I voted for Barack Obama because of only one issue: the Bush tax cuts.
Republican presidential candidate John McCain campaigned on a promise of extending Bush’s tax reductions for the rich, as well as subtracting another 80+ billion dollars from their tax bills. Obama insisted he was going to kill the Bush tax giveaways sometime after taking office, and my research showed this was the only intelligent thing to do.
The Bush tax cuts are one of the major reasons why only slightly more than 2 million private sector jobs have been created since June 2001 (less by the time you read this). On a per year average, this is the most pathetic job growth for any business expansion in United States history, no matter what criteria is used. The tax breaks are also a major reason why per capita real family income plummeted over $2,000 per year since Bush took office.
Republicans assume that if you give the rich such favors, they’ll invest their money and magically create jobs; but that’s not how most publicly traded limited liability corporations work.
When Bush slashed taxes for the investor class, he gave them billions of dollars they wouldn’t otherwise have had. CEO’s hungrily eyed the newly available cash because the stock markets had experienced large losses since the end of the Clinton years. In a time of weak demand, CEO’s needed to entice the beneficiaries of Bush’s generosity into purchasing their stocks, thereby bidding up their prices. In industry after industry, they did this by pushing up profits and dividends; and they achieved this by shipping jobs overseas, by laying people off and by cutting or holding steady real wages, salaries and benefits.
This is precisely how the Bush tax giveaways placed downward pressure on the growth of jobs, wages, salaries and benefits. And that’s why a ballot marked for McCain was a vote for increasing joblessness during the current financial crisis.
And here is where those tax cuts especially come into play. The problem with the U.S. economy isn’t the sub-prime mess. That’s only a symptom of the real problem. The mal-distribution of income and wealth during the past thirty years has created the current economic meltdown (That’s another story).
Obama’s stimulus may drag the economy out of the recession sometime next year, but without repealing the tax cuts, there should be a relatively swift return to economic meltdown after a short and feeble business expansion.
That’s why the president-elect should raise capital gains and income tax rates closer to fifty percent for any income beyond $250,000. Less money would then be available to bid up stock prices, and this would relieve pressure on CEO’s to cut jobs, wages, salaries and benefits.
To see the obvious, one only has to look at what occurred when President Clinton raised the top tax rate: record job creation, middle incomes rising in real terms, and the already giant wealth and income gap began to close, however slightly.
We also can’t forget the economy boomed from 1940 through the early 1960s, despite a 91 percent top tax rate. But those tax codes gave the affluent class incentives to invest in ways that helped the middle class sustain and grow; and this allowed many millionaires to pay a real tax rate far below 91 percent.
Obama and the Democrats would be doing all citizens a favor by raising the top tax rates while giving the wealthy tax breaks if they invest their money in industries that ensure domestic job, wage, salary, and benefits growth. Ultimately, this is what an economy is for, and that’s why Obama should follow through with his pledge to immediately reverse Bush’s tax cut folly.