In a column in today’s New York Times, Paul Krugman assails President Obama’s “National Commission on Fiscal Responsibility and Reform.” Calling it “The Hijacked Commission“, Krugman is responding to the recently released comments by the Commission’s Chairs entitled “Guiding Principles and Values”.
Krugman’s analysis – “Under the guise of facing our fiscal problems, Mr Bowles and Mr Simpson are trying to smuggle in the same old, same old – tax cuts for the rich and erosion of the social safety net.”
Here is part of Krugman’s analysis:
“…what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.
It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?”
In a poll of Midterm Voters done by Democracy for America they asked to pick between the following choices and got the following response:.
1. Congress should make up for possible budget gaps by cutting Social Security benefits?
agree – 4%
2. Congress should make up for possible budget gaps by changing the social security tax to also apply to income above $108,000, which currently is not taxed by Social Security?
agree – 55%
3. Congress should not make any changes to Social Security?
agree – 31%
Not sure – 11%
Clearly proposals to cut benefits for working families and retired citizens whatever their political persuasion are not going to be popular. They are not solutions that would benefit most Americans.
As Nickolas D Kristoff writes in a column in the New York Times entitled “Our Banana Republic”, the solutions to our fiscal state in America will not be solved by right wing proposals supported by corporations and the wealthy. America is becoming the land of opportunity only for the wealthy and proposals for more tax cuts for the wealthy makes it harder for working families in America to survive.
While Republicans and Tea Party Conservatives argue for extending the Bush tax cuts for the wealthy, they do so in the face of the ugly reality that the rich in America are accumulating more and more of America’s wealth. Working class families struggle and find it harder and harder to make ends meet.
As Kristof points out, the wealthy are accumulating more and more of our country’s wealth.
The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.
That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.
Republicans are arguing that taxing the rich will hurt small businesses because they will not have the money to spend on reinvesting in their business. This is nonsense, because any money invested in their business is pre-tax money. It gets written off as a business expense and would not count toward calculation of any income tax owed. To me it seems that more investment is likely in small business if personal income taxes are higher on the wealthy because then they can spend the full amount on their business without having to pay tax on it.