Obama erred in the tax compromise for all the wrong reasons


Objections to the Obama tax compromise has been thoroughly vetted, chewed, and debated by my liberal colleagues, and adding to that dialogue offers nothing new or of special value, so I will not reprise it here. 

I disagree with their critique – mostly because they want the tax compromise modified for reasons I find either built around anger at the President, the desire to “fight” the Republican leaders, or “giving away too much to the wealthy”.  All admirable goals, but not persuasive enough to either make Obama rethink his decision, or more importantly effect needed change in America with this legislation.  Thus, I also object to Obama’s decision to compromise and go forward with this tax package – but for entirely different reasons which I feel are more significant, relevant, and important.  There are three. But they are all based on the same premise: our country is on a very bad path…it has been going down that path (and I use the word “down” with careful thought) for decades now…this tax legislation just takes us further down that path…and unless Obama, or some other wise and bold leader, changes our course, we are heading for serious issues that will irrevocably damage the fabric of our nation.  This is not hyperbole, because while the Senate and political parties are arguing about a micro – and largely short term – tax issue; several macro issues are going unresolved and are being affected.

Distribution of wealth

The first is the continuing mal-distribution of wealth in our country. This is a lingering condition which has been steadily going in the wrong direction for several decades now, and needs to be addressed.  There are a number of ways to measure this, but the fact is, most Americans have no idea how egregious this problem is. In careful work economist Edward N. Wolff at New York University (2010), has charted how wealth is highly concentrated in a relatively few hands in America. As of 2007, the top 1% of households owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%. There is only one other industrialized democratic country in the world with a higher concentration of wealth (Switzerland) There’s more, but the point is this – the legislation accepted by Obama incredibly exacerbates this undesirable situation. What is really needed is not less taxes on the wealthy, but more if there is to ever start to be a more even distribution of wealth in America. I would remind him the more wealth, and income, which resides in the lower income groups the healthier, is our Capitalism. Obama compromised this.

Deterioration of infrastructure, education, national health

Next macro issue facing America is our decade’s long deterioration of several resources: mainly, education, national health, and our crumbling infrastructure. No modern leader has ever addressed these problem with vigor or intelligence – and our nation is slowly, but inexorably – sliding down the international scale on all three of these fronts; and it will not be long till the effect come back to bite us hard, and undermine our prowess as a great nation.  But the answer to these issues is money! There is no other way around it. The micro issue of the tax laws of 2010 is infinitesimal compared to the need to redress all three of these continuing weaknesses in our country – and Obama compromised this. Clearly he is not the leader we thought could take us out of this malaise.


Thirdly, is the whole issue of taxes! I am astounded at both our political parties when the word “taxes” is mentioned. The Republicans have a historical mantra of depraving anything that might mean some taxation, no matter how, how much, or who. It is their Bible. But taxes have always been the “third rail” of politics, so when the Democrats are attacked for supporting reasonable taxation, instead of defending their position, they typically run for cover.  No one “likes” taxes, but the facts are, they are the dues one pays to live in a progressive, enlightened, educated, safe, secure society. A society with good schools, public safety, good roads, a healthy citizenry, and all the other things we want America to be.  In Minnesota, our Interstate bridge went down killing dozens; I always felt it was a metaphor for what is happening in America as we watch, without response, our infrastructure crumble before our eyes.  We could, and should have a serous, honest and frank discussion about taxation – but it again is not happening under the Obama watch – he compromised this.

He should not have given in because taxes now are not just needed, but are totally vital to our country’s well being. Taxes will alleviate the deficit. Taxes can put people to work on public improvements. Taxes could have evened out the distribution of wealth.  Taxes would have helped pay for two wars, something that has been disgracefully remiss for ten years now. If Obama would have presented this need more clearly, the American public would have supported him (not reversing taxes for the top 2% had overwhelming support of Americans with a 67% approval rate).  I doubt the Republicans would allow the rest of us to have our taxes raised, but if they did two thing would happen – it would come back to haunt them in 2012; and secondly our deficits would be probably a Trillion dollars less, and some needed public good could be initiated by the administration.

But what of the Republican challenge, “We cannot raise taxes in a recession”. It is a bogus argument – we have had lower taxes for ten years now, and look where that strategy has gotten us. It is smoke and mirrors. The same is true of the extension of unemployment benefits. This is so transparent, it breaches credulity – the Republicans demanded some reductions in government programs to extend money to the unemployed; but were willing to borrow money in the hundreds of Billions to pay for the tax break for the rich. Properly framed, this argument would be death for the Republican position. I sincerely believe the Republicans would fold on such a Scrooge-like position that has little support. But, Obama compromised it.

Taking hostages

Obama using a strange analogy has stated that the Republicans have used the recession and the unemployment extension, and “taken them hostage” to get their way. He further added (paraphrasing): “I do not want to harm the citizens who deserve this tax break, or the unemployed, or see the hostage killed”.  Well, the hostage did not get “killed”, but he DID damage all the rest of us in a way with this compromise, because now the rich will be richer; the deficit will grow; the wars are not paid for; our most urgent needs will still not be met; and we are still, as a nation, on a slippery slope sliding downwards in too many ways.