Hello kossacks. I have not written a diary in a long time and I will now add my take and urge a call to action to Congress in order to oppose this capitulation. Yes, that’s what it really is, definitively. Don’t believe me? Let’s look at the definition of compromise:
Definition of COMPROMISE
1 a : settlement of differences by arbitration or by consent reached by mutual concessions
Mutual concessions did not happen here. In exchange for allowing those rates to continue for two years, Republicans agreed to extend unemployment insurance for an additional 13 months. Is that mutual? Absolutely not. Is it really a compromise? Absolutely not. You know why? Compromise is a 2 way street.
But what if one lane is blocked about halfway? That’s what we have here so welcome to Capitulation Road.
Jim Demint has said he will drive the filibuster-mobile into our lane and cause a head on collision, anyway. Yet Obama was so sure of his word and Boehner's over this deal to let them drive for two more years even though in the past he has expressed worry over their driving skills and even said he would refuse to give the keys back again and yet here we are. I was hoping that wouldn't be the case, at least here, but I guess that changed too.
I would now like to talk about some of the qualifiers that supposedly make this a great deal for a second when the only somewhat effective thing in theory here is the employee-side payroll tax cut of 2% out of the 6.2% that employees pay for 2011. I would say though that this proposal is severely flawed compared to the one James Galbraith proposed in 2008 which would make up the temporary shortfall with the same type of a estate tax Obama surrendered in this deal via estates up to $5 million will be exempt and 35% estate tax after that, which, as others have noted is lower than the lowest rate under the Bush estate tax in his last fiscal year.
Republicans get that restored at now the lowest rate in history. Note how supposed tax law expert Lawrence O’Donnell takes issue with this as estate taxes turned to 0% for 2010 which is technically true, yet what he doesn’t realize being such an "expert" was that it was going to sunset anyway without this capitulation in effective January 1, 2011. It was also a part of Bush’s 2001 tax cuts which also passed via reconciliation which O’Donnell is confused about and proven wrong like that loophole and the Byrd rule violation which is actually why the Bush tax cuts have sunsetted. So I wouldn’t use his logic and also we know he’s too full of himself.
So it is Merry Christmas Republicans? One cannot pretend that this is a progressive idea just because there is a payroll tax holiday considering the circumstances. It doesn’t make up for the collateral damage politically or the lack of spending here. Those true spending measures with proper multipliers we desperately need are off the table.
Nancy Altman co-director of Social Security Works, lays out the danger of this flawed payroll tax holiday with no offsets like Galbraith’s original estate tax idea in correlation, which IMO is most dangerous politically as it hinders our ability to deficit spend on what matters and it should be stimulus with the best multipliers to restore demand in order to pay down the debt at a better time when revenue is raised from the jobs that will only come from demand. There is no good reason to blow up the deficit in this fashion with little or no reward. This will give more ammo already given by a Deficit commission in a jobs crisis gunning for SS with acolytes of Peter Peterson and this is his wet dream, whether they have the votes or not. It doesn’t bode well for the future of SS which should be expanded as a public insurance and pension program and not treated as a welfare program with any means testing.
Even if there was no danger and the payroll tax holiday was set up right, as slinkerwink and others have noted referencing Paul Krugman, the payroll tax holiday and unemployment are only for a year and all evidence points that it will stall out in 2012 and elections depend on the rate of change of unemployment, not its level. The road ends before 2012 street and again, that's not a compromise. That is a capitulation.
Though the advanced Earned Income Tax Credit, the child tax credit, AMT patch, and the tuition tax credit will be added and bonus depreciation allowing businesses to write off at 100% the cost of new investments and the R&D tax credit; here’s the problem; business are already sitting on about 2 trillion in reserves and so that begs the question as to why they need these incentives to invest this money if they are going to buy equipment and hire people and why this is not going on already?
We know it’s not the phantom specter of "UNCERTAINTY!" the RW is screaming about, but if we keep placating them the public might start to believe this nonsense. We know it’s not the deficit, because markets are not calling for deficit reduction; now or later and you can see it in the spreads.
It’s the demand, stupid.
Business won’t hire or truly buy new equipment unless the government can fill demand long enough until private demand is restored and then and only then will we see jobs and lower unemployment. In a deflationary environment, they are going to go for the short term gain and fall into the same patterns they have been in so these proposals are much ado about not much in this environment.
This brings me to my next point which is that counting all these proposals up which is 900 billion dollars added to the debt, it gets you to about $300 billion dollars in 2011-2012 stimulus unfortunately focused about 80% on the tax side of things. Guess what? That’s not going to amount to much when we need to spend, spend, spend and behind that no nonsense word ‘spend,’ we need to multiply, multiply, multiply; this is how you get that demand I was talking about and at best these measures are anti-contractionary. It’s also the multiplier, stupid.
Again, none of this is paid for either which is a political problem more than anything else, like when too many Democrats were tricked into voting for the two wars, one illegal, at a cost of over 3 trillion ultimately. And once it was time to go for a big stimulus with decent multipliers including unemployment insurance, Republicans said, "We can’t afford that! Some A-hole ran up the debt!" Never mind that it was them they will use their debt they created for the most part to call this president and Democrats out for debt they didn’t raise. By not standing up to them or really standing up for what we are supposed to believe in as a party, we inadvertently legitimize their claims and make it harder, much harder to extend unemployment once one year is up. All of this while we deal with two years of deficit busting trickle down tax cuts and did I mention the 99ers get nothing?
Bottom line: we must get active on this issue and while you are at it, quiz your Congressman or Senator on whether they know the true impact of regressive top tier bracket tax cuts and all the effects of continuing them in bad economic periods. For instance, if one follows history, we also know that tax cuts for the rich are not only not stimulating, not only does they not truly create enough jobs or revenue, they fuel financial bubbles, historically.
Extending these cuts for even two more years could very well fuel the next financial crisis as the massive foreclosure fraud crisis is staring in the face as we speak as we deal with fraudulent notes and investments on those notes endangering banks that might go into insolvency once again. There’s more than one reason to oppose this extension, even ones no one is talking about.
I agree with Bernie Sanders that this deal is unacceptable and you should too, so I am asking you to please call your Congressman and your Senator and tell them to oppose this capitulation. If Republicans won’t extend middle class tax cuts, then let them all expire and let the American people see who just raised taxes on the middle class.
As demand siders we should all demand that our Democratic Representatives side with us and fight.
Call your Democratic Senators and Representatives with and reference anything in this diary.