Friday, December 24, 2010

THE WEALTHY AND THE "LAME DUCK" SESSION

People seem surprised at the compromise between the Republicans and the Democrats on the tax policy for the next two years, but it really isn't such a mystery. The Republican party is all about the wealthy, and they will agree to most anything to keep the taxes low on the wealthy. During the George W. Bush administration, they wanted to lower the highest tax rate from 39.6% to 35%. When they saw this would not fly, they included tax breaks for the middle class and the poor. So in 2010, we saw the Republicans retain the 35% top income tax rate for the wealthy but agreed to many compromises on keeping the existing tax rate for all plus some other benefits like lowering the Social Security payroll tax by 2% and extending the unemployment insurance for 13 months.

It seems clear that the Republican party will agree to almost anything to preserve low tax rates on the wealthy. The Republican Party is all about preserving and increasing the fortunes of the wealthy. Their philosophy is called "trickle-down economics" in which the rich have the money, and they spend it with some money trickling down to the middle and poor classes. The fallacy in this, aside from the wealthy not being elected by the lower classes, is that all the money doesn't trickle down. The wealthy buy bonds, both Treasury and foreign government bonds as well as corporate bonds. Some of the corporate bonds may be productive, but, if they are to pay down debt to lower interest rates, they aren't. They also buy things like chalets in Switzerland, islands in the Bahamas, and Canadian bombardier personal jets which may trickle down in the global economy but not in ours.

The wealthy know there aren't anywhere enough of them to win elections so they have to get allies. The most important of these are the religious right which has the energy generated by righteous indignation and the Southern Strategy. Something that I have never understood, however, is the number of non-union laborers who vote Republican. I can understand that they might be upset by the Democratic party emphasizing the rights of disadvantaged groups like minorities, women, and more recently homosexuals, but they don't get anything from voting Republican. If fact their wages are decreasing and being outsourced by the party they vote for.

But the compromise bore fruit that let the wealthy keep their low taxes (the increase was going to be only from 35% to 39.6%) and reinstate the inheritance tax at 35% for the next two years on estates above $5 million even though the compromise will increase the deficit by nearly a trillion dollars. The result was one of the most productive "lame duck" sessions that I can recall. They passed the new Start Treaty which surprisingly the Republican Senatorial leadership opposed for reasons unknown as the administration acceded to a number of their demands, they eliminated the Don't Ask, Don't Tell provision for being in the armed forces (which itself was a compromise during the Clinton Administration),** and the health plan for the first responders in the 2011 Trade Center disaster. The one important bill that was overturned was the "Dream Act"* which would have given Conditional Permanent Residency to children of illegal immigrants who grew up in the country if they went to college for two years or joined the military forces for two years. They would get permanent residency if they got a degree or finished two years of college in good standing or served two years in the military and received an honorable discharge. I can see no reason not to give Conditional Permanent Residency for six years to anyone who joins our military forces for two years or Permanent Residency if the served two years and received an honorable discharge as they are risking their lives to get it (Heck, I would give them citizenship.), but perhaps the objection was the provision about going to college. This was not the first time this act appeared before congress as it was introduced to the Senate in 2001: http://en.wikipedia.org/wiki/DREAM_Act

Once gain the come Back Kid has come back.

* The DREAM Act is an Acronym for Development, Relief and Education for Alien Minors Act.

** See In The End Liberalism Wins: http://stopcontinentaldrift.blogspot.com/2009/12/in-end-liberalism-wins.html

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