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PORTSIDE  December 2010, Week 2

PORTSIDE December 2010, Week 2

Subject:

The Tax Cut Deal - Responses on the Left - Three Views

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Date:

Thu, 9 Dec 2010 22:55:41 -0500

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The Tax Cut Deal - Responses on the Left - Three Views

[Moderator's Note: The following pieces were written prior
to today's action by House Democrats in refusing to support
the Tax Cut Deal, arranged by PResident Obama and
Congressional Republicans.]

1. Obama Threatens Social Security
   (William Greider - The Nation - December 9)
2. Obama's a Sell-Out on Taxes? Not So Fast 
   (Michael Meeropol - The Nation - December 8)
3. re: "The Positives and the Negatives - What Comes Next?"
   (Ethan Young - Brecht Forum - Economy Watch - Dec. 9)

==========

Obama Threatens Social Security

by William Greider

The Nation

December 9, 2010   

http://www.thenation.com/article/157022/obama-threatens-social-security

The most dangerous feature in the president's proposed
compromise on taxes is not the $700 billion tax cut for
billionaires.  It is the Trojan horse provision that
threatens to destroy Social Security by undermining the
longterm solvency of the social insurance system.

Barack Obama has proposed to knock two percent off the FICA
deductions every worker regularly contributes to the Social
Security Trust Fund, the money set aside for their future
retirement benefits.  Obama's one-year tax relief sounds
attractive and workers can surely use the money, but the
consequences could prove deadly for the federal government's
most popular program.

Doubtless, that is not Obama's intention - he regularly
calls for strengthening Social Security - but the president
has bought into a Republican proposition favored by
conservatives who would love to do away with this New Deal
creation.  They know this will deprive the trust fund of
$120 billion in annual revenue and that shortfall will
sooner or later have to be made up to sustain future
benefits.  Can you imagine Congress finding $120 billion for
Social Security amid all the other fiscal pressures?

For that matter, can you imagine Congress turning off this
modest tax break for working people once it's in place?  If
you believe that, you probably believe Obama is going to
fight to recover the $700 billion tax giveaway to
billionaires while he is in the midst of his reelection
campaign.

Nancy Altman, a 30-year policy expert and co-chair of Social
Security Works, fears this perverse policy turn "will lead
inexorably to killing Social Security."  The right-wing
agitators  will renew their claim that Social Security is
unsound and should be privatized, only now their case will
have a little substance.   Democrats in Congress should
discard Obama's  proposal before it damages the crown jewel
of the federal government.

Don't count on Democrats for doing anything that principled.
"Today's Democrats fail to understand the program," Altman
said, "and so are not only blind to subtle assaults against
it, but seem to conspire in those assaults.  With the
Republicans and the Democratic president, perhaps
unwittingly, conspiring to destroy Social Security, the
American people don't stand a chance."

==========

Obama's a Sell-Out on Taxes? Not So Fast

by Michael Meeropol 

The Nation

December 8, 2010

http://www.thenation.com/article/156953/obamas-sell-out-taxes-not-so-fast

Now that President Obama reached a deal with Republicans to
extend all of the Bush tax cuts for two years and
significantly lower the estate tax, I'm finding myself in a
strange position for a progressive economist. I'm pleasantly
surprised at how much he (and therefore the people of this
country) has gained in exchange for what many were calling
an abject surrender. After all, he got Republicans to agree
to an extension of unemployment insurance, a payroll tax
holiday and (amazingly) an expansion of the earned income
tax credit (EITC). Remember what that program does: if you
are a low-income worker and you don't make enough to pay
income tax, you actually get a check from the government.
The right wing has consistently attacked the EITC as a
welfare entitlement and yet there they were, agreeing to its
expansion.

It is certainly true that on the grounds of fairness in our
tax policy and good economics, the part of the deal that
extends the Bush income tax cuts for the top 2 percent of
the population, and cuts the estate tax permanently, is just
plain bad. Every dollar spent refraining from raising income
taxes to 39.6 percent from 35 percent for those making over
$250,000 a year as well as the unconscionable gift to
millionaires and billionaires with the cut in the estate
tax, could be much better spent helping states avoid deep
spending and service cuts.

However, Republicans had made clear that they were willing
to let all tax cuts expire and refuse to do anything
meaningful to help the unemployed unless millionaires got an
extension of the Bush tax cuts.  So the choice for the
president was to let all the tax cuts expire and fail to get
unemployment benefits extended or to do something that would
preserve some of what most economists believe the economy
needs: that is, extending unemployment benefits for the next
thirteen months, the cut in payroll taxes and expansion of
the earned income tax credit.

Of the total $900 billion cost of the plan, only $120
billion will be spent on extending the Bush tax cuts for the
wealthiest 2 percent of taxpayers and on reducing the estate
tax. The rest of the plan will be significantly stimulative.
According to the first round of back-of-the-envelope
calculations, within the next year it should cut
unemployment anywhere from one-half to a full percentage
point [1]. The difference between 8.5 percent and 7.5
percent unemployment is not enough, but it's not
insignificant.

Consider the alternative: letting the Bush tax cuts expire
and turning the next session of Congress into a battle for
all future stimulus spending against a much larger
Republican group in the Senate and a strong Republican
majority in the House. They would have held all possible
assistance to the unemployed and the working people in
general hostage to budget cuts elsewhere. Making that kind
of deal would have of course reduced the fiscal impact of
the increased spending and done something else that would
have been worse. It would have lent support for the current
austerity nonsense emanating from, for example, the deficit
reduction commission. The fact that Obama did not have to
offer budget cuts in order to fund this $900 billion package
is an extremely positive thing. As every decent economist
since John Maynard Keynes knows and as public opinion also
makes clear, running deficits to create jobs in the middle
of a recession (or a sluggish recovery, which in terms of
human pain and suffering is the same thing) is a better
policy than deficit reduction all the time. With this
agreement, the President, Democrats and Republicans have
tacitly agreed with that argument - revealing that deficit
hawks use the deficit as a stalking horse for attacking
spending they don't like. This is no small thing, because in
terms of economic policy, the most serious obstacle to the
pursuit of progressive actions now and into the future is
the argument that deficit spending today means disaster
tomorrow.

I also think, however distasteful it is on moral grounds,
extending the Bush tax cuts does not do much harm. Even
after Clinton persuaded Congress to raise taxes on the
highest income earners and well before the estate tax cuts
passed in 2001, the super-rich were continuing to increase
their share of the nation's income and wealth. Long term
trends in inequality have more to do with the decline of
union membership, financial deregulation and increased trade
in labor intensive goods, while increasing protectionism for
high salaried professionals (doctors, accountants,
professors) and the fraying of the social safety net. Tax
policy plays some role, but it is nowhere near the whole
story.

If we on the left want Obama and the Democrats to strongly
back a progressive agenda, we have to make them do it. If
there had been a strong progressive movement such as existed
in the 1930s demanding universal healthcare, pro-union
policies, increases in the minimum wage, a crash program to
create a green infrastructure for energy and transportation
and, yes, a progressive tax policy, we wouldn't need to be
having this discussion today. Instead of complaining about
Obama we ought to be working our tails off to build a real
movement that will ultimately force him and a recalcitrant
Congress to do the right thing.

==========

In 'The Positives and the Negatives - What Comes Next?' the
Center on Budget and Policy Priorities make the case for a
Democratic vote in favor of the Obama budget compromise.
They see an optimistic outcome based on two points.

#1: The Democratic vote will be able to come back stronger
in the next election because "In 2012, the economy should be
stronger than it is today."

Says who? Not the economists who predicted the recession in
2008.

#2: The consequences of budget cuts will move the public
mood against tax breaks for the ultra rich: "The country
will not likely believe that millionaires should continue to
get tax cuts averaging over $100,000 a year and multi-
million-dollar estates should continue to receive $1 million
average tax cuts while programs ranging from education to
environmental policies to Medicare and possibly Social
Security are on the cutting block."

There's the problem. CBPP assumes that 'the country'
currently favors those tax breaks, presumably because 'it'
accepts the premise that it's more important for the rich to
be free to hold their wealth untouched than to make it
possible for the government to intervene in the economic
crisis on behalf of everyone else. And that's why the tax
breaks are happening.

If that's true, it may happen that the tide of opinion will
turn, although it's not exactly 'likely' if the economy DOES
get stronger. What's more, if most unprivileged people
identify with the privileged out of hopes of getting rich,
in the face of the most outrageous income gap in history,
they're in pretty deep denial.

But is it true? Poll stats vary. Many show that the general
public has no problem with raising taxes on the rich,
increasing spending on social services, and limiting
giveaways to the corporate and financial sector. This
contradicts the identification with privilege, but that
theme is pushed constantly by the GOP, while social services
get only muted advocacy from the Democrats.

And if it's not true that the majority favors tax breaks for
the rich, then the real question is, does it even matter
what 'the country' thinks? Is the crisis not just economic,
but political -- a crisis of democracy as we've known it
collapsing around us?

If the levers of power are out of reach, there's a lot more
at stake than who's on top in deliberative chambers, however
important that is. Economists - and activists - have to face
the need for a reassertion of democracy, which will take
long hard years of organizing and sharing of political
resources.

Ethan Young
brechtforum.org/economywatch

==========

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