve already eaten the meat.  Well, enjoy your bone.  MEYN2DJD66QY

(5) Readers Comments

  1. So, what my question would be is, what is the alternative here? Couldn’t agree with you more that the rich deserve to pay more, but I think there are a few important things you miss here

    This compromise included middle-class tax cuts, unemployment benefits, renewable energy grants, and an extension of the Estate Tax that just expired. Without this deal in place, the Republicans have the numbers to block any sort of deal.

    Why go after the “absolute limp-dicked effort” of Democrats on this and not Republicans? It’s because of the Republicans that this gap has expanded, not the Democrats, who are forced to meet them in the middle because of the way the system works. You need 60 votes to do ANYTHING in the Senate. If you’re angry, why not take on the filibuster? Or Republicans?

    I don’t doubt that Republicans are willing to drag this out as far as they can, and would block a deal that didn’t include upper tax bracket tax cut extension. The rich, who they represent, wouldn’t feel the hit, but you can be sure that the unemployed and middle class families would, along with the important companies that rely on the renewable energy grants. If nothing gets extended, the whole country loses, the economy goes in the shitter, and we will be guaranteed to have a Republican President, which will make you yearn for the days of President Obama, no matter your thoughts on his backbone.

    • Thanks, there are a lot of good points in this. I have made a dig at Obama here because he has not put up a fight. He is swinging with the political winds and formulating policy based on political pressure, rather than principle. This is poor bargaining, and this time he bargained away a core policy. Rather than hide at the mere specter of a filibuster, Democrats should call the Republicans’ bluff. I don’t understand why we don’t just let them filibuster unemployment benefits over and over again. This is a political goldmine. The Democratic party cannot always play the part of the responsible parent. The only way to force the Republican party to take on legislative responsibility is to be less responsible and match their pugnacity.

      As to the “otherwise the economy goes in the shitter” comment–I agree there are some good policies in this bill that are tough to lose. But the inequality in income distribution in this country is so severe that it is more important than growth. We don’t need to shrink taxes on the upper brackets, we actually need to move the other way and add new brackets to account for the radical changes in the makeup of American society. So, once again, we are ignoring the big picture issues about the structure of our economy and pursuing short-sighted growth.

  2. I love this post! You have a great blog here!

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  4. How can i donate to support Japan?
    I am so unhappy about what happened in Japan with the earthquake plus tsunami and I really need to assist all of them by donation.

    Does any individual find out an online site or anything which you could donate to help Japan?

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