The Great Debate

The hypocrisy over deficits and calls for shared sacrifice can be illustrated with one simple statistic. According to the Institute for Policy Studies, 25 of the most-well-paid chief executives got higher compensation than their companies paid in federal taxes.  There’s a class war on, as Warren Buffett has noted, and his class is winning it.

The drive for austerity, with its attendant manufactured crises, carries with it a host of mini-outrages making this point. Americans learned after the fiscal cliff negotiations ended that the final agreement, ostensibly to pass “tax hikes for the wealthy,” extended huge corporate handouts. These included special breaks for NASCAR, help for Hollywood movie studios, $3 billion a year for General Electric, support for mining and railroad companies, and even a push for electric scooters.

Outrage over this story flamed everywhere, from the floor of the House of Representatives to cable news networks, including ESPN. The anger at these corporate subsidies was justified because breaks like these are a symbol of a budget process designed to shift money and power to people who already have too much of it.

The real story of the fiscal cliff negotiations, and the coming debt ceiling debate, are corporate tax cuts and the CEOs who love them. There are many corporations that don’t pay taxes. They then pass along some of that increased profit to their CEOs, who also shelter their income from the Internal Revenue Service. It’s a veritable circle of life.

As David Cay Johnston has shown recently in his excellent book, The Fine Print, the middle class is at a double disadvantage. One, we actually have to pay taxes every year on our income. Two, we have to deal with a frightening overly complex tax code.

A year ago Thursday in Osawatomie, Kansas, President Barack Obama delivered a fiery defense of the middle class. It marked a turning point in the president’s economic argument — and helped him win reelection, despite historic economic headwinds.

“This is a make-or-break moment for the middle class,” Obama told the crowd, hundreds of whom had lined up overnight in frigid conditions.

The middle class faces another make-or-break moment in the intensifying fiscal showdown. If congressional Republicans deny tax relief for 98 percent of Americans to preserve a tax windfall for the top 2 percent, then the failed dogma of trickle-down economics has won again — despite being pummeled in the election last month.

Republican leaders such as Grover Norquist and Senate Minority Leader Mitch McConnell (R-Ky.) continue to strike a hard line on taxes and revenues, “warning” President Barack Obama that the GOP will not negotiate or compromise when it comes to tax policy and deficit reduction.

From an electoral politics standpoint, the Democrats should “have at it.”

As the election made clear, this policy is out of step with voters. Obama made raising taxes on people making more than $250,000 a year a centerpiece of his economic message – something he emphasized in his recent press conference – and he was rewarded with a resounding victory. Voters also handed Democrats an increased Senate majority, where the tax debate played out front-and-center in many campaigns.

This theme echoed through state politics as well. Voters in California, for example, passed Governor Jerry Brown’s plan to fund K-12 public schools through a revenue increase that comes from the highest earners.