The Obama Tax Cuts

Can we hear a little less about how Obama is just another tax-and-spend liberal? As the New York Times reported the other day, one third of the stimulus package consisted of tax breaks worth $116 billion, covering “95% of working families.” It also provides tax credits worth up to $1,725 for families with two children and a single parent holding a full time job that pays minimum wage.

Why does nobody know about this? More specifically, why does a recent New York Times/CBS poll show that less than one out of ten Americans are aware of the program? The Times offers one explanation, but I proffer two.

First, as the Times reports, the tax cuts, called Making Work Pay, have been difficult to discern because they were awarded in the form of withholding rates: the government took $800 a year less from checks sent by employers to married couples earning up to $150,000 and $400 a year less from individuals making up to $75,000. In other words, most families received an extra $65 a month. This is in contrast to the Bush administration’s strategy of mailing rebate checks, which was more noticeable. In spite of its self-evidently bad politics, the philosophy behind Obama’s plan is noble, as it maximizes the stimulating aspect of tax cuts and does away with the pitfalls of such a policy: unlike the conservatives, who idiotically cling to the discredited orthodoxy that tax cuts always work and pay for themselves (an idea that even Alan Greenspan has discarded), Obama’s economic team made sure that the extra money their tax breaks put into the pockets of Americans actually get spent, not saved. The withholding paradigm was deemed more likely to accomplish this than Bush’s rebate approach.

The second reason for the pervasive confusion is far more sinister. It’s because Americans are often ignorant and irresponsible. If they had made a serious effort to follow the news, and if the majority of those who do engage in politics had relied on credible sources for their information; or if they had actually paid attention to how much money the checks they receive from work are worth, they would have noticed the difference in government compensation.

But instead most people follow the news by heeding and cheering on disinformation-based shouting matches instead of relying on factually-sound sources. Consequently, whoever shouts the loudest wins, no matter how much evidence to the contrary can be produced. That’s why most Americans think their federal tax rates have increased even though they have actually decreased. That’s also why many Americans believe the new health care laws will add to the budget deficit in spite of the non-partisan Congressional Budget Office’s calculation showing that the legislation will likely reduce deficits by $143 billion during the next decade. That also explains why almost nobody is aware that the bailouts (the only legislative initiative undertaken by Bush that I consider necessary and successful) have in fact earned the taxpayers roughly $23 billion dollars in interest and dividends.

What makes this pathetic development all the more disheartening is that it’s yet another example of how Obama has been punished for his efforts to govern as a serious centrist who prioritizes results over politics. No matter what he does, the conservatives will grossly mischaracterize his initiatives. To take two salient examples out of a wide selection, they call him an “out-of-control” liberal who’s increasing taxes even though he has not only implemented his own tax breaks but is pushing to extend the Bush tax cuts for 95% of Americans, excluding the wealthiest 2% (because the latter are often apt to save rather than spend, which would needlessly add roughly $700 billion to the national debt that the conservatives claim to be so concerned about). Obama’s enemies also call him soft on terror even though he has dramatically increased drone strikes and special operations against terrorists in the Middle East and has waged a full-scale war against the Taliban and Al Qaeda in Afghanistan, measures that Bush, for all his disingenuous cowboy talk, never took.

And it seems most Americans are falling for these false portrayals of the President, and they are eager to do so in large part because the economy is still in an awful state, inducing many to seek out a scapegoat. But the only “solutions” the Republicans have proposed are to “cut spending” without adequately specifying how they would realistically do so, and to continue the Bush tax cuts for everybody. The astonishing irony is that all but the top 2% of Americans will see no difference in their tax rates if the Republicans gain control of Congress. Well, there may be one difference: there’s a good chance that they’ll have to pay more taxes because a—the Republicans will apparently block the Bush cuts if they don’t cover the wealthiest 2%, and b—there can be little doubt that the right will oppose expanding the Obama tax breaks after they expire next year simply because it was the President who put them in place, and according to the Times Obama wants to extend them. Considering that the Republicans have already resisted efforts to lower taxes and increase loans to small businesses, there is good reason to presume they will repeat this hypocritical and contemptible approach, especially since the American people have thus far rewarded them for their disgusting behavior.

As we head into the final days of the campaign for congress the Republicans appear poised to make huge gains. But Americans itching to express their anger at Obama and the Democrats had better take a warning. If they elect a Republican majority, 95% of the people will likely receive at best the same level of tax breaks that they would have otherwise obtained anyway and at worst a rise in their rates. And on top of this, such an outcome would make it much harder for the President to enact serious legislation that would create jobs and improve the country, such as investing in infrastructure and clean energy.

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