Talking Point

Conservatives promise to crack down on “earmarks”—federal spending allocated in legislation for a specific project or location. No more "bridges to nowhere." That’s great, but it doesn’t add up to much—$18 billion of a $3 trillion federal budget. Want to root out waste in government? Over the past eight years, you’d do better to look at the Iraq war ($656 billion), subsidies for big corporations ($100 billion a year), waste and fraud in the Pentagon’s budget, and tax breaks for the rich (which amounted to a $1 trillion transfer to the richest 5 percent of Americans).

On Monday morning, the Dow Jones Industrial Average fell below 9,900. It was the latest sign that that the $700 billion bailout bill passed by Congress last week at the behest of the Bush administration will do little, if anything, to address the fundamentals of the economic crisis.

Nonetheless, last week Senate Republicans used a filibuster to kill a modest stimulus bill that would have pumped needed money into Main Street. We need help for the real economy, not just for the mess on Wall Street.

But that's not all. Conservatives promise to continue and expand the Bush trade policies that are costing Americans their jobs.Conservatives also continue to push another huge tax cut for corporations, while rejecting direct job creation and new economic stimulus proposals. One analyst estimates that the major components of a so-called "jobs plan" proposed by Sen. John McCain would cost $280 billion and create fewer than half a million jobs in 2009—a drop in the bucket when compared to the jobs that are expected to be lost if this recession unfolds with the ferocity of recessions of the past 30 years. (More details in this Making Sense alert, "What About Our Sinking Economy?")

Here's the alternative: public investment in renewable energy and rebuilding projects for schools and infrastructure, expanded unemployment benefits, and aid to cities and states to avoid layoffs of teachers and cops. In the long term, we need a national strategy in the global economy that works for working people, while supporting workers with universal health care coverage, union-organizing rights, and fair wages.

Twenty-nine states and the District of Columbia face a combined budget shortfall of about $48 billion in their 2009 budgets, which in most states take effect in July. Already, state and local governments modestly trimmed jobs in the past year, but to close the looming shortfalls states will have to make more dramatic job cuts, and program and project cuts will have ripple effects in the private sector as well. This will worsen economic conditions in states that are already struggling economically, including Arizona, California, Illinois, New Jersey, New York and Rhode Island. Congress should pass an aid package to states that will help them balance their budgets without deepening the recession.

A right-wing group called The Tax Foundation declared April 23 "Tax Freedom Day," representing the time it takes "Americans" to earn enough money to pay their federal, state and local taxes. A YouTube video dramatizes the organization's contention that average Americans are overtaxed, with a song that says, "I think it's too late in the year for Tax Freedom Day." But their annual proclamation is bogus.

Their calculation averages the tax burdens of the wealthy and the non-wealthy. And because the income increases experienced by the wealthiest 20 percent of taxpayers during the Bush administration far outstrip the income stagnation of the bottom 80 percent, the increase in tax receipts from that higher income bears no relationship to the tax burden of average families, which has actually gone down.

It's also misleading to say that families are paying more of their income in taxes than they are spending on food, clothing and other necessities. That is definitely untrue for low-income families, who may pay little or nothing in federal taxes, and is likely to be untrue for a number of middle-income families, depending on the tax deductions available to them.

Conservatives, and some in the media, say that a cut in capital gains taxes will stimulate economic growth enough to actually increase government revenue. But, as the Center for Budget and Policy Priorities notes, both the Congressional Budget Office and the Treasury Department have estimated that the government would lose money in the long run if the capital gains tax cuts enacted in 2003 were made permanent—$100 billion, according to the CBO. As for the economic growth effects, consider this: A study by Federal Reserve economists found that European stocks, which did not benefit from the U.S. capital gains tax cut, performed as well as stocks in the U.S. market in the period following the tax cut. Rather than pursuing the myth that tax cuts provide a free lunch, we need sensible tax policies that will allow us to pay for urgent notional priorities.

Like many conservatives, Arizona Sen. John McCain wants to eliminate the one item in the tax code designed to keep the wealthy from escaping taxes altogether: the alternative minimum tax. The intent of the AMT is to limit the ability of wealthy individuals to escape paying taxes by piling on exemption after exemption. It is true that the tax is increasingly affecting middle-income people it was never intended to ensnare, and Democrats in Congress have struggled to come up with a fair solution, which would cost about $50 billion a year. But McCain is a leading proponent of eliminating it altogether, which some congressional analysts say would mean $1 trillion less revenue to the government over 10 years. This is not even "trickle-down economics"; this is allowing the wealthy to game the tax code and leave the government unable to pay for the kinds of programs that serve the common good.

The effects of disastrous federal economic policies continue to roll downhill.

At least 25 states face budget shortfalls in fiscal year 2009, according to the Center for Budget and Policy Priorities. For 21 of those states, the combined deficits are expected to total at least $36 billion; the remaining four have yet to come up with an estimate. These states will most likely drastically cut services to meet the requirement that they balance their budgets—an action that will worsen an economic slowdown by laying off employees, cutting purchases and shifting costs to already overburdened residents.

This is where the federal government should step in—as it did belatedly in 2003—by giving direct aid to states so they will not be forced to take actions that will deepen a recession.

At the 2008 Conservative Political Action Committee conference in Washington, President Bush said that the tax cuts for the wealthy he pushed through a conservative Congress “contributed to a record 52 months of job creation. They helped produce strong economic growth — and the increased revenues from that growth have put us on track to a balance our budget by 2012. Here is the bottom line: tax relief works.”

What he did not say is that during that period, job growth, such as it was, has been anemic by historic standards, and has been on a downward path since early 2006, according to the federal government’s own data. In fact, according to the Bureau of Labor Statistics, in January 2008 the number of people with jobs was just 6.2 percent higher than it was in January 2001, while the country’s population growth was 7 percent during that period. Not surprisingly, the number of people unemployed in January 2008, 7.57 million, was 25 percent higher than the number unemployed in 2001.

That statistic doesn’t even speak to the quality of jobs created versus the quality of jobs lost under Bush’s watch, once of the reasons the nation is experiencing record income inequality. The bottom line is that if President Bush is looking at the job market, tax relief has not worked to bring about broad-based prosperity.

When the Supreme Court in 2007 ruled that an employee only had 180 days to file a wage discrimination complaint against an employer, it ignored the real-world realities of wage discrimination. In the case of Goodyear Tire employee Lilly Ledbetter, who brought her case to the Supreme Court, it took her years to learn that she was earning less than her male counterparts. Yet, she was denied a way to address the discrimination.

The Senate in January 2008 began considering a bill, the Fair Pay Restoration Act, which addresses the 180-day statute of limitations for employees to bring pay discrimination claims against their employers. Sen. Edward Kennedy, D. Mass., said that the legislation "gives workers a realistic opportunity to stop ongoing discrimination, and it holds firms accountable for violating the law." As Ledbetter herself put it when she testified before a Senate committee in January, the Senate should follow the lead of the House in passing the bill so that "so that our civil rights laws can once again offer effective protection against discrimination."

The tax code is now a swamp of corporate tax dodges and exemptions. We need a simplified and far more progressive tax code. With globalization generating Gilded Age inequality, those who benefit most should contribute most to the public investments we need.