Pass the Tax Cut Deal
This is the best deal liberals will get to help working-class Americans
If you told liberals a few months ago that they could pass a bill that would keep two million Americans out of poverty, we would have wondered where and how quickly we could sign up for this deal. President Obama’s tax-cut deal does exactly that, providing much-needed help to the poor and middle class. While liberals’ concerns about the bill’s giveaways for the rich are justified, they should grudgingly accept them and pass the bill, because the welfare of the hardest-hit Americans depends on it. This imperfect legislation will provide much-needed stimulus to a sluggish economy and help to alleviate economic suffering across the nation.
The most important thing this bill does is help to protect the poor and middle class during the ongoing unemployment crisis. The Center of Budget and Policy Priorities has reported that the tax provisions of the bill, namely an extension of the Child Tax Credit, the Earned Income Tax Credit, and the temporary payroll tax cut, “would keep more than 2 million Americans above the poverty line and reduce the severity of poverty for 19 million more.” This alone is reason enough to support this bill; the poverty rate has already risen to the unpalatable level of 14.3 percent, and we have a moral duty to support the hardest-hit during the worst times.
The CBPP’s calculation does not even include the good that will come from the extension of federal unemployment benefits for the next 13 months. Unemployment benefits are the most substantial part of the weak safety net we have for the poor, and they are also an enormous source of demand for businesses. A sizable amount of the money right now spent on food, warm clothes for the winter, Christmas gifts, and other basic purchases comes from unemployment benefits. This is why the Council of Economic Advisers estimated that ending the benefits would result in a loss of 600,000 jobs and decrease economic growth by 0.6 percent.
This deal will significantly boost economic growth and reduce unemployment. The provisions for the low-income Americans that stimulate demand combined with tax cuts for businesses will have a meaningful impact on hiring and growth. Mark Zandi of Moody’s has estimated that the package will increase gross domestic product growth from an expected 2.8 percent to an increased 3.9 percent in 2011 and decrease unemployment to an average of 8.7 percent in 2011 as compared to a previous forecast of 9.9 percent. These are meaningful changes that will improve lives across America on a large scale.
The only stumbling block left for this bill is the House of Representatives, where liberals have some fair critiques of the legislation. Their strongest argument against the bill is that the provisions for the rich, notably the two-year extension of the Bush tax cuts and the two-year estate-tax decrease, are unfair and do not benefit the greater economy. These arguments are accurate, and it’s a shame that Republicans refuse to help the poor unless they can also help the extremely wealthy. However, including these provisions was the only way to get 60 votes in the Senate to pass the bill. Democrats have tried passing standalone stimulus for a year with no success, and need Republicans on board to get to 60 votes. Because of the enormous good the bill does for the poor and middle class, liberals should grudgingly accept this compromise and then fight hard against the extension of these provisions for the wealthy in 2012, as President Obama has vowed to do.
Many are also worried about the bill’s impact on the deficit. It is true that, at $900 billion over two years, the legislation is costly. However, in times of low growth and high unemployment, the government must take advantage of low borrowing costs to make up for the lack of spending in the private sector. Most of this bill consists of giving money to those who most need it and, thus, are most likely to spend it. In the short term, this will help boost growth and spending. The legislation has a two-year lifetime, and those serious about deficit reduction should aim to boost growth now to get the economy growing quickly again and then decrease long-term deficits through a medium to long-term fiscal consolidation plan.
Liberals have been outraged over this tax-cut deal. The Huffington Post has been covered with shrill and angry articles against the legislation, and many liberals claim that it validates their disappointment in President Obama. These criticisms are misguided. President Obama’s entire term has focused on the lives of working-class and poor families. The health-care bill expanded coverage to those in need, the stimulus bill helped alleviate suffering for the unemployed, and the financial-regulation bill helped protect Americans against the excesses of the financial system. Low-income households need all the help they can get during tough times. That’s why the President made the difficult compromises necessary to get this deal, and that’s why liberals, a group that prides itself on looking out for America’s poorest, must vote for this bill.
Ravi N. Mulani ‘12, a Crimson editorial writer, is an applied mathematics concentrator in Winthrop House. His column appears biweekly.