|
The reasons why it was a bad idea: A) A disproportionate amount of the benefit flowed to high earners. A person making 100K got a $2,000 tax cut. A person making 10K got a $200 tax cut. The approximately 40% of all wage earners earning 20K and under received $400 or less. This is the STUPIDEST economic stimulus (not to mention extremely undemocratic) I have ever heard of. It is destined to attain legendary status for economic stupidity in textbooks.
B) It really does threaten SS, because even though the money is being put back into the SS "fund", the fact is that there are no funds in the fund. For that fund to mean anything in the future, we will have to be able to borrow money on the open market. Every buck we accumulate now in debt is a buck we won't be able to pay back to SS in the future.
C) Because the Fed pursued a deliberately inflationary policy last year, which had already been announced months before this policy initiative of the Obama administration, we already knew in December 2010 that the real incomes of the bottom rung would be deeply eroded by inflation of basic needs (transportation, medicine, food, fuel) in 2011. So the administration's policy response was to RAISE THE FEDERAL TAXES on the bottom 35% of earners and CUT FEDERAL TAXES for the top 50%? Even Reagan didn't do trickle down economics this vilely.
Giving very large tax breaks to the 20% of taxpayers in this country was doomed to make that worse.
And it did. They increased consumption, because their real incomes rose, while the bottom 50% of taxpayers were placed under severe pressure. But the top 20% of taxpayers spend much more on consumption than the bottom 50%, so inflation kept rising even as the average American family was increasingly forced to cut spending on food, etc. This directly led to the slow growth in the US economy over the last year.
This initiative replaced the MWP. The MWP gave larger tax breaks to those who were barely getting by, such as a person earning 15K who got $400 versus $300 under the FICA tax cut, and didn't give any tax break to the taxpayer earning 100K. Because of that, it was a much more effective stimulus and it cost much less overall.
In 2012, we could produce a much stronger relative economy by dropping the FICA cut, restoring the MWP, and adding additional funds to LIHEAP.
This isn't Keynesian. Things like assistance for necessities, (food, fuel), unemployment benefits for those who have lost jobs, etc, do make the economy stronger because they cause less businesses providing services to those people to shut down or contract, which causes further job losses.
I'm appalled that anyone on DU would defend the president's proposal to give $3,000 federal tax breaks to persons earning 100K next year while cutting LIHEAP and giving $300 tax breaks to persons earning 10K next year. This will only hurt the economy rather than help it, and the damage will be felt next year and for many, many years to come.
Obama is not a Democratic president, no matter what anyone thinks. He's the president for the top 20%, and he doesn't care about anyone under that. As he goes along in his presidency he gets more and more committed to this course, and I won't stand by silently and not speak out any more.
I am glad Obama will lose the next election. Under a Republican president, the FICA tax cut would never have happened - the press and the Congress would agitate against it. It would never even have been proposed. Obama truly is the Manchurian candidate, but he was brainwashed by the Republicans. He's Reagan cubed.
|