Obama Takes Charge -- Will He Bail Out America?
Continued from previous page
This gets to the heart of the debate we’ll encounter when Obama takes office in January: How much various proposals will boost economic demand in the short-term versus how much investment will be made in longer-term structural changes. Here, a balance is necessary both politically and in the context of the dire situation in which American workers and employers find themselves today.
What Is Obama Willing to Give to Get His Plans Implemented?
The Obama team appears extraordinarily fond of the trial balloon, and this week they floated the possibility of allowing Bush’s “temporary” tax cuts for the richest Americans expire as scheduled in 2011, rather than rolling them back early on in his presidency as he promised on the campaign trail.
If there’s any merit to the idea -- problematic as the 2009 deficit looks likely to reach an eye-popping trillion dollars -- it is purely political; leaving the tax cuts in place might provide some cover for Republicans to cross over and support Obama's broader economic rescue plan.
But while some Republican legislators are likely to see the economic woes as a freight train headed their way, and move to get their necks off the track by supporting a large-scale stimulus, it’s clear that conservative dead-enders are sticking to their discredited ideas. On Fox News this week -- where else? -- House Minority Leader Rep. John Boehner, R-Ohio, said, “If we’re really serious about creating jobs, what we ought to do is we ought to eliminate the capital-gains tax… Why not lower … corporate income taxes for corporations in America to help keep jobs here?”
The reason we shouldn’t is twofold. First, it's among the least-efficient ways of boosting the economy available to lawmakers. Consider this table, compiled by the nonpartisan Economic Policy Center, which suggests that in this debate, the facts once again have a liberal bias:
The second answer to Boehner’s assault on capital gains taxes is that the tools lawmakers have long relied upon to stave off recession aren’t working, and won’t. The tax burden for the wealthiest Americans has already been slashed deeply -- to their lowest levels since World War II; working Americans are too far in the hole to do much with one-time checks, besides paying down their credit card balances; the rate at which the Fed lends money to banks has been cut to 1 percent -- and may end up at zero before long -- but when people aren’t buying, even “free” money doesn’t encourage businesses to hold the line or expand, and the financial system is teetering under a mountain of funky securities and derivatives that are almost impossible to untangle and are too large for the government to buy.
So while all options should be tried to keep a deep recession from blossoming into a generational depression, all that’s really left is the kind of national transformational project for which progressives have long called, and toward which Obama appears to be leaning: put Americans to work building a 21st century economy, give them a real stake in the outcome and allow them to share in the gains.
It’s worked before.