Such a Deal

The Fortnightly Rant for December 17, 2010, from The New Hampshire Gazette, Volume 255, No. 6, posted on Saturday, January 15, 2011.

Recently President Obama struck a tentative deal with leading Republicans to resolve, for now, the contentious issues of tax cuts and unemployment benefits. At mid-week, the final depravities were still being negotiated.

In broad terms, it appears that the Republicans will get most of what they wanted, namely, two years worth of tax cuts for everybody, according to their proper station in life, of course: big tax cuts for those with big incomes, and small tax cuts for those with small incomes.

Republicans also stand to get a generous $5 million exemption on the estate tax, along with a relatively low 35 percent tax rate for larger estates. And make no mistake — it will largely be Republicans who get the benefit.

The Democrats did not come away empty-handed. They will get a 13-month extension of unemployment benefits and two percent shaved off the payroll tax rate paid by employees, if the Democrats are not forced to bargain those away, too.

This close to our deadline it would be fruitless to try to track all the shifting details, such as what shade of lipstick the pig will wear. We’ll settle for summing up a few of the fundamental assumptions on which the deal is based and which the more profitable news outlets seem to find boring.

Republicans claim that extending the Bush tax cuts for the wealthy is essential. Doing so, they say, will lead to job creation.

If, in fact, the Bush tax cuts had created jobs, that argument might be credible. The facts say otherwise. The rate of job growth between 2001 and 2007 was less than half what it had been during previous periods of economic expansion. What’s more, during that period real wages and salaries grew at less than half the rate of earlier economic expansions. [1]

Republicans claim that federal taxes are spiraling out of control, consuming a huge and ever-increasing percentage of the Gross Domestic Product (GDP). If not checked immediately, this will have a catastrophic effect on our bond rating.

Again, the facts say otherwise. Income and corporate taxes are down and going lower. As a percentage of GDP, federal taxes have not been this low for 60 years. [2]

Republicans claim that the power to create jobs resides with the wealthy and can only be activated by properly stimulating their acquisitive instincts with low income and corporate tax rates. They believe that power is being negated by an ongoing and essentially Marxist effort to redistribute wealth downwards — orchestrated, rather curiously, by people who have no demonstrable political power.

Yet again, the facts say otherwise. As already noted, income and corporate taxes, which are paid by higher-income earners, are low and still dropping. It is the payroll taxes paid by lower income earners that are high and rising. A fundamental redistribution of wealth is going on and has been for some thirty years. The GOP is wrong about the direction in which the wealth has been flowing. The overall burden of paying federal taxes has been shifting from the wealthy to the middle and lower classes.

As a Republican Senator and a member of the President’s National Commission on Fiscal Responsibility and Reform, better and perhaps more accurately known as the Catfood Commission, Judd Gregg is a logical person to ask about the pending tax cut deal. On December 8th, New Hampshire Public Radio (NHPR) quoted Gregg as saying he was “leaning in favor of it,” despite the bills being too costly “because its extension of unemployment benefits will increase the deficit.”

Gregg is right — the extended benefits will raise the deficit. They will also stimulate the economy, but he didn’t mention that. Nor did he mention that the tax cuts for the wealthy, which will not stimulate the economy, will cost ten times as much as the extended benefits.

As for the payroll tax cut, if Gregg offered an opinion, NHPR did not air it. We haven’t heard any Republican say much of anything about it. The time will come, though, when we will. Today’s bargaining chip will be tomorrow’s club — the lost revenue being another reason why Social Security must be phased out, scaled back, privatized, or somehow outsourced to China.

There are two basic reasons, so far as we can tell, why the Democrats keep getting their clocks cleaned by the Republicans on these issues.

The first reason was revealed on December 10th, in a National Public Radio interview with President Obama. Discussing his hope for more comprehensive tax reform during the next two years, he referred to the reforms passed in 1986. They happened, he said, when “people of good will came together.”

You don’t go to the negotiating table with the adversaries you want, you go to the negotiating table with the adversaries you have. Despite mountains of evidence to the contrary, President Obama behaves as if he’s negotiating with people of good will.

The second reason has to do with how the media report the news. It takes effort to assess whether a claim is true or false. If a claim is false, there’s risk involved in saying so. Republicans know the media would rather don the figleaf of objectivity than go to the trouble and take the risk of making judgments.

Politicians of less than good will have been taking advantage of that loophole for generations. Today’s crop of Republicans have perfected the art. And can we really blame them? If the press will not limit them to telling the truth, why would they limit themselves?

1 — Mark Thoma, “CBS Moneywatch,” November 30th.
2 — Felix Salmon,, December 6th.

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