“Sounds like voodoo economics.” — George H.W. Bush in 1980 commenting on Reaganomic tax cuts for the rich.
It comes as no surprise to most of us that 2+2 does not equal 22.
But the current debate over Bush-era tax cuts is based on an illogical equation. The goal of any tax plan should be to stimulate the economy, produce jobs and ease the burden on working and middle-class Americans. Anything else is pretending that 2+2=22.
The 2001 tax plan adopted to stimulate the economy was heavily weighted in favor of higher income taxpayers. Middle- and working-class Americans got crumbs while the upper echelon got a seven-course meal. And since the start of the great recession in 2007, the incomes of average Americans have plunged while those of CEOs and bankers have soared.
An extension of tax cuts for the highest income groups makes sense only if tied to measures that will bolster economic growth. That means support for business investment, small businesses, and another extension of unemployment benefits. Two million unemployed will exhaust their benefits at the end of the year if there’s no extension. It is twisted logic to claim the country can’t afford another unemployment benefit extension while simultaneously fighting to explode the deficit with another big tax break for the rich.
The reality is, the increase in income for high net worth groups resulting from the Bush tax cuts was not used to create jobs in America – much of it in fact was invested overseas. Employment rose only 0.9 percent between 2001 and 2003. Tax cuts for the top 5 percent was simply a bad investment by any measure.
Those in the “tax-cuts for the rich” crowd who claim deficit reduction as an ultimate goal are talking out of both sides of their mouths. The inequity of their proposal is compounded by the absurd fact that it will actually exacerbate the deficit problem by adding another $700 billion to our current $1.3 trillion national debt over the next 10 years.
Any extension of tax cuts for the highest income groups not only should be tied to job-creation measures, but they should be temporary – limited to no more than three years. If the top 5 percent is getting a seven-course meal, middle- and working-class Americans must be guaranteed at least an entrée.
How, in good conscience, can we give tax breaks to the wealthiest while denying unemployment benefits to middle and working class Americans who have lost their jobs through no fault of their own? How can we make it possible for millionaires to buy an extra Mercedes each year, while middle-class families are struggling to pay bills and send their kids to college? How can we continue to give tax breaks to individuals and companies that are shipping jobs overseas, while 15 million Americans are desperately looking for work? President Obama should not allow the return of voodoo economics. He should not cave to a Congress pretending that 2+2=22. The country has nothing to gain from any attempt by the president to appease those who have already declared their only goal is to assure his defeat in 2012 – even if that means making a dire economic situation worse.
Marc Morial is president and CEO of the National Urban League.