By Bill McCabe
Election results are in (mostly), the American people have spoken, and life goes on. Congress has resumed its business and must address some urgent and serious issues that had been put off because of the elections — including the arms control treaty with Russia, an extension of unemployment benefits, and, of course, a decision on what to do about the temporary Bush era tax cuts, which are due to expire on January 1.
Whatever Congress decides regarding the tax cuts will have major repercussions not only on tax payers right now, but also on the national deficit. When instituted in 2001 and 2003, Congress (Republican led at the time) and President Bush made those tax cuts “temporary” because they were completely unfunded in the national budget, resulting in a huge hit to the budget surplus that existed when President Clinton left office and the beginning of our current national debt, which now amounts to $14 trillion.
Combined with the unfunded war in Iraq and the economic calamity caused by the unregulated chaos and greed of Wall Street investment bankers, the “temporary tax cuts” of George W. Bush are the prime causes of the increase to the national debt. Social Security, Medicare, and Health Insurance Reform have not caused the problem requiring us to borrow money from China to decrease the share that the top 2% of wage earners pay in taxes. The Social Security and Medicare programs are currently funded sufficiently, and adjustments to those programs will insure their effectiveness in the future, as has happened in the past. The Social Security System’s payments account for about 5% of the economy, and it is fiscally sound until 2037. Major aspects of health insurance reform go into effect in 2011 and will, according to the non-partisan Congressional Budget Office, actually “produce a net reduction in federal deficits of $143 billion” between 2010 and 2019.
What Congress must do this month is to find common ground. Everyone already agrees to making the tax cuts permanent for the middle class, for individuals with adjusted income up to $200,000 and couples filing jointly with adjusted income up to $250,000. The costs of this legislation can be absorbed in the federal budget without adding to the national debt.
The $700 billion cost over ten years to make permanent the tax cuts presently enjoyed by the top 2% of wage earners is definitely another story. To pay for the extension of tax cuts for the rich, Congress would have to continue their “temporary status” (adding $700 billion to the national debt) or make serious cuts in federal programs. A few Republicans in Congress, some newly elected and some re-elected, actually want to protect advantages of millionaires and billionaires by cutting or even eliminating Social Security and Medicare and want to repeal health insurance reform before its major parts are implemented.
Republicans (and, yes, a few Democrats) claim that the tax cuts for the rich have to be permanent to benefit small businesses. The fact is that 98% of small business owners earn less than $250,000 in adjusted income. Those individuals and businesses in the top tax brackets used to pay 90% in the Eisenhower years and 39% in the Clinton years. Now they pay 35% under the temporary cut, and they would return to the reasonable 39% rate if the Bush era cut lapses for rich.
Currently, the rich are getting richer, and the middle class is shrinking. Large corporations are storing away billions and billions of dollars, and the largest investment banks grow larger than ever and give huge bonuses as they operate much as they did before the economic meltdown they caused in 2008. For insight into just how the banks and insurance companies brought our economy to near collapse and how influential Wall Street insiders and academic advocates of banking industry de-regulation have determined American economic policies in the Treasury Department since the 1980’s, see the documentary film “Inside Job,” directed by Charles Ferguson and narrated by Matt Damon. It is a remarkably clear indictment of how Republican and Democratic administrations have been too willing to submit to the influence of the power brokers of Wall Street.
If Congress wants to control the soaring national debt, instead of coddling millionaires it should end the war in Afganistan, make middle class tax cuts permanent, and bring back strong regulation of the investment banking industry.
Congress should not risk essential social programs to insulate the super-rich from paying their just share of taxes. According to a poll published in last Sunday’s New York Times, 73% favor allowing the tax breaks to expire for those with adjusted income over $250,000 but making tax cuts permanent for rest of us. Congress should do that this week.
Call to urge your Congressman to support the middle class tax cut and let the top 2% fend for themselves because they do that very well.