by Linda Beale
crossposted with Ataxingmatter
As we near the fall elections amid a “tea party” surge of anti-government (and hence anti-tax) sentiment, I cannot help but worry about my country. The tea party activists are apparently primarily decently educated, middle-class citizens. They have supported extremist candidates in a number of states, and they have evidenced some worrisome tendencies that smack of racism or at least ad hominem attacks irrelevant to questions of good governance (questioning Obama’s faith, which should be irrelevant to national office; his birth certificate, which demonstrates their own credulity; his patriotism, which smacks of smug arrogance mingled with racism and greed; his economics, calling him a socialist for doing much less than we have traditionally deemed appropriate to help the vulnerable in this country). It is that last thing–the tea partiers’ entrenched distaste for community spiritedness, helping the vulnerable, and using socio-economic tools to ensure a more just and egalitarian society that is the most disturbing. It is as though the decades of Reaganomics have inured many Americans to comprehension of their fellow Americans’ suffering, and have created a wall of isolation based on greed and misunderstanding of how government benefits the wealthy that leads middle-class people to vote against their own interest in support of the continued hegemony of the rich.
Obama and the Democrats, of course, are not immune to suasion in the face of potential election losses. So as the GOP party of “no” continues its push to provide tax cuts for the wealthy or bust, and the tea partiers continue their push to paint all of the effort that has been necessary to combat the terrible mess that the Bush regime left the country in as Obama’s problem rather than a predictable result of the lousy economic policies followed by the GOP “believers” in market fundamentalism and greed-is-good philosophy, it is not such a surprise that the Democrats are adopting GOP-favored tax policies that benefit big corporations and the wealthy to the detriment of the fisc.
Case in point– Obama has come out for an expensing deduction for big corporations. This is essentially a huge multi-billion tax write-off, even if temporary. It would cost about $200 billion upfront, though after taking otherwise allowable depreciation into account, there’d be a net cost of $30 billion (plus the fact of acceleration of losses to the fisc). See Jackie Calmes, Obama to Propose Tax Write-Off for Business, NY Times, Sept 6, 2010.
The problems with expensing are multiple. Investments are made that would have been made anyway, but the government acts as a partner in the cost without getting any benefit from the partnership. INvestments are made that are unnecessary and do nothing to increase hiring, since the investments are merely an acceleration of investments that would be made in the future. And once a temporary provision is in place–even if the REAL intent was that it be a temporary stimulus–there will be inordinate lobbying and pressure to make it permanent. That will be especially the case for an expensing program, since it has long been one of the goals of right-wing economic theorists arguing for low corporate taxes and for the notion that capital should be favored. (Of course, it is especially the case that gimmicks like the GOP sunsetting provisions for the Bush-era tax laws create long-term problems, since in that case it was acknowledged by the creators of the provisions that they wanted them to be permanent but were enacting them with a sunset to limit the perception of deficit creation though not the reality of it.)
Meanwhile, Peter Orszag (former Obama White House Management and Budget Director) has an idea for compromise on the GOP “keep all the Bush tax cuts forever” and DEM “let the tax rates increase on the very wealthy but keep the cuts for everybody else” battle over whether or not to enact new tax cuts given the end of the temporary Bush provisions on December 31, 2010. See Orszag, One Nation, Two Deficits, NY Times, Sept. 6, 2010. Orszag’s idea is to pass a new temporary bill sunsetting the laws in 2012, and then don’t pass any more tax cuts–let them die altogether. As a compromise, it has something going for it, in that the temporary enactment of new cuts would act (a little) as economic stimulus and the permanent end of all of the tax cuts wipes the slate clean of a messy set of tax changes that never made any sense in the first place. As stimulus, it is not as good as spending federal money on needed public and human capital projects, but it is much better than giving more permanent tax breaks to big business and the wealthy.
Of course, the problem with this is similar to the problem with the proposed temporary expensing rule–the GOP will always fight to make the temporary tax cut into a permanent one, and will always cast their side as against a tax increase in spite of the fact that the law ends the break at a specific time, and so they are actually arguing for deficit increases to pay for big tax cuts to the wealthy and big corporations. If the Dems lose Congressional seats in the fall elections, the GOP would be even more likely to push through more deficit-increasing tax cuts, while still arguing against deficits to justify privatization or cutbacks in Social Security and Medicare. Their hypocritical inconsistency on this hasn’t bothered them yet, so no reason to expect a change in the future.