Thursday, January 27, 2011

State of the DisUnion

It was inevitable that progressives would be disappointed with President Obama's State of the Union speech. Personalities and showmanship aside, the content of the speech was not what liberals wanted to hear. I knew going in that he would be shifting toward the center and trying to position himself as a moderate who would work with the GOP to achieve common goals. It was still very difficult to listen to him abandon campaign promise after campaign promise.

Yes, renewed focus on education is vital to our future - and would hopefully provide more opportunity for the under-privledged in our country.

Yes, fostering new technological innovations would create jobs and stimulate economic growth. And if we could manage to re-educate the labor force to work in these growing (or future) industries, unemployment will decrease.

Yes, investing in our infrastructure would improve the efficiency with which our economy can transfer goods and information, which would make us more competitive globally.It would also have the added benefit of creating jobs in the very hard hit construction sector.

Those are all laudable goals and I completely agreed that if we want to remain competitive into the future and provide a better life for our children, these are the areas to focus our energies.I have very little faith that these goals will actually be achieved while the GOP controls the House of Representatives.

Reforming the tax code is all well and good, but do we really think that the Republicans are going to agreed to a corporate tax reform structure that actually increases the effective taxes for corporations in this country? Or a reformed individual income tax structure that actually increases the effective tax rates for the wealthy? Dream on.

Obama played right into the GOP's hand when he claimed the U.S. has high corporate taxes. We don't. Corporations pay about 2.5% of GDP in taxes. That's extremely low even among other developed countries including those social democracies in the European Union. Yes, there are other ways to evaluate corporate taxes and our top marginal corporate rate is high, but if you show me a company that actually pays that rate, I'll show you a bankruptcy in waiting. So cutting corporate taxes isn't really going to help anything except corporations. They aren't sitting on piles of cash, because they're worried about corporate taxes. They're sitting on piles of cash, because there isn't as much demand for their goods and services - because nearly 20% of us are un- or under-employed.

While I appreciate President Obama's call to end the Bush tax cut extensions for the wealthy, I find it comical that he, Rep. Paul Ryan (R-Wisconsin), and Rep. Michele Bachmann (R-Neverneverland) all attacked the deficit as our greatest enemy when all three of them supported extending those tax cuts. The hypocrisy is staggering.

Everyone needs to get it through their thick skulls that we'll only reach a balanced budget and a reduced federal debt through both spending cuts and tax revenue increases. There is plenty of sound economic research showing tax cuts do not increase revenues. So taxes have to go up for revenue to go up. Cuts alone will never get us there - not with the gridlock we see in Washington.

And now is not the time to balance the budget anyway. Our recovery is weak. Austerity measures could lead to a double-dip recession. Don't believe me? Did anyone notice what's been happening in the UK?

In May 2010, David Cameron and the Conservative Party took control of the UK government. 

In October 2010, the Conservative Party announced broad austerity measures.

 In January 2011, it was announced that the UK economy *contracted* in the 4th quarter.

They blame the weather. I'm sure it didn't help, but neither did the threat of austerity measures in a weak recovery. Well done, Conservative Party leadership.

I'm just dumbfounded how poorly our leaders understand economic principles.

Taxes aren't a threat to our liberty - they  help assure our liberty.

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