So, as I predicted, Barack Obama and the Democrats have, with much handwringing about how sad they are to do this but had no choice, given the oligarchy all that they want, and more.
Obama announced that he had agreed to:
- Retain all the tax cuts given to the wealthy.
- Exempt from the estate tax inheritances up to $5 million while cutting the rate heirs pay to 35 percent for amounts above that. In 2009 the exemption figure had been $3.5 million exemption with a 45 percent tax rate, and this had been ‘temporarily’ reduced to zero this year. But it was due to return in 2011 to the $1 million exemption level and a top rate of 55%. So the heirs of the oligarchs get to keep the money to themselves. Paris Hilton must be so pleased.
- Keep taxes on unearned income low by having the top tax rate on capital gains and dividends (the source of much of the oligarchy’s wealth) be 15% for two years. In 2011 it had been due to become 20% for long term capital gains and 39.6% for short term.
In a gesture to unemployed, Obama extended the period of unemployment benefits but the oligarchy really does not care about a few crumbs tossed to the poor (or the deficit for that matter) as long as waves of money keep getting directed towards them.
In another gesture to the poor and middle class, Obama also cut the employee contribution to payroll (i.e., Social Security) taxes from 6.2% to 4.2%, so that their take home pay would increase. But being deeply suspicious as I am, I wonder if this alleged benefit also has an ulterior motive to favor the oligarchy. Remember that the oligarchy wants to raid the Social Security funds under the guise of ‘rescuing’ it from a crisis. But as has been repeatedly pointed out, there is no long-term Social Security crisis that cannot be solved with minor adjustments. Could this new move be a means of artificially creating a crisis, since revenues will now go down?
Obama is assuring everyone that the shortfall in Social Security revenues will be covered by general revenues. But that is not the point since the government was always obliged to cover the costs. The point is that as far as book-keeping goes, Social Security will now actually have a serious long-term deficit and this is what the raiders will point to down the road to argue that it needs rescuing.
Cartoonist Tom Tomorrow captures the essence of the charade that Obama, the Democrats, and the Republicans have been playing on us, though he seems to fall into the common liberal trap of thinking that Obama is naïve and ingenuous, while I think he knows exactly what he is doing and for whose benefit. One thing that Tomorrow gets exactly right is that it is telling that Obama’s ingratiating and obsequious approach to the Republicans switches to becoming really animated and angry at the very people whose energy and support propelled him to office.
There will still be some Kabuki theater with some rank and file progressive Democrats trying to kill this deal But the fix was in a long time ago. I hope I am proved wrong on this but I am not optimistic.
Hi, perhaps this can give you a smile: I have painted Barack Obama two years ago as Santa Claus, some weeks before he gets president. And I wrote on it: “Barack Obama is not Santa Claus. Do not expect from others to changeyour life. Merry Christmas …
Best wishes, Martin
Richard Frost says
Matt Taibbi’s latest blog post details how the Social Security “trust fund” has been comprehensively raided for years to pay for expenditures that should be covered by general revenue. Social Security taxes were raised to 15.3% in order to build up a trust fund for the boomers, but we then decided that it was more important to use the money for the crushing present needs of rich people and armed forces with nothing real to shoot at.
The redistributive aspect of this theft only exacerbates its depravity. Since Social Security taxes only apply to the first $106,800 of wages, unlike the infinite reach of Medicare taxes, they are paid disproportionately by the middle class. This would be fine if they were used as intended to pay for middle-class retirement benefits. But when they are surreptitiously transferred to the wealthy through tax cuts, we have a problem. Or at least we would have if anyone gave a damn.
This fact has actually been in political economy textbooks for years. We didn’t need Wikileaks to learn about it. It’s easy to blame Bush Junior for all that ails us, but the rot set in a long time ago.
Mano Singham says
I wrote a post about the use of the Social Security surplus to provide tax cuts for the rich nearly three years ago that I think you might find interesting.
Richard Frost says
Ok, thanks. Looks like you got there before Matt did!
Steve LaBonne says
In another generation or two we will be like China in authoritarian governance and economic inequality- but poorer.