The New Obama Stimulus and Tax Tango
Later today, the House is expected to vote on HR 4853 — the “Tax-Cut-and-Stimulus” package that President Obama recently negotiated with the Senate.
Since this so-called compromise bill that would extend the current tax rates for two years first came out, I have had very mixed feelings about it.
On one hand, keeping the current tax rates the same will help avoid a potentially disastrous downturn in the struggling economy. On the other hand, the tax rate extensions have been combined with an additional 13 months of unemployment benefits on top of the two years of benefits already pushed into law. The Obama bill does not have any offsets to pay for this deficit-growing portion. The death tax is also addressed in the bill by substituting a 35 percent tax.
Then we find out that the bill includes more ethanol subsidies and we know government intervention in that industry has harmed the chicken industry and helped raise our gas costs.
Then we find that the Social Security tax is reduced 2 percent from 6.2 percent for two years, which dramatically damages the solvency of Social Security even further. When I proposed my Tax Holiday bill, the costs were going to be offset by money allocated to TARP. This new proposal has nothing to offset the costs, meaning huge new debt and quicker Social Security default. The more I thought about it and discussed it with economists, I realized that when the two years of this rebate expired, few members of Congress would want to be on record raising that tax on the employee, so there may well be a push to add that to the employer’s portion which would further devastate job growth.
Then I heard from investment analysts who have said businesses considering expansion are not likely to take out a five-year loan knowing they could only be assured that tax rates will remain the same for two years. So, temporary tax extensions are unlikely to help the economy as some had thought.
Then I learned of the subsidies for city commuters that would further drive up the deficit while doing nothing for the non-suburban areas that have also suffered economically, like east Texas. Then we further learned of additional deficit-raising federal expenditures for payments to solar and wind energy projects, while job-providing oil and gas exploration is still severely restricted.
On reviewing the enormity of the “deal” that was cut, it seemed that conservative columnist Charles Krauthammer may have had a point when he said the following this week: “Barack Obama won the great tax-cut showdown of 2010 — and House Democrats don’t have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years — which just happen to be the two years of the run-up to the next presidential election.
Since the proposed bill is not a tax cut, it is not going to stimulate the economy but rather temporarily avoid more harm. Republican Speaker-elect John Boehner, who had promised fiscal responsibility says this is the best deal we could possibly hope for and that the deal could get worse next year. I disagree.
On Jan. 5, Republicans take the majority in the House. Our leadership promised if we took the majority we would bring down the deficit and stand firm on our principles. Yet, our first act is to refuse to do those things. If we stand firm that businesses need more than a two-year assurance of tax stability and have a bill ready to pass on Jan. 5, we should get a far better deal for the economy, our future and our nation’s future.
Think about it: If the Democratic majority refuses to budge on this vast, deficit-expanding bill and cannot pass it with their own votes, taxpayers will be screaming at the president on Jan. 1. We will need to make clear that we are ready willing and able to pass a clean bill with the current rates extended on Jan. 5, when we as a new majority are sworn in.
The only reason the Democratic Senate and the president would refuse to pass and sign such bill into law is so they can play a game of “Class Warfare” and continue to divide America despite years of saying he was a uniter. Taxpayers who receive less in their first check will make clear to the president to quit playing the “divide-America-game” and extend the tax rates across the board.
Republicans must realize that if we continue to show we will vote for huge deficit spending to get what we want, there will be no end to deficit spending We must show the Democratic leadership and the administration they can’t keep buying our votes for bigger deficits. In this case, there is a better bill ready to go Jan. 5.
Considering all the aspects of the Obama Tax Deal, it does sound like a couple of weeks of patience and standing on the principles we promised should yield a far better deal for taxpayers and the economy. We can pass a bill early next year and make it retroactive so people aren’t hurt by tax hikes. My request is please don’t panic. Let’s do what is truly right for America and not grab the first, worst offer made.