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Let the “Do Nothing” Congress Do Nothing

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James Kwak

The fiscal cliff is a unique opportunity to solve three of the most pressing problems facing our country. Simply letting the Bush tax cuts expire is our best chance to reduce inequality, bring the national debt under control and protect crucial social insurance programs such as Social Security and Medicare.

The Bush tax cuts of 2001 and 2003 widened the gap between rich and poor: the top 20 percent of households received 67 percent of their benefits (with 15 percent of their benefits going to the top 0.1 percent of households). Eliminating the tax cuts will help counteract growing inequality.

Letting the tax cuts expire will cut the federal government’s long-term budget gap in half, buying us about twenty more years to solve our national debt problem.

Higher taxes today mean more money to pay for Social Security, Medicare and Medicaid in the future. We cannot maintain these and other important programs without higher tax revenues. Conservative proposals to privatize Social Security or voucherize Medicare are only taken seriously when tax revenues fall and budget deficits rise.

Most importantly, in today’s political climate, there is no other practical way to address these problems. We know that Republicans will never vote for significant tax increases; the few measures they might support, such as limiting deductions, will barely affect the super-rich. The opportunity we have today is that we can eliminate the Bush tax cuts by doing nothing.

Many people are justifiably concerned with the short-term economic effects of such a large tax “increase.” Once the Bush tax cuts are history, we can decide what stimulus measures, such as temporary payroll tax cuts, will best reduce unemployment. But our first priority should be to ensure the long-term funding necessary to preserve the government programs that ordinary families rely on.

James Kwak is an associate professor at the University of Connecticut School of Law and the co-author of 13 Bankers with economist Simon Johnson. The two run and write for the economics blog Baseline Scenario.

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  • Cathy Easter

    Not only does this make perfect sense,but it is the best we can hope for in the current climate of bloviating bloviators.

  • Peter McNamee

    What outcome would I like to see? The fiscal cliff is an artificial construct, meant to create a crisis that would justify a major economic change by Washington policymakers. It is a symptom and a byproduct of decades of economic policy making that shifted America away from a fair and equitable distribution of the wealth created by America workers and shifted that wealth into the pockets of a small super powerful elite. It is time to end the economic tyranny of the super rich, and restore America’s economy to what it should be – and engine that serves to deliver a high quality of life for every single American. Default on the national debt or tax the rich to pay it off, makes no difference to me as long as we restore the wealth of America to the workers who create it through honest toil, sweat and ingenuity.

  • Tom McCurry

    This would make 2014 a whole new ballgame…especially if the Republican House cannot be convinced to change their attitude toward taxing the wealthy.

  • Hal Leslie
    Your neo conservative ideology is hurting us canadians too. STOP borrowing, tax yourself to pay for Iraq etc! Don’t borrow from communist china.

  • dave

    I am in agreement with James Kwak. When Bush put in those “tax cuts” over several years,I knew it was a bad idea. Ask me if i want my taxes raised Mr. Boehner, ask me Mr. President, if I want my children/grandchildren/great grandchildren…to pay for my expenses, or do i want to pay my own way…just ask

  • Michele Wilcox

    I hope everyone is making sure they are writing the president and congress reps their thoughts on the matter and not just posting it here.

  • Dave Atch

    The “grand bargain” was slated to cut SS & Medicare (eligibility age for Medicare goes up as per Pat Robertson’s enlightened comment). But the Wikipedia def of “Budget Control Act of 2011″ does not stipulate the Act would leave Medicare safe if it has to kick in. Looks like a cliff both ways…in the second case a cliff for some PEOPLE as opposed to big whoop t do aggregate numbers. What wording is there in the act that governs how and how much Medicare expenditures would be reduced?

  • Anonymous

    This may be the most honest way to raise taxes on the wealthy. Just raise taxes on everyone, via the Bush tax, then cut taxes on everyone earning less than $251 thousand. The bottom line is that, from Reagan on, money got redistributed to the top. Now, it needs to be re-redistributed to the middle.


    I’ve read that adding a small tax onto the purchase of goods as Canada has done would solve your debt crisis in a short time.

  • Dan Brown


    I completely agree. A massive tax hike on the capitalist thieves in the top 10% would be better but we’ll need a revolution to make that happen. This expiration will happen by itself.

    Bring it on!

  • PFJChow

    I agree whole-heartedly on how big money moves our political
    system behind some façade organizations.
    Here is my take on Entitlement
    Programs by the same big money to destroy them.

    Hey, you politicians of both stripes (some should wear those
    zebra stripes as their uniforms), republican and democrat all, listen up. Stay away from the Entitlement Programs. We, the people, those not of the top 2 % on
    the economic scale, are entitled to them.
    We have that right. We’ve earned
    it! We earned it by contributing to
    these programs through our mandatory payroll deductions.

    These three programs are the spunks that keep the medically
    indigents and middle class senior citizens going with their minimal subsistence
    income. The rich and most politicians don’t
    need Social Security and Medicare because their financial futures are handsomely
    secure. The rich get their entitlements
    from secretive bank accounts scurried away in some offshore banks. And politicians can live off on non-disclosed
    campaign funds from super PACs stuffed in their refrigerators’ freezer
    compartments. This
    goes to show these guys don’t know a first thing about liquid assets. No wonder our economy is in such a deep
    freeze and sliding down a slippery permafrost slope to the fiscal cliff into
    the financial crevasse.

    Some venture capitalists, aka
    corporate raiders, live off on corporate welfare through government subsidies
    and bailouts, leaving the taxpayers holding the bag. Consider Bain Capital, headed by one Mitt
    Romney and his investors. When Bain Capital was acquiring Steel
    Dynamics, Mitt Romney and his partners was able to take in $37 million in
    taxpayer subsidies. Then later, Bain
    Capital gained majority control of an Armco
    steel mill in Kansas City, Missouri. They renamed it GS Technologies, GST. There they cut corners, skimmed profits and
    finally wrung the company dry. The
    company went under, costing a loss of 750 jobs.
    When it was discovered that GST had underfunded its pension plan by $44
    million, the federal agency who oversaw and guaranteed pension plans had to
    step in to pick up the tab, sticking it again to the taxpayers. This is just an example tip of the proverbial
    iceberg. How did Bain Capital get away
    with hauls of cash through taxpayers’ sweat and toil? One can look no further than Capitol
    Hill. There is gold in them thar Hill,
    where crocks of taxpayer gold are hoarded and doled out by political leprechauns who chair powerful
    senate or congressional committees and caucuses.

    The CEOs draw off their discretionary funds for their
    recreations with their favorite politicos on some indiscretionary
    procreation activities from facade corporations in tax haven countries and by creative accounting.
    If you learn your stuff well from Economy 101 about liquid assets, you
    can easily spot these discretionary corporation accounts, listed under the main
    category Liability, subcategory Expenses, Lobby, and then Procreation. Oops, I meant Recreation. For these guys, recreation means procreation with
    the lobbyists and interns. The pro- part of the procreation process they like
    it well enough, but the post- part is where they hush up and sweep under the
    discretionary fund carpet. This underground economy operates and flies under
    the radar of the IRS and FBI, here the
    money behaves by the laws of quantum mechanics. They pop in and out of those
    politicians’ pockets without leaving a trace, and more elusive than those
    elementary quarks. The minute you notice
    them and poof, they are gone, leaving behind nothing more than a Cheshire Cat’s
    grin on those screw-the-taxpayer politicians’ faces. This is the quintessential Washington DC Barter System: Money, and Sex, and Political
    Favors, Oh My! You sure get the feeling
    you are not in Kansas anymore. This is
    something they don’t teach you in Econ 101.

    Some would complain that the
    Entitlement Program is getting too big and we will go the way of the
    Greeks. This country is not like Greece. The United States is seventy four times the
    size of Greece. Our economy and
    financial system is backed up by our huge natural resources, our relatively
    political stability, tons of gold in them thar Fort Knox, not to mention we
    have more geeks than all the Greeks in Greece.
    And the geeks will lead them economist types and see us through this
    financial quagmire, if only them political types would listen. Our country alone in the whole world can
    print all the money we need and still have people queuing up to buy US Treasury
    bonds; and if you haven’t notice, the US dollar is the de facto international tender
    for exchange and trade. Of course, we
    need to cut the deficit, but not at the expense of the middle class and their
    retirement future.

    Social security would be financially sound (and still is) had
    it not been for certain previous administrations and Congress siphoning off
    funds to support their own unwarranted wars and pork barrel projects. Trim wastes, frauds and abuses from the
    Entitlement Programs, yes! Eliminate COL
    increase, reduce benefits, no! United
    States have always been known as a nation of generous people. We dish out millions in
    aids annually to developing countries the world over, why can’t we do the same
    for our own citizens at home. Remember
    and take heed of an old but sage injunction: charity must begin at home!

    To those politicians
    who act as proxies for those super rich, super PACs and corporate heads to
    undermine the current Entitlement Programs, I give this fair admonition. To quote the man who warned off a TSA
    Official whose was over-enthusiastic in frisking him: “Don’t touch my
    junks!”, I’ll paraphrase here to warn you two-timed politicians:
    “Don’t touch our spunks or they will rise to the occasion to screw you
    royally come next erection! Uh… election!”