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Decmber 10, 2010
So many things are wrong in this present Washington scenario. To be honest, so many things have been wrong in Washington since President Obama took office. Yes, indeed, ever since this man, made a historic U.S. presidential election, was warmly embraced by the international community and was crowned even with the most coveted Nobel Peace Prize shortly after he took office, something wrong had started brewing in Washington.
His star shone so brightly on his first year, his political rivals must be grinding their teeth in secret contempt and jealousy of this new president, who vowed to bring the promised change voters, especially the young and the independents, embraced with such passion. Back then, this president looked like a man of steel, a paragon of courage and iron will to do what was right. Back then he had his people on his back, soaring at the polls and looking unstoppable in bringing reforms to Capitol Hill.
What a difference two years make. The man that was once so sure of himself, persuasive in his speeches and easily credible seems to have lost his way. The shellacking his party got in the recent election must have convinced him that he must strive for bipartisanship to convince the people that he is willing to compromise with the Republicans to get things done.
And compromised he did but swore he did so for the greater good of working people, the middle class and their unemployment benefits. The Liberals and Progressives were fuming mad at the deal the President struck with the Republicans. They felt their President didn’t fight hard enough to end the tax cut to the top 2 percent rich from the Bush era which drove the U.S. economy to its collapse.
Do the Liberal and Progressive Democrats have the right to reject Obama’s tax proposal? Or, is the President right about saying he did the best he could to negotiate a fair deal for the working class and the unemployed? Here’s President Obama’s deal with the Republicans, in a nutshell:
Households making less than $40,000 a year will see an increase in their federal taxes. This is because President Obama’s plan will allow the Making Work Pay tax credit of $800 per household or $400 per individual to lapse. There are new tax breaks of a few dollars a week for these workers in his plan but they will not be nearly enough to make up for the lost credit.
On the other hand, this proposal will reward the rich with average tax breaks of $70,000 a piece. This includes the extension of income tax cuts to people in the top two tax brackets, costing the government $75 billion in two years. Furthermore, his proposed tax cut to the estate tax will cost the government $88 billion. The tax, which is applied to the inheritance of wealth, was temporarily repealed in 2010, under the terms that it will be reinstated in 2011 at a rate of 55 percent on estates over $1 million. Obama’s plan even sweetened the pot by cutting this rate to 35 percent on estates over $5 million. This estate tax will add to the budget deficit another $88 billion, with the money going almost completely to the wealthy few.
The plan also provides for a $200 billion program that would allow companies 100 percent tax credit on their expenses in equipment and software, which are already being deducted over several years.
An estimated cost of $100 billion will also be the result of the plan’s proposal to make the research and development tax credit permanent, a huge handout to the software and technology industry which had been enjoying this tax credit since 1981.
The 13-month extension of unemployment insurance which will cost only $56 billion is pathetic when juxtaposed with the tax credits to the rich and the companies, which is placed at $463 billion. While the President wanted the poor to middle working class to believe that reducing the percentage of workers pay to Social Security by 2 percent (from 6.2 percent of income to 4.2 percent) will help them, it must be noted that in the end, a lower contribution will only result in lower benefits. The Republicans are ecstatic, knowing such a band aid remedy can ultimately bankrupt the Social Security and thus cause a desperate and extreme reduction of the program.
If only for the above reasons, President Obama’s tax deal deserves to be repudiated by his fellow Democrats. More than that, it deserves a public outcry.