The House is going to pass a permanent extension of the Bush tax cuts in 2012

[Better Believe It]

More on the Tax Deal
By James Kwak
December 8, 2010

In effect, saying that tax cut extensions for the rich are a reasonable price to pay to save tax cut extensions for the middle class is the same as saying that the Bush tax cuts were, on balance, a good policy. Or that securing one last extension of unemployment benefits (since they expire before the rest of the tax cuts, there’s no chance they’ll be extended again by a Republican-controlled House) was enough to make it good policy.

There is always the “in the middle of a recession” defense. But again, you don’t get exactly what you want in politics. You can’t say the deal was a good deal because you can fix all the bad things about it in two years. I also want stimulus now and higher tax revenues later. But that’s not a credible option. If you think the tax cuts were bad policy, your chances of fixing that bad policy are much worse in two years than they are now. The administration’s best card would have been a threat to veto any bill that contained an extension of the tax cuts for the rich. The House is going to pass an across-the-board permanent extension in 2012. Are the Democrats going to block it in the Senate in an election year? Is Obama going to veto it in 2012? (And even if he leaves it for a lame-duck session, he’s going to have to make a commitment during the campaign.)

Doing nothing, of course, is the old Republican “starve the beast” strategy: cut government revenues to the point where it is unable to do anything. In practice, Republicans have cut revenues and continued to spend on whatever they felt like spending on. But the core of the strategy is that if you cut taxes at every possible opportunity, eventually you will force the government into a crisis where something has to give (and probably it will be a Democratic administration that takes the political hit for cleaning up the mess). And unless American public opinion does an about-face, the thing that will give will be entitlements.

So perhaps with the best intentions, the Obama administration, by making it more likely that the Bush tax cuts will become permanent, is probably hastening the day when push will come to shove and Medicare will be gutted. The bigger the projected national debt, the more seemingly reasonable people in the middle of the ideological spectrum shake their heads sadly and say something has to be done about Medicare, as if it’s a fact of nature and not a fact of politics. As I’ve said before, no administration has tried harder to control health care costs and thereby protect the future of Medicare. But at the same time, they are digging deeper the hole on the funding side that, politically, is the big threat to Medicare–and to retirement security for hundreds of millions of ordinary Americans.

Read the full article at:

http://baselinescenario.com/2010/12/08/more-on-the-tax-deal/

[GSLevel9]

1. agreed... that's right on. nt

[stopbush]

2. Faulty premise. Why not say:

"In effect, saying that the lives lost due to our entering into WWII was a reasonable price to pay to save democracy in the world is the same as saying war is, on balance, a good policy."

[aquart]

3. Unless it sunsets NOW.

[Octafish]

4. It's worse: Game Plan for a Flat Tax, Social Security Cutbacks and Austerity

We're going to need a bigger prison.

Obama's Sellout on Taxes, an article by Michael Hudson.

EXCERPT...

So the game plan is not merely to free the income of the wealthiest class to “offshore” itself into assets denominated in harder currencies abroad. It is to scrap the progressive tax system altogether. The Democratic Congress is making only token handwringing protests against this plan, no doubt with an eye looking forward to the campaign contributors two years down the road.

Crises usually are orchestrated years in advance. Any economic recovery typically is shaped by the way in which its predecessor economy collapsed. Medieval Europe’s emergence from the Dark Age, for example, was shaped by ancient Rome’s debt crisis caused by its aggressive oligarchy. In a similar fashion, the coming epochal tax shift off finance and property onto labor will be introduced in response to the dollar’s crisis, in much the way that we have seen Ireland and Greece tap their pension funds to bail out reckless bankers. In America as in Europe, the large “systemically important banks” that caused the crisis will be given enough money by the government – at the expense of labor (“taxpayers”) to step in and “rescue” the bad debt overhang (i.e., toxic junk).

SNIP...

Contra Obama’s pretense, cutting taxes for the rich will not spur recovery. The wealthiest 2 per cent do not spend their income on consuming more. They invest it financially – mainly in bonds, establishing more debt claims on the economy. Giving creditors more money will deepen the economy’s debt deflation, shrinking “the market’s” ability to spend on goods and services. And part of the tax subsidy will be recycled into Congressional lobbying and campaign contributions to buy politicians who will promote even more pro-financial deregulatory policies and tax benefits. There still has been no prosecution of banking crime or other financial fraud by large institutions, for example. Nor is there any sign of Attorney General Holder initiating such prosecutions.

SNIP...

The bottom line is that after the prolonged tax giveaway exacerbates the federal budget deficit – along with the balance-of-payments deficit – we can expect the next Republican or Democratic administration to step in and “save” the country from economic emergency by scaling back Social Security while turning its funding over, Pinochet-style, to Wall Street money managers to loot as they did in Chile. And one can forget rebuilding America’s infrastructure. It is being sold off by debt-strapped cities and states to cover their budget shortfalls resulting from un-taxing real estate and from foreclosures.

CONTINUED...

http://www.counterpunch.org/hudson12082010.html

The rich aim to be the Lords of the Castle, from which they'll rule over the peons and indentured servants formerly known as the "Middle Class" or, as I like to remember We the People, "citizens."