Tuesday, December 7, 2010

Bush’s Revenge: Or how Zombie Tax cuts Will leave the USA the land of the walking dead

We are supposedly $13.8 trillion in a deficit hole. A parlous (claimed) condition that will soon have the bond markets circling like hungry vultures to pick the bones of this country dry. Some even say (like members on Obama’s deficit commission) we are approaching an emergency. If so then riddle me this: WHY is more debt being created to try to reduce the existing debt? Especially debt via tax cuts when as a percentage of GDP, Americans are shouldering their lowest tax burden in 60 years!

If this is not insanity what the hell is it?

Is ANYONE paying attention? Is there anyone left with two functioning sane neurons? Is this what it looks like when political gamesmanship trumps reason and logic?

Look, say a household has two credit cards. Using one they manage to dig themselves into $20,000 of debt- mostly by reckless, indiscriminate spending. Also, shelling out $10,000 of nifty gifts for two rich (independent) sons. Now, facing creditors they decide this debt is intolerable so decide to get rid of it. They then use the maximum credit line of their other credit card and pay off the debt of the first- but with 23.9% interest attached since they can’t pay it off all at once.

In other words, they’re using massive debt to pay off existing debt.

This is exactly what the U.S. is doing with these misbegotten Bush tax cuts ALL of which should have been allowed to expire next year. Period. Full stop. TWO things can’t be true at once: a) the deficit is killing the country with $1 trillion just in interest paid each year, and b) tax cuts will create jobs and cut the deficit by people in those jobs spending money.

As I already showed in a previous blog: http://brane-space.blogspot.com/2010/12/nation-thats-lost-its-mind-moorings-and.html

(b) is manifestly false. A Financial Times study of the effects of the Bush tax cuts showed clearly that over the years of Bush’s reign little was done.

Now, if (a) then is true – and we have all indications the deficit IS as large as it is, WHY are we adding massively to that deficit?


1) To implement the 2-year extension of the Bush tax cuts to all – including the wealthiest (Lebron James for example, will receive about $666,000 each of the next two years free on top of his $14 million income) nearly $420 billion will have to be borrowed from China, and $60 billion from Russia. In other words, $500 billion borrowed from two nations for which we could find ourselves on the opposite side of any number of confrontations (Taiwan comes to mind, in the case of China)

People who yap about national security and country first need to think carefully about this.

2) At the new expiry date, in 2012, the extension of the same Bush tax cuts (like re-animated zombies)will come up for consideration again, but Obama insists he will let them fade then. Am I missing something? If you are not able politically to do so now, how can you do so in a re-election year? The answer is obvious: you can’t! The Repukes will howl like stuck pigs that Obama is planning a “massive tax hike” – and because the D-side never wins the battle of language and rhetoric then they will cave, as they have now – for the sake of political points, but the nation’s long term fiscal harm.

Thus- even BEFORE the election in ’12 we are looking at yet another 2-year (at least) extension of these damned cuts, and at least another $600 billion borrowed from China, or Saudi Arabia, to keep them. Plus another $600 billion to the deficit which will now be approaching the $15-16 trillion range – all other things being equal. If Palin or some other Repug wins in ’12 we can look for even more extensions of those zombie tax cuts and an even bigger hole.

The way could easily be open to the U.S. being in hock by more than $20 TRILLION in deficits by 2016! Plus, an unemployment rate still near 8% or more. (Since the core reason for the high unemployment is jobs being shipped off to Asia or Mexico, and until that halts or reverses – no amount of tax cutting will make any appreciable dent)

To make things even worse, Obama has agreed to allow a 2% payroll tax cut for two years as part of this noisome “compromise’. That means the total FICA tax will go down to 10.4% from 12.4%. This means decreased funding for Social Security and Medicare which are paid for via payroll taxes. (And note, this last year was the first in which Social Security paid out more than it took in, so this situation can be expected to be exacerbated)

People in this country need to wake up for once, get out of their brain haze and see the writing on the wall. Right now, every waking American ought to be bombarding his representatives with phone calls and emails telling them NOT to extend the Bush tax cuts - given the humongous deficit, and since they'd rather keep their Social Security and Medicare intact later, when they're on a fixed income. (It seems the pols never read the polls anymore which shows a clear majority against extension of the tax cuts, especially for the rich).

If these Bush tax cut zombies aren’t permanently put to rest now, the likelihood is they will keep coming back to wreak more fiscal havoc – deepening the deficit as we enrich Chinese bankers.

How in hell’s bells can ANY American worth his salt accept this? HOW can ANY politico, IF he believes the deficit is real and serious, and wants the best for the national welfare? Inquiring minds want to know! Well, we do know Bush tweeted the other day congratulating Obama on his "perseverance in staying the course" in Afghanistan. One wonders if he'll also issue up a tweet soon thanking the Prez for extending two sets of his tax cuts that had a sunset clause - finally returning them to the crypt next year. Zombies anyone?

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