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IBEW helps build Busch Gardens' newest roller coaster.
IBEW helps build Busch Gardens' newest roller coaster.
Republicans are holding the middle class hostage to their demands on behalf of the richest 2 percent of Americans. There can be no excuse for giving in to their demands to extend tax cuts for the 2 percent; cut Social Security, Medicare and Medicaid benefits; tax workers’ health benefits; or sacrifice middle-class jobs. The labor movement is therefore grateful to President Obama and Senate Democrats for making clear the Bush tax cuts for the top 2 percent—families that make five times the median family income—must end.
The Republican position is that if the richest 2 percent of Americans cannot get their tax breaks, then middle-class Americans should get nothing. While President Obama and Democrats in Congress propose to extend tax cuts on income of less than $250,000 for all Americans, Republicans threaten to block extension of these middle-class tax cuts unless tax cuts on income greater than $250,000 also are extended. This is an indefensible position.
The Bush-era tax cuts were always meant to be temporary, and they are scheduled to expire at the end of this year. If Congress does absolutely nothing between now and the end of the year, the tax cuts will expire automatically. As a result, the U.S. national debt will be stabilized for years to come.
Despite their weak position, the hostage-takers have a list of additional ransom demands. Some have signaled they could accept the expiration of a portion of the Bush tax cuts for the richest 2 percent, but only if Democrats agree to cuts in Medicare, Social Security and Medicaid benefits. This is the height of hypocrisy. Republicans can hardly pretend these benefit cuts are necessary to reduce the deficit at the same time they are insisting on tax cuts for the richest 2 percent that would increase the U.S. deficit by nearly $1 trillion over 10 years. It is just wrong to insist that Medicare benefits must be cut so millionaires can be spared from the scheduled expiration of their temporary tax breaks.
On closer inspection, however, the hostage-takers are not even offering to give up a portion of the Bush-era tax cuts for the 2 percent. Republicans have made clear that if they agree to more tax revenue, it will have to come not from the expiration of Bush tax cuts for the richest 2 percent, but from “tax reform” that inevitably increases taxes on the middle class.
What these Republicans have in mind is “tax reform” that limits tax expenditures such as the tax exclusion for employer-provided health care. To generate enough tax revenue to spare the 2 percent, “tax reform” along these lines almost certainly would have to tax workers’ health care benefits. It is simply wrong to insist on taxing workers’ health benefits so millionaires can be spared from the scheduled expiration of their temporary tax breaks.
Republicans want us to think they can get away with this extortion because they have the power to throw the economy into a “double dip” recession. In other words, Republicans also are holding the U.S. economy hostage to their demands for the 2 percent. It is true that Republicans have the power to cause a recession by blocking extension of middle-class tax cuts, blocking extension of federal unemployment benefits, refusing to replace the payroll tax cut with the Make Work Pay tax credit, shutting down the federal government and manufacturing a political crisis by refusing to raise the debt ceiling. But the power of congressional Republicans to inflict damage on the U.S. economy and the middle class can hardly justify yielding to every demand of the 2 percent, because there is no limit to those demands.
The power of congressional Republicans to cause a “double dip” recession must not be confused with evidence that tax cuts for rich people actually work. On the contrary, the Bush presidency proved they do not. We should have learned from the disastrous Bush economy that tax cuts for rich people are a lousy way to create jobs. The 2001-2007 economic expansion was the weakest expansion since World War II in terms of job growth, wage growth, investment growth and GDP growth. Even before the Great Recession, the 2000s were on track to be the worst decade for job growth in 50 years.
There is a consensus among economists that income tax cuts for the wealthy are a relatively ineffective way to create jobs. Mark Zandi, a former economic adviser to Republican Sen. John McCain’s presidential campaign, estimates income tax cuts have less “bang for the buck” than most other economic stimulus proposals. Economic output would increase only $0.35 for every $1 spent on making all the Bush tax cuts permanent—and surely even less for every $1 spent on extending tax cuts on income over $250,000. By contrast, economic output would increase by $1.44 for every $1 invested in infrastructure.
The Bush-era tax cuts not only failed to create jobs, but they also were horribly expensive. They exploded the deficit and were a primary reason why budget surpluses under President Clinton turned into budget deficits under President Bush. It is hypocritical for people who claim to be deficit hawks to insist on throwing away $1 trillion on tax cuts that don’t work, for millionaires who don’t need them.
There is a double standard at work here. When it comes to throwing money at millionaires, Republicans seem to think America has unlimited resources. But when it comes to fixing our economy and putting America back to work by investing in our future, these same Republicans would have us believe America is broke.
The refusal of congressional Republicans to pass President Obama’s jobs proposals—or to do much of anything to reduce unemployment—demands some explanation. Republicans in Congress seem to think making unemployment worse will help them defeat President Obama in the next election. In fact, many Republicans announced publicly from the very first days of the Obama presidency that they wanted the President to fail. Unfortunately, their obsession with inflicting political damage on President Obama has ended up inflicting damage on the U.S. economy and the middle class.
There also is a double standard when it comes to tax cuts for lower-income people. While Senate Republicans would extend the Bush-era tax cuts for the richest 2 percent of Americans, they would discontinue improvements to the Child Tax Credit and the Earned Income Tax Credit that also expire at the end of this year. Senate Republicans would thus extend tax breaks for 2.7 million high earners but allow them to expire for 13 million working families with 26 million children. Senate Republicans do not have a consistent position on the expiration of tax cuts for rich people and the rest of us.
The issue is whether we stand for the 2 percent or for the rest of America. Our country simply cannot afford to waste $1 trillion on yet another round of tax cuts for rich people. If we want to fix what is wrong with our economy, we have to stop catering to the demands of the richest 2 percent of Americans. We have to prioritize our needs, and right now America’s top three needs are jobs, jobs and jobs.
The first year of across-the-board sequestration cuts that were enacted as part of the August 2011 debt ceiling deal should be canceled—and not replaced with other spending cuts. If first-year sequestration cuts totaling $109 billion must be replaced, they should be replaced with tax revenue, such as a tiny tax on Wall Street speculation that would help the U.S. economy by discouraging economically harmful behavior. However, the need to cancel the first year of sequestration cuts in no way justifies giving in to the demands of the 2 percent, since Republicans and Democrats have equal incentive to cancel them.
The remaining nine years of sequestration cuts also are unnecessary, and could be avoided altogether by ending tax incentives for outsourcing by taxing overseas corporate income the same as domestic income; taxing investment income the same as labor income; and allowing estate and gift tax cuts to expire on schedule at the end of this year.
We call on Congress to stand with the 98 percent to fix our economy and put America back to work; to extend the middle-class tax cuts on income under $250,000; to restore tax fairness more generally; and to oppose any “Grand Bargain” that cuts Social Security, Medicare or Medicaid benefits.
