Robert Reich: Obama's choice: Fight fire with gasoline

[woo me with science]

http://www.salon.com/news/politics/war_room/2011/02/14/reich_obama_budget/index.html

Obama's choice: Fight fire with gasoline
The president proposes a budget with spending cuts ... which have nothing to do with reviving the economy

By Robert Reich

Republicans want America to believe the economy is still lousy because government is too big, and the way to revive the economy is to cut federal spending.....Today, Obama pours gas on the Republican flame by proposing a 2012 federal budget that cuts the federal deficit by $1.1 trillion over 10 years.

It’s the wrong debate about the wrong thing at the wrong time.

To official Washington it seems like 1995 all over again, when Bill Clinton and Newt Gingrich played a game of chicken over cutting the budget deficit....But the 1995 playbook is irrelevant. In 1995 the economy was roaring back to life. ...In 2011 most Americans are still in the throes of the Great Recession, which was caused by the bursting of a giant debt bubble. The Fed can’t reverse course by cutting interest rates; rates have been near zero for two years.

Big American companies are sitting on almost $2 trillion of cash because there aren’t enough customers to buy additional goods and services. The only people with money are the richest 10 percent whose stock portfolios have been roaring back to life, but their spending isn’t enough to spur much additional hiring.

The Republican bromide -- cut federal spending -- is precisely the wrong response to this ongoing crisis, which is more analogous to the Great Depression than to any recent recession. Herbert Hoover responded the same way between 1929 and 1932. Insufficient spending only deepened the Great Depression.

The best way to revive the economy is not to cut the federal deficit right now. It’s to put more money into the pockets of average working families. Not until they start spending again big time will companies begin to hire again big time.

Don’t cut the government services they rely on -- college loans, home heating oil, community services, and the rest. State and local budget cuts are already causing enough pain.....
....

(Progressive taxation) will get the economy growing again....But we can’t get to this point – or even to have a debate about it – if Obama allows Republicans to frame the debate as how much federal spending can be cut and how to shrink the deficit.

The President has to reframe the debate around the necessity of average families having enough to spend to get the economy moving again. He needs to remind America this is not 1995 but 2011 — and we’re still in a jobs crisis brought on by the bursting of a giant debt bubble and the implosion of total demand.

[ProSense]

1. The investments in the budget have something to do with reviving the economy. Still

Reich's proposal is interesting.

<...>

The most direct way to get more money into their pockets is to expand the Earned Income Tax Credit (a wage subsidy) all the way up through people earning $50,000, and reduce their income taxes to zero. Taxes on incomes between $50,000 and $90,000 should be cut to 10 percent; between $90,000 and $150,000 to 20 percent; between $150,000 and $250,000 to 30 percent.

And exempt the first $20,000 of income from payroll taxes.

Make up the revenues by increasing taxes on incomes between $250,000 to $500,000 to 40 percent; between $500,000 and $5 million, to 50 percent; between $5 million and $15 million, to 60 percent; and anything over $15 million, to 70 percent.

And raise the ceiling on the portion of income subject to payroll taxes to $500,000.

It’s called progressive taxation.

<...>

The debate about reforming the tax code is going to be interesting.

[jwirr]

4. Actually like that idea and as an old FDR democrat I think that is the

only way to get the ball rolling again. Also by doing it that way the people can make the decision as to how the money will be spent. My family would use ours to continue the move to self-sufficiency. Several more greenhouses. A colony of bees. Things like that.

[zipplewrath]

8. Show the voting patterns

I think it would be interesting to match those income levels, with associated voting patterns. I'd bet a couple of bucks that the voting is inversely proportional to the tax rates he proposes. Also, without a discussion of the capital gains rate, those income levels are meaningless, since so many in them obtain their income through capital gains.

[xchrom]

2. GE paid under 4% corporate tax for 2010 i think it was --

reform the tax code indeed.

[mascarax]

3. I'm surprised GE paid anything

Since others pay 0%.

[xchrom]

5. I hear ya.

But it's that guy from ge that Obama put right next to his ear.

[polichick]

6. The way this prez adopts Republican lies is disturbing - and flat out wrong. nt

[Avant Guardian]

7. The fact corporations sit on two trillion

Waiting for a demand proves that supply side economics does not WORK!!

Hear that Obama?