Godheval

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How is the party with the clear advantage put on the defensive?   Probably because President Obama was insistent upon “reaching across the aisle” – which while honorable – opened the Democrats up to political attack.  It would seem to me that the skeleton crew of Republicans remaining after the massive Democratic victory in November, are those who are the most ideologically opposed to any Democratic initiative.  After all, Republicans in conservative strongholds were unlikely to lose their seats, meaning that most of the casualties were the more moderate in the party.

Therefore, President Obama would be more reaching across a chasm than an aisle.  And really, bipartisanship for bipartisanship’s sake is absurd.  The Democrats won handily, which signaled an ideological shift amongst the electorate, and left no real need for bipartisanship.  The voters elected to place the future – at least temporarily – in the hands of the Democrats, in the hope that they would at least do things differently than the previous administration.  It’s my opinion anyway, that partisanship is an unavoidable consequence of having parties at all, and I’d just as soon seem them dissolved.

Bipartisanship, in any case, would require a “reaching” from both sides, and in spite of President Obama’s efforts, it is pretty clear that most sitting Republicans had no real intention of doing so.  They are probably still in the process of licking their wounds and attempting to repair their damaged pride – and be damned if they were going to concede any further victory to Democrats in the way of compromise.  That much is obvious in how they used minor flaws in the House bill to criticize the overall initiative.  Furthermore, there is the irony of criticizing spending while advocating for sweeping tax cuts, both of which amount to the same thing – a massive and sustained national debt.  Both spending and reducing taxes bring about similar, if not the same results – and the Republicans’ proposed tax cuts would near triple the Democrats’ projected spending in a few years.

Adding to the confusion is the fact that there are two separate bills – the House version and the Senate version – which while they overlap considerably, will require some serious reconciliation before a final version can reach the President’s desk.  The Senate version, which initially raised the overall tab to more than $900 billion, has since been trimmed down in another attempt at compromise between Democrats and the few remaining moderates amongst the Republicans.   While some of those cuts came from the more extraneous provisions of the bill, a sizeable portion came from the bedrock of the Democratic agenda – most lamentably, funding for education.

So as I said in the beginning, the only thing that’s clear about the stimulus is that nothing is clear.  Hardly anyone can agree – with differences appearing between economists, along party lines, within parties along ideological lines (liberal vs. moderate vs. conservative) and even between the two houses of Congress.  Personal interests taint if not fully steer any motivations for supporting or opposing the legislation – Democrats stuffing it with agenda items, Republicans fighting it to make a political point, and individuals within each party arguing to ensure their own priorities are adequately represented in the final version.  All of this superseding the purpose of the bill  – to stimulate the economy.

With all of this bickering and maneuvering and chaos, how is anyone – most of all the average citizen – to make any sense of this debacle?  Because hardly anyone can agree, and because even economists – the presumed experts on the subject – can only speculate on the outcomes of any stimulus bill, we can only follow in the politicians’ footsteps, and evaluate the merits of the bill through the lens of those issues that are most important.  For those few of us who support ideology before candidates, and try to remove ourselves from partisan bickering, it would seem to be the only option.

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1. Five Percent Across the Board Income Tax Cut – This provision would reduce the six federal income tax rates by 5% beginning with 2008, and make the new rates permanent.

If the purpose of an economic stimulus is to provide individuals and families with some relief so that they can more confidently participate in our economy, then a tax cut is clearly a good idea.

2. Increase child tax credit from 1,000 to 5,000 – Under current law, families are eligible for a $1,000 tax credit for each child under the age of 17.  This provision would increase, and make permanent, an increase in the child tax credit to $5,000 beginning in 2008.

I am in favor of anything that provides relief to families with children.  However, I feel that there needs to be some oversight for this kind of thing, to ensure that families are not exploiting this benefit.  I am not certain how it could be implemented, but it needs to be mandatory for families receiving this tax cut to spend a certain percentage of their income only on goods and services that directly benefit the children.  I fear the American tendencies towards excess that would see this money being spent on things that are unnecessary, with no change in the livelihoods of the children.

3. Make the Lower 15% Rate on Capital Gains and Dividends Permanent – Under current law the lower rates (15%) currently in effect expire at the end of 2010, which means that the top capital gains rate will go back to 20% and the top tax rate for dividends will be 39.6%.

I fervently disagree with this provision as it appears to only benefit the wealthy.  If it were amended to benefit only those making beneath a certain income – say $200,000, then perhaps it would be more reasonable.  Although everyone is suffering in these harsh economic times – relatively speaking – the extremely wealthy are still at least very wealthy and will manage even with the capital gains tax increase.

4. Repeal the Alternative Minimum Tax on Individuals  – The AMT was created in 1969 to prevent 155 wealthy taxpayers from using loopholes in the tax code to avoid paying taxes altogether.  Under current law, the tax will hit more than 30 million people in 2009.

Again I disagree, because I am skeptical of completely eliminating something for the sake of the wealthy.  However, after reading about the AMT, pros and cons, I agree with those who think that it needs to be examined and perhaps reformed.  It can’t hurt to take a look and revise it for our current economic needs.

5. Permanently Repeal Required Distributions on Retirement Accounts – Under current law, senior citizens, beginning at the age of 70-and-a-half, are required to make mandatory withdrawals from their IRAs and 401(k)s.

If anyone’s suffering during these times, it’s the elderly.  My job has made me quite aware of the the ridiculously high costs of eldercare, and the insufficiency of medicare and medicaid to cover their expenses.  If this provision will truly provide them with relief, then it is a good thing.  Furthermore, I do not even understand why seniors should be forced to do anything with their money that they do not wish to do.  The reasoning behind the required distributions escapes me.

6. Make All Withdrawals from IRAs Tax- and Penalty-Free During 2009 – As a general matter, the purpose of 401(k)s and IRAs is to incentivize retirement savings. However, individuals who are facing foreclosure or some other financial emergency during the current recession should have penalty-free access to all of their savings.

It is easy to see how this relates to economic stimulus, so I agree with it for the same reason that I agree with the across-the-board tax cut.  While this will do virtually nothing for the lower class, who for the most part do not have IRAs and 401(k)s, it will be worth it for the middle class who have invested well.

7. Increase by 50% the Tax Deduction on Student Loans and the Tax Deduction on Qualified Higher Education Expenses -this would increase by 50% the tax deduction of for interest on student loans and higher education expenses to $3,750 and $6,000 respectively.

As a member of the [lower] middle-class who can personally attest to the crippling burden of student loans, I have to agree with this provision.  I didn’t even know until now that I could claim these deductions at all.  Too bad I’ve already filed for 2009.  In any case, this will most certainly help struggling families, since colleges and universities, regardless of the economic climate, only see fit to raise the cost of education.

8. Full Immediate Expensing – would allow all businesses to immediately expense—or fully
deduct on their tax returns—the costs of assets (including buildings) they purchase for their business in the year that they buy such assets.

I agree with this provision in principle, but only businesses with revenue below a certain amount, so that it cannot be exploited by wealthy and greedy corporations the same was as the  the bank bailout.  Furthermore, it should have a statute of limitations, and be extended only so long as it is necessary for fixing the economy.

9. Significant Reduction in the Top Corporate Income Tax Rate – The bill would immediately cut the top corporate income tax rate from 35% to 25%

Here’s where the Republicans show their hand as pro-corporate.  Still, I can agree for businesses making beneath a certain amount (say $500,000), for the reasons mentioned above, but there must be rigorous oversight to ensure that this is not exploited.  It also should not be permanent.

10. End the Capital Gains Tax on Inflation – Under current law, the capital gains tax is based on the difference in the original purchase price of the asset and the sale price of the asset. However, some of this difference, or “gain,” can be attributed to inflation

I think this needs to be analyzed thoroughly to determine just how much gain can be attributed to inflation, so that this is not just another tax-cut for the wealthy and corporations disguised under a separate pretext.  Unless individuals are taking a major hit (relative to their wealth) as a result of this tax, then I don’t think it needs to be repealed.

11. Simplify the Capital Gains Rate Structure – allow corporations to benefit from the
15% capital gains rate.

Absolutely not, unless accompanied by a strict limitation on employee raises/bonuses, to prevent CEOs and the like from pocketing the extra money or the company from splurging on unnecessary expenses like executive hotel parties.  Did we learn nothing from the unlawful excesses of AIG executives?

12. Make the R and D Tax Credit Permanent – The Research and Development tax credit is currently due to expire at the end of 2009.  Originally enacted as party of President Reagan’s Economic Recovery Tax Act of 1981, it has since been extended on 13 separate occasions without being made permanent. The purpose of this tax provision is to spur research and development in the private sector.

I completely disagree with this provision.  The tax credit should continue to be observed and extended where plausible, to prevent exploitation.  A company could feasibly categorize nearly any expense as “R&D”, and so oversight is required before any tax credits can be given.  Were our current financial burdens not the result of the disgraces of wealthy corporations, then perhaps we could be more lenient, but as things stand now – especially in light of how the bailout was handled – tax credits for companies need to be streamlined and tightly regulated.

There are a few provisions in ERMCRA that I do not understand, and as such I will not comment on them.  Overall, I’d say that the bill is strong for how it proposes to stimulate the economy and provide families with immediate relief, but as with all things Republican, I am skeptical of any provisions that mostly (or only) benefit the wealthy and corporations.  And it seems that much of this bill involves tax cuts for those very groups, only under given a variety of different names.

To be clear, I am not necessarily opposed to tax cuts for the wealthy – which is why I have no problem with the 5% across the board cut. After all, it is only fair.  But those things which only benefit the wealthy, the country – the majority of which are not wealthy – can do without.  The wealthy always have the option of giving tax-deductable donations to charities, which allows them some greater measure of control of where their money goes.  If they are not inclined to give, then neither should the rest of the country be inclined to shoulder their tax cuts.

I am also not necessarily opposed to tax cuts for businesses, especially not small businesses which for in many cases are merely self-employed individuals.  As for the larger corporations, any tax cuts granted to them must come with mandatory oversight – I can’t state that enough – and with the expectation, if not obligation, that they use the money to create new jobs for Americans.

So while ERMCRA has some fine provisions, it is in need of some serious revisions, so that its purpose remains economic stimulus, and not libertarian-style deregulation – which has only proven to broaden the socioeconomic gap between the rich and poor, and completely ignore the middle.  This may all be moot, however, as the Republicans probably lack the support to see this bill pass the House.  Still, one would hope that whatever form the final stimulus package takes, that it takes some of the more useful items of ERMCRA into consideration – in the name of bipartisanship, and for the sake of the economy.

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Second is that Obama has consistently moved towards the political “center”, against the ideology of many of the people who supported him, to maximize his electability. From a purely political standpoint I understand it, but I can only hope that he returns to his liberal roots. Furthermore, as many progressive commentators have observed, Obama got the vote of the left by default. He did not have to work for it, and so he was not held accountable BY the left.

Just because it was the people in the center – those ever hard to define “independents” – who may have pushed Obama over the line, he would not have even been a contender were it not for the the people on the left who voted for him in huge numbers. The left MUST hold him accountable after he has taken office, MUST have his ear more than the lobbyists.

The economic and political climate changed dramatically during the Presidential campaign, and in a way that no doubt gave Obama the edge where he previously might not have had it. Because of that, we can expect him not to be able to deliver on all of his campaign promises. There is one promise that he MUST keep, however, and it is one of his first – to not succumb to “special interest groups”.

As of now, I am concerned about his choice of Rahm Emmanuel for chief of staff, given that man’s background and history as not only a quintessential Washington insider, but a member of the pro-Israel lobby. While I am not someone who thinks that “pro-Israel” always has to mean “anti-Palestinian” or “anti-justice” – I’d like to see peace for all people in that region – that is what it has amounted to historically. The choice of Emmanuel represents – especially to the people of the Middle East – a maintenance of the status quo instead of any real “change”.

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