You’ve heard all the excoriations on the tax cut compromise, here are the facts

• Working families will not lose their tax cut. A typical working family faced a tax increase of over $3,000 on January 1st. The framework agreement includes a mutually agreed upon solution to the impasse over taxes by extending the 2001/2003 income tax rates for two years and reforming the AMT to ensure that an additional 21 million households will not be hit with a tax increase.
• $56 billion for unemployment insurance extension. According to the Council of Economic Advisers, passing this provision will create 600,000 jobs in 2011 alone.
• $120 billion payroll tax cut for working families
• $40 billion in tax cuts for our hardest hit families and students
• 100% expensing for businesses next year
• Child Tax Credit: The $1,000 child tax credit will be extended for two years with the $3,000 refundability threshold established in the Recovery Act. This extension will ensure an ongoing tax cut to 10.5 million lower income families with 18 million children.
• Earned Income Tax Credit: The Recovery Act included an expansion of the EITC worth, on average, $600 in additional assistance to families with 3 or more children. It also helped working married families by reducing the marriage penalty in the EITC. Continuing this tax cut  for two years will benefit 6.5 million working parents with 15 million children.
• American Opportunity Tax Credit: The Recovery Act included a new, partially refundable tax credit of up to $2,500 to help students and their families cover the cost of college tuition. This deal fully extends AOTC for two years, ensuring that more than 8 million students will continue to receive this tax benefit to help them afford college.
• A 2-year extension of the R&D tax credit and other tax incentives to support business expansion. 

You decide 

What worries us is that Karl Rove is endorsing this deal along with many others on the Republican side whilie Democrats are livid.  In a balanced negotiated deal both parties walk away a little unhappy.  However, when one party is swinging from the chandeliers and the other is about to jump off a cliff the deal is probably not balanced.  So prominent GOPers accepting this proposal from this White House after rejecting every single idea for the past two years is probably a signal that something is  afoot in Denmark.

Though we will not be jumping all over the President about the tax cut compomise like most other progressive sites and pundits there is an issue within the compromise that needs to be fixed.

In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.

[snip]

Although the $120 billion payroll tax reduction offers nearly twice the tax savings of the credit it replaces, it will nonetheless lead to higher tax bills for individuals with incomes below $20,000 and families that make less than $40,000. That is because their payroll tax savings are less than the $400 or $800 they will lose from the Making Work Pay credit.

“It will come to a few dollars a week,” said Roberton Williams, an analyst at the nonpartisan Tax Policy Center, “but it is an increase.”

Mr. President, if true, this really cannot stand given the tax cuts for the wealthy included in the compromise.

If the GOP continues to spout this ridiculous defense for keeping the tax cuts on earned income above 250K this blogger is going to scream.  This is a ridiculous argument for not letting the tax cuts expire on income of 250k or more.  These same earners will receive the same tax cut that everyone else receives on the first 250k that they earn.  However, the income after the first 250k will be subject to tax rates in place during the Clinton administration….you know, when the economy was booming. 

The GOP argues that because corporations have no certainty and their tax cuts are are going up on income exceeding 250k that the business community will be de-incentivized to create jobs.  Really?  First, the tax cuts are on personal income earned that exceeds 250k.  In addition, “corporations” and “small businesses” have had these tax cuts for ten years and we entered the worst recession during the Great Depression.  In addition, the previous President Bush during the tax cut era had the worst job creation record since Herbert Hoover.  Lets also remember that because Bush decided not to pay for those tax cuts our deficit is beyond historical levels.  So please expain to this blogger how this make sense to anyone with even a short term memory?  Do you know what market has boomed during the tax cuts for the rich period?  The luxury goods market.  It appears that people are spending more on plastic surgery, private jets, and Tiffanys jewelry than every before.

Lets not also forget that the GOP is saying that unemployment benefits must be paid for but the twenty times over deficit increasing tax cuts for the top 2 percent do not have to be paid for.  SERIOUSLY???  Republicans label themselves as deficit hawks yet they are again proposing reckless spending on tax cuts that have NO job creation or social value except to enable the top 2 percent of earners to take more of their money out of the business and spend more of it on luxury products such as face lifts and $75,000 Camaros….a $75,000 Camaro REALLY???

This whole argument put forth by the GOP makes no sense!  And why the President and Democrats are actually considering negotiating this aspect of the tax cuts is a mystery to any sane person who has been paying even the slightest attention to this debate.

While Americans are repeatedly being asked to take it on the chin by our government a bill like ”Make Wall Street Pay for the Restoration of Main Street Act” just make sense.  The American people bailed out Wall Street to the tune of $750 billion and Wall Street repays them by raising the insurance rates, imposing abusive and deceptive credit card fees, and continuing the same practice it engaged in to get us into this maelstrom of a crap storm.  The American people need fair treatment and reciprocity.  Wall Street has pretty much operated with impunity and without repercussions even though it took us into the greatest economic downturn since the Great Depression.  The bill currently being worked on by Democratic Reps. Peter DeFazio (Ore.) and Ed Perlmutter (Colo.), would impose a 0.25 percent tax on the sale and purchase of financial instruments such as stocks, options, derivatives and futures.  The bill would raise $150 billion in tax revenue per year half of which would go to paying down the deficit and the other half would go to creating JOBS, JOBS, JOBS.   See a description of the bill by The Hill below:

The bill, a copy of which was obtained by The Hill, is titled the “Let Wall Street Pay for the Restoration of Main Street Act of 2009.”……..

Half of the $150 billion in tax revenue would go toward reducing the deficit, while the other half would be deposited in a “Job Creation Reserve” to support new jobs.

The job fund would be available to offset the additional costs of the 2009 highway bill and other legislation that creates jobs.

This is a common sense solution that may make too much sense for Congress.

The President announced yesterday that he will reduce federal spending by $17 billion next year.  Below are some of the programs subject to the cut.  Efficiency is the order of the day.

•  LORAN-C ($35 million).  This long-range, radio-navigation system has been made obsolete by GPS.
• Abandoned Mine Lands Payments ($142 million).  This program now pays to clean up mines that have already been cleaned up
•  Educational attaché, Paris, France ($632,000).  The Department of Education can use e-mail, video conferencing, and modest travel to replace a full-time representative to UNESCO in Paris, France.
• Los Alamos Neutron Science Center refurbishment ($19 million).  The linear accelerator housed here was built 30 years ago and no longer plays a critical role in weapons research.
• Even Start ($66 million).  The most recent evaluation found no difference between families in the program and those not in it across 38 of 41 outcomes. Strengthening early childhood education is accomplished through significant investments in proven, more effective programs such as Head Start, Early Head Start, and the Early Learning Challenge Fund.
• Christopher Columbus Fellowship Foundation ($1 million).  Due to high overhead, the Foundation would spend only 20 percent of its 2010 appropriation on the fellowships it awards.
• Advanced Earned Income Tax Credit ($125 million).  This program benefits very few taxpayers, and has an extremely high error rate:  GAO found that 80 percent of recipients did not meet at least one of its requirements.
• Javits Gifted and Talented Education Program ($7 million).  Grants from this program go to only 15 school districts nationwide, and there are no empirical measures to judge their efficacy.
• Public Broadcasting Grants ($5 million).  USDA made these grants to support rural public broadcasting stations in their conversions to digital broadcasting.  That transition is now almost complete.
• Rail Line Relocation Grants ($25 million).  This program, duplicative of a merit-based program, is loaded with earmarks.

It is very easy for someone to say that a plan will not work and criticize it excessively.  It is much more difficult to offer sound alternative solutions in the light of such criticism.  Every time I hear the President speak I walk away feeling completely confident of our eventual recovery.  So I pull up my bootstraps and head out to do my part by using a small amount of purchasing power to help in the cause.  Just as I’m about to head for the door, I hear someone from the GOP screaming ‘oh my goodness…..the sky is falling….the sky is falling.’  So what do I do instead….I go out and buy an umbrella. 

The GOP has been all over the Sunday shows and the political spectrum shouting that the budget proposed by President Obama spends too much and will impose insurmountable debt on future generations.  Such an argument confuses the immediate priorities.  Who amongst us would forgo an opportunity to provide our starving child with food knowing that it will result in a larger credit card bill next month even if there was a possibility that the grocer may not accept credit and you may walk away empty handed.  In times of emergency all reasonably viable opportunities must be pursued.  Besides, give a child a fish and he/she will eat for a day. Teach a child to fish and he/she will eat for a lifetime. It is a much better proposition to sacrifice the funds now and clean up the ocean so that future generations can eat for a lifetime.

Unfortunately, the GOP have failed miserably at offering any plausible alternatives to the president’s budget that have not already been tried during the eight years of the Bush administration.  In spite of the fact that the GOP has all of a sudden got fiscal religion, lets revisit history for a moment in terms of its fiscal track record.  The budget was balanced for the first time in 30 years under President Bill Clinton.  That means that the four Republican presidents preceding Clinton (Reagan, Bush 41, Nixon, Ford) and the single democratic president (Carter) could not balance the budget.  Lets also remember that President Bush and a republican controlled Congress entered office with a 86.4 billion dollar surplus.  President Bush, with the help of a GOP controlled Congress six out of his eight years in office, left the presidency and the country with a staggering $638 billion dollar deficit.  One wonders if on the Titanic the GOP were the ones bailing water into the ship. Needless to say, the Republican party has absolutely no credibility when it comes to debt left to future generations or fiscal discipline in general.

The President proposes that the best way to bring down our deficit is to have a budget that leads to broad economic growth. It also makes sense that the president’s budget is inseparable from our economic recovery because it lays the necessary foundation for a secure and lasting prosperity.  The administration plans to create a new foundation for the economy by creating a new health care system, new energy technology, and achieving great progress in education so that it will enable us to become a much stronger competitor in the global economy.  There is an enormous need to counter the incredible drop in demand currently plaguing the nation and pull us out of this crisis.  The only sector with money to do so is the government.  That means that the government is the liquidity source of last resort right now. It must spend to stimulate demand and prevent us from sinking into a depression. As a matter of fact, the Congressional Budget Office (CBO), a nonpartisan body, says that the adoption of the Reinvestment and Recovery Act will help to end the recession by fall of this year. 

We must make the necessary investments in education, health care, and renewable energy infrastructure now in order to equip future generations for future and sustained prosperity.  So instead of just putting a band-aid on the broken economy this administration has opted to confront it, operate, and heal it.  The biggest drain on future funds is health care.  More specifically, Medicare and Medicaid.  Therefore, investing in an information technology system to make the health care industry more efficient will also contribute significantly to decreasing our deficit. Now that all the relevant players in the health care industry now recognize that the industry must be reformed including the majority of the GOP, twelve years later, but at least they are on board now, now in the time to do it.  We must face the fact that we as a people must make a tectonic shift in how we move throughout or day to day lives.  During this challenging time it will be inconvenient and we will have to make sacrifices now in order to secure a prosperous future.

Other obstructionist arguments offered by the GOP.

 The GOP argues that the small businesses will be hurt most by a tax increase on Americans making over $250,000 a year.

According to Politifact, a small business would have to ”make” $250,000 in net profit after deducting all his expenses (employees pay, supplies, and other legitimate business expenses) to be subject to the tax increase.  The nonpartisan Tax Policy Center says that only two percent of small businesses will be subject to the tax increase.  Which means that 98 percent will more than likely receive a tax cut.

Charities will lose by a decrease in the deductions allowed for charitable giving by the wealthy.  There will be a cap on such deductions for those earning $250,000 or more a year.

The best way to encourage and enable charitable giving is to have a flourishing economy. When the economy is booming people are much more charitable. In addition, a significant amount of charitable giving comes from low income people through religious institutions etc.

Requires a Cap and Trade or energy tax on all Americans.  

The cap and trade plan is designed to reduce green house emissions and address climate change in addition to investing in necessary infrastructure building. Further, building such infrastructure will enable us to decrease our dependence on foreign oil.  The plan will also move toward providing us with alternative sources of energy and provide millions of green jobs in the process.  Not to mention that it will help us to become an energy producing rather than an energy consuming economy.  This part of the president’s budget is a necessary investment in our infrastructure, by way of updating the electric grid among other things, for the jobs of the future.  Our outdated electricity grid is costing the U.S. over $100 billion dollars a year.  It wastes twice as much energy as it did thirty years ago.  We need to update and modernize our energy grid.  The GOP has criticized this part of the budget by referring to it as an energy tax. Why you ask? Because the GOP is significantly dependent on oil company money and it is not in the interest of the oil industry for the U.S. to become less oil dependent.  Why you ask?  Because the cap and trade plan will result in consumers using less energy (driving less)which cuts into oil industry profits.

Repealing tax credits to the oil and gas industry that may result in putting the industry at a competitive disadvantage.

Exxon Mobil shatters U.S. records in January 2009 by reporting profits of 45.2 billion for 2008.   Nuff said.

Where is the GOP’s budget you ask? They don’t have one.

See Peter Orzag’s blueprint of the 2010 budget and outlines our way to fiscal reponsibility.

The Fiscal Year 2010 Budget

This Budget puts us back on a road toward economic and fiscal health by:

• Being honest. If this Budget used the gimmicks employed in recent budgets, it would show a bottom line that would appear about $2.7 trillion better over ten years. For example, these other budgets didn’t include the likely cost of natural disasters or the cost of permanently continuing the temporary patch that prevents millions of Americans from paying the Alternative Minimum Tax. Using gimmicks may make good politics temporarily, but it doesn’t help move the nation forward.
   
• Cutting the deficit in half by the end of the President’s first term.  We inherited a deficit of $1.3 trillion or 9% of GDP in fiscal 2009. Even though we increase the 2009 deficit to give the economy a desperately needed jolt, over subsequent years we reduce the deficit by more than half by 2013, the end of the president’s first term: to $533 billion or 3.0% of GDP. As I mentioned above, we inherited a path of projected deficits adding up to $9 trillion over the next ten years – and our policy proposals will reduce those projected deficits by more than $2 trillion.     
   
• Reforming health care. At the President’s direction, we have begun the process of doing a line-by-line review of the Budget.  One of the lines we’ve started with is among the most important to the budget and to many other aspects of our economy: health care.As I have long said, health care is the key to our nation’s fiscal future – and there are substantial efficiency improvements that are possible to deliver better results at lower costs in the health system. In the Recovery Act and in this Budget, we begin to make the investments necessary to bring about these efficiencies over the long-term—such electronic health records and comparative effectiveness research—and also identify more immediate saving measures to slow the growth of Medicare and Medicaid spending. These savings are devoted to a health reserve fund, which will be available as we work through the legislative process on health care reform this year. This proposal is a starting point, not an ending point, for health reform as additional resources will be needed to improve and expand health care for all Americans.
   

• Making key investments. The Budget also makes key investments in education, energy, and infrastructure. It invests in early childhood education;makes Pell Grants for college into a reliable source of support for students and indexes their value above the ordinary rate of inflation so as to better keep up with the rapidly rising cost of college tuition; and helps at-risk students complete college.  The Budget also lays down a comprehensive approach to transform our energy supply and slow global climate change. And it makes infrastructure investments that will provide our nation a foundation for long-term economic growth.