Tax deal: Plenty of bitter taste, likely poor results

Cary Brunswick

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Cary Brunswick

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December 18, 2010

Anonymous Daily Star The Daily Star Wed Jun 29, 2011, 10:10 AM EDT

"The agreement left some lawmakers in both parties with a bitter taste, and they complained that their leaders had sacrificed too much in the interest of striking a deal." -- Associated Press, Jan. 24, 2008

Sound familiar? It should, because you've been hearing or reading about that same sentiment during the past few weeks.

But it was less than three years ago that Congress and President Bush agreed on a $168 billion economic stimulus plan that was supposed to quell the growing symptoms of a recession.

That bill wasn't passed to prevent tax hikes that would subtract a few bucks from ordinary citizens' paychecks. It included tax rebates for most people and families, an aid plan for distressed mortgages and tax breaks for small businesses.

Remember getting those checks for $600 or $1,200 or more about two and a half years ago? The idea was that people would spend that money and the increased demand for goods would spur economic growth and create jobs.

Bush was one of the biggest cheerleaders for the plan. "When the money reaches the American people, we expect they will use it to boost consumer spending, and that will spur job creation as well," he said.

Obviously, the president and lawmakers were wrong. Any meager impact from the dole-out was squashed a few months later when the collapse of Lehman Bros. sent the stock market crashing, created a credit and banking crisis and plunged the so-called recession even deeper.

Now the debate has returned to whether the government should get more money, which it doesn't have, back to the people so they can buy things, and to the wealthy so they can invest it and create jobs.

And now, as before, the name of the game is compromise. Back in 2008, Bush wanted to exclude the working poor _ those who work but don't make enough to pay income tax _ from the rebates. His plan would have excluded 30 million working households.

To cut a deal with congressional Democrats, he agreed to include them but insisted the bill not include an extension of unemployment benefits, or any other add-ons. I mean, does this sound all too familiar, or what, with just some of players switched around?

So, this time around, we have President Obama agreeing to include an extension of tax cuts for the wealthiest people so congressional Republicans would go along with an extension of jobless benefits.

This time, there is enough "bitter taste" for everyone, as Obama liberals thought he should have played hardball and not given in to GOP demands for the tax break for the rich. And the fiscal libertarians are mad at the Republicans they supported for going along with any tax breaks when the nation is in debt up to its neck.

They're both right, but it's too late now.

This year's bill, which will cost a whopping $858 billion _ more than five times the cost of the 2008 rebates _ was approved by the Senate on Wednesday and was expected to get the OK later by the House.

Tax breaks for business are estimated to be less than 10 percent of the plan, so many economists doubt that they will cause a move to start creating jobs. Businesses are already holding hundreds of billions in cash that they're afraid to invest because it's not clear consumers can afford, or are ready, to start buying.

And, again, a few more dollars in peoples' paychecks are not likely to send them scrambling to buy enough goods to spur the demand that businesses believe they need to invest in boosting their production.

Americans are still too much in debt to go on any spending sprees, and a short-term shot in their wallets is not going to make much difference. Of course, the government is in even-more-serious debt trouble, but most agree that it has to do something to get people and businesses back on their feet and the economy moving again.

The trouble is that, just as in 2008, the latest plan probably will not work because the government deficit and debt will continue to grow, fueled by the GOP insistence on the tax cuts for the wealthy and the Fed's decision to buy more U.S. Treasury bonds.

In 2008, we had the credit-banking-housing crisis. In 2011, the crisis could come as early as April when Congress has to agree to raise the government's debt limit or throw the Treasury into economic turmoil. Many of the new congressmen elected last month rode a wave of fiscal restraint into office. What will they do?

Mysteriously, it seems like nobody, including the experts, knows how to get a handle on our struggling economy.

Cary Brunswick, of Oneonta, is a freelance writer and editor. He can be reached at brunswick@earthling.net.