Commentary by California Congresswoman Maxine Waters:
WASHINGTON - Two years ago, Members of Congress were forced to take a very difficult vote on what the federal government’s response would be to the worst economic collapse in modern history. As apprehensive as we were to bail out the same banks responsible for the crisis, we were advised by leading economists that without immediate and decisive action, the country would be brought to another ‘Depression.’ Ironically, it was the Republican administration of President George W. Bush and Congress that together laid the foundation for a $700 billion program (which the CBO now estimates cost $25 billion) to bail out the financial services industry. While many economists have since concluded that the program did in fact stabilize the economy, many Americans opposed what they considered a bailout of the very same institutions and individuals who caused the collapse of the housing market and economic meltdown.
In fact, this bailout was one of the motivating factors that sparked the Tea Party movement, and many Congressional Republicans who voted for it now passionately condemn the program.
Now, in taking a hard line on the extension of the Bush tax cuts, the Republicans are doubling-down on old policies, essentially asking the American people to support a $900 billion compromise that includes unconscionable tax bonuses for the ultra-rich (even though tax revenue as a percentage of GDP is at its lowest in almost 60 years). Although the economic stabilization program served a critical purpose, an extension of the Bush tax cuts for the wealthy will cost the United States billions of dollars in lost revenue; add to the deficit; further exacerbate existing racial wealth gaps and income disparities; and divert federal resources from other initiatives that could stimulate economic development and help put Americans back to work.
I imagine that in the 112th Congress, the Republican majority in the House will attempt to pay for the tax breaks by cutting a variety of vital programs and services for America’s working class and disadvantaged populations – taking away from the “poor” to give to the “rich.”
The Republicans continue to claim that they want to cut spending and reduce the national debt. However, they are willing to blast a multi-billion dollar hole in the deficit, without paying for it, all to benefit the wealthiest Americans. The Republicans’ positions are utterly irreconcilable. We clearly see the values and priorities of Republicans, who have unduly delayed extending unemployment benefits for workers – who lost their jobs through no fault of their own – but vigorously advocate for a tax break for multimillionaire CEOs and Wall Street moguls.
In exchange for a 13-month extension of unemployment benefits the President’s compromise with Republicans includes a two-year extension of the Bush tax cuts for the wealthy. Adding insult to injury, the deal also includes a renewal of the estate tax at 35 percent – with a $5 million exemption – along with other preferential tax rates for capital gains, dividends, and other investment income. It’s no surprise that Wall Street rallied after the President’s announcement. However, for the majority of Americans, a continuation of tax policies favoring the nation’s wealthiest Americans will have devastating socioeconomic impacts as well as grow the deficit.
As the country’s middle class has grown increasingly dependent on credit cards and loans to keep up with the rising costs of housing, healthcare, and education, the wealth gap has grown ever larger. The nation’s richest top 1 percent of households has acquired nearly 50 percent of America’s financial wealth. Their investment income has yielded windfall returns, while for the bottom 90 percent of U.S. households, debt surpasses investments. Wealth, defined as what you own minus what you owe, allows people to start a business, buy a home, send children to college, and ensure an economically secure future. However, preferential tax treatment for the rich and other tax loopholes have allowed the nation’s wealthiest Americans to sustain record incomes as the rest of the country continues to suffer under rapid home foreclosures, crippling debt, unemployment, and financial uncertainty.
Consequently, the Census Bureau recently reported that the U.S. now leads Western industrialized nations in income disparities. The economic outlook for African Americans is exceptionally bleak. Across all economic indicators, African Americans have fared significantly worse. In fact, a recent study from Brandeis University’s Institute on Assets and Social Policy (IASP) concluded that the racial wealth gap between black and white families has quadrupled, The study also reported that many African Americans now hold more debt than assets, and at least 25 percent of African American families had no assets to turn to in times of economic hardship. The study says the four-fold increase in the wealth gap reflects public policies, such as tax cuts on investment income and inheritances, as well as persistent discrimination in the housing, credit, and labor markets.
Indeed, when Members of Congress are presented with this compromise, we will be asked yet again to take a very difficult vote – a vote to concede on a fundamental principle held by many Democrats. Furthermore, many of the nation’s leading economists have concluded that tax cuts are not the most effective way to stimulate the economy. The past several years have disproved the notion that tax cuts for multimillionaires trickle down to create jobs for all Americans. While U.S. workers across all demographics have contributed to significant productivity gains, the middle class and poor remain on a treadmill of debt and stagnant wages as most of the nation’s wealth flows to the richest top 1 percent. Public policies have and continue to play a critical role in sustaining the wealth gap and income disparities, and they must play a role in closing them. One thing is for certain: extending the Bush tax cuts for the wealthy would ensure that the nation’s poor and working class continue to pay the price.
When progressives make such arguments, we are accused of fomenting class warfare. However, after observing that a secretary in his office paid a far greater percentage of income in taxes than he did, Warren Buffett, one of the world’s richest people, famously remarked: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”