Bailing Out America

 
     Who are the rich people who need their tax cuts extended--when they shouldn't?

     They are not billionaires.  They are people who became millionaire because of the Bush tax cuts, and at the expense of the working class, but lost most of it during the Great Recession.  They are people whose trusts, many established for their children, grandchildren and great grandchildren, were also hit.     

     They are people who invested more than they could ultimately afford on homes that were too big. on mansions they could't afford, and on expensive cars for each member of the family.  

     They are people who spent much of their children's inheritance on worldwide trips, entertainment and recreation, not expecting the Great Recession and the decline in prices of their homes whose sizes too often exceeded the needs of the family.  

     Many of these are people who impoverished themselves by poor management of their wealth, and hope to bounce back on the backs of the middle class to which they only recently belonged, and they won't feel guilty about impoverishing them so long as they regain their financial standing.  

     Many of these people were rich people, who earned as much a $500 thousand a year, who have become middle class again, and fear they may have lost their last best opportunity to again enrich themselves legitimately.      

     Many of them are having to take care of adult children who did not prepare themselves for secure employment, forcing parents and the children into a lower standard of living.

     Many of them are trying to build new wealth at the expense of the middle class and working poor, money which they should have saved for their children's future and present needs.

     However, people with hundreds of millions of dollars in wealth or more  don't need tax-cut extensions.  They're generally smart enough, shrewd enough or positioned well enough to have invested wisely and avoided being terribly damaged by the recession.  Most of them actually used the recession, and the lead up to it, to further enrich themselves. Many of them were already super-rich, with enough money to adequately fund even trusts of  future generations. 

    The only problem with funding future generations is that top academic talents may go undeveloped to the detriment of the nation.  And if moral virtues and traditional values are not the underpinnings of their ambitions and if those talents were to be used to seek out weaknesses  within our political and economic systems for personal gain--then maybe the nation is better off with their not be well-educated.

     Poor management of money, of course, enriches some elements of the population, whereas, wise management of money enriches a different set of elements, and often provides jobs for a different kind of employee.

     The people of the emerging economies want to have what Americans have, and the more they achieve that goal, the more Americans trend toward conditions from which they have come.

     Former British Prime Minister Gordon Brown pointed out in a recent interview that while the emerging world is presently taking jobs and wealth from the Western world, those jobs and that accumulation of wealth will eventually produce consumers who will want to buy the kinds of thing we will either make or make better and faster than anyone else.  

     But that will only happen in the US if we educate our children better than everybody else, so they can either generate the creative ideas, produce unique but necessary products, or play their parts by enabling both of these to happen through education and productive, rewarding labor.

     In the meantime, although there are many formerly rich people (and people who were just well off) who need tax cuts to return to their status among the elite, there are very rich people whose standards of living have not be seriously impacted by the Great Recession, and would not be impacted were their wealth reduced in some cases by a billion dollars or two, and in other cases by several hundreds of million dollars, and  still others by several tens of millions of dollars.  Some of them spend hundreds of millions of dollars seeking political office.

     Now, is the time for President Obama to call on the patriotism of the wealthy who really did not want or need their Bush tax cuts extended, and ask them to come to the rescue of the nation that made their wealth possible by giving back to the government, not only any tax cuts to which they are entitled to over the next two years, but give even more as they can afford.

     Right-wing conservative Republicans have criticized wealthy Americans who have expressed opposition to Bush tax cuts being extended for the wealthy, suggesting that they could give it back if they don't want it.  Well, this is the time for every liberal, moderate, and conservative American, for every religious leader and congregations, for every doctor, lawyer, and Indian chief, for every bank and corporation who has an American agenda to, not only make that appeal, but make a generous contributions to this "bailout" of America.  Middle-class generosity would make the job even easier.

     Our brave young men and women, the vast majority of whom have neither amassed nor inherited wealth of any consequence, are sacrificing their lives and jeopardizing their futures to protect this nation, its way of life and the opportunities it affords fellow Americans.  Those who have benefited from those opportunities, be they businesses or individuals, should be willing to show that nation, in times of dire need, their gratitude in measures commensurate with their good fortune. 

     But we need somebody of note to take the lead toward sacrifice and a new national pride, toward a renewal of the American economy to one where lost wealth and lost opportunities can be restored, both for ourselves and our posterities.
     This is a venture where Democrats and Republicans should find common ground.

Ronald

Democratic Compromise or Capitulation

     The Democrats and Republicans have come to an apparent "compromise" on the Bush tax cuts; that is, the President's words announcing the agreement sounded like a compromise:  Tax cuts for the middle class to  be extended permanently, while cuts for the wealthy would be extended for another two years.  Unemployment benefits would be extended for another thirteen months, and other tax benefits would help stimulate the economy.  Even at that, I would have preferred extending the tax cuts for the wealthy by one year, and making extending it for the second year contingent on evidence of significant job growth as a result of it.

     But I understood wrong.  Under the agreement, ALL tax cuts would be extend for two years--that includes the middle class cuts.  And unless businesses are going to plow profits during the next two years into middle class salaries and wages the way they did for upper-income tax payers during the past thirty years, the middle class will be no better able to fit such cuts into their budgets in two years than they are now.   

     There are, however, two good things about this agreement: (1) Extension of tax cuts for the wealthy for two years still gives the present congress and the President control over further extensions for them and (2) middle-class voters will again have a chance in November 2012 to realize and rectify their mistake, and return Democrats to a majority status sufficient to make middle class cuts permanent.   

     But I still don't see any figures made public showing how much the taxes at various income levels of the middle class would increase if the tax cuts expired.  They should have been announced continuously before the last Nov. elections and certainly should be publicize now and for the next two years if this agreement prevails. 

     Faced with the reality of this agreement, I have to rate it more capitulation than compromise.  With Republicans willing to hold the middle class hostage to demands of the rich, the President had to capitulate by taking what Republicans were willing to give him.   There are Democrats who say the President and Democrats should refused this compromise and fight.  But most of these people likely can afford to have their taxes increased.  

      It remains to be seen whether senate democrats will hold out for a better agreement (or a real compromise).  They could demand that the middle-class tax cuts be made permanent.  Such a stand would assume that middle-class tax payers could (or were willing to) take a tax hit, and whether the unemployed could (or were willing to) go another two years without further unemployment relief.  If there were sufficient jobs created during the next two years despite increased taxes, then the need for unemployment benefits would be less.  But that would be up to the business community.

      This is the kind of quagmire which the people chose on November 2.  The middle class voted against itself.  Many of those who are unemployed blamed Democrats for their condition and voted for Republican, and many middle-class workers, not realizing that they were offering themselves to be hostages for the enrichment of the wealthy, did likewise.

     While voters obviously did not understand the consequences of their votes, Democrats did--or should have.  I heard very little from the party, warning middle-class voters what would happen to their taxes if Republican gained sufficient strength in Congress.  The dilemma that we face now was predictable when the idea of extending tax cuts for only the middle class was first conceived..

     But even if all of the tax cuts are extended, we may be no better able to effect job growth and economic recovery than we are now.  Why? Because instead of the middle class and borderline rich continuing to spend tax savings that stimulate job creation, they may decide to start saving because of the chance their taxes will increase in two years.    

     Capitalism requires that risk be taken and shared by all participants in the economic system:  consumers, corporations, insurances companies, banks--everybody.  But just as businesses are claiming uncertainty as a basis for not employing more workers now, won't there be the same uncertainty during the next two years as they prepare for the uncertainty about what will happen in next two years, and couldn't that uncertainty continue to offer the same reasons for businesses not to hire during future extensions?

        Ultimate, there seem to be only two endings possible for the tax-cut dilemma facing present-day Democrats and Republicans: All tax cuts will eventually either be made permanent or all of them will expire.  Letting taxes expire not only would be devastating to many members of the middle class, but it hinders the economic recovery by keeping businesses afraid to hire, and middle-income and borderline rich people, afraid to spend.  Making the tax cuts permanent, together with compromise spending, will deepen the hole of the federal debt, all with no strategy for long-term debt reduction and economic recovery.  Either way, however, it's heads the wealthy wins, tails the middle class and working poor lose.  

     We will be borrowing to put in the pockets of the wealthy money that will be paid back through the sacrifices of everybody else.  No wonder the Republicans leaders are smiling.

     

Ronald