13 December 2010

The tax cut compromise

So today, the tax cut compromise looks to be on track for a vote later this week.

I'll never quite understand why conservatives are so insistent on cutting taxes for such an incredible minority of wealthy Americans. They insist that these very few people are the ones that create jobs, and that tax increases will hinder that. But clearly the tax breaks haven't helped them create jobs for the last decade, and higher taxes didn't hamper them when the country experience record growth during the Clinton administration. Even if the tax cuts expired, the rates would be lower than they were during the Reagan administration. I really believe that the biggest obstacle facing our country is debt. We simply have way too much of it, and letting the upper-class tax cuts expire would have a much better long-term benefit. The upper-class tax cuts, by the way, will be financed entirely by adding to the national debt.

So, some dems are predictably pissed that Obama didn't stick to his "principles" and stubbornly insist that it's his way or the highway. But I think what he did was turn a Republican political stunt into ammo he can use on re-election day. He can now say that he cut taxes for "all Americans", that he worked with the Republican party, that he was willing to compromise and get things done. And that's why I like Obama. It's easy to subscribe to some kind of idealism, where every campaign promise bears out exactly as hoped. But that's a fantasy. The health care bill could have been tons better by having a public option or, better still, moving to a single-payer system. But even with the compromises, it was a big accomplishment. Obama is smart enough to make compromises when things need to get done. Obama preserved the middle-class tax cuts which are equally worthless, but at least they're relatively inexpensive (all tax cuts combined are less than those that will be given to people making over 250k) and make for nice campaign rhetoric.

When will we learn that tax cuts don't actually stimulate the economy? Historically, the evidence for it has been dubious at best. The economy needs long-term saving, investing and fiscal prudence – and that means getting rid of this $14 trillion debt.

Incidentally, I saw a special about Brazil on 60 minutes over the weekend. There was great disparity between the upper and lower classes, so you know what the President did? He taxed the rich, and paid poor families a $150 stipend on the condition that they sent their children to school. The result? A new generation of better educated kids, and thousand of people went from poverty to the lower middle class, which brought newfound economic growth. But would we ever do something like that here? Nah, that's "socialism".

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