Weekly Audit: Tax Cuts for the Rich Extended

By Lindsay Beyerstein,  Media Consortium Blogger

Congressional Republicans and the White House  struck an agreement in principle on Monday night to extend all the Bush tax cuts for 2 more years in exchange for extending unemployment benefits. The GOP agreed to the so-called “Lincoln-Kyl compromise” a partial 2-year extension of the Bush estate tax cuts on estates worth over $5 million. If the deal had not been struck, estate taxes on estates over $5 million would have gone back up from 0% to the pre-cut rate of 55%. Instead, the rate will be 35% for the next 2 years.

The GOP also agreed to a short-term “stimulative” 2 percentage-point cut off the 6.2% payroll tax we all pay on income up to $106,800. The good news is that a payroll tax holiday will provide the most noticeable tax relief to low- and middle-income Americans. The bad news is that payroll taxes fund Social Security, so cutting the tax means starving a program that most directly benefits average people. Social Security is not in crisis yet, but steps like these could push the program into worse financial straights where significant benefit cuts become inevitable. It’s almost as if the GOP, having failed to spark panic about an as-yet non-existent Social Security crisis, is determined to engineer one.

All these gimmes for the rich were the price of a partial extension of unemployment benefits. The stakes couldn’t have been higher. If Congress had failed to act, 2 million people stood to lose their benefits this month and another 7 million would have run out before the end of next year, reports Andy Kroll of Mother Jones.

Meanwhile, unemployment continues to rise. The economy only added 39,000 jobs in November when analysts were expecting about 150,000. “At the beginning, some people just thought it was a printing error,” said reporter Motoko Rich on the New York Times‘ weekly business podcast. The overall unemployment rate climbed to 9.8%.

At ColorLines, Kai Wright argues that the time has come for President Obama to seize the opportunity to debunk conservatives’ bad faith arguments for tax cuts above all else:

At the same time, the anti-government crowd’s political hand—if forced—has never been weaker. A depressingly large number of middle-class and working-class Americans now know all too well what economists have long understood: You get a great deal more economic bang out of keeping lots of people from becoming destitute than you do by helping a few people horde wealth. People remain enraged about the no-strings-attached bank bailout, for instance, because they intuitively understand its ramifications. Wall Street is now enjoying a narrow, taxpayer-financed recovery while unemployment, hunger and poverty all continue climbing through the former middle class.

Extending UI makes sense

Tim Fernholtz of TAPPED tackles some of the bad arguments against extending unemployment insurance. Economist Greg Mankiw claims that extending unemployment insurance is just a surreptitious ploy to redistribute income to the poor from the wealthy. Actually, as Fernholtz points out, the point of a UI safety net is to prevent people, 3 million of them in 2009, from becoming poor in the first place. Poverty is very expensive for society at large. If we can keep the unemployed in their homes, spending their benefits in their communities, we can keep the socially corrosive effects of poverty at bay until the economy improves. The social costs of child poverty alone have been estimated at $500 billion a year, Fernholtz notes. The deeper we allow people to sink into poverty, the more difficult it will be for the economy to rebound. On this view, UI is a shared investment in a well-ordered society, not just a lifeline for jobless families.

Why corporate tax cuts won’t create jobs

Jack Rasmus of Working In These Times explains why tax cuts will not create jobs. Simply put, banks and big companies are sitting on over a trillion dollars. Among the nation’s biggest banks, lending to small and medium size businesses, the engines of job creation, has dwindled over 2009 and 2010. America’s biggest companies are sitting on a hoard of $1.84 trillion dollars, which they are not investing in job-creating projects. The Deficit Commission recommended slashing corporate taxes, ostensibly to spur investment and job creation, which would ultimately generate taxable income to help balance the budget. As Rasmus points out, this wishful thinking is predicated upon the assumption that if only corporations had more money, they would invest it to create jobs. The fact that companies are already sitting on huge piles of cash suggests that shoveling more moolah on the pile won’t change the basic dynamic. Perhaps companies are waiting to invest because they know that consumers aren’t keen to buy goods and services when they are unemployed or fearing job loss.

Economic disobedience

At In These Times, Andrew Oxford interviews sociologist Lisa Dodson about her new book on getting by in the low-wage economy. Her research shows that as economic instability mounts, many Americans are quietly taking matters into their own hands:

To understand how fair-minded people survive in an unfair economy, Dodson interviewed hundreds of low-wage workers and their employers across the country, examining what she terms the “economic disobedience” now pervasive in the low-wage sector. From a supervisor padding paychecks to a grocer sending food home with his employees, these acts of disobedience form the subject of her latest book, The Moral Underground: How Ordinary Americans Subvert an Unfair Economy.

Winner-take all economy

In an interview with Democracy Now!, Yale political science profesor and  Jacob Hacker explains why the Deficit Commission has it all wrong when it comes to tax cuts vs. unemployment benefits.

Hacker studies inequality. He has written a book on how the richest Americans cornered an unprecedented share of the country’s wealth for themselves over the past three decades. The richest Americans have never been in a better position to help the country grapple with the deficit. Yet, as Hacker points out, the Deficit Commission wants to balance the budget on the backs of middle- and lower-income Americans by cutting spending on programs that disproportionately benefit working people and readjusting the tax code to make it even more favorable to the rich.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

[UPDATE x2] Lame Duck Round Up - 90 Second Summaries

With 90 Second Summaries, we aim to cover policy items due to receive close attention in the coming weeks and months that are not being properly explained by most of the press corps. As a result,  over one third of our episodes cover pieces of legislation that are receiving action or are expected to receive action during this lame duck session of Congress. We did not hit every hot topic on the board, but we got to a good number of them. Without further ado, here's a roundup of the bills we covered that you should know about as the lame duck session unfolds:

Unemployment Insurance Extension:

UPDATE: The unemployment insurance extension failed to pass in today's House vote.

The House votes today on a suspension bill to extend unemployment insurance by three months. David Waldman explains:

Now, suspension bills need a 2/3 vote to pass, so that's a pretty high hurdle -- 290 votes, at least 35 of which would have to come from Republicans. So why bring the bill to the floor that way? Suspension bills aren't subject to amendment, nor to the motion to recommit. So although the hurdle is high, it's a straight-up yes-or-no vote on unemployment benefits extension. Click here for more information on the unemployment insurance extension.

The Dream Act:

Senate Majority Leader Harry Reid has announced he will bring up the DREAM Act as a standalone bill in the lame duck session. In the past, the Senate has attempted to attach the DREAM Act to larger bills.

Click here for information on the DREAM Act.

The Expiring Bush Tax Cuts:

The deals are still being hammered out on this so the specifics of what legislation will pass are still little fuzzy. By all reasonable expectations, an extension of some sort WILL get passed before the end of the year.

Click here for more information about extending the Bush tax cuts.

The FDA Food Safety Modernization Act:

UPDATE 2: A compromise was reached on the Tester Amendment and it will be included in the Senate bill. It is still unclear whether or not a similar provision will be included when the Senate version is reconciled with the House version.

This bill has been moving its way through the Senate somewhat quicker than most of us expected. Cloture passed yesterday, 74-25, on the motion to proceed to debate (generally a proxy for cloture on the final bill) and the Senate is expected to pass the bill today or tomorrow. The hot topic has been the Tester Amendment, which provides exemptions for small and local farmers from the new regulations. The Tester Amendment will likely pass, but H.R. 2749, the House version of the Food Safety Bill, was passed without a similar provision. The two bills will have to be merged and whether or not the Tester Amendment will survive that step is unclear.

If the Tester Amendment is indeed included in the Senate bill, then it is scheduled to be our next 90 Second Summary (that will be Monday).

Click here for more information about the FDA Food Safety Modernization Act.

 

Record Number of Americans Seeking Government Help

That the private sector has failed should be obvious but the takeaway that conservatives will draw from the news that one in six Americans, or 17 percent, is now aid-dependent for some or all of their needs is that these Americans are somehow lazy. 

The four government social safety programs most being accessed are Medicaid, Food Stamps, Unemployment Insurance and Welfare. USA Today breaks down the numbers:

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That's up at least 17% since the recession began in December 2007.

The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they're at their limit," says Dan Hawkins of the National Association of Community Health Centers.

More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years.

Caseloads have risen as more people become eligible. The economic stimulus law signed by President Obama last year also boosted benefits.

"This program has proven to be incredibly responsive and effective," says Ellin Vollinger of the Food Research and Action Center.

Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. Caseloads peaked at nearly 12 million in January — "the highest numbers on record," says Christine Riordan of the National Employment Law Project, which advocates for low-wage workers.

More than 4.4 million people are on welfare, an 18% increase during the recession. The program has grown slower than others, causing Brookings Institution expert Ron Haskins to question its effectiveness in the recession.

As caseloads for all the programs have soared, so have costs. The federal price tag for Medicaid has jumped 36% in two years, to $273 billion. Jobless benefits have soared from $43 billion to $160 billion. The food stamps program has risen 80%, to $70 billion. Welfare is up 24%, to $22 billion. Taken together, they cost more than Medicare.

The necessity of jump-starting the economy should be obvious. Conservatives worry that government programs won't contract after the recession and that we're creating some of sort lasting dependency to government assistance. "They're much harder to unwind in the long term," says Michael Tanner of the Cato Institute, a libertarian think tank. I guess Mr. Tanner and his libertarian ilk would prefer that Americans line up for private charities and soup kitchens. This isn't just the poor that we are talking about. Increasingly those accessing these social safety net programmes are those who formerly comprised the middle classes.

In 2006, the SEIU and the Center for American Progress published a report entitled Middle Class in Turmoil (pdf) that warned that "despite an economic recovery well into its fifth year, middle class families are struggling to pay for a home, health insurance, transportation and their children’s college education due to a weak labor market and sharply higher prices. To pay for these necessary expenditures, middle class families are borrowing record amounts of money, leaving them unable to put away hardly any cash for a rainy day."

Well, guess what that rainy day is here and it's not just a deluge but a monsoon.

Record Number of Americans Seeking Government Help

That the private sector has failed should be obvious but the takeaway that conservatives will draw from the news that one in six Americans, or 17 percent, is now aid-dependent for some or all of their needs is that these Americans are somehow lazy. 

The four government social safety programs most being accessed are Medicaid, Food Stamps, Unemployment Insurance and Welfare. USA Today breaks down the numbers:

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That's up at least 17% since the recession began in December 2007.

The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they're at their limit," says Dan Hawkins of the National Association of Community Health Centers.

More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years.

Caseloads have risen as more people become eligible. The economic stimulus law signed by President Obama last year also boosted benefits.

"This program has proven to be incredibly responsive and effective," says Ellin Vollinger of the Food Research and Action Center.

Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. Caseloads peaked at nearly 12 million in January — "the highest numbers on record," says Christine Riordan of the National Employment Law Project, which advocates for low-wage workers.

More than 4.4 million people are on welfare, an 18% increase during the recession. The program has grown slower than others, causing Brookings Institution expert Ron Haskins to question its effectiveness in the recession.

As caseloads for all the programs have soared, so have costs. The federal price tag for Medicaid has jumped 36% in two years, to $273 billion. Jobless benefits have soared from $43 billion to $160 billion. The food stamps program has risen 80%, to $70 billion. Welfare is up 24%, to $22 billion. Taken together, they cost more than Medicare.

The necessity of jump-starting the economy should be obvious. Conservatives worry that government programs won't contract after the recession and that we're creating some of sort lasting dependency to government assistance. "They're much harder to unwind in the long term," says Michael Tanner of the Cato Institute, a libertarian think tank. I guess Mr. Tanner and his libertarian ilk would prefer that Americans line up for private charities and soup kitchens. This isn't just the poor that we are talking about. Increasingly those accessing these social safety net programmes are those who formerly comprised the middle classes.

In 2006, the SEIU and the Center for American Progress published a report entitled Middle Class in Turmoil (pdf) that warned that "despite an economic recovery well into its fifth year, middle class families are struggling to pay for a home, health insurance, transportation and their children’s college education due to a weak labor market and sharply higher prices. To pay for these necessary expenditures, middle class families are borrowing record amounts of money, leaving them unable to put away hardly any cash for a rainy day."

Well, guess what that rainy day is here and it's not just a deluge but a monsoon.

Record Number of Americans Seeking Government Help

That the private sector has failed should be obvious but the takeaway that conservatives will draw from the news that one in six Americans, or 17 percent, is now aid-dependent for some or all of their needs is that these Americans are somehow lazy. 

The four government social safety programs most being accessed are Medicaid, Food Stamps, Unemployment Insurance and Welfare. USA Today breaks down the numbers:

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That's up at least 17% since the recession began in December 2007.

The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they're at their limit," says Dan Hawkins of the National Association of Community Health Centers.

More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years.

Caseloads have risen as more people become eligible. The economic stimulus law signed by President Obama last year also boosted benefits.

"This program has proven to be incredibly responsive and effective," says Ellin Vollinger of the Food Research and Action Center.

Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. Caseloads peaked at nearly 12 million in January — "the highest numbers on record," says Christine Riordan of the National Employment Law Project, which advocates for low-wage workers.

More than 4.4 million people are on welfare, an 18% increase during the recession. The program has grown slower than others, causing Brookings Institution expert Ron Haskins to question its effectiveness in the recession.

As caseloads for all the programs have soared, so have costs. The federal price tag for Medicaid has jumped 36% in two years, to $273 billion. Jobless benefits have soared from $43 billion to $160 billion. The food stamps program has risen 80%, to $70 billion. Welfare is up 24%, to $22 billion. Taken together, they cost more than Medicare.

The necessity of jump-starting the economy should be obvious. Conservatives worry that government programs won't contract after the recession and that we're creating some of sort lasting dependency to government assistance. "They're much harder to unwind in the long term," says Michael Tanner of the Cato Institute, a libertarian think tank. I guess Mr. Tanner and his libertarian ilk would prefer that Americans line up for private charities and soup kitchens. This isn't just the poor that we are talking about. Increasingly those accessing these social safety net programmes are those who formerly comprised the middle classes.

In 2006, the SEIU and the Center for American Progress published a report entitled Middle Class in Turmoil (pdf) that warned that "despite an economic recovery well into its fifth year, middle class families are struggling to pay for a home, health insurance, transportation and their children’s college education due to a weak labor market and sharply higher prices. To pay for these necessary expenditures, middle class families are borrowing record amounts of money, leaving them unable to put away hardly any cash for a rainy day."

Well, guess what that rainy day is here and it's not just a deluge but a monsoon.

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