Bush Tax Cuts, Unemployment Benefits and National Deficit

December 7, 2010

By Padmini Arhant

The 111th Congress with Democrats still in control of the House and Senate is challenged by the White House capitulation to the Republican unsustainable deal on Bush tax cuts.

Fortunately the House passed the bill per initial democratic plan – allowing tax cuts to the wealthy expire and granting permanent tax cuts to the families with income $250,000 and below.

Speaker Nancy Pelosi leadership and the House representatives’ commitment to the middle class America is commendable.

‘Political Irony in Republican Congress Victory’ – Article published on November 18, 2010 under ‘Politics – United States’ category on this website highlighted the specifics on Bush Tax Cuts and Protecting Social Security for America.

There are different proposals from the majority and the minority in Congress.

Republican members unanimously dedicated to the top 2% wealthy Americans getting wealthier at the rest of America’s expense pushed tax cuts extension for the multimillionaires while disregarding their irresponsible claim’s devastating impact on the ballooning deficit – the primary political slogan that enabled Republican victory in the recent mid-term election.

Unlike the Republican minority, the Democrat majority are divided on this issue.

The Senate Democrats have laid few options – Some favor the House version which is the initial Democratic strategy outlined above. It is unequivocally a pragmatic solution to the status quo.

Other Senate Democrats are considering $1 million threshold for tax cuts redefining the middle class category that is contradictory to reality.

Yet another democrat’s perspective opposes any tax cuts alongside rising deficits.

“We can’t afford any of these tax cuts,” says Rep. Bobby Scott (D) of Virginia. “It is hard to imagine that extending all of the tax cuts at a cost of $3.7 trillion is fiscally irresponsible but extending $3 trillion worth of tax cuts [to families earning less than $250,000] is somehow fiscally sensible.”

It’s obvious that the opposition to tax cuts for middle class America stems from blanket assessment of the fiscal crisis without any consideration to the slow economic growth and rising unemployment predominantly affecting the poor and the middle class not the super-rich.

According to the latest reports the deal between the White House and Congressional Republican members comprises the following;

Bush tax cuts extended at all income level for two years – the cost of this compromise is estimated at $700 billion over the next two years.

Estate tax capped at 35 percent after $5 million exemption to each wealthy individual – This alone would deprive the economy of the desperately required revenue contributing further to the alarming deficit.

The Republican two year extravagant tax breaks to the wealthiest is in exchange for the jobless benefit to the long-term unemployed up to 13 months at the anticipated $60 billion cost and last but not the least,

Social Security payment is diverted from retirement savings and added to the present income through 2% payroll tax reduction for workers.

However, this detrimental step is substituted for the general tax relief provided to the middle and lower income groups in the previous year economic stimulus.

Otherwise the bill eliminates last year tax credit from the middle and lower income families’ paychecks and utilizes their only safety nest thus far – the Social Security for consumer spending in the payroll tax diversion.

It’s a dangerous precedence with the possible depletion of reliable income to the baby boomers nearing retirement notwithstanding the easier access to Republican goal in privatizing Social Security and increasing the retirement age similar to the unpopular Pension bill enforced upon the people in France.

The contentious issues are the disproportionate concession to the 2% with an extraordinary disposable income mostly invested in personal holdings against harsh imposition on the 98% hard working middle and lower income groups burdened with not only diminishing income, spending cuts on life dependent programs, savings replaced for tax credits but also expected to pay substantially towards national debt mainly accumulated from irrational economic and defense policy.

Above all the Republican members’ euphoria on the pending bill –

‘Not raising taxes on anyone in the country’ is ideological for it rejects the ramifications on national deficit. Again the issue presented as pivotal to the conservative agenda during the 2010 election.

If there are no tax hikes for two years, the essential unemployment aid up to 13 months in the provision combined with a magnanimous estate tax credits,

How do the decision-makers of this deal propose to trim the burgeoning national deficit?

Are the Republican members complacent to the Borrow and Spending concept that was targeted against the Democrats in the past two years irrespective of the Democrats Pay-go rule to fund the key economic legislations?

Given the undercurrent in the U.S and China relationship from currency devaluation to North Korea skirmishes – China the major U.S. creditor may not volunteer to be the Santa Claus.

Who is then expected to bailout the wealthiest Americans in the GOP sponsored –

Who wants to be a billionaire contest?

It’s imperative to dispel the myth surrounding the bizarre agreement that Republican minority have control over the crucial legislation when the Democrats are the majority in the legislative branch and the White House currently has the power to do the right for the suffering Americans as demonstrated by the House Democrats on this bill.

Republican legislators assuming cart blanche to steer the critical economic decision despite the catastrophic effects on their constituents and the nation at large is purely political besides betrayal of the electorates’ trust in the Republican action to protect self-interest over the average American interest.

In fact, Republican party awaiting House dominance and increased Senate representation is on national watch to deliver their campaign promise on containing the growing deficit, coordinate efforts in easing unemployment not excluding jobless aid to the millions who elected them in the fall election and transcend Washington partisan culture visibly promoted by special interests.

The Speaker-elect John Boehner emotional speech upon victory reminiscing the hard times experienced to achieve the American dream is a common factor in the contemporary society.

Relevantly, Republican lawmakers’ allegiance to the campaign financiers instead of the people they are elected to represent clearly revealed in their failure to address the American plight.

In the difficult economic period the GOP priority to undermine main street struggles is regrettable sending a strong message to the electorate to exercise diligence during election since Washington is not amenable to change.

Therefore the people power must exert pressure on the elected representatives with a reminder about the legislative responsibility towards the constituents and the nation they are elected to serve during their term in office.

The republic position in this matter is absolute and that being “No deals on tax cuts for the wealthy.” Overwhelming electorate disapprove the GOP reckless demand to shift the economic liability on the average Americans – the driving force of the economy.

Hence the Senate Democrats and moderate Republicans focused on fiscal constraints have a unique opportunity to exhibit bipartisanship in passing the House approved Bush tax cuts bill.

Ignoring public concerns is a political misstep and often realized in the electoral results. If GOP won in November 2010 then it does not take long for the political tide to turn against them and that is politics.

It is incumbent upon the esteemed Senate to acknowledge the American families’ hardships and the escalating deficit when casting votes on this particular bill evidently vital for national and global economic recovery.

Good Luck! To the Congressional members for a successful passage of the prudent economic legislation.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy 

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