Paul Krugman Rightly Critical of Obama's Commission on Fiscal Responsibility and Reform

In a column in today's New York Times, Paul Krugman assails President Obama's "National Commission on Fiscal Responsibility and Reform." Calling it "The Hijacked Commission",  Krugman is responding to the recently released comments by the Commission's Chairs entitled "Guiding Principles and Values".

Krugman's analysis - "Under the guise of facing our fiscal problems, Mr Bowles and Mr Simpson are trying to smuggle in the same old, same old - tax cuts for the rich and erosion of the social safety net."

Here is part of Krugman's analysis:

"...what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?"

In a poll of Midterm Voters done by Democracy for America they asked to pick between the following choices and got the following response:.

1. Congress should make up for possible budget gaps by cutting Social Security benefits?
 agree - 4%
2. Congress should make up for possible budget gaps by changing the social security tax to also apply to income above $108,000, which currently is not taxed by Social Security?
agree - 55%
3. Congress should not make any changes to Social Security?
agree - 31%
Not sure - 11%

Clearly proposals to cut benefits for working families and retired citizens whatever their political persuasion are not going to be popular. They are not solutions that would benefit most Americans.

As Nickolas D Kristoff writes in a column in the New York Times entitled "Our Banana Republic",  the solutions to our fiscal state in America will not be solved by right wing proposals supported by corporations and the wealthy. America is becoming the land of opportunity only for the wealthy and proposals for more tax cuts for the wealthy makes it harder for working families in America to survive.

While Republicans and Tea Party Conservatives argue for extending the Bush tax cuts for the wealthy, they do so in the face of the ugly reality that the rich in America are accumulating more and more of America's wealth. Working class families struggle and find it harder and harder to make ends meet.
As Kristof  points out,  the wealthy are accumulating more and more of our country's wealth.

The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.

C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.

That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.

The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.

Republicans are arguing that taxing the rich will hurt small businesses because they will not have the money to spend on reinvesting in their business.  This is nonsense, because any money invested in their business is pre-tax money. It gets written off as a business expense and would not count toward calculation of any income tax owed. To me it seems that more investment is likely in small business if personal income  taxes are higher on the wealthy because then they can spend the full amount on their business without having to pay tax on it.

Republican Hypocrisy on the Deficit

Republicans continue to harangue about the deficit but are hypocritical. Many of the continuing causes of the current Federal deficit are the direct result of actions espoused and supported by the Republicans.  These include the actions taken by the Bush Administration to wage 2 wars without new funding, pass new legislation to help people pay for prescription drugs without providing any new funding, pass  tax cuts for the wealthy that did not produce new revenue or jobs as a result and support a bailout for the economy in the final months of the Bush Administration.

Now they want to say it's all Obama's fault. The Republican game plan if elected will not be to make taxes fairer or increase revenue to cover existing programs.  It will be to use the deficit to further cut Federal programs that help the needy, the poor and less fortunate.  For example, they want to roll back the newly passed health care legislation which will reduce the donut hole on prescription drugs, prohibit health care companies from denying health care based on pre-existing conditions and roll back a program to have your children on your insurance through age 25.

But more importantly they want to re institute the Bush tax cuts which helped the rich keep more money in their bank accounts but did not increase jobs or income for most middle class Americans.  As Paul Krugman says in today's  New York Times,

"... flirting with crisis is arguably part of the plan. There has always been a sense in which voodoo economics was a cover story for the real doctrine, which was “starve the beast”: slash revenue with tax cuts, then demand spending cuts to close the resulting budget gap. The point is that starve the beast basically amounts to deliberately creating a fiscal crisis, in the belief that the crisis can be used to push through unpopular policies, like dismantling Social Security.

Reinstating the Bush tax cuts would cost another $650 billion or more according to Paul Krugman. He quotes Senator John Kyl of Arizona as saying that "... you should never have to offset the cost of a deliberate decision to reduce taxes on Americans.". Senator Kyl is the second highest ranking Republican in the US Senate. The Bush tax cuts benefiedt the very wealthy, not middle class Americans. I guess Kyl would rather raise the age on social security recipients or cut health care for senior citizens instead. Or privitize your social security account so that corporations can profit at your expense. Who really thinks that average citizens can depend on the stock market for security?

Don't be fooled by the Republican noise machine. We know what life was like under the Republicans. Unless you're a millionaire or a corporation, history shows they are not going to help middle and lower income Americans. Voters would make a big mistake this November voting to return to the failed economic policies of the Bush years.