My Opinion of The Obama Tax Cuts

I just watched the live press conference held by Obama to address the tax compromise reached between the President and Republicans. If you haven’t heard, Obama agreed to extend the Bush-era tax cuts on the wealthy for two years in return for the following tax breaks desired by Democrats:

1. Parents raising children and paying for college tuition

2. Small-business tax cuts

3. A cut in payroll taxes

The compromise also prolonged unemployment benefits for 13 months, a provision pressed by Democrats, opposed by Republicans.

In the weeks leading up to this deal, the Republican majority in congress made it clear they would obstruct any form of tax legislation unless the President extended the Bush-era tax cuts. Obama caved to republican demands recognizing the impending damage of not letting taxes rise amid the economic recession. The President’s parable was, we typically don’t negotiate with hostage takers, but if it’s clear the hostages are going to be harmed, and those hostages are the majority of Americans, a negotiation is necessary.

I’ve been a Republican in the past, but I can’t in good conscious align with a party that will sacrifice all in the notion of one ideal, especially when that ideal is harmful in the current economic climate. Trickle-down economics does not offset deficits, does not create jobs, and does not help the neediest. Period.

Conversely, certain Democrats chafe because they view Obama’s compromise as his acceding to Republican obstructionism. These Dems say he’s stepping away from his principles, that he’s teaching Republicans to wield the power of blackmail. They ignore that failure to compromise would have left the economy, middle-class Americans, and poor Americans further crippled. This, as our nation claws itself out of a slick-walled recession pit.

As a result of this compromise, all Americans are taxed less than under W. Bush, Clinton, and H.W. Bush, when the tax cuts were first enacted. This is good because, for the time being, we need to grow our economy out of the recession. To do that, American people need money in their pockets (tax benefits for mid-class). Businesses need money to grow and hire (business tax cuts). Students need specialized education and training (tax breaks for parents paying their children’s tuition). The jobless don’t need additional hardship in this country, which we laud as humane and developed (unemployment benefit extension). And perhaps a little bit of the money saved amongst the the richest will trickle down through the economy too (Bush-era tax cuts). And therein lies the genius. As we battle the slump, a capital infusion will grease the economy's gears and hopefully give Obama some political capital for the next election.

The danger is that the cost of these tax breaks is tallied at $900 billion. Lay that beside our $14 trillion deficit and it’s no big sum, but it marks what's close to the last pilfering our nation's coffers will withstand.

Obama explained that a lot of those millions, billions, and trillions were warranted. “We’ve had two years of emergency, but we’ve got to have a larger debate about how we’re going to compete in the 21st century.”

To compete, as he said, we need to focus heavily on infrastructure, education, and green energy. These are the programs that will root America in 21st century economics. Unfortunately, they're all primarily funded by the government. The government gets money from taxes. That is a truth. There's no way around it. Starting in 2011, the government is getting less tax revenue than before, while our debts and deficits are greater than ever. The bottom line is, we can’t climb out of the deficit, we can’t compete in the 21st century without a greater tax base.

To keep the tax breaks, as the Republicans so desire, the government would have to make corresponding cuts. The first programs to go: infrastructure, education, green energy. These cuts will bleed or kill us in the long term.

Education – The most popular story running in the New York Times today was about Test Scores From Shanghai Stunning Educators because they’re astronomically better than ours. We rank 24th in the world for quality of education. That’s a harbinger for a power shift.

Green-Energy—Our dependence on oil and coal destroy the environment. Foreign oil funds the terrorists who attack us here and in the Middle East. The US could use tax revenues to fund programs for clean energy: domestic natural gas, electric cars, nuclear, wind, solar. A dramatic shift would be precipitated by governmentally funded programs. A dramatic shift would give the US political clout for bullies like Saudi Arabia, Iran, and Iraq because we would no longer need their oil. A dramatic shift would save our planet.

Infrastructure—The biggest economic lead possessed by the US now is in telecommunications. The tech sector gives the US billions of jobs and distinguishes our nation abroad as other countries look to us for innovation. China-based companies such as Huawei, however, are quickly growing, gaining revenues, and building out telecom infrastructure due largely to consolidated funding efforts from their governments. There’s no political bickering in the People’s Republic of China. Agreed? Cutting our telecom infrastructure will debilitate our communications, usurp our lead, and help usher a power shift.

So the danger is that, in the torrent of Tea Party tax furor, Americans will be blinded to what’s really happening.

The Republican tax cuts for the wealthy and the estate tax proposal ( which helps only 39,000 Americans) are piling onto a deficit by adding to China’s credit in treasury bonds while draining funding for programs that will make the US competitive in the future.