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Commentary: The Elephants in the Recovery Room: Taxing the richest two percent
Published on December 13, 2012 Email To Friend    Print Version

By Mario Boothe

Republican and House Speaker John Boehner has his political plate filled to the brim with gravy and no meat. In other words, the experienced, middle of the road leader, who gained control of the Speaker position after Republicans seized the House of Representatives in the Tea Party conservative wave of the 2010 mid-term election cycle, has a continuously self-exiling fragment of his political party that contains ideologues and far-right principles preachers who have made a name for themselves in the last “big deal” fiasco over the budget and raising the debt ceiling, where the US credit rating was downgraded by Standard and Poor’s, citing “political turbulence and partisanship” as major factors for its decision.

What cliff… That cliff?

mario_boothe.jpg
Mario Boothe is a young aspiring political analyst, with a growing blog readership. He has been involved in the Jamaican political environment with his involvement in political organizations and groups. He has obtained an associate’s degree in hospitality and tourism management, majoring in travel and tourism.
This “fiscal cliff” that has been heatedly spun on the airwaves and academically sifted includes the automatic cuts created during the passing of the Budget Control Act. President Obama and lawmakers established a 12-member “super committee” to draft a bipartisan agreement with $1.2 trillion in cuts over the next decade. If the panel failed to draft an agreement, both sides agreed that draconian spending cuts would begin after New Year’s Day. The following are the mechanics of the deal according to the White House official website:

Mechanics of the Debt Deal

• Immediately enacted 10-year discretionary spending caps generating nearly $1 trillion in deficit reduction; balanced between defence and non-defence spending.

• President authorized to increase the debt limit by at least $2.1 trillion, eliminating the need for further increases until 2013.

• Bipartisan committee process tasked with identifying an additional $1.5 trillion in deficit reduction, including from entitlement and tax reform. Committee is required to report legislation by November 23, 2011, which receives fast-track protections. Congress is required to vote on Committee recommendations by December 23, 2011.

• Enforcement mechanism established to force all parties – Republican and Democrat – to agree to balanced deficit reduction. If Committee fails, enforcement mechanism will trigger spending reductions beginning in 2013 – split 50/50 between domestic and defence spending. Enforcement protects Social Security, Medicare beneficiaries, and low-income programs from any cuts.

As January 2013 approaches and with the “sequestration” on the horizon or at the bottom of the cliff, Obama finds himself trying to save the middle class from unbearable tax rate hikes that would come from the George W Bush-era tax cuts expiring on January 1, at the same time as the huge automatic spending cuts come into force, likely throwing the US and, by effect, world economies into recession. Obama wants to raise rates on the richest two percent of Americans but fringe Republicans, after most conservatives have decamped from the conservative stance fearing further damage to their political futures, want to extend all tax cuts for a year, then discuss spending cuts and tax reform to produce more revenues.

Learning from Reagan

President Obama campaigned for re-election on the basis of raising taxes on the wealthiest Americans, while Republicans, though open to raising more revenue, refuse to do so by raising marginal tax rates, so why is it that there is a holding out on allowing the rates go up on the top two percent, due to the mere fact that the average annual income of the 400 richest Americans has more than tripled -- to $345 million -- while their tax burden has plunged by 40 percent.

This Republican Party has been described as not being your “grandfather’s Republican party”. Ronald Reagan, now the fiscal hero of the party, once said, "Do you think the millionaire ought to pay more in taxes than the bus driver, or less?" But in his first administration President Reagan in the 1970s, when high inflation drove up wages and pushed the middle class into higher tax brackets, did an across-the-board tax cut that brought the top rate down to 50 percent. According to supply-side economists, the wealthy would use their tax break to spur investment, and the economy would boom. But unfortunately the Reagan tax cuts spiked the federal deficit to a dangerous level, even as the country remained mired in a deep recession.

Reagan repeatedly raised taxes after his failed experiment; and it took some intervention from Democrats. In 1983, he hiked gas and payroll taxes. In 1984, he raised revenue by closing tax loopholes for businesses. The tax reform of 1986 lowered the top rate for the wealthy to just 28 percent – but that cut for high earners was paid for by closing tax loopholes that resulted in the largest corporate tax hike in history. Reagan also raised revenues by abolishing special favours for the investor class: he boosted taxes on capital gains by 40 percent to align them with the taxes paid on wages.

Move it or lose it

It is projected -- more like expected -- that from this tax battle the Republican Party will probably create more space between them and the fringe quarters to prepare for its restructuring going into the next election, responding to the call of voting public for them to take on a new persona, more racially, sexually and economically diverse. There is no longer any space in Washington or the world for blockades of progressive and big ideas that can solve our problems, those bent on subjecting us to their “Our way or the highway” approach to governance have no place in government. It’s time for the “Elephants in the Recovery Room” to move it or lose.
 
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